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One Option Is Competence

by BILL WADDELL

The Washington Post wrote a storyabout Lighting Science Group decrying the loss of manufacturing jobs that result from American innovators.  The gist of the article is that the US doesn't throw enough money at companies like LSG to compete with Mexico and China to keep the manufacturing of their whiz bang inventions here.  As an ardent proponent of local manufacturing - no matter where 'local' is - I would normally be in favor the idea of helping outfits like this ramp up their production in the US.  In their case, however, my concerns as a US taxpayer drive me to hope that not a thin dime from the government coffers flows their way.

CEO Zach Gibler says, "Like any manufacturer, we have to look at our options."  One option he might want to consider is taking manufacturing seriously.  Gibler is the head guy and has a pedigree in sales from Acuity Brands (a company boasting that 58% of its American sold stuff is either made in Mexico or by a third party, and is "reducing its manufacturing footprint" and laying people off as fast as possible). I don't think tossing taxpayer cash at anything he runs and expecting manufacturing jobs to magically appear is particularly wise.  This is especially true in light if the fact the VP of Supply Chain also came from Acuity Brands and the Chief Operating Officer is a finance guy. There is not a serious manufacturing professional among the seniormanagement team.

Any question about whether these guys know anything about manufacturing can be dispelled by a quick glance through their most recent 10Q in which they acknowledge a lack of inventory control, the pictures of their stone age batch production operations including one showing 50 sub-assemblies being handled on wooden slabs, and their recent presentation to JP Morgan in which they describe China, Mexico and automation as their manufacturing strategy.  In short, these folks are inept manufacturing managers and no amount of government money can change that.  Better to have them fail on Mexico or China's dime than ours.

Technically innovative companies that fail as a result of the idea that inventions and money are all that matters, and manufacturing will somehow take care of itself, abound.  LSG is hardly alone. Johnson & Johnson needed nine recalls to figure out that the women in charge who sees products as 'brands' and whose background doesn't appear to have included a single day actually working in a factory isn't going to get their manufacturing debacle straightened out.

Examples abound of companies that fail to see manufacturing as a serious endeavor, then conclude that they must run off to some cheap place or outsource production all together when - not too surprisingly - it is not done too well.  Investors would never put their money into the hands of a senior management team that had finance run by an engineer with no accounting knowledge or experience, or sales and marketing in the hands of a guy from the factories who had never sold anything in his life, yet they routinely back companies that put production in the hands of people with no manufacturing qualifications whatsoever.  While private investors certainly have the right to throw their money away so foolishly, the mere fact that someone claims to be a manufacturer is hardly justification for the government to throw my money down the drain in like fashion.

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3 Responses to "One Option Is Competence"

  • Paul Todd
    17 September 2010 - 6:27 am

    At a previous employer we actually did entrust marketing to people who had an interest, but no expertise, in the field. Not surprisingly, the results were haphazard and amateurish.

    I’m afraid we’re fighting the 40-year misconception that a good manager can manage any business. I agree with your tax allocation ideas Bill, but in one case it’s too late. Daniel Akerson, no doubt a smart and experienced executive, seems to be running GM because everyone else was busy the day they needed a CEO.

  • Jim Fernandez
    17 September 2010 - 8:06 am

    Perhaps your expecting too much out of the American capitalist.

    We Americans have always been great innovators, builders and thinkers. It’s our heritage. Suppose it’s the turn of the century, (1900). I’m living in the United States. I sell pens and pencils. And I have an idea for a new kind of ink pen. My thinking goes something like this.

    Where can I find the materials at the least cost? How and where should I make these pens? I want to make them for the least cost possible. How do I distribute my new pens? How much money will I make?

    So now it’s 2010. You have an idea for a new product. And you still have that same style of American capitalistic thinking. Now you come to the second question, how and where can I make these items for the least cost. In 2010 the answer to this second question will probably not be, let’s make them in the US.

  • david foster
    17 September 2010 - 8:19 am

    Fortune Magazine had an interesting article on the J&J debacle. Apparently, they moved responsibility for this product line into the consumer products division, which immediately proceeded to integrate its manufacturing operations with those of its other product lines, even though the work was pretty different. It should have been obvious from first principles that this was unlikely to have a happy ending: even without manufacturing experience, an executive with a sound sense of organizational design would have been very very cautious about doing something like this.

    An old business friend was fond of the expression “Synergy costs money.” It certainly did in this case.