Making Value Instead of Making Things: Important Lessons for America

March 17, 2014

Cover image Making Value for AmericaGlobalization, developments in technology, and new business models are changing the way products and services are conceived, designed, produced, and distributed around the world. These forces are also transforming work and operations in manufacturing. Increasingly, business is not simply about “making things” but about “making value.” Making value is the process of using ingenuity to convert resources into a good, service, or process that contributes additional value to a person or a society.

A new report published by the National Academy of Engineering, Making Value for America: Embracing the Future of Manufacturing, Technology, and Work, examines these changes and offers recommendations for government, industry, and education institutions to help ensure that the U.S. and the companies that operate here thrive amid global economic and technological changes.

How can civil engineers benefit from this focus on making value?

The concept of making value is an effective way to examine the success and failure of individuals, businesses, communities, and nations. Consider, for example, the fate of Kodak and Fujifilm. For decades Kodak and Fujifilm created products – mainly film and the materials needed to develop it – that had great value for individuals and society. But the rise of digital photography changed the value that film had for people, and if the companies were to continue to thrive, they had to find new ways to make value. Kodak and Fujifilm responded to this challenge in different ways, with very different results.

Throughout the 1970s and 80s, Kodak increased its focus on film and either exited or failed to enter other areas that could have helped it adapt to the coming crash of the film market. As digital photography continued to rise, the company experimented with products to augment its film business, but nothing developed into a major market. After filing for bankruptcy in 2012, Kodak shed many of its product lines and emerged in 2013 as a much smaller firm. Kodak’s decline had damaging economic effects on its home city of Rochester, New York, as the number of people employed by the company dropped from 62,000 in the 1980s to fewer than 7,000 in 2012.

In contrast, Fujifilm moved much more decisively into different product lines. It harnessed its expertise in dealing with the antioxidant chemicals used in photography to develop antioxidants for cosmetics. And it developed optical films for use with flat-panel screens. Fujifilm became so accomplished at developing new technologies that in 2012 and 2013 Thomson Reuters named it one of the 100 most innovative companies in the world. The company remains strong and profitable, even though film now accounts for only a tiny percentage of its sales.

It is not only companies that fare better or worse depending on how well they succeed in making value, but also individuals, communities, states, and nations. Consider North Carolina, which had to find new ways to make value when its textile and tobacco industries relocated many jobs overseas. Instead of stagnating, the state has been generating new high-tech jobs in analytics, electronics, and pharmaceuticals. In a sense, the state had been preparing for this transition since the 1950s, when it established Research Triangle Park to foster innovation in the region. Local government worked with industry and academia to create an environment for innovation that could attract high-tech companies and take advantage of the crop of talented students graduating from nearby universities. Now the Research Triangle area is home to a rapidly growing number of companies making electronics components, designing software, and developing nanomanufacturing techniques.

This is an important lesson for Americans to keep in mind today, as the economy faces a number of disruptive changes. Advances in technology and changing business practices in manufacturing and across the economy are continuing to reshape the labor market in dramatic ways. Automation and streamlined operations are likely to supplant an increasing number of workers in a variety of occupations. The effects on society could be severe unless new types of jobs are created to replace the ones that have been lost. By some estimates, up to 50 percent of U.S. jobs are at risk. Meanwhile, increased globalization and the development of emerging economies have intensified competition. While U.S.-based businesses remain among the best in the world in terms of research and output of many high-tech manufactured goods and services, several other countries are catching up quickly.

The same forces that are causing these disruptions – technological advances, reorganized business processes, and shifts in growth throughout the global economy – also open up new and exciting opportunities for making value. Even as technological advances eliminate some jobs, they create others and offer companies new ways to understand their customers’ needs and increase the demand for their products in response. Emerging economies offer not just competition but also new markets for U.S. exports.

The individuals, companies, and countries that understand these changes and act on them—responding to the challenges they present, and taking advantages of the opportunities they offer—will be the ones most able to prosper in the 21st century. Businesses can take individual actions—by adopting best practices to improve innovation and productivity, by training their workforces, and by examining their business models to identify ways to add value. Communities, governments, and education institutions also have roles to play. By improving the skills of current and future workers, strengthening local innovation networks, and encouraging the long-term investments that lead to new products and businesses, they can help ensure that the United States thrives amid increasing technological and economic change and remains a leading environment for innovation.

Photo of Dr. John TracyDr. John J. Tracy is chief technology officer of The Boeing Company and senior vice president of Engineering, Operations & Technology. He reports to Boeing Chairman and CEO Jim McNerney. Tracy is a Member of the National Academy of Engineering and is a Fellow of the American Institute of Aeronautics and Astronautics (AIAA), the Royal Aeronautical Society, and the American Society of Mechanical Engineers (ASME). He has authored more than 35 publications in the areas of composite structural mechanics, launch vehicle structures, smart structures, and aging aircraft. Tracy received a PhD in Engineering (1987) from the Civil Engineering Department at the University of California-Irvine.
Photo of Dr. Kate WhitefootDr. Kate S. Whitefoot is a senior program officer and the Robert A. Pritzker fellow at the National Academy of Engineering. In this capacity, she directs the NAE’s portfolio of programs on Manufacturing, Design, and Innovation, conceptualizing and managing studies on technology change and its impact on manufacturing and high-tech industries and implications for labor markets, the environment, and innovation and education policy. Whitefoot co-edited the NAE report on Making Value for America: Embracing the future of manufacturing, technology, and work. She has also published several studies analyzing the influence of energy policies on manufacturers’ product design decisions and consequent environmental impacts. Whitefoot received three degrees from the University of Michigan: a BS and MS in Mechanical Engineering and a PhD in Design Science with a concentration in mechanical engineering design and industrial organization economics.
1 Comment
  • It is a nice article. I live in Tokyo. Now, in Japan, due to aging population, many civil works does not have enough workers. So, they develop many automation in many aspect. We can say robot has done a lot of things. It is really not good for business when Japan export this technology perhaps US. Only few workers are needed to build a bridges.

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