Small Business Labs

The New York Times on Hackerspaces

The New York Times article One Big Workbench covers the growth of hackerspaces, which are coworking facilities for people who like to hack or make things.  Think of them as shared workshops instead of shared offices. 

Like coworking facilities, hackerspaces (also called makerspaces) generally use a gym-like membership model with  with monthly fees ranging from $50 to $200 per month.

These spaces have a variety of industrial equipment and tools available for member use including things like laser cutters, 3D Printers and other computer controlled tools. Electronics related tools and equipment and also usually available. 

And again like coworking facilities, access to a community of like-minded people is a key selling point.

There's lots of collaboration at hackerspaces.  

My favorite part of the article is their description of the vibe at a hackerspace, which I think is quite accurate:

The atmosphere at a hacker space is a bit like finding yourself in an episode of “The Big Bang Theory.” There is unabashed geeking-out on science and technology, and an enthusiasm for making that is infectious.

The article focuses on the hobbyist side of hackerspaces. But we've found in our research that hackerspaces are also hotbeds of entrepreneurship.

For more information, see Make Magazine. It's the publication of record for hackerspaces and the maker movement in general. 

The Rise of Handmade Bike Manufacturing

Barron's The $22,500 Bicycle covers the growing demand for handmade, customized and high end bicycles. The title refers to an expensive custom bike made by bike studio Signature Cycles - and yes, it costs $22,500.

Of course most custom bikes are a lot cheaper than $22,500.  Prices in the $5,000 to $7,000 range are common and entry level custom bikes can be found in the $2,000 to $3,000 range.  

The demand is coming primarily from aging baby boomers and Gen Xers with disposable income who have discovered biking is a great, low impact way to get exercise that also provides sustainable transportation.  

My favorite example from the story is bike frame maker Richard Sachs. Key quote on this artisan maker: 

Today’s base price for a Sachs frame, which is all he makes, is $4,400, exclusive of the $400 fee required to put your name on his list. For that privilege, customers wait up to eight years. 

The handmade bike industry is large enough that it has its own trade show with hundreds of exhibitors. This year's show had 22 new handmade bike companies that exhibited at the show for the first time. Most of these are very small shops or solo bike artisans.  

One of the new exhibitors this year was A*Train Cycles, a one man shop in Minneapolis. One of their bikes is pictured below. Not surprisingly given their location, it's a combo mountain-snow bike.

     

One of the leading cities for artisan bike manufacturing is Portland.  It's the most biking oriented city in the U.S. and home to many artisan bike manufacturers. 

But this trend is not limited to the U.S. According to the BBC, handmade and custom bike manufacturing is also growing in the UK.  

The growth of handmade and customized bikes is a great example of the growth of small manufacturing and new artisan economy trends.  

3D Scanner Turns 3D Printers Into Replicators

Makerbot, a leading 3D printer manufacturing company, announced a new 3D scanner prototype at the big tech trade show South by Southwest last week. It's called the "Digitizer" that can scan small objects and create a 3D digital design.

The digital design can then be printed out with a 3D printer. Basically, anyone with a Digitizer and a 3D printer will have a replicator.  The picture below, from Makerbot's blog post on the digitizer, shows how it works.

 

This is exciting because while creating 3D designs is not considered hard in among product designers and engineers, it's very hard for non-technical types. I've tried doing it and let's just say the idea of having a scanner do it for me is something that makes sense.

3D printing has been getting a lot of attention of late and many are wondering if it is overhyped. Our view remains the same - 3D printing is and will continue to an excellent niche tool for making things as well as wonderful device for product designers.

But broad, mainstream industrial use of 3D printing is still at least 3-5 years away and general use by consumers even farther out. But advances like the 3D scanner show the industry continues to make steady progress.  

BTW, this year's South by Southwest has a bit of a focus on physical products.  GigaOm has a nice article summarizing this.

What is the Industrial Internet?

Industrial giant GE has been pushing the idea of the Industrial Internet, including publishing a detailed white paper on the concept.  

This is a larger scale variation on the concept of the Internet of Things, first coined back in the late 1990s.

The basic idea behind both concepts is more and more objects are being embedded with sensors and gaining the ability to communicate. And in fact, machine-to-machine communications (which means machines and objects talking to other machines and objects) is outpacing human-to-human communications.

Researchers expect by 2020 there will be over 50 billion machines connected to the Internet.  This, of course, is a lot more than the 7 billion humans expected to be alive then. And these smart machines will generate enormous amounts of big data.  

GE's definition of the Industrial Internet is primarily focused on big machines like aircraft engines and power generators. Their framework consists of three broad elements:

1. Intelligent Machines: embed the world's machines, facilities, fleets and networks with advanced sensors, controls and software applications.

2. Advanced Analytics: combines the power of physics-based analytics, predictive algorithms, automation and deep domain expertise.

3. People at Work: connecting people at work or on the move, any time to support more intelligent design, operations, maintenance and higher quality service and safety.

The concepts and ideas behind the Industrial Internet are not new. They go back at least to the 1980s, when the early work around ubiquitous computing was done.  Also, many firms have already deployed smart machines and objects.

But what is new is after a long gestation period we're at the point where deployments are entering the mainstream and the technology is starting to impact industry in major ways.

Whether you call it the Industrial Internet or the Internet of Things, the growth of smart ojects and machines promises to create new business models, improve business processes, and reduce costs and risks.

Is 3D Printing Overhyped?

3D printing has been getting a lot of attention these days. Maybe too much.

The chart below shows the number of Google hits for 3D printing for each of the last 4 years.  The hits are in millions and for 12 month September to September time periods. 

 

It's pretty clear from this data interest in 3D printing has taken off over the last year. To be fair, there has been a lot of interesting 3D printing news.  

Maker Bot opening a retail store in New York City is an example (click here to see a video of the store). They also released a new version of their Star Trek inspired Replicator 3D printer.  

There's also been a lot of announcements around new things that can manufactured using 3D printing. My favorite is Airbus announcing it hopes to make planes using 3D printers. Before you get too excited, they hope to do this by 2050.  

We're big fans of 3D printing and have been covering it for years. We consider it one of the key technologies helping to bring back small manufacturing. 

But the hype does seem to be getting ahead of the reality, or at least that's what one expert thinks. Gartner also thinks 3D printing is overhyped and at least 5 years away from broad use.

We agree. 3D printing is and will continue to an excellent niche tool for making things as well as wonderful device for product designers. But broad, mainstream use of 3D printing is still at least 3-5 years away.

Reshoring of Manufacturing, Services Accelerating

According to several recent studies America is becoming increasingly cost competitive for manufacturing and services relative to our competitors overseas. Because of this, the reshoring to the U.S. of work once outsourced to the rest of the world is accelerating.

A recent study by the strategy consulting firm BCG found that the U.S. is the most cost competitive developed country for manufacturing. This is leading to more firm choosing to manufacture in the U.S. and could result in 5 million new manufacturing jobs being created in the U.S. by 2020. 

This would be a very big increase in manufacturing employment, which currently is close to 12 million.

BCG credits America's energy cost advantages and particularly the low cost of U.S. natural gas a key reason behind America's new found competitiveness. We've posted in the past on energy and natural gas being an economic game changer for the U.S. Manufacturing is where low cost energy helps the most.

But it's not just manufacturing jobs that are moving back to the U.S.  According to a recent article in CIO Magazine, services jobs are also moving back to the U.S. 

In this case it's not just that U.S. costs are more competitive - there are other factors favoring the U.S. Key quote:

After more than a decade of offshore outsourcing, corporate leaders may be looking for more than just labor cost savings from their outsourcing engagements. And the new types of value they're seeking--innovation, communication skills, domain knowledge--are much more readily available in the U.S. than overseas ...

Given our current economic and employment situation, this is great news for the U.S. economy. 

The Rise of Artisan Distillers

The broader food movement, and in particular the local food movement (referred to as the locavore movement), has led to celebrity chefs, a rapid increase in farmers markets, the rise of urban farming and the growth of craft brewers.

So it comes as no surprise that artisan distillers (craft makers of spirits) are becoming more numerous. 

I attended a Commonwealth Club meeting tonight that focused on Bay Area craft distillers.  The description of the event was:

Bay Area craft distillers like St. George and Charbay drive the handcrafted cocktail scene, creating community-conscious and drinkably delicious products that pay tribute to the locavore spirit. Their hyper-local beverages compete with the top foreign and national brands on drink menus across the country. 

It was also no surprise that the owners of these small, local distillers described their businesses much like other new artisans do.  They talked about being authentic, making great products and finding a niche audience for their specialized offerings.  

They also described their industry as having a barbell industrial structure (my words - they said it was dominated by a couple of soulless, money grubbing giant corporations that made mediocre products).  

The meeting was followed by a tasting from a group of local distillers.  My favorites were two gins - Terroir Gin from St Georges and Blade Gin from Old World spirits.  

Both were unique and I've never tasted anything quite like them before.  Go to their sites for their tasting notes.  They do a much better job of describing them than I can - especially after tasting multiple products from 5 distillers.

The Reshoring of Manufacturing Continues

Reshoring is the latest term for manufacturing returning to the U.S. from overseas.  "Insourcing", "boomeranging" and "inshoring" are also used to describe this shift.

We first spotted this trend in 2007 (and yes, we are patting ourselves on the back), and it was clear by 2010 this trend was gaining momentum.

The Boston Consulting Group (BCG) gave reshoring a major PR boost last year with a report on this topic.  Key quote from their report:

"Over the next five years, a U.S. manufacturing renaissance in home appliances, car parts, and other sectors could accelerate—boosting output by $100 billion and adding 2 million to 3 million jobs."

BCG has followed up their report with a survey of U.S. manufacturers and found the reshoring movement continues to gain steam - 37% of the respondents say they are planning to reshore some of their manufacturing to the U.S..  

The chart below is shows the results by industry.

  
I'm going to digress a bit here just to say the survey question is very leading and likely resulted in false positives.  Because of this, I discount the results a bit.  But having said that, even lowering the results the news for U.S. manufacturing is still good.

For more on reshoring visit the Reshoring Initiative, a non-profit group focused on bringing manufacturing back to the U.S.  They have a good set of resources on this topic.  

They also have a very cool Total Cost of Ownership calculator that can be used to evaluate the total costs of manufacturing in the U.S. versus offshore.

The Rise of Small and Micro Manufacturing

U.S. manufacturing is on a roll.  

The New York Times recently called manufacturing a "Surprising Bright Spot in the U.S. Economy", the sector has added 330,00 jobs over the last two years, manufacturing economic indicators continue to rise and the President has made manufacturing the center of his economic policy.

The times are even more exciting for small (less than 100 employees) and micro (less than 5 employees) manufacturers.  Most people don't realize how many small manufacturers there are the U.S.  

According to the National Institute of Standards and Technology (NIST), which is part of the U.S. Commerce Department, there are about 330,000 U.S. manufacturing firms.   As the chart below shows, roughly 120,000 of these firms have 4 or fewer employees and over 80% have fewer than 50 employees.

   

But even this way understates the number of small manufacturing firms in the U.S.  The chart data is based on traditional definitions of manufacturing and excludes the growing number of artisans, professional Makers and others who build or create physical goods.

The craft market place Etsy, for example, had over $500 million in sales in 2011 - $70 million in December alone.  Etsy's strategy going forward is create a business platform that will provide broader support to their thousands of business oriented artisans.

To see some examples of artisan manufacturing, watch one or more of the wonderful and inspiring Made by Hand videos or visit their online store.

The professional Maker market also continues to grow.  Make Magazine's Best of Maker Business 2011 provides an excellent summary of the business activities of these inventors and tinkerers.

The trends supporting the rise of small and micro manufacturing are powerful. One of the most important is a structural shift in how the U.S. manufacturing industry is organized.  

Due in large part to foreign competition, U.S. manufacturing is no longer dominated by large companies and commodity manufacturing.  Instead, U.S. manufacturing is increasingly done by a decentralized network of small, specialized firms.  These firms rely on close customer relationships, automation, high productivity,valued added services and customized or specialized products to compete.  

Other trends leading the the rise of small and micro manufacturing include:

 - Shifts that are making U.S. manufacturing more cost competitive.

 - New technologies like 3D printers that enable small and micro manufacturers.

 - Increased demand for customized, specialized or niche products.

 - The growing awareness of the hidden costs of manufacturing overseas.  

As you can tell, we're very optimistic about small manufacturing and expect the sector to continue to expand in the coming years.  

Professional Makers Expand in 2011

TJ McCue has an excellent review of the growth professional Makers in 2011 on the Make Magazine blog. 

For those not familiar with Makers, they are part of the new DIY movement of crafters, artisans, digital tinkerers and others interested in making and inventing things.  Most Makers are hobbyists, but a growing number are turning Pro and starting small, Maker-based businesses. 

TJ's post captures some of the exciting Maker Pro news from the last year.

TJ, who's become the go-to guy on the professional Maker movement, also has a regular column on Makers at Forbes, a newsletter for professional Makers and is working on a book. 

TJ is crowdsourcing the book via Kickstarter, a popular approach used by Makers to fund their projects.  I'm very excited by the book and one of the backers (I also want the t-shirt).  We consider the Maker movement a key component of the broader resurgence in small manufacturing. 

For more on the professional Maker movement, see the Intuit Future of Small Business research report Today's Hobbyists are Tomorrow's Hobbypreneurs, which we co-authored.