(This column originally appeared on June 21, 2016 in Forbes)
When someone says manufacturing, what’s the first image that comes to mind? Detroit? The rust belt? A big smelly factory? Greasy hands and a whistle blowing at 5:00? I bet you didn’t think of palm trees and beaches. But Monday, President Obama announced that Los Angeles would receive $140 million of public and private funding to build the Smart Manufacturing Innovation Institute.
In case you are scratching your head over what business the Southland has running such an institute, you’d probably be surprised that Los Angeles is the largest manufacturing center in the country. In fact, the metro area employs more than half a million people making just about anything, from packaged food and designer jeans to rocket ships and biomedical devices.
Who would have guessed that the home of Hollywood employs four times as many people in manufacturing than in film and television, and more than all the creative industries combined? This fact is why—when I joined L.A. Mayor Eric Garcetti’s team as Entrepreneur-in-Residence—I embarked on a year-long study to better understand the manufacturing ecosystem.
How can an industry of such staggering size get so little attention? There must be some undiscovered opportunities in there somewhere. And I am excited to share for the first time some of the high level findings from our recent MAKE IT IN LA Study.
Over the last year, we surveyed 1,600 businesses in L.A. County, did GIS analysis of 30,000 local companies self-reporting as manufacturers, hosted roundtables and CEO focus groups, interviewed about 100 leaders and hosted an urban manufacturing summit. Thanks to generous support from Dun & Bradstreet, the LA Chamber of Commerce and other partners, we were able to get a deeper glimpse into what makes the manufacturing ecosystem of LA tick. The study identified many opportunities, and many of the results are available on our website, launched today, in the form of cool interactive maps and charts. I’m eager to share two of those key findings here.
Excess capacity means opportunity.
One of our most surprising findings was that 58% of manufacturers reported excess production capacity. That means that more than half of our manufacturers have their factory floor sitting idle part of the time.
Meanwhile, local companies are interested in sourcing more locally; 86% of companies that are sourcing products and services already do some sourcing locally, and the majority of all companies expressed an interest in doing more. Meanwhile 42% of all businesses projected an increase in sourcing needs in the coming year. All of these businesses could be a source of growth for local manufacturers if we could better connect customers with suppliers.
There has been a recent drive to create technology platforms to help with this. Companies like BriteHub, Makers Row, Syncfab, Connectory and the Etsy Manufacturing initiative are all trying to connect designers and entrepreneurs with domestic contract manufacturers.
But we found through focus groups and follow-on surveys that manufacturers value face-to-face relationships. And while some industries like aerospace are familiar with contract manufacturing, many companies haven’t done it yet—but they want to learn more. There is a great need and opportunity to connect and inform the whole ecosystem at a local level.
Entrepreneurship drives manufacturing.
The image of an entrepreneur has increasingly been driven by a stereotype of a young white male coding a social media app or running a newly formed venture-backed tech company. Yet most entrepreneurs don’t fit that mold. Manufacturing businesses in particular provide us with an opportunity to reimagine what it looks like to be an entrepreneur—and a risk-taker.
Nearly half of all respondents were women- or minority-owned companies. Most of our respondents were entrepreneurs in the sense that they ran their own businesses, but only 15% of entrepreneurs self-identified as “startups.” The average company was well-established, with an average age of 25 years old! And even for companies self-identifying as startups, contrary to expectations, the majority were more than 5 years ols.
New business starts are important. More than two-thirds of businesses thought startups can be a source of business growth and could lead to more innovation. Furthermore, 55% of businesses expressed an interest in exploring partnerships with startups. Helping startups tap into LA’s vast industrial base could grow the economy and employment.
In the last three years, at least 2,679 new startup manufacturers were founded in LA County. These numbers do not include non-manufacturers that play a role in the ecosystem. Some of the most interesting startups driving the manufacturing industry these days aren’t producing products themselves, but are plugging into this quickly bourgeoning ecosystem as suppliers and customers.
For example, companies like Nasty Gal and Hautelook reimagined the apparel buying experience through new e-commerce models. Startups like Local Roots and Cargomatic are rethinking the supply chain. Some entrepreneurs are developing platforms to help other entrepreneurs prototype, connect with manufacturers and package their products—like Syncfab, IndieSource and Lumi. Companies like Fabdesigns are using cutting edge technologies in new ways to rethink how things are manufactured.
Despite the opportunity, nearly a third of our respondents were risk-averse and concerned that partnerships could be challenging because startups lack sophistication. The good news is that many resources have been popping up in the last year, from startup and scale-up facilities to accelerators and training programs. We just need to make them easy to find, so local startups can scale their operations and increase their impact on the ecosystem.
What are we doing about it?
The L.A. Mayor’s Office today announced it is launching a new initiative called MAKE IT IN LA to connect the largest community of makers and manufacturers in the country. (Full disclosure: I will be leading the initiative.) MAKE IT IN LA is a coalition of organizations whose mission is to support the manufacturing ecosystem and inspire entrepreneurs to turn their ideas into products in the region.
We are kicking off with a week of four carefully curated events in aerospace, food and retail brands. The website launched today with the results of the study, including interactive maps. This summer we will be adding more online resources, including an online makerspace map; a list of local, state and federal incentives; a regional event calendar; connections to programs and facilities across the region; and profiles and stories of innovators.
This will set the stage for more programs in the fall. With our coalition partners, we’ll be rolling out educational events, technical training and showcases to connect manufacturers with customers, suppliers and capital. We’ll host more intimate gatherings of CEOs for creating trusted connections for sharing best practices. We’re looking forward to working with the mayor’s office to bring our constituents together with governmental officials to further identify opportunities to streamline regulations and develop a skilled workforce. And we’re also working on some more in-depth partnerships that we hope to roll out in the coming year.
Why does this matter?
The manufacturing sector is responsible for more than one-third of all economic activity in the United States and 80% of all trade globally. New technology and socioeconomic trends are making manufacturing more influential and exciting than ever. Not only does domestic manufacturing provide good, skilled jobs for a wide range of Americans, keeping production onshore is critical for national security and for keeping innovation here.
It’s a grand experiment for L.A., but not unprecedented. Similar efforts, such as SFMade, have been making an impact on the manufacturing ecosystem in other cities. But an ecosystem as complex as Los Angeles will take a whole other level of attention and ambition.
We are looking to the community to help us shape the initiative and pitch in. Can you contribute to a new program? Would your organization like to host educational events? Can you lend your expertise for some entrepreneurs? Know a contract manufacturer that wants to work with startups or can you recommend an entrepreneur that we just have to meet? Please comment and share your ideas.
In the process of learning about the ecosystem, I have met an amazing array of innovators tackling the pitfalls and possibilities of manufacturing. I’ve started recording interviews with entrepreneurs taking risks on their next big idea and next month will launch a weekly podcast called the Art of Manufacturing to highlight these amazing profiles of creativity and grit. Stay tuned as I start sharing their stories, with links to the interviews, in a weekly column.
Krisztina ‘Z’ Holly is an engineer, tech entrepreneur and the Chief Instigator of MAKE IT IN LA, an initiative of L.A. Mayor Garcetti. MAKE IT IN LA is a coalition of partners whose mission is to support the local manufacturing ecosystem and inspire entrepreneurs to laim high and build their products in Los Angeles. It was inspired by the City’s Entrepreneur-in-Residence program and made possible by founding partners that include Ernst & Young, GE Ventures, the LA Cleantech Incubator (LACI), and DLA Piper. The MAKE IT IN LA study was made possible by support from Dun & Bradstreet, the Los Angeles Area Chamber of Commerce, the Urban Manufacturing Alliance and other partners. For more information, visit www.makeitinla.org.