Kick-Starting the Make Economy

Adrian Gonzalez, a third party logistics (3PL) expert and friend of ScratchPaper, has written an excellent follow-up piece to my post Why Angels Chase Electrons. In the piece (Entrepreneurs, 3PLs, and Angel Investors: Kick-starting the Make Economy), Adrian points out that, while it is true that manufactured products still involve more capital than software products, the gap is narrowing every day. Because of the increasing ease of working with contract manufacturers, logistics service providers and out-sourcing all sorts of non-core activities, manufacturing-oriented companies are more capital efficient than ever these days. He makes some excellent points. The days of every company needing to be good at everything are over. Are you doing enough to leverage best-of-breed contract partners for the non-core aspects of your business?

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Comments

  1. Eduardo Lindenberg says:

    Professor, how have you been?

    This is a very complicated issue you’re approaching in this article. Do you plan to develop on that point in the future? There are two main points of discussion at stake here. One of them, which I believe to be your focus, is whether physical businesses involve more capital than virtual businesses. I’d agree instantaneously a few months back before starting to work with e-commerce and finding out about all sorts of costs are involved in such an operation that would never weight on a traditional retail cash flow. Nevertheless, my main question to you (if I may), is regarding what I see as the second point of discussion in this issue, which is about relying on outsourcing for everything (except you true-core). Call me old-fashioned (or ignorant), but I still believe that if you need something done, you have to do it yourself. In my short business experience, I must say it’s very hard to find that true-core. Regardless of the line of business, there are certain requirements of stakeholder satisfaction and operational efficiency that any business needs to attain great success, wouldnt you agree?

    Best regards from Brazil,

    -Eduardo

    • Eduardo Lindenberg says:

      Something to illustrate investment required on the virtual world on the days to come: http://news.yahoo.com/top-fbi-cyber-cop-joins-spy-thwarting-startup-055541643.html

    • Christopher says:

      Best of breed specialists are always going to out-perform generalists. Transaction costs (latency & friction) have historically been the only barrier. Now that digital communications and modernized small batch manufacturing and out-sourced logistics-as-a-service are so easy to interface with, the walls are coming down and it is becoming harder and harder to justify trying to be the jack of all trades – you wind up being the master of none. Look at the radical transformation in Apple’s financials when they stopped manufacturing their own products. And there are countless other examples.

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