The document analyzes the manufacturing innovation ecosystem in Massachusetts and provides recommendations to strengthen it. Key findings include: 1) The ecosystem has many assets but connections between actors are weak, 2) OEMs are central but SMEs have limited links, and 3) Startups could better connect to OEMs and SMEs. Recommendations are to: develop a state advanced manufacturing strategy, increase OEM-SME collaboration, provide more technological support to SMEs, and improve startup-industry connections.

1. Strengthening the Innovation Ecosystem for
Advanced Manufacturing:
Pathways and Opportunities for Massachusetts
Dr. Elisabeth Reynolds, Executive Director, MIT IPC
Dr. Yilmaz Uygun, Research Fellow, MIT IPC
STEXautomation
June 17, 2015

2. Changing Landscape
• “Holes” in our industrial commons
• Large manufacturers (OEMs) reorganizing to increase efficiency and
innovation
• Increasingly competitive landscape nationally and internationally
• New “game-changing” manufacturing technologies
2

3. Overall Findings
• Advanced Manufacturing Capabilities Support a Diverse Set of
Regionally Important Industry Clusters
• Manufacturing in the Commonwealth Competes on Talent, Quality, and
Innovation
• Manufacturing Intermediaries in the Commonwealth are Primarily
Focused on “Point Solutions” and on the Supply Side
3

4. Intermediaries
MA Manufacturing Innovation Ecosystem
SMEs
OEMs Universities
Startups
Associations
Globalnetworks
R&D networks
Innovation sources
Strong knowledge flow
Weak knowledge flow
R&Dnetworks
4

5. Recommendations
1. Develop an Advanced Manufacturing Strategy for the State
• Introduce Consortium-based Applied Research Projects
2. Increase Collaboration with and among OEMs to Drive Innovation Within the State and
Upgrade SME Capabilities
• Lead the Formation of a Commonwealth Manufacturing Innovation Advisory Group
• Initiate an OEM Joint Supplier Upgrade Program
• Introduce an Advanced Manufacturing SME Innovation Award
3. Increase Technological and Managerial Support for Innovation for SMEs
• Provide Technological and Engineering Support
• Better Promote and Increase Awareness of Support Services for SMEs
• Support Education Programs for SME Executives
4. Improve Connections between Startups and the Innovation Ecosystem
• Better Promote and Connect SME Capabilities in Early-Stage Scale-Up to the Startup Community
• Connect Startups with OEMs for Beta Testing and Piloting
5

6. Appendix
6

7. Overall Findings
• The Massachusetts Manufacturing Innovation Ecosystem is Rich in
Terms of Assets, but Relatively Poor in Terms of Interconnectedness
• OEMs are key nodes in the innovation ecosystem
• SMEs are weakly connected to the innovation ecosystem
• Universities have relatively strong links with large OEMs and with the startup
community, but limited engagement with SMEs
• Startups are an important source of innovation in advanced manufacturing,
particularly for OEMs, but could be better linked to OEMs and SMEs
7

8. The Team
8
Dr. Elisabeth
Reynolds
Executive Director
of Industrial
Performance
Center (IPC)
Dr. Yilmaz
Uygun
Research
Fellow
at IPC
Nicholas
Martin
Graduate
Student
Professor
Richard Lester
Founder and
Faculty Co-Chair of
the IPC and Head
of the Nuclear
Science
and Engineering
Department
Professor
Michael Piore,
Emeritus, David
W. Skinner
Professor of
Political Economy,
Departments of
Economics and
Political Science
Arnaud
Pincet
Graduate
Student
Eric
Hagopian
President of
MCADM
Jim Newman
VP of
Operations,
Nucleus
Scientific
Professor
Willy Shih
Robert and Jane
Cizik Professor of
Management
Practice in Business
Administration,
Harvard Business
School
Mitch Tyson
Former CEO,
PRI Automation
and Advanced
Electron Beams,
Co-Chair, MA
Advanced
Manufacturing
Collaborative
Karen Mills
Senior Fellow at
Harvard Business
School and Kennedy
School of Government,
previously
Administrator of the
U.S. Small Business
Administration
MITTeam
AdvisoryBoard

9. 9
Findings Regarding Manufacturing Intermediaries
Manufacturing support in the state largely focuses on “point solutions”
• For workforce training, lean practices, and certification
• Targeted at supplier companies, but those efforts rarely directly involve the
recipient firms’ OEM customers
• Limited awareness by many SMEs of services and providers available in MA
Lean by itself does not foster sustained product and process innovation
• Technological and engineering support may be necessary
• Some structures exist in MA to provide these services, but tend to be
fragmented and hard to access for SMEs
Existing efforts mainly focus on supply side
• Few structures exist to connect to demand and systematically deepen OEM–
SME collaboration
Lack of strategic vision for advanced mfg. in MA 5-10 years out
• Supply Chain
• Technology Roadmapping
• Talent & Training

10. 10
Four Areas for Improving the Manufacturing
Innovation Ecosystem
1. Develop a Statewide Advanced Manufacturing Strategy and Agenda
• Rather than other state cluster-focused strategies (e.g. biotech), advanced
manufacturing requires the development of cross-cutting capabilities that
work across clusters (e.g. robotics, advanced materials)
• The state needs a deep understanding of these capabilities as well as the
state’s key clusters
Recommendations:
1. Develop robust analysis of the state’s advanced manufacturing clusters and
capabilities to create an advanced mfg. strategy and agenda
2. Use grant funds to encourage regional consortium-based applied research
projects (University, OEM, SME) focused on pre-competitive product and
process innovations
• Build upon NMII model and experience
• Look to German model

11. 11
2. Incentivize OEM Collaboration in driving innovation and SME Upgrading
• OEMs have window into global trends, R&D, and training needs 5-10 years out
• OEMs are a driving force for innovation for SMEs with own individual supplier
development programs
• Little collaboration across OEMs particularly in areas of collective strategic
interest such as in upgrading of the supplier base in the state
Recommendations:
3. Support formation of a Manufacturing Innovation Advisory Group to promote
strategic and long-term thinking & action and to highlight best practices
4. Explore collaborative OEM Supplier Upgrading Initiatives to jointly support
supplier development program
5. Create an Innovation Award for high-performing SMEs in MA evaluated by a
jury comprising representatives of OEMs, Universities, and Intermediaries
Four Areas for Improving the Manufacturing
Innovation Ecosystem

12. 12
Four Areas for Improving the Manufacturing
Innovation Ecosystem
3. Technological and Managerial Support for Innovation in SMEs
• Advanced manufacturing SMEs are under constant pressure to improve
efficiency and innovate. Being “world class” today requires not only a culture
and practice of lean, but sound managerial infrastructure and leadership, as
well as product and process innovation
• Support for SMEs has largely revolved around workforce training and lean, but
needs to go further
Recommendations
6. Better promote existing services available in MA to manufacturing SMEs by
existing intermediaries
7. Continue funding for lean training but expand support to include more
technological and engineering advice to support product and process
innovation
8. Create Executive Education program for SME CEOs and managers,
building on operations management expertise in MA business schools
• Competitive program providing matching funds

13. 13
Four Areas for Improving the Manufacturing
Innovation Ecosystem
4. Enhance Connection Btw. Startups and the Mfg. Innovation Ecosystem
• Startups are a vibrant and critical part of the Commonwealth’s innovation and
capabilities in manufacturing
• Current manufacturing needs are found through an ad-hoc and word-of-mouth
process; unclear how well startup community knows about state-wide capabilities
• Connections between startup community and OEMs are relatively robust, but
more opportunity for facilitating connections to support scale up process
Recommendations
9. Create more systematic connections between startups and regional
SMEs, esp. machine shops (“manufacturing backbone”) for prototyping and
early-stage production
10. Work with SME industry associations and regional intermediaries to
highlight and market capabilities and facilitate introductions
11. Explore ways to encourage OEM-startup partnerships to create early
adoption to support the scale up process

14. 14
The Team
Dr. Elisabeth
Reynolds
Executive Director
of Industrial
Performance
Center (IPC)
Dr. Yilmaz
Uygun
Research
Fellow
at IPC
Nicholas
Martin
Graduate
Student
Professor
Richard Lester
Founder and
Faculty Co-Chair of
IPC and Head of
Nuclear Science
and Engineering
Department
Professor
Michael Piore,
Emeritus, David
W. Skinner
Professor of
Political Economy,
Departments of
Economics and
Political Science
Arnaud
Pincet
Graduate
Student
Eric
Hagopian
President of
MCADM
Jim Newman
VP of
Operations,
Nucleus
Scientific
Professor
Willy Shih
Robert and Jane
Cizik Professor of
Management
Practice in Business
Administration,
Harvard Business
School (HBS)
Mitch Tyson
Former CEO,
PRI Automation
and Advanced
Electron Beams,
Co-Chair, MA
Advanced
Manufacturing
Collaborative
Karen Mills
Senior Fellow at
HBS and Kennedy
School of
Government, prev.
Administrator of
U.S. Small
Business
Administration
MITTeam
AdvisoryBoard

15. Key Questions Driving This Research
15
What are the qualities of an innovative advanced manufacturing
SME?
1
What are the pathways to innovation and upgrading for SMEs?2
Where should Massachusetts focus its efforts to ensure it is renowned
as a globally competitive region for manufacturing?
4
What are the critical factors that support an innovative industrial
ecosystem?
3

16. Defining Innovation in Advanced Manufacturing
16
! Product/service innovation is the first-
time commercial utilization of a new
product/service idea that is absolutely new
in the market (market perspective)
! Process innovation is the implementation
of methods that are new to the company -
not necessarily absolutely new in the
market- and that change the way of
manufacturing in the company (company
perspective)*
! Organizational Innovation is the
implementation of organizational methods
that are new to the company and that
change the company’s business practices,
communication, and workplace organization
(company perspective)
Service
Innovation
Process
Innovation
Organizational
Innovation
physical intangible
productprocess
InnovationObject
Tangibility
Product
Innovation
Innovation Fields
basedon[Kirneretal.2009]
* includes process improvement measures, like
lean manufacturing, Six Sigma, etc.
Process
Innovation
Organizational
Innovation
Product
Innovation

17. Overall Trends in Manufacturing Employment and
Establishments in MA since 2001
17
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
#ofemployees
Total # of Employment in Mfg. (NAICS 31-33) in
MA 2001-2013
[BLS Data]
250,923
0
2,000
4,000
6,000
8,000
10,000
12,000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
#ofestablishments
Total # of Establishments in Mfg. in MA
2001-2013
[BLS Data]
6,993
! 97% of all mfg. establishments are SMEs (≤500 employees), but employ only 30% of all
mfg. employees1
! 92% of all mfg. establishments are small establishments (≤100 employees)2
1 OneSource Database
2 US Census 2012 Data [Census 2012]

18. How Does Massachusetts Compete in Manufacturing?
18
Early-stage and prototyping products with high proprietary content
(esp. for New Product Introductions)
Products where proximity-to-market is desirable
Products where regulatory factors encourage siting in the US
Highly customized products
High performance requirements (esp. quality, turnaround time)
High knowledge/innovation content (patents; SBIR/STTR)
ProductProcessMarket&
Regulation
Small-batch (rather than large-volume) high-quality niche production

19. Focus on Eight Key Manufacturing Subsectors that Make
Up Core Capabilities in the State Supporting Key Clusters
0
100
200
300
400
500
600
700
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Semiconductors
and related
device mfg.
Machine shops Surgical and
medical
instrument
manufacturing
Pharmaceutical
preparation
manufacturing
Analytical
laboratory
instrument mfg.
Search,
detection, and
navigation
instruments
Industrial
process variable
instruments
Aircraft engine
and engine parts
mfg.
#ofestablishments
#ofemployees
Top 8 Subsectors based on employment (6 digit NAICS)
Pharmac.
Manuf.
Machinery
Manufacturing
Corresponding
Sector
EMC Corporation
Analog Devices
EMD Millipore
MKS Instruments
Altra Industrial Motion
Excelitas
Brooks Automation
Machine Shops ~100% SMEs
Medtronic
Haemonetics
Invensys
Accellent
Genzyme
Sunovion
Vertex
AstraZeneca
GE Aviation
RaytheonLargest
Companies
Computer &
Electronics
Aerospace &
Defense
Medical
Device
19

20. Semiconductor
Surgical and Medical Instruments
Pharmaceutical Preparation
Analytical Laboratory Instruments
Search, aeronautical, and nautical systems
Instrument for Measuring Industrial Process Variables
Aircraft Engine
Machine Shops
Source: http://www.census.gov/econ/cbp/ [2012 data]
WORCESTER
BOSTON
LOWELL
TAUNTON
SPRINGFIELD
HOLYOKE
Geographical Distribution of the Most Important Advanced
Manufacturing Industries in MA
20

21. 21
OEMs and Changes in Supply Chains: Consolidation and
Collaboration
Stra-
tegic
Suppliers
Bottle-
neck
Suppliers
Commodity
Suppliers
• A stratification and consolidation of the supply chain
to reduce the overall number of suppliers (esp. of
commodity suppliers)
• Greater emphasis on collaborative partnerships with
a select number of strategic suppliers, and a more
solutions-oriented approach with suppliers in general
• High pressure on commodity suppliers to be high
performing at competitive price and at the same time
more investment/support to top commodity suppliers
• An integration of supply chain management with
engineering to bring design and technological
innovation into the supply chain procurement process
earlier
• Centralizing supply chain operations across business
units or particular products rather than within each
business unit
• Shortening lead times overall and highly responsive
supply chains to respond to customer demands that
can’t be known ahead of time
• There are examples of firms moving production back
to the US, where it is becoming more competitive to
manufacture, particularly given the emphasis on shorter
lead times
Increasingintensityofcollaboration
Increasingcriticality&uniquenessofcomponents
Supplier Pyramid showing stratification of supplier base

22. 22
SMEs and Characteristics for High Performance
• Price: yearly price reductions
• Quality Control: zero defects
• Rapid Response: 100% on-time
delivery
• High Flexibility
• Accountability
• Concurrent Engineering due to
product complexity
• Innovative components that
• add value to OEMs’ products
• support OEMs’ product innovation
process
Current Small Suppliers
(esp. commodity & bottleneck suppliers)
New Suppliers
(Startup / Spin-off Suppliers)
Minimal Requirements
• Standard Certifications (e.g., ISO, AS)
• Lean (esp. cross-trained operators, Just-in-time, Kanban)
• Technical skills (IT, CAD/CAM)
• Culture of “Curiosity” and Continuous Improvement

23. 23
What Can We Learn from the German Applied Research
Model Based on Consortia?
Characteristics
• Applied research funding as a
driver of innovation
• Funding enables:
• bringing together partners who
otherwise would not meet (esp. SMEs
and universities)
• Extremely intensive inter-firm
communication leading to knowledge
exchange and mutual understandings
(e.g. about technology roadmaps,
expectations) that would not occur
otherwise
• Faster development and wider
diffusion of innovations which would
otherwise have occurred much more
slowly and on the basis of bilateral
cooperation, reducing diffusion into
wider firm ecosystem
Success Factors
• Ideal size
• 3-5 partners: SMEs, university or research
institute, one or two large OEMs
• Close alignment btw. consortium R&D
objectives and participants’ existing
strategies
• Different kinds of consortial
relationships fostering different types of
innovation
• value chain based approach: rather incremental
innovations
• complementary competency based approach:
rather radical innovations
• Flexible approach to question of pre-
competitiveness to speed up time to
market and incentivize commitment
• Consortium-based joint development of pre-competitive product and process
innovations comprising SMEs (pre-requisite), universities, research institutes,
large companies, consultancies, and intermediaries

24. Recent Innovation Initiative in CT