What is the difference between creating a product and manufacturing a product?
From UT San Diego, June 12, 2012
A report — Innovation, Production and Sustainable Job Creation: Reviving U.S. Prosperity — recently released by the CONNECT Innovation 
Institute contends that San Diego (and the U.S.) can create more manufacturing jobs if we recognize the growing interdependence of services and manufacturing and take steps to ensure that we keep pace with our global rivals.
Many San Diego companies are leaders in creating game-changing products, such as Qualcomm’s CDMA wireless technology and Hybritech’s Tandem PSA Assay (for detection of prostate cancer). What many companies are less skilled at is how to make process and incremental improvements in the design, production, distribution and servicing of these innovative products.
The report, written by Dan Breznitz, associate professor of the College of Management and the Sam Nunn School of International Affairs at Georgia Institute of Technology, and Peter Cowhey, dean of the School of International Relations and Pacific Studies, UC San Diego, has four key recommendations.
- Firms need to fund and share assets such as electronics testing equipment that is too expensive for an individual company to purchase.
- New networking organizations and problem-solving teams focused on process and manufacturing innovation need to be organized. San Diego has a large number of organizations such as CONNECT, CommNexus and Biocom that are currently primarily focused on product innovation.
- Encourage the development of flexible business models. For example, look at ways to use crowd funding for finance.
- Promote the establishment of specialized financial institutions that have the expertise to assess risk and develop appropriate lending models.
Like the rest of the U.S., San Diego’s manufacturing employment has declined, going from 113,900 (9.25 percent of the total nonfarm public and private workforce) in April 2002 to 90,600 (7.31 percent of the workforce) 10 years later, according to data from the National University System Institute for Policy Research. Increasing this number is an important part of improving the San Diego economy, and the private sector can take steps to make it happen.
We talked with three San Diego manufacturing-sector CEOs who contend that “local” is a better solution for many companies.
“Businesses should include quotes from San Diego contracted manufacturers in the analysis of their options to get a more complete and accurate picture, and in many cases the local pricing is the lowest,” said Ted Fogliani, CEO, Outsource Manufacturing, a local contract manufacturer.
Of course, workers with the right skills are essential. “We need a more robust source of midlevel technical talent, including experienced electronics technicians, manufacturing engineers and test engineers. The private technical schools focus more on teaching students how to fix PCs and trouble-shoot networks but don’t do an adequate job in preparing graduates for positions in high-tech companies where they need to know basic principles of electronics and embedded hardware/software troubleshooting,” said Brian Kelleher, CEO, BIT MedTech, a contract manufacturer focused on medical equipment.
The shared-equipment concept is significant. “Test equipment for wireless technologies is very expensive, costing as much as $500,000 for a single piece of equipment. The capital investment for a small to midsize company is prohibitive if you want to build out a lab that supports wirelessly enabled products,” said Jim Caraccio, VP and general manager, West Coast operations, Logic PD, which designs products and develops manufacturing plans.
CONNECT plans to take a leadership role in implementing the recommendations, said Duane Roth, CEO, CONNECT, starting with expansion of the “near sourcing” program that is led by a Steering Committee of Production Cluster CEOs, the East County Economic Development Corp. that owns and operates the Connectory (a database of 5,600 local production companies), and the San Diego Regional Economic Development Corp. Other initiatives include launching a “look near first” education and marketing campaign, holding workshops on the benefits of near sourcing and the capabilities of our local production cluster, and matchmaking sessions between San Diego “innovation” and production companies.
Neil Senturia and Barbara Bry, serial entrepreneurs who invest in early-stage technology companies, take turns in writing this weekly column about entrepreneurship in San Diego. Please email ideas to Barbara at [email protected]