“Any time you give the means of production to everybody, it changes the world.” Chris Anderson, CEO of 3D Robotics
So it goes with the Maker Economy – otherwise referred to as the Maker Movement. According to Industry Analyst Jeremiah Owyang, the Maker Movement puts power in the hands of people to fund, design, prototype, produce, manufacture, distribute, market, and sell their own goods. According to youth market research firm Ypulse, 69% of millennials wish they could create a new product, and 81% would be interested in helping a company design one. This shift in production also shifts power from large, capital intensive enterprises to individual prosumers. As the focus on a next economy increases, so does the likelihood that it is driven by networks of prosumers versus large corporations.
This movement is not a future movement. According to the Infographic below, 135 million makers in America are already growing local economies and creating new jobs – contributing 18 million small businesses in the U.S. and accounting for two out of every three new jobs. When viewed through the lens of 3D Printing Forecasts, the future looks bright as well. One such forecast has the 3D Printing Industry becoming a $16 billion global industry within the next five years, with a 45.7 CAGR. It is also reviving the hardware sector, as VCs pumped $848 million into hardware start-ups in 2013 – nearly twice the prior record of $442 million set in 2012.
As a result of this movement, millions of workers are supporting themselves by starting micro-businesses and Redefining Entrepreneurship in the process. The micro-business sector is typically defined as businesses that employ fewer than five people and require little start-up capital. This trend describes larger shifts in the economy, most notably the recent dramatic increase in flexible work, peer-to-peer businesses, and a declining middle class – which has shrunk to an all-time low according to a September 2012 U.S. Census report. Etsy – a marketplace where people around the world connect to buy and sell unique goods – reflects these growing trends. Just 26% of Etsy sellers are full-time employees, while 48% are independent, part time, or temporary workers. These sellers combine income from traditional jobs and their Etsy efforts to make a living. As the middle class continues to decline, the Maker Economy represents new opportunities to bolster it through micro-businesses.
This disruptive scenario is driven by several market dynamics. According to a recent article on the big changes driving the Maker Movement, new products and services that capture the public’s imagination can become overnight successes. By unlocking the means of production, the emerging environment allows individual makers to compete and succeed against traditional companies. Access to this environment allows ideas to become tangible, enabling large portions of society to manifest them. The notion of creativity becoming tangible is a powerful one. As possibilities are seen and touched, it helps to envision the art of the possible. This more physical method of thinking and communicating ideas has the potential to spur innovation to exciting new heights – but it also challenges the traditional company to keep pace. Like every disruptive scenario assessed through this recent Blog series, there are massive implications that drive the need to analyze the scenario and formulate a set of responses.
The Maker Economy is one of several disruptive scenarios in our line of sight. An additional challenge becomes very apparent when you look across this growing set of disruptive scenarios – they impact each other. This will force companies to view relevant disruptive scenarios holistically, while effectively connecting the dots between scenarios. For example, the Smart City scenario intersects with the maker movement to create a differentiated environment that attracts talent.
So what are the Maker Economy implications and possible responses? A recent report published by Deloitte captures the Impact of the Maker Movement across several industries, and presents several possible responses. Here are some key findings from the reports synopsis of the Maker Impact Summit held in December of 2013:
- The maker ecosystem will disrupt today’s large enterprise
- Mass customization is the future, as makers and consumers define what they want vs. companies defining what they can buy
- Public interest and engagement in science flourishes, as consumer technology creates a scientific platform
- Distributed production via smaller entities will likely integrate with the scale of larger entities
- Experimentation is the key to innovation, and it requires relaxing constraints and making it possible to fail – a key Digital Enterprise Characteristic and crucial to future viability
- Traditional employment may decline as work is organized primarily around projects versus job titles
- Small businesses will no longer require scale to be viable. Scale operations will continue to have a role, but will largely use automated, robotic production rather than labor
- A greater portion of labor or value creation will reside in the personalization component. Local personalized production is valued and can be done affordably at smaller scale
- Ecosystem participants combine and recombine as necessary to exchange skills, capital, and learning, creating a resilient and agile networked structure that enables the distribution of activities including innovation and production
- Successful large enterprises of the future will find ways to create scale for maker ecosystems by providing infrastructure services or platforms
- Fragmented, small businesses need logistics, design tools, digital infrastructure, financing, and marketplaces – which requires large scale providers
One of my key learnings through analysis and executive dialog is that scenario analysis takes too narrow a focus. The broad implications of a particular scenario are underestimated, limited in part by our traditional views of an industry or business. As discussed in the past, all boundaries are blurring, as the reach of each scenario is broadening. Risk and opportunity are therefore missed if the lens is not wide enough. Let’s look at possible broad implications of the Maker Economy across multiple industries.
Consumers demand customization across a growing number of product segments, increasing that portion of the market and eroding the mass produced portion. More people in more places can prototype new products, and Maker businesses gain market share as they rapidly test, adapt, and customize for specific niches. As a result, distributed small scale manufacturing disrupts large scale manufacturers and their traditional infrastructure optimized for long run batches. Additional implications include:
- Components that require localization or customization are manufactured in smaller scale, distributed facilities, as access to low cost manufacturing makes small production more economical and viable
- Businesses with broad portfolios are forced to learn and manage both long and short run manufacturing models
- Product production companies see a decline in production and sales
- Centralized manufacturing firms are restructured, as assembly functions move closer to the consumer
- Demand for manufacturing-related expertise rises as maker businesses scale
- Certain industries trend toward shorter product cycles (e.g., electronics, clothing, jewelry, home furnishing, etc.), driving the need to learn from rapid prototyping and designing
- A distributed model also emerges in larger and higher cost consumer goods like home appliances and cars
Big Box Retail is likely impacted by a shift to online platforms and a physical resurgence of mom and pop shops, while supply chains specialized for high volume and long lead markets are disrupted. Small scale production drives the need for a more flexible supply chain that handles various volumes and accommodates a different level of variability in niche product inventories. Driven by demand for customization, Retailers are forced to adapt to local tastes and co-create with customers. Additional implications include:
- Small business becomes an alternative to large retailers, as enabling platforms lower barriers, while social media provides awareness and discovery
- New sharing platforms may further change how consumers, creators, and Retailers interact
- The existing physical Retail infrastructure is forced to evolve, as businesses of all sizes try to meet demand for personalized products
- The addressable market for traditional mass production Retailers declines, as more consumers recycle, reuse, share, and reconfigure products
The liability landscape shifts as the Maker Economy drives new risks. Additive manufacturing introduces insurance risk centered on issues of design and intellectual property, raw material quality, untested material combinations, product and employee liability risks, and jurisdiction for products that are distributed across borders. Analysis by Zurich points to risk scenarios that include accidental injury or damage caused by 3D printed products, recall insurance and respiratory issues for employees dealing with the powder used in printing. Additional implications include:
- Understanding where responsibility lies to underwrite risk
- 3D printing technology increases exposure to IP infringements
- Property risks may also increase, as 3D Printing requires heat, thereby increasing fire hazards
- If you shoot somebody with a 3D plastic gun, who is responsible? The designer? The maker of the printer? The material supplier? The consumer who makes the gun?
- Powder-based 3D printers release small particles into the air, which may raise the level of pollution and workers compensation/employer liability issues
- Will a building made with 3D-printed parts be as durable as a structure built by conventional means? Will it comply with municipal building codes and safety regulations?
- An automobile owner that prints a new car engine may increase the risk of damages if the engine is faulty or improperly installed, driving a safety exposure on both the property and liability fronts
Commercial food production companies see an increased liability risk, driven by the ability to use new and untested food processing methods. Materials used during the processing of 3D-printed food, such as printer plastics or metals, could potentially seep into the food and cause unforeseen health risks and exposures. The number of complaints about the substitution, tampering, or misrepresentation of food or food packaging (food fraud) for economic gain, may also evolve with respect to 3D-printed food.
In a world where creativity and design are critical to success at every level, education quickly comes to the fore. The Maker Economy disrupts traditional education institutions, as the focus of learning shifts to experience-based learning and practice versus theory. The new education model focuses on values often undermined by traditional education, becoming more hands on to nurture the key characteristics of experimentation. An ecosystem for learners is thereby created that facilitates collaboration and knowledge share, allowing individuals to create educational experiences tailored to their own needs. Additional implications include:
- Learning becomes a lifetime journey to continually develop new skills and capabilities
- The shift in learning focus from physical outcome or product created to the creation process is highly disruptive
- Learning through self-directed experimentation drives teachers to release control over student learning and embrace the role of guide and facilitator rather than authority
- Government and Public Policy – The Maker Movement drives changes in government policy at all levels, as existing policies were established for the large corporate world
- Legal: The Maker economy prompts an increase in patent and intellectual property lawsuits
- Healthcare: The healthcare industry is negatively affected by the do-it-yourself person that uses a 3D printer to manufacture traditional products, such as a cast or prescription medications
Given the implications of the Maker economy, companies will either proactively (preferred) or reactively generate appropriate responses. Every business across every industry must get comfortable experimenting with different approaches and learning from failures in order to create viable models. Let’s take a look at some possible responses to these broad Maker Economy implications across multiple sectors:
- Specialized retailers emerge to help curate products to meet specific niche needs
- Retailers deploy new models to serve the changing needs and preferences of consumers
- Retailers accommodate the shifting dynamics of a diverse supply chain
- Retailers experiment with engagement models that enable collaboration with the maker ecosystem and foster connections between local communities of makers and buyers
- Retailers use maker businesses to help consumers define options and make purchasing decisions
- Retailers invite maker businesses into their stores to provide a physical presence
- Retailers create sustainable models for showcasing niche products
- Education institutions support lifetime learning by becoming talent development agents and providing infrastructure to learning ecosystems
- Education institutions meet employment needs by focusing on the process of trying, failing and rapidly iterating in order to improve the learners creativity and design skills
- Manufacturers leverage the Maker Movement to return production to the U.S from offshore sources
- Large companies increasingly provide platforms to create and support ecosystems for makers
- Platform providers deliver market accelerators that help maker businesses rapidly prototype
- Ecosystem apprenticeship models emerge to overcome the gap in manufacturing literacy and design skills
- Cities establish centers of excellence that draw talent, enable small business, reskill the workforce to offset technology-driven job loss, and create a compelling platform for civic engagement
- Large corporations add makers to their innovation teams
- Local communities create vibrant ecosystems that leverage limited resources, create more jobs, grow businesses, and stimulate commercial output
- Current governing regulations, costs, risks and cost-benefit analysis will be re-examined to drive a rebirth of US manufacturing
- Facilities that serve niche and small run production develop specialized skills and techniques
- Digital platforms emerge to make coordination of a supply chain of smaller suppliers easier
These are just a handful of potential responses gleaned from executive dialog and the various sources referenced in this post. The Maker Economy as a disruptive scenario is very disruptive – but when it intersects with other disruptive scenarios, the impact takes on a multiplicative affect. To reiterate, it does not suffice to view these disruptive scenarios in isolation. Much like the combination of digital forces is increasing the pace of innovation, so too will these disruptive scenarios combine to accelerate disruption. As if the challenge wasn’t onerous enough, the combinatorial nature of our current environment complicates things further. That wraps up this look at the Maker Economy.