Manufacturing, platforms and network effect

We are getting more connected these days. Many elements of our every day life habits and needs are moving into digital space – media & news moved completely from paper magazines online, e-commerce is developing fast, transportation is catching up.

I can see some interesting signs of digital transformation in manufacturing as well. It mostly started from 3D printing, but expanding on additional domains. Some people call it OCM (One Click Manufacturing). Few examples of companies getting into this business. Tempo Automation, CircuitHub, FusionPCB, ProtoLabs, CloudDDM, Maketime.io, etc.

There are two reasons why you would use such services. First is speed. If you need few units built for prototyping and you need them fast, you can upload data to the website and get parts or a whole assembly in the next few days. The second reason is agility or on-demand effect. If you don’t know when you need a part, you would prefer to have somebody who can do it for you when you need it. It applies to a scenario with maintenance components as well as an increased demand. The quotation process, ordering and business process will remind you Amazon and other e-commerce business.

It made me think about future innovation platforms in manufacturing as a growing number of relationships between providers of manufacturing services and consumer. In a modern manufacturing space nothing is done by a single company. The times when Ford Motors plant in Michigan did everything from steel and glass to car is gone forever.

In a new online and connected environment, the success of failure of these platform can be dependent on their ability to build for a network effect. The most successful examples of new digital economy are coming from companies that built on network effect in their business.

a16z presentation by Anu Hariharan gives you an interesting perspective on different aspect of network effect. Navigate here  to see a slide deck. I captured few slides below that giving you some examples and highlight the difference between economy of scale, virality and network effect.

Difference between network, marketplace and platform

What is my conclusion? It is still very early days of transforming of manufacturing industry into digital network.  The companies I mentioned above are at the beginning of their formation and building online relationships. But I think, the future manufacturing will be completely digitally driven. It will be able to utilize network effect and many mechanisms of optimization for demand and supply used by modern web and other businesses online. The note for manufacturing strategists and product lifecycle architects – be prepared for the future network effect in manufacturing. Just my thoughts…

Best, Oleg