Small Business Labs

Fab Labs, Maker Spaces and the 3rd Digital Revolution

A new book, Designing Reality, argues we're entering the 3rd digital revolution, which the authors say is based on new fabrication techniques and technologies. 

In case you were wondering, the book says the first two digital revolutions were computing and communications.

The 3rd revolution is being driven by a combination of computer aided design tools linked to a variety of fabrication technologies including laser cutters, NC milling machines and, of course, 3D printers.

The authors are three brothers including Neil Gershenfeld, who runs the Center for Bits and Atoms at MIT.

The center studies "how to turn data into things, and things into data." 

Gershenfeld is also a founder of the Fab Foundation, which supports a global network of over 1000 Fab Labs.

These are makerspaces focused on educating members on digital fabrication. They are located primarily in schools, libraries,museums and other public spaces.

The book lays out a future where in the next decade fabrication stores will be located in most communities. Think FedEx Office/Kinko's, but for making physical goods.

Twenty years or so into the future the book suggests homes with a digital fabricator will be common. And in 30 years or so most homes will have multiple digital fabricators, fulfilling Star Trek's vision of the replicator. 

While this vision may or may not come to pass, what is happening is the number of global  fab labs and makerspaces is rapidly growing. 

We've long studied these coworking spaces for making things and our 2009 study on the maker movement is one of our favorite research projects. 

So while a Star Trek like replicator is probably decades away, fab labs and makerspaces are changing how things are made today. They're also creating new, small business manufacturing opportunities.

Are Makers the Future of Small Manufacturing?

The National League of Cities recently released Discover Your City's Maker Economy, a report that "provides a roadmap for cities to develop policies, programs and a culture that better supports local maker businesses."

The thrust of the report is that "maker-entrepreneurs" -  individuals or micro-businesses who create (either by design or fabrication) and sell tangible products - are potentially the future of manufacturing. 

The report also suggests the maker movement can drive employment opportunities and provide more inclusive access to entrepreneurship. 

This echos a report earlier this year from the Brookings Institution. It too says the maker movement could be the future of manufacturing and describes it as:

 "a deeply American source of decentralized creativity for rebuilding America’s thinning manufacturing ecosystems."

Brookings concludes by saying:

“By embracing the do-it-yourself ethos of the maker movement, communities across the country can renew a sense of local community and help rebuild American manufacturing from the ground up.

The recent article Economy of Scale: Can the Maker Movement Revive U.S. Manufacturing?, from AB Architecture, also covers this ground. 

The article chart below provide some interesting data on the growth of maker entrepreneurs. 

    

We've long covered the growing maker movement and "maker-entrepreneurs".  It's one of the most interesting industrial sectors we follow.

So we certainly agree there's a lot of potential for growth from this sector. 

3D Printing Moving Past Prototyping to Large Batch Manufacturing

After literally several decades of hype and hope, it appears 3D printing may finally be starting to deliver on its promise to change manufacturing.

The shortcomings for 3D printing have been they aren't economical for large scale manufacturing, they don't produce parts as strong or reliable as traditional manufacturing methods and they are limited by the types of material they are able to use.

In particular, 3D printers have not been good at printing metal parts. 

All three of these shortcomings are rapidly changing. 

One example is Voodoo Manufacturing. 

They've created a network of 160 3D printers that is able to produce parts fast and cheap, at prices competitive with traditional injection molding in order quantities up to 10,000 pieces. They expect to be competitive with injection molding on up to 100,000 pieces in the near future. 

This is a big shift. Up until very recently 3D printers were only cost effective for small batches of 500 pieces or less. 

Another 3d Printing company, Carbon 3D, has developed a 3D printing technology that matches the strength and reliability of parts made using injection molding. 

Carbon also claims the ability to do larger scale production manufacturing.

And Desktop Metal claims their 3D printers can fabricate metal parts cheaply and quickly enough to make the technology practical for widespread use in product design and manufacturing.

Investors clearly believe in these companies. Both Carbon and Desktop Metal have raised over $200 million in venture backing. 

The elite strategy consulting firm BCG also thinks 3D printing is about to take off. Key quote from their article How to Position Your Company in the 3D Value Chain:

In 2015, the entire 3D-printing market—which includes products made from plastics, ceramics, and metals—totaled $5 billion. BCG expects this market to triple by 2020 ... and reach $350 billion by 2035.

Small manufacturing companies and Makers have long been active users of 3D printers.

And just as desktop publishing and desktop movie editing systems enabled the growth of small and solo media and entertainment firms, 3D printing will drive the growth of small and solo manufacturing firms.

Manufacturing Joining the On-Demand, Collaborative Economy

Estimates are that most manufacturing equipment in the U.S. sits idle about 50% of the time.

So comes as no surprise several companies are trying to become the "Uber of manufacturing" by creating online marketplaces to connect customers who need parts made with companies who have spare manufacturing capacity. 

The Quartz article An Uber model for manufacturing is ready to upend the industry covers the distributed manufacturing company MakeTime. Key quote:

Under a model known as distributed or on-demand manufacturing, MakeTime is meeting small businesses’ manufacturing needs in much the same way Uber meets the needs of passengers looking for rides. Companies, entrepreneurs, and inventors can rent time on nearby equipment, be it CNC milling machines, water jets, or laser cutters—any of which can cost from $50,000 to $250,000 apiece to purchase.

MakeTime's tagline is "Your Supply Chain in the Cloud".

MakeTime, of course, isn't the only company offering this type of online marketplace.

Xometry (tagline: Manufacturing on Demand) has an online platform connecting small to medium sized manufacturers with customers in a wide range of industries. They claim to have over 4,000 customers and manufacturing partners in 35 states. They recently raised $23 million from GE Ventures and VC firm Highland Capital. 

The process is similar with both firms. Customers upload CAD drawings and pertinent information such as preferred materials, tolerances and quantity required. Manufacturing firms then bid on the projects. 

According to both companies, this saves time and money compared to traditional outsourcing options.

More broadly, this is another example of shift to variable costs. Instead of owning their production equipment - which is a fixed cost  - more firms are looking for ways to buy parts on a variable cost basis.

For the buyers, this increases business agility and flexibility while also reducing the need for capital. For the manufacturing firms, this increases their efficiency. 

As we said in a recent article, we consider the shift to variable cost business models to be one of the major megatrends of the new economy. Key quote on the switch to variable costs:

It's a driver in the growth of sharing and gig economy firms like Airbnb and Uber, it's a major reason businesses large and small are increasing their use of contingent labor, it's one reason there are more online only businesses, including restaurants and it's the main driver behind the rise of platforms, ecosystems and cloud computing.  

Despite its importance, the shift to variable cost business models get little attention. We think this is because it's a fairly wonky topic. Also, few people get excited about accounting concepts. 

It's also having a major social impacts. Again from our prior article:

... it's driving a lot of change, and not just business change. 

Consumers are also avoiding fixed costs and long term commitments. They're delaying or not opting for marriage and kids, they're renting instead of buying homes and they're reducing or delaying large purchases of all kinds, and they're even choosing pets over children.

The shift to variable costs is covered in more detail in 2016 Intuit Future of Small Business Dispatch From the New Economy. 

Desktop Tools Driving the Growth of Small and Solopreneur Manufacturing

3D printers get all the press.

But there are a growing number of other manufacturing tools and equipment democratizing manufacturing and enabling small and even solopreneur manufacturing companies.

Kickstarter's article Future Fab Lab and More at the 2016 World Maker Faire covers some of the more interesting of these tools. 

Wazer, for example, is a desktop waterjet cutter. It can cut through most any material, allowing industrial grade shaping of metal and stone. 

Wazer costs under $5,000, which is dramatically less than the $100,000 + cost of most industrial waterjet cutters.

Mr. Beam is a desktop laser cutter and engraver. It can be used to cut through materials like wood, fabric and cardboard or for engraving on most any material.

It costs around $3,000, which is again substantially cheaper than most machines of this type.

FormBox is a vacuum former that's used to shape plastic. One of the cooler aspects of this product is it uses a vacuum cleaner to draw the suction power it needs.

Formbox starts at under $500.

We covered the growing number of solopreneur manufacturing companies earlier this year. These numbers will only increase as tools like those shown above become even cheaper and more capable.

For more on this topic, see our Small Manufacturing section.

The Rise of Solopreneur Manufacturing Companies

The Wall Street Journal's Big Growth in Tiny Businesses nicely covers a trend we'e been following for years - the growth of solopreneur, non-employer manufacturing businesses.

Key quote:

"The number of businesses classified as manufacturers with no employees has been rising steadily since the depths of the recession. The tiny operations often make food, craft beer, toiletries or other niche products. Their growth stands out in a sector that has been shedding workers for decades."

As the chart below shows (click to enlarge), there were about 350,000 manufacturing firms with no employees other than the owner in 2014, up almost 17% from 2004.

During the same period the number of U.S. manufacturing establishments with employees declined by 12%, to about 293,000. 

Growing numbers of solopreneur manufacturing companies is part of the broader trend towards more solopreneur businesses in general.

There are a number of drivers of this trend, including a shift to contract workers instead of traditional employees. 

We've been tracking these "employee free" solopreneur businesses for the past 5 years through the MBO Partners State of Independence in America study series. In 2016 we found that there are about 5.4 million U.S. solopreneur businesses that use contract labor instead of hiring traditional employees.

We also found these firms spent about $95 billion hiring other independents over the past year. This is the equivalent of hiring about 2.3 million full-time workers.

The recently released U.S Federal Reserve study 2015 Small Business Credit Survey: Report on Non-Employer Firms also found a high rate of contract worker usage by non-employers.

The Fed study found 32% of all non-employer businesses surveyed use contract labor and almost half of non-employers with revenue greater than $100,000 use contract labor.

In our opinion the growth in the use of contract labor by non-employer, solopreneur businesses is one of the most important and least understood economic trends. 

The reason is non-employer firms are not included in most small business studies, many of which are finding entrepreneurship is in decline in America. 

But if non-employer businesses who use contract labor were included in these studies - and we believe they should be - the findings would be that entrepreneurship is the strongest it's been in decades. 

We'll have more on this topic in the near future.

Key Smart Manufacturing Technologies

"Smart manufacturing is in the midst of transforming the global manufacturing economy" according to the Information Technology and Innovation Foundation (ITIF).

In their report A Policy Maker's Guide to Smart Manufacturing they go on to say:

The digitalization of manufacturing will transform how products are designed, fabricated, used, operated, and serviced post-sale, as much as it will transform the operations, processes, and energy footprint of factories and the management of manufacturing supply chains.

They see this as changing the competitive landscape of of manufacturing industries by reducing the relative competitive advantage of low-wage nations. This means higher labor cost nations, like the U.S., could see stronger manufacturing growth through the use of smart manufacturing technologies.

The report nicely describes the key smart manufacturing technologies. These are:

Sensor Technologies: Sensors embedded within devices, machines, and products themselves measure everything from output, consumption, wear, and capacity to salient operating conditions such as temperature, humidity, and electrical flow. Sensors play a key role in creating the information streams upon which smart manufacturing techniques rely.

Wireless Connectivity: Smart manufacturing requires wireless connectivity to join the wide variety of sensors, actuators, and robotics to analytics or control platforms.

Data Analytics: The ability to effectively analyze the massive amounts of data generated by individual plants, entire factories, whole supply chains, and the manufactured products themselves is vital for the vision of smart manufacturing to be realized.

Generative Design: A design technique that mimics nature’s evolutionary approach to design, in which designers or engineers input design goals into generative design software, along with parameters such as materials, manufacturing methods, and cost constraints, and the software algorithmically explores all possible permutations of a design solution. We used to call this biomimicry.

Computer-Aided Design (CAD): Refers to the use of computer systems to aid in the creation, modification, analysis, or optimization of designs of parts, final products, and even entire production systems or factory environments.

Advanced Robotics: The next generation of industrial robots that are far cheaper and which are reprogrammable and thus not dedicated to a single specific task and as such are much more flexible and versatile.

We're a little surprised 3D printing didn't make their list. But it's getting plenty of PR these days, so it probably didn't need to be included.

Digitalization is impacting all industries at this point. It's also democratizing most industries and allowing even one person companies to compete in ways only giant corporations could have only a few years ago.

As we cover in our small manufacturing section, these new technologies are creating vast opportunities for small manufacturing firms.

Like Coworking, Makerspaces Rapidly Growing in Numbers

There are about 1400 makerspaces around the world. This up from only about 30-40 as recently as 2006. 

This data is from Popular Science's BY THE NUMBERS: THE RISE OF THE MAKERSPACE. The article came out last February (we're behind in our reading). 

Key quote describing makerspaces:

Also called hackerspaces or innovation labs, these establishments act as communal workshops where makers can share ideas and tools. They can pop up anywhere, including in schools, libraries, and community centers. Different locations offer different resources, ranging from 3D printers to synthetic biology kits.

If you've never been to a makerspace, you should go. They are a lot of fun. 

The chart below is from the article (click to enlarge).

We've long tracked the maker movement and the rise of makerspaces. Our 2009 study on the maker movement is our 2nd favorite study (our food truck studies come in first).  Tracking makerspaces is part of our ongoing coworking research project. 

Nanotechnology and the "Golden Age" of Materials

The Economist's New Materials for Manufacturing covers what it calls the "golden age" of materials. Key quote on what this means:

New, high-performing substances such as exotic alloys and superstrong composites are emerging; “smart” materials can remember their shape, repair themselves or assemble themselves into components. Little structures that change the way something responds to light or sound can be used to turn a material into a “metamaterial” with very different properties ... The result is a flood of new substances and new ideas for ways of using them to make old things better—and new things which have never been made before.

Most of these materials are developed using some form of nanotechnology, which is science, engineering, and technology conducted at the nanoscale - generally defined as sizes ranging from 1 to 100 nanometers.

This, of course, raises the question "what is a nanometer?".

The answer is one nanometer is a billionth of a meter, or 10^-9 of a meter. Examples:

• There are 25,400,000 nanometers in an inch
• A sheet of newspaper is about 100,000 nanometers thick

What makes working with nanoscale materials so exciting is the properties of the materials change significantly from those at larger scales.

At nanoscale, quantum effects rule the behavior and properties of materials. This gives many nano materials unique and useful physical, chemical, mechanical or optical characteristics (see How Nanotechnology Works for a fairly simple explanation).

A good example is the composite material carbon fiber. The Economist nicely describes how this is made.

The material is made from thin filaments of carbon woven into a cloth. This is cut and pressed into the shape of a part and the fibres bound together with a plastic resin, cured by heat and pressure. The molecular structure of carbon compounds produces strong chemical bonds, much like those in diamonds, and by aligning the fibres at different angles the strength of a component can be reinforced exactly where needed.

The result is a material that is stronger than steel, yet 50% lighter. It also doesn't corrode. 

Carbon fiber is already widely used in newer aircraft. For example, it makes up about half the weight of the Boeing 787 Dreamliner. But the cost and time required to make carbon fiber has limited its use until recently. 

New manufacturing methods have cut the costs and it's now starting to be widely used in cars and other applications. As the article chart below shows, auto industry use of carbon fiber is expected to grow quite rapidly over the next couple of years.

NPR also covers some interesting applications of nanotechology and nano materials in their article The Future Of Nanotechnology And Computers So Small You Can Swallow Them.

A wide range of technologies are fundamentally changing manufacturing. We'll be diving deeper on this topic in the new year with a focus on what this means for small manufacturing firms.

Merging Machines and Analytics with the Internet of Things

GE, the large industrial conglomerate, is re-positioning itself as a digital company.

Their recent ads describe GE as an "indugital" and "digidustrial" company. And yes, I agree these marketing efforts are still a work in progress.

They've coined the term "The industrial Internet" to describe their efforts and market. This is basically a new name for The Internet of Things (IoT), a term coined in the late 1990's and defined by Wikipedia as:

... the network of physical objects or "things" embedded with electronics, software, sensors and network connectivity, which enables these objects to collect and exchange data. 

GE sees huge opportunities in this space, particularly by "merging machines and analytics".

According to their Industrial Internet Insights report spending on the Industrial Internet is forecast to reach $500 billion by 2020 and they say the Industrial Internet could add up to $15 trillion of global GDP by 2030.

They're not the only ones thinking this way. According to CB Insights funding of IoT startups has more than doubled over the past 5 years -  from $768M in 2010 to over $1.9B in 2014.

We agree The Industrial Internet/The Internet of Things is a huge opportunity. We even (disclosure) own GE stock as well as stock in several other IoT private and public companies.

We also think the Internet of Things will create new opportunities for small businesses.

We recently partnered with Intuit on a forecast of cloud application use by small businesses. The Intuit chart below shows the average number of cloud applications used by SMBs growing from 3.1 in 2015 to 8.2 in 2020.

One of the drivers of this growth is the Internet of Things.

In particular, we think small businesses will benefit greatly from the IoT by adding applications specifically designed to help them collect, analyze and use operational data to improve their productivity and efficiency. 

We've posted in the past about the Internet of Things finally starting to reach its long forecasted potential. We continue to believe this is correct.