Pilot Program Targets Region’s Manufacturing Sector
The Goal: to Make Progress
In an effort to bolster the region’s manufacturing sector by opening doors to opportunity for many of the smaller firms that dominate the landscape, Valley Venture Mentors will customize its startup accelerator program for use with existing businesses. The goal is to create matches between these companies and original equipment manufacturers that will lead to contracts, jobs, and a broad ripple effect.
When asked what the team at Valley Venture Mentors intends to do with and for area manufacturing companies through a unique and intriguing adaptation of its startup accelerator program, Paul Silva flashed a broad smile and said simply, “we’re going to show them how to dance.”
That word ‘dance’ is a euphemism for many things in this case, said Silva, co-founder and executive director of VVM. He summed them up by noting that many of the region’s small to mid-sized manufacturers are too bogged down in the day-to-day work of producing parts for a client — quite often one of the nation’s larger defense contractors — to introduce themselves to potential new customers.
Nor do they often have the time, inclination, or, in some cases, the know-how to put their machinery and expertise to use in different markets and for different customers — and for understandable reasons.
“These are, by and large, family-owned, multi-generation enterprises, small shops with 50 or fewer employees, so they don’t have the resources to do anything different than what they’ve been doing all along,” he explained while painting a profile of the target companies. “Many of them have one customer, Uncle Sam, directly or indirectly, and they just don’t have the experience to go find other customers.
“They’re literally world class at what they do, but they do the things they do, and they’ve made money doing that for decades,” he went on. “But the margins in that business are such that there’s not a lot of room to go out and do crazy experiments. You have lots of expensive capital equipment and highly trained, expensive employees — you can’t just go off and try new things. It’s not a risk-tolerant business, and for very good reason; the people who take on too much risk very often wind up dead.”
A $320,000 pilot program to be undertaken in conjunction with MassDevelopment (the primary funding agency putting up $200,000), the National Machine Tooling Assoc. (NMTA), the Economic Development Council of Western Mass., and other partners will seek to change many aspects of this equation. It will enable, and essentially force, participating companies to become more willing and able to take some calculated risks.
Here’s how it will work: VVM and its partners will spend the next several weeks recruiting companies that fit the profile described above for a three-month, boot-camp-like experience that will, in many ways, mirror VVM’s accelerator program for startups (its second class just graduated a few weeks ago; see sidebar on this page).
But while the accelerator introduces startups to venture-capital companies and angel investors, this pilot program will put manufacturing companies in the same room as several growth-minded original equipment manufacturers (OEMs), with the goal of creating matches, or dance partners, said Rick Feldman, development director for VVM and veteran of the manufacturing sector.
“The idea behind this accelerator is to have a lot of match-up,” he explained. “You’re a small manufacturer … here are the OEMs in the region who are looking for skill, machine, ability to produce those kinds of parts. Go talk to each other.”
Like Feldman and Silva, Veda Clark, vice president of Manufacturing Initiatives for MassDevelopment, said there are many goals — and thus many ways to ultimately gauge the success — with this program. They include jobs, obviously, but also revenues, profits, and, in some cases, the ability to keep companies and jobs in this region.
Indeed, many of this area’s smaller manufacturers are “aging out,” said Feldman, using that term to describe a Baby Boom-age owner mulling various exit strategies.
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There may well be more opportunities to keep companies from being closed or sold to outside entities if they have a broader, more diverse customer base and better prospects for the future, he told BusinessWest. “As soon as we have 10 to 15 companies needing to produce new products, on time and high-quality, for several OEMs, we should expect some ripples through the economy. And we’ll be tracking those — things like revenue, profitability, jobs, new industries, or existing sectors expanding.”
For this issue, we take a preliminary look at this pilot program and its prospects for providing a boost for one of the region’s most prominent — and important — business sectors.
Parts of the Whole
Silva admitted that the initial phone call from Clark that eventually brought VVM to this point caught him more than a little off guard.
He was and is quite familiar with MassDevelopment, which is kicking in $2 million for the accelerator facility currently being built in downtown Springfield, but far less so with its so-called Advanced Manufacturing Futures Program.
As Clark explained to Silva — and later to BusinessWest — MassDevelopment has been addressing the many issues and challenges confronting the state’s manufacturing sector through that initiative and, more specifically, grants awarded for several pilot programs across the state. It attempts to deal with specific concerns identified in a comprehensive study of the Commonwealth’s manufacturing industry, funded by MassDevelopment and undertaken by a team at the Massachusetts Institute of Technology, which outlines several potential action areas.
One of them involves providing more educational opportunities to the owners and managers of SMEs (small and medium-sized enterprises), with an eye toward enabling those companies to run more efficiently, seize new business opportunities, and initiate comprehensive succession-planning efforts, among other things.
The desire to address this concern brought Clark to VVM and that phone call to Silva.
“She said, ‘we have this bucket of money to help advanced manufacturing in different parts of the state; there’s a bucket for Western Mass., and no one has asked for it the right way,’” he recalled. “And I said, ‘we haven’t asked for it, either; thank you for calling, but we help startups.’”
Fast-forwarding through events, that phone call led to a request for a lunch meeting — “you’re asking me to lunch so you can give me money; I think the answer is ‘yes,’” said Silva, recalling his thought process — which led to more meetings, at which the attending parties agreed that the VVM model could and should be utilized for a very different purpose.
“In talks with those at VVM and other agencies, it became clear there was a need to help the owners of SMEs, especially the small machine shops, with diversifying their companies, growing their businesses, and developing succession plans,” Clark explained, adding that business and management schools had little interest in trying to meet that need, prompting efforts to look elsewhere.
Familiar with VVM’s success with its accelerator, which involved 30 startups in three months of programming, Clark believed that model could help another constituency with the universal goal of working on the business, not in it.
“We needed something that would help these executives think beyond their four walls,” she noted. “When you’re a small to medium-sized manufacturer anywhere in the state, you tend to be head down, day-to-day, grinding out the business, rather than looking ahead.”
Silva agreed, and noted that, while the pilot program will indeed involve existing companies, some of them several decades old, it will in some ways be addressing them as startups.
“They’re there to think about new products,” he explained. “We want them thinking, ‘how can I use my existing equipment and teams to make something else?’
“The way we look at it, and the way the manufacturers we’ve talked to look at it,” he went on, “yes, these are existing businesses, but it’s really a startup inside of their business — a startup that has access to a manufacturing facility and a staff, but they have to treat it like a whole new business.”
Silva said the pilot program will entail learning curves not only for participating manufacturers, but for VVM as well as it customizes its well-regarded accelerator model for this new purpose.
“We’re spending the summer designing the program and doing customer development, which is our fancy term for talking to people and designing the product right before you build it,” he explained, adding that the agency won’t be reinventing the wheel, only modifying it slightly.
Indeed, like the accelerator program, the pilot will make use of what’s known as the Lean Launchpad philosophy, which simplifies and accelerates the process of developing new businesses and plans for them. And this approach should certainly resonate with those in this sector.
“They’re very familiar with the concept of lean manufacturing,” he explained. “And the lean startup philosophy is descended from lean manufacturing. So we’re going to go in there and say, ‘you know all that ‘lean’ stuff you know … we’re just applying the same concept you know and love and that has generated profit for you, and apply it to other parts of your business.”
When asked to sum up Lean Launchpad as it applies to concepts and the potential to create a successful business with them, Silva did so with his now-familiar — and colorful — way of getting his points across.
“Translated into plain English, it’s just ‘stop thinking that you know shit,’” he explained. “Instead, write it down as a hypothesis as a scientist would, then figure out the cheapest, easiest way to determine if you’re smoking something or not. Go do the tests, and if the tests come back positive, do a bigger test, then rinse and repeat until you’ve got a business.”
Silva said these sentiments will be expressed to members of the pilot program’s first cohort, which will likely include six to eight manufacturing companies as well as a number of OEMs — CRRC, the company that will soon will assembling subway cars in Springfield, is likely to be one of them — with the explicit goal of creating matches, or dance partners, as the case may be.
And in this respect, the pilot is again like the accelerator program, said Feldman, adding that, with the latter, startups and investors learn about each other. It will be the same with the precision manufacturers and the OEMs.
And this is an important consideration, because there is considerable learning to be done on both sides of the equation.
“The OEMs have told us, ‘we would love to hire these companies, but we literally can’t find them,’” Silva told BusinessWest. “They say, ‘it’s too hard for us to find them because they’re small firms, they don’t go to the trade shows we go to, they don’t speak our language; it’s a pain in the neck, and we end up having the work done far away or not as well.’”
As mentioned earlier, this pilot program comes complete with a number of goals, the most overarching being the creation of new opportunities for companies and that resulting ripple effect that Feldman described.
And the pilot program calls for a hard assessment after one year to see if those goals are starting to come into focus.
“After a year, the state wants to see how many jobs are created, how many companies have expanded their markets, whether new technologies emerge, and whether revenues and profitability have gone up,” he explained. “What we find with many manufacturers is that sales revenues improve, but profitability doesn’t because it’s such an expensive industry to be in.”
When asked about the next steps in the process for this pilot program, Silva said one of them is the task of recruiting manufacturers to take part, and this, in itself, will likely be a stern challenge.
“That’s because they’re really busy — they have to run their shop; they don’t have time to do this,” he explained, adding that the hope, and expectation, is that forward-thinking business owners will somehow find the time.
They will need to if they want to open some doors, forge relationships, fashion new opportunities, and create sustainability.
Because, for all that to happen, they must learn how to dance.
George O’Brien can be reached at [email protected]