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November 1, 2014

Disruption: Get Used To It

To beat the competition, businesses must anticipate and capitalize on transformative new technologies.

New technologies are poised to disrupt manufacturing: It’s not a matter of if, but when. In the coming years, how and where products are designed and manufactured will change dramatically, remaking industries and accelerating and transforming competition. Yet, as I’ve learned while speaking at metals industry conferences, a significant number of small to medium-sized companies are still designing, manufacturing and providing services in the same way they have for decades. 

A word of warning to those companies: If you don’t disrupt yourself, then someone else will. Businesses can’t afford to ignore the game-changing trends on the horizon. Anticipating and mastering them is key to survival and growth.

 

The Big Three

  • 3-D printing. The ability to 3-D print with 200 different materials will allow for a high level of customization and complexity at no additional cost. It will transform how we design products and how we manufacture them. I’m on the board of 3D Systems, which has a business called Quickparts, offering on-demand 3-D printing. For a small customer who wants something manufactured, it’s just a matter of bringing design specifications to Quickparts, which then uploads them to 3-D printing systems. This technology is changing the way people think about prototypes, low-volume production and the investment casting patterns for product casting (a technique that uses an expendable pattern—usually wax or plastic—around which a mold is formed to make small castings; the pattern is removed by melting).
  • Artificial intelligence. As AI helps create new manufacturing processes (and even designs new materials), it will transform the industry. IBM’s foray into AI, for instance, is named Watson—a cognitive computing technology that can process natural language, generate and evaluate hypotheses, and learn from repeated use and feedback. Developers think that Watson will change the way we’re able to process and analyze data, especially in the areas of medicine and genomics. AI’s influence will eventually touch everything from the design and planning stages to execution and manufacturing integration.
  • New kinds of competitors. Up until now, it has required substantial capital resources to become a major manufacturer. But technology like 3-D printing is easing the barrier to entry for both design and manufacturing. Eventually, this trend will change where manufacturing takes place. As the cost of labor decreases in the United States and the cost of labor in Asia rises, American operations that used to be overseas will either reshore to the United States or relocate elsewhere. New players will enter the game, in new and varied markets. Tesla, for example, emerged as a new player in the industry and created the safest car in the United States. SpaceX, another Elon Musk company, has also disrupted the aerospace industry with rocket designs that are performing three times better than the competition.
     

Adapt to Survive—and Thrive

In a world of exponential change, if you’re focused on trying to improve your business in 5% or 10% increments every year, you won’t be in business in 10 years. Someone is going to come along with something 10 times better than what you do and put you out of business. So how do you ensure that your team can disrupt itself? 

Attract creative talent. The only way to convince young, inventive talent to join the manufacturing industry is by making it sexy. Turn your 100-year-old company into a 21st-century beacon of innovation by creating challenges in areas where employees are given the opportunity to think outside of the box. Give people extraordinary freedom to experiment and fail and iterate. No one wants to do the same thing that’s been done for the last 100 years. 

Educate. A century ago, when the rate of change was slower, it was reasonable to think that a college or graduate education could be used for the rest of life. Today, by the time you graduate with a Ph.D., a lot of what you learned your first year is out of date. 

The concept that education should occur only at a specific phase of life is preposterous. Education has to be continuous and on-demand, which is the philosophy of Singularity University, the Silicon Valley-based education organization I co-founded. Executives from every industry come back each year for Singularity programs, which bring them up to speed on the most powerful technologies on the planet—the same ones, like 3-D printing, AI and robotics, that are going to make or break your business. At Singularity U, CEOs and manufacturing and metals executives experience firsthand how quickly this technology is changing and how critical continuing education will be for their business. 

Brainstorm. Challenge your team within constraints. If you have a normal process, how can you do it 10 times faster or cheaper or with 10 times fewer people? When you put unreasonable constraints on employees, it forces them to throw their normal way of doing things out the door and imagine, “How could this be done?” You can’t make a dramatic change in your business by making incremental changes. You’ll get stuck and end up out of business. Imagining how to reinvent yourself takes courage. But staying with the status quo is not a business plan. 

Of course, I understand that re-engineering a company is not so easy. One of the biggest difficulties is that businesses, especially ones that have been around for a long time, have significant long-term investments in products and processes that they almost instinctively defend or rationalize. But that can’t be used as justification to avoid change, because it will come. Do a bottom-up analysis of your processes and then answer this question: If you were starting the company from scratch today, what would you do differently? 


Peter Diamandis is the chairman and CEO of XPRIZE, which designs and launches multimillion-dollar incentive prizes to drive innovative breakthroughs. He is also co-founder and chairman of Singularity University, a Silicon Valley-based business education institution. He received his M.D. from Harvard and degrees in molecular genetics and aerospace engineering at MIT.