Great Report on User Manufacturing, Mass Customization, and How a New Infrastructure is Providing New Opportunities for SMEs

Sme_furture_reportLast week, I got a note by Steve King, a research affiliate with the Institute for the Future. This is a non-profit research group based in Silicon Valley. Founded in 1968 by a group of former RAND Corporation researchers with a grant from the Ford Foundation to take leading-edge research methodologies into the public and business sectors, the IFTF today publishes reports to help people and companies to understand what is coming next.

They recently released a forecast report that is part of a series on the future of small business. In this report, they stress that small businesses will actively take advantage and use new manufacturing methods to create mass customized goods.

The report was sponsored by Intuit and can be downloaded on their website: http://www.intuit.com/futureofsmallbusiness/ (download Report #3)

In the report, IFTF writes about a new artisan economy that is the result of new manufacturing technologies, enabling individuals to access similar production technologies as large corporations (crafters using Ponoko, see previous posting, are a perfect example). It is a very nice summary of many of the recent trends that I have discussed here. Fabbing, blogging, user manufacturing, customization, open innovation — it’s all there and brought into a nice and coherent framework.

I especially liked the part about the new infrastructure that is enabling these developments:

„Plug-and-play infrastructures will make small businesses more competitive and successful. The ability of small businesses to take advantage of large-scale infrastructures and leverage new technologies will allow them to enter and compete in industries formerly served only by big business.“

As an example, they refer to a great service that is enabling moms to become entrepreneurs, Mom Inventors, Inc.:

„For those who want to avoid teh hassle of assembling these services, firms are available to do everything for an entrepreneur. Mom Inventors Ic., for example, weill develop, manufacture, and sell quality Mom invented products throughout the United States and Europe. The mom (entrepreneur) only needs to come up with the idea, Mom Inventors will do the rest.“

So I am expecting to these many more knitted marvels and clever kitchen aids on the shelves, invented by „Lead Moms„.

The three developments described in the reportIn an e-mail exchange, Steve told me more about the background of the report, and stressed another implication from their research:

„A major issue we are trying to figure out is how small business relates to mass customization and user innovation. This was originally prompted by our work looking at consumer generated media – specifically blogs.

We found that the blogs with the most traffic were not authored by consumers, but by professionals. The professionals tended to fall into two categories: (1) small or independent businesses trying to build a small publishing business; or (2) professionals using blogs to promote either themselves or the goods and services of their company. Looking deeper at the second group, we found that most of them worked for small businesses.

Based on this work (which we did several years ago), we started looking at other categories. We quickly found a similar pattern of small business participation across a broad range of categories, including media (YouTube videos, etc.), open source software, crafts and small scale manufacturing (a lot of Makers at Maker Faire are small businesses, for example), financial services, etc.

Basically, we saw small businesses playing a role in almost every category where niche products and/or services were being built or highly customized. We also found a pattern of category „power users“ moving from being hobbyists to starting their own small businesses. We kept seeing „prosumers“ turning into small businesses, and we kept seeing small businesses somewhere in the customization value chain.“

Accordingly, another area indicated in the report where small businesses will grow in the future is to serve as an innovation lab for larger corporations. Platforms like Innocentive or P&G’s connect and develop program will help small businesses to sell their creativity to larger corporations in an efficient way. This may be the next wave of contract research.

Overall, a nice summary of recent trends that is worthwhile reading due its focus on small businesses.

Context: Get the full report here. http://www.intuit.com/futureofsmallbusiness/ (download Report #3)

About the Author:

Frank T. Piller is a Co-Director of the MIT Smart Customization Group at the MIT Media Lab, Massachusetts Institute of Technology, USA, and a chair professor of management at the Technology & Innovation Management Group of RWTH Aachen University, Germany, one of Europe’s leading institutes of technology. Before entering his recent position in Aachen, he worked at the MIT Sloan School of Management (2004-2007) and has been an associate professor of management at TUM Business School, Technische Universitaet Muenchen. Frequently quoted in The New York Times, The Economist, and Business Week, amongst others, Frank is regarded as one of the leading experts on strategies for customer-centric value creation, like mass customization, personalization, and innovation co-creation. His recent analysis of the crowdsourcing business model “Threadless” (co-authored with Susumu Ogawa), an innovative crowdsourcing business model in the fashion industry, has been elected as one of the Top-20 articles in MIT Sloan Management Review.