The Titanium Economy: A book review by Bob Morris

 

The Titanium Economy: How Industrial Technology Can Create a Better, Faster, Stronger America
Asutosh Padhi, Gaurav Batra, and Nick Santhanam
Public Affairs (October 2022)

How do the top-performing companies in the Titanium Economy improve their performance?

According to Asutosh Padhi, Gaurav Batra, and Nick Santhanam, peak performers in the field of industrial technology leverage a three-step approach:

1. They drive core transformation, leveraging tech and data, to achieve margin expansion and growth in an accelerated fashion.

2. They focus on multiple expansion to improve investor attractiveness while improving performance.

3. They leverage M&A to achieve “segment of one” status and build a platform for future expansion.

These are important strategic objectives and they achieve them by focusing on several dozen organizations (e.g. Quorvo, JBT, Trex, Brady Corporation, HEIKO,  Graco, Dot Foods, and Enphase Energy) that have received little — if any — attention in recent business bestsellers in recent years. The co-authors “reveal this under-appreciated and under-valued sector of the economy for what it really is: a reliable source of high-paying, domestic jobs and soaring stock prices—a bright spot in an economy that has too often been buffeted by external shocks. The shining stars in this sector leverage technology while investing in people and processes to drive competitiveness. These companies provide a recipe for both stability and long-term, profitable growth, while also strengthening the backbone of an economic supply chain that has been under siege for several years. This book sets right the perception that good American jobs have disappeared and paints an attainable picture of better times to come for the industry, its constituents, and our economy at large.”

How does industrial technology differ from manufacturing? Padhi, Batra, and Santhanam cite several differences, including these four:

1. Titanium Economy (TE) companies aren’t business-to-consumer brands. In fact, many of them make products that consumers cannot even purchase.

2. However, the products they do make enable the design and creation of other products and services that are often critical to consumers’ daily lives, and also to finding solutions of the problems facing society.

3. They tackle all manner of challenges that include climate change, creating a more sustainable and more reliable food system, and restoring and upgrading infrastructure.

4. TE companies’ innovations range from tiny essential parts in cell phones, to a new process for protecting steel from weather damage so that it will last longer and perform better.

Why are workers so eager to be employed by these companies? Here are two of several reasons. First, TE jobs pay (on average) more than twice the salaries paid to workers in the service sector — $63,000 as opposed to $30,000 annually. Also, working conditions are generally comfortable, typically with well-lit facilities and top-of-the-line technologies, and many (if not most) TE companies have innovative policies for workplace management, with many even being employee-owned.

Padhi, Batra, and Santhanam point out that China invests up to 22 times the current level of U.S. funding to provide grants and support to a large emerging network of research centers. Also, Germany’s Fraunhofer Institutes, supported in part by the government, comprises 76 technical centers that are focused on applied innovation. They also point out that South Korea boasts the highest share of researchers moving between academia and industry innovation. That is indeed a substantial gap and tie is running out on the U.S. What to do?

Recall the prior reference to peak performers in the field of industrial technology. They leverage a three-step approach:

1. They drive core transformation, leveraging tech and data, to achieve margin expansion and growth in an accelerated fashion.
2. They focus on multiple expansion to improve investor attractiveness while improving performance.
3. They leverage M&A to achieve “segment of one” status and build a platform for future expansion.

How?

Industrial technology can — indeed MUST — become what Asutosh Padhi, Gaurav Batra, and Nick Santhanam characterize as “the lifeblood” of the U.S. economy. They conclude their book with 30 specific recommendations for innovation, education, and government. All are evidence-driven, high-impact envisioned, and DO-ABLE.

My own opinion is that the infrastructure of industrial technology must become our nation’s entire cardiovascular system.

 

 

 

 

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