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How Manufacturing Incubators Are Moving Manufacturing into the 21st Century

Posted by Goldin Peiser & Peiser on Dec 7, 2015 10:51:14 AM

December 2015

Incubators as a business concept are nothing new. First developed in the 1950s, the idea of the business incubator continued to expand in the decades since, spreading from the United States to Europe and eventually the Asia-Pacific region. The concept behind the incubator is to provide an environment where startup businesses and concepts can be developed without the pressure for instant revenue generation in the marketplace.

Understanding the Incubator Concept

In a traditional startup model, a venture capital firm or investor gives a small business some seed capital to start building a business or venture. In return, the investors typically take a stake in the new business commensurate with the level of investment they provide, and the startup is expected to start producing revenues as soon as possible.

In an incubator environment, startup businesses and concepts are typically provided with the infrastructure and a base of operations, as opposed to capital investment. In some instances, the incubator is compensated via receipt of equity in the new venture, and in some cases the startups pay for their use of the incubator services.

Not all incubators operate like this, but a common thread among most is that they offer a stable place to develop new concepts and business, along with the infrastructure to turn those concepts into reality.

Incubators in Manufacturing

Today, incubators are typically associated with technology firms, and there are many such incubators around the country. But the concept of the incubator is perhaps even more applicable and important to the manufacturing industry.

Unlike technology companies, which require relatively modest infrastructure, manufacturing startups require significantly different, and more expensive resources to produce their products. Manufacturing equipment and technology isn't cheap, and it's usually a significant barrier to any manufacturing startup.

And that's where incubators can really help manufacturing startups. By providing not only the usual incubator benefits such as office space and the ability to network, manufacturing incubators can offer a common infrastructure composed of tools, machinery and other benefits that would otherwise be too expensive or difficult for anyone startup to procure.

Bringing Manufacturing into the 21st Century

The potential for firms in manufacturing incubators is increasing. The last several decades have seen a decline in manufacturing jobs in the United States. However, there is a shift in the marketplace that's leaning toward the re-introduction of manufacturing on U.S. shores, as manufacturing technology continues to evolve, business and labor models become more affordable, and customers continue to demand innovation and production timelines that are best met onshore.

And as the industry continues to rapidly evolve, incubators offer startups the opportunity to develop new methods of production that lift the entire industry into the 21st century. When firms consider the impacts of technologies such as robotics and 3D printing on the manufacturing industry, it's easy to see where something like a manufacturing incubator, which can make these elements available in shared model, would be critical to the firms that have the potential to shape the future of the manufacturing industry.

Manufacturing incubators provide a range of important services to the industry. Just some of the benefits of manufacturing incubators include the following:

  • Access to Common Tools and Infrastructure

For most startups, the ability to access fabrication tools and facilities would be impossible on their own. Likewise, many of the tools and platforms that make manufacturing possible aren't affordable for a single startup. But by making those tools available as a shared service to multiple startups, economies of scale are derived, and they become affordable and usable.

  • Collaboration and Sharing

So much is changing so quickly in the manufacturing industry, and so many new concepts are impacting the manufacturing process, that many startups are finding ways to produce goods in ways that would have been unthinkable even a few years ago. And when those new ideas, and the engineers who think about them, come together within an incubator, collaboration among firms is facilitated.

  • Networking

The sharing of technical ideas is important, but so is the establishment of business relationships and partnerships, which can lead to even greater innovation over time. Incubators bring like-minded startups together, and make those kinds of connections possible.

  • Business Infrastructure

Like any startup, manufacturing startups require common business infrastructure like office space, meeting rooms, phones and Internet access. Incubator environments provide all of that to their startups, for comparatively little cost.

Economic Impacts of Manufacturing Incubators

In an increasingly competitive global marketplace, the ability of U.S. manufacturing firms to compete is more important now than ever. Whereas foreign manufacturing was once considered unbeatable, U.S. manufacturing has made significant gains over the last decade, to the point where many manufacturing jobs are returning to the United States, and U.S. firms are becoming increasingly competitive.

This shift is partly a result of rising wages in traditionally low-wage countries like China and India, and partly due to a renaissance in manufacturing technologies that are transforming the industry. But if this trend is to continue, it will largely be due to new startups and the innovation they bring. And those startups, before they can develop innovation, will require the kind of support and infrastructure that only a manufacturing incubator can provide.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Manufacturing