January 15, 2012

The Next Industrial Revolution

Filed under: Articles + Blogs — smeyer @ 9:53 pm

Modern manufacturing is largely the result of Henry Ford’s innovation, assembly line mass production.  The goal of which was primarily to make cars available to large numbers of people due to significantly lowered costs.   No other single innovation has contributed as much to increase the quality of living conditions throughout the world.  Mass production has made more goods available to more people in more places than any other system in the history of mankind.

The electric light, for example, which was coveted 100 years ago as the great solution to night time darkness, making obsolete the candle or gas lamp.  Mass production has made the light bulb an inexpensive  commodity on the verge of extinction at about 25 cents per bulb.  The desire to reduce energy consumption is ushering in the age of the light emitting diode (LED) as the replacement technology for electric light.  Every effort is under way to reduce LED costs by any means possible so that illumination will be available that is even cheaper than incandescent lighting when the energy cost over ten years is factored into the new technology.

Even generating and delivering electricity is the result of applying the principles of mass production.  Large generating facilities are able to generate power cost effectively through economy of scale, selling the power profitably at 4.5 cents per kilowatt hour.  Wire, cable, switching systems and other infrastructure are generally costed in at an additional 2 cents per kilowatt hour to deliver the power to your door.  This is an incredible deal, trillion of dollars of resources at your disposal for pennies.

But mass production is not the answer for every aspect of modern society.  Lowering the cost of mass-produced goods implies that there is a requirement for the sufficient numbers of a product to warrant the investment in the necessary processes and tooling to accomplish the task.

Enter 3D printing technology.  Also known as “Maker bots”, this new class of tools is making fabrication a  new American pastime at incredibly low cost.  Where 3D printing equipment has recently been the domain of well-funded large corporations , selling at $10,000 to $20,000 each, 3D printer kits are available at less than $1000.  And lest you think that these are only toys for boys, the additive manufacturing paradigm has taken hold in the metals industry producing high quality parts in various steel alloys and even in titanium.

Why does it matter?  Because anything that lowers the barrier to market entry for new products creates the opportunity for people to enter a market that was previously inaccessible.  The hidden relationship is financial, it is the cost of amortizing the manufacturing resources across a given number of products that makes startup of a new product impractical.  So barriers to entry in new product development are primarily the result of amortization costs.

What happens when a new technology introduces a significant reduction in the amortization cost?  You get the opportunity to experiment with things because the cost of iterating the design is low.  New products can be test marketed and improvements made because there is no major investment in tooling that would have to be modified in order to change the design.  You don’t have to get it right the first time.

And that means that anything is possible.