Future of High Value Manufacturing

High Value Manufacturing (HVM) is a concept that is widely used and accepted now. The concept was beneficial to manufacturing businesses in that it encouraged the sector to think about whole businesses and to consider a wider range of aspects of business such as time-to-market, societal and environmental issues, marketing and global strategy at a new level of focus.

In previous common usage was the term “high value-added manufacturing”. This term was limited to meaning that the finished product is worth much more than the input materials. This is crucial to but only part of what is meant by the newer term ‘HVM’. “High Value” here refers also to the benefits to society of the presence of a business that requires above average at-hand expertise, which tends to provide more high quality, well paid, interesting work, locally, than would a pure licensing technology business (See J Hayward presentation at “HVM East Conference 2003”, for evidence of this, and “Defining HVM”, IfM Cambridge U (2006), where Dr F Livesey mentions the ‘social value’ of HVM). “High Value” also refers to the environmental benefits of this kind of manufacturing, which takes us away from ‘smokestack’ industrial businesses. (CIR ran an HVM conference on this aspect in April 2008 – environmental sustainability through closed loops and sale of service business models, see also “Towards a Sustainable Industrial System”, Professor Evans (Cranfield) et al, 2009). HVM could go some way to finding more modern means to stimulate innovation and growth, compatible with a more connected and advancing world.

This more holistic view of the manufacturing business concept, which has obviously been developed over a long period of time, but with focus by academics and others under the phrase HVM, has been more marketable, and has arguably improved the image of the sector or the relevant parts of it.

A search for the phrase on Google now yields many hits and there are institutions in academia, government and industry, with the “HVM” in the name, which did not exist when the phrase was coined in 2002 by CIR as it began writing a report on and defining it.

This HVM as we understand it today in 2011 after these iterations and developments is just the start of something, that when properly and fully embraced, can go much further. Not all manufacturing companies have taken the HVM idea on board and are therefore not maximising value. And as the world globalises, and markets become freer and fairer, the areas where HVM can thrive and work will expand. Some contend that this is a risk, others say it is an opportunity (see Kaletsky in FT January 2011).

When we first wrote down a definition of HVM, which emerged from an analysis of what regional technology manufacturers told CIR in the market research (“High Value Manufacturing in the East of England”, J D Hayward, CIR 2002) we noticed how much more there was to it than linear “high value-added manufacturing”. This latter meant simply that the product assembly would be of much greater value than the previous stage of input or inputs, and was common usage. With the phrase “HVM”, used repeatedly in Cambridge and elsewhere from 2002 onwards at the conferences and in reference to the reports written, it became clear that it was nonlinear and multifaceted. The nonlinearity comes from the interdependence of innovation, marketing and operational choices made by the HVM business.

And this leads to a change of mindset, reflected in, for example, academic institutions responsible for teaching and research into manufacturing formerly focussed on the act of manufacturing and all things to with ‘lean’, now covering everything from manufacturing to distribution to management to marketing to strategy and location selection to finance to energy efficiency and so on. Those institutions were perhaps doing all these things decades ago, but there is a renewed consciousness of it, as they themselves position themselves to be, in part, commercial per se.

What HVM was and is still about was a range of inputs and ultimately, more than one type of positive output or benefit. And these in turn, were, of course, found to interrelate in various ways or be relatively independent. There is surely more, interesting academic work to be done in this area.

Some of the inputs were R&D and reinvestment in it, IPR strategy, time-to-market, novelty or difficulty of process or manufacture, novelty of market. And outputs now included not just product price for sale compared to price of materials, but also social and community benefits and getting towards sustainability environmentally. Ultimately, ‘sustainability’, with all its current confusion as a term, will necessarily mean both viability and environmentally; a nice dialectic synthesis!

It is satisfying to be able to tell the story of 20 conferences and events stemming from the HVM definition of 2002, the report about the East of England scene for HVM in 2002, and then the similar report in 2005 for the South East and the academic reports that then appeared from then on, refining and taking ownership of the concept. I would like to thank James Gray, the then Chief Executive of Invest East, a sister organisation of the RDA EEDA, for accepting an unsollicited proposal for a small amount of funding for the HVM Report of 2002 and the first conference of 15 November that year. I would also like to thank Professor Sir Mike Gregory CBE for being sympathetic towards the idea and conference, and for going on not only to Chair the first conference, but to chair a handful of conferences that CIR organised under the HVM banner in Cambridge and elsewhere. This has led not least to a wealth of case studies that could be used for teaching and development purposes.

And this is just the beginning. HVM businesses are a candidate DNA entity for the industrial system of the future: they will not damage the environment or people in society, while remaining viable and thriving. There is a 2x2x2 matrix with seven undesirable possibilities and only one desirable!

When we quite naturally have such a system, that is when we can prosper in the original sense of the word.

The 10th Anniversary of the HVM Series, where we will bring together old friends, and many new ones, young and wizened to discuss just this appealing future, takes place in Q4 2012: do contact us if you wish to know more.