CROWDFUNDING

March 20, 2016


If you have an idea you feel will be profitable over the long haul, you will no doubt be very interested in commercializing that idea and turning it into an on-going company or even a not-for-profit company.  At any rate, you will need financing.  Have you tried getting a bank loan for an idea lately?  Ever tried getting an SBA loan?  If so, you know the odds of success are very limited, even for a project or product that is seemingly “bullet-proof”.  You may have credit that is pristine but the odds are still not in your favor.  Money is remarkably tight because banks and other lending institutions have no idea as to where our economy is going or what might be the next “big thing”. Our government, you know the one supposedly on our side, has burdened this country with so many regulations and taxes we are literally stagnating to the point of no real return.   For this reason, banks are remarkably risk-averse at this time in our country’s history.    You better know somebody to get the money and it very well may take forever at that.   This just might be where crowdfunding has a huge advantage.

DEFINITIION:

I think the very best thing we can do is start off with a definition of crowdfunding.  Just what is it?  Then we will discuss how it works:

Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, today often performed via internet-mediated registries, but the concept can also be executed through mail-order subscriptions, benefit events, and other methods.

According to a new survey of one thousand people, only twenty-nine percent (29%) of Americans have heard of this funding method, in which individuals donate cash in exchange for a portion of a company’s ownership. The research was conducted by a third party on behalf of equity crowdfunding company NextGen Crowdfunding.com.  This was after the Securities and Exchange Commission voted to approve Title III equity crowdfunding rules on October 30, 2015.  According to Entrepreneur Magazine:

“The Securities and Exchange Commission voted 3-1 to adopt the next generation rules for equity crowdfunding this morning for entrepreneurs and small-business owners. Equity crowdfunding is the exchange of a piece of a company for cash. Before today’s ruling, entrepreneurs could only sell pieces of their companies to accredited investors, or those individuals who meet sufficient levels of assets and income. With the passing of this new set of rules, entrepreneurs can sell pieces of their companies to anyone who has the interest and cash to do so.”

The JOBS Act, signed into law in April of 2012, made equity crowdfunding for unsophisticated investors legal, but it has taken the SEC more than three and a half years to wrangle a set of rules for how equity crowdfunding should be implemented.  This is how our government works.  I wonder how many members of Congress had to be guaranteed campaign money by special interest groups to get this passed?  At any rate, I do think the possibilities are great and can have beneficial significance.

SUCCESS:

OK, what does it take to be successful?  Let’s look.

  1. Solve a real problem.  You must create a product or process that people want to buy. It must be marketable.  You have to have something of a viable nature to sell.
  2. Do your homework. The success of any crowdfunding effort is inextricably linked to the amount of hard work you put into testing and refining your idea long before launching the campaign. You MUST look at any competition you may have.  Determine what sector of our country might purchase your product.  What is the “staying power” of your product?
  3. Bring money to the table-– Crowdfunding shouldn’t be your first source of money.  You, as the inventor, must have skin in the game.  You have to initially contribute.
  4. Get a smart funding goal—You MUST make a distinction between how much money you would love to have and how much money you need.  Develop a one year, three year and five year business plan as well as a first year cash flow spreadsheet.  If you don’t know how to do this—LEARN. Learn before you make your first presentation asking for financing.
  5. Make an effective presentation relative to your idea—People are drawn to a vision, a dream, a hope.  They are looking for eventual success. If you cannot articulate this vision you are SUNK.
  6. It’s not always about the money—Listen to those individuals who have ideas as well as interest in becoming part owners and contributors to your idea(s). Feedback can drive product design.  The product you start out with may evolve into an eventual offering far better than you first envisioned. This is critical.
  7. Make the campaign your passion--Managing an active crowdfunding campaign is an intense process. “It’s not only full-time for one person, it’s full-time for everyone in the company,” says Gyalokay. Sager agrees. “When we ran our campaign, the entire team was 100% focused on crowdfunding,” he recalls. “We sent out multiple surveys to our backers. I personally answered 3,000 emails in the first week.” Although it can be a nearly overwhelming experience, the campaign offers a valuable opportunity to engage with your backers. “We believe that if we can have a dialogue with the market, we can be successful,” says Fish. “We decided to host a separate forum for our backers, to continue the conversation beyond the crowdfunding campaigns.”

THE BEST CROWDFUNDING SITES:

The best crowd-funding Internet sites are:

  • Chuffed.org
  • Fundly
  • Crowdrise
  • Indiegogo
  • GoFundme
  • Kickstarter
  • Buzzbnk
  • JustGiving/Yimby
  • Pozible
  • Startsomegood
  • NextGen Crowdfunding

Here again, do your homework.  Look at all crowdfunding web sites and determine which one or ones, if any, meet your needs.  Each web site lists the fees, if any required and how they manage your request, so study each as you would prior to taking a university final exam. You may save yourself a great deal of heartache later on.    You also may develop other ideas also and if so, factor those into your business plan.

I am constantly amazed at the resourcefulness of the American people.  Crowdfunding would have never come to fruition if lending institutions were willing to look at people with ideas.  It’s always been tough but in today’s economy, it’s doubly tough.  Maybe this method of raising money is good for you.

DO YOUR HOMEWORK.  WATCH OUT FOR SCAMS.  They are out there.


In 1985 I was self employed, as I am now, as a consulting engineer.  That year, being my “rookie” year, was one in which I had a great deal to learn.  One painful learning experience involved theft of intellectual property—MY PROPERTY.  I suppose in hindsight it was good it happened early in my company’s history but the memories of that event remain very much etched in my psyche.

The company involved, we will call them Company “A”, manufactured microwave (MW) ovens; many hundreds of MWs each day.  Company “A” had very personnel-intensive assembly lines with many “hands-on” operations.   They recognized that automation could save them hundreds if not thousands of dollars on a daily basis.  My company developed robotic systems to automate manufacturing processes.  It seemed like a good fit.

I had called on them several times prior to receiving a telephone call one afternoon asking if I could come for another visit to discuss a project preparatory to quoting.  I scheduled an appointment two hours later in the same day. (Cash flow is a huge issue for any company and particularly a new, fledgling company.)

The project involved rotation a partially-assembled MW door so additional components could be installed prior to final assembly.  As with any company, they ask me to provide several options with accompanying cost projections for each.  There were three viable possibilities with varying complexity that satisfied their demands for production times and degrees of employee involvement.  After three weeks of design work and drafting, I presented each option to the purchasing manager of Company “A”.  I was assured the appropriate individuals would review my work and the options and make a decision quickly so I could order parts and start fabrication of the robotic superstructure.  A week went by, then two weeks, then a month, then six weeks until finally I get a phone call.  This is just about how it went.

PURCHASING AGENT:  Hey, can you come down to take a look at another project and possible provide a quote?

CIELO TECH:  How about the quote I furnished five weeks ago?  Are you going ahead with that one?

PURCHASING AGENT: We are still deciding on which option we want to use.  This one is still in the works but we do feel you can do the work and we are very satisfied with your second option.

CIELO TECH:  OK, good. I will be down tomorrow afternoon.  (I don’t remember the time but that’s of no real consequence at this point.)

I made the visit the next day.  We again, went to their assembly line to get a better picture of the job they wished me to look at and eventually quote.   It was a fairly simple hold-down fixture requiring installation of rivets attaching four mating brackets.  Not that complex but a good project and if you can automate the process you are better off for it.  I was given all of the parts necessary to design my fixture but while walking back to his office, he was paged to answer an emergency phone call.  One that could not wait.  During those days, there were no cell phones so he answered the call from a desk phone located at the head of an adjacent assembly line.  The phone call lasted for several minutes and during that period of time I was approached by an employee asking if I could come take a look at the system I had just installed.  JUST INSTALLED!  It apparently needed a slight adjustment—tweaking.  A great deal of confusion swelled up and as I got closer to the adjacent assembly line I realize that MY robotic system was running and running wide open.  MY SYSTEM.  The purchasing agent caught up with us.

PURCHASING AGENT:  You are not supposed to be here.

CIELO TECH:  I can understand why.  This is my system.  Who built it and why was my design used?

The employee was truly baffled and embarrassed and slowly moved back to his work cell after receiving looks that could kill from the purchasing agent.  My questions were not answered but one comment was given.

PURCHASING AGENT:  You can sue us if you wish but you won’t win.  We can keep this thing in court long enough to bankrupt you.  You know that.

I did know that. He was correct.  To prosecute the theft would have tied me up for years and taken a tremendous amount of time and creative capital.  I simply did not have the time to recoup my investment.   I left, never to return.  About a year later, Company “A” moved their production to China.   I had provided too much detailed information and my designs were very easy to fabricate. Lesson learned.  I’m sure he was a hero to his management and boasted on how much money he saved the company.  The fact that his actions were very much immoral had no real concern to him and his management cared not one whit.

QUESTION:  Just how big is intellectual property theft and counterfeiting in our country today?  As Senator Bernie Sanders would say:  “It’s YHUGGGGGGE”.  Let’s take a look.

THE THREAT:

According to ABC News, counterfeiting has become a one-trillion-dollar industry globally, and has deprived governments of much needed tax revenue. The United States alone loses 250 billion dollars a year to various types of intellectual property theft, resulting in the loss of 750,000 jobs nationally. In the music industry, the people who suffer the most from pirating are neither the musicians nor the companies. Instead, low- or mid-level employees, like song writers and sound designers, are left without a job because of sales that are lost to illegal downloads.  According to the Crime Prevention Council:

“Not only is the United States the wealthiest country on Earth, but it is also the world’s greatest producer of intellectual property. American artists, entrepreneurs, inventors, and researchers have created a nation with a rich cultural fabric. Every day, Americans can avail themselves of consumer goods, entertainment, business systems, health care and safety systems and products, and a national defense structure that are the envy of the world. It is frequently said that the American imagination knows no bounds, and that is probably true. In fact, the U.S. Patent Office recently issued its eight millionth patent (Cyber Attacks and Intellectual Property Theft, Defense Tech, August 22, 2011). The U.S. Copyright Office has issued more than 33.6 million copyrights to date (U.S. Copyright Office).  The U.S. Chamber of Commerce Intellectual Property Center has calculated the worth of intellectual property in the United States as being between $5 trillion and $5.5 trillion (Counterfeiting and Piracy: How Pervasive Is It?, Electrical Contractor magazine, 2008, retrieved November 12, 2011).

More than 250,000 more people could be employed in the U.S. automotive industry if it weren’t for the trade in counterfeit parts (Counterfeit Goods and Their Potential Financing of International Terrorism). According to the Council of State Governments (Intellectual Property Theft: An Economic Antagonist, September 7, 2011), the U.S. economy loses $58 billion each year to copyright infringement alone—crimes that affect creative works. That includes $16 billion in the loss of revenue to copyright owners and $3 billion in lost tax revenue. Furthermore, the problem is transnational: The U.S. Department of Commerce puts the value of fake products—such as CDs, DVDs, software, electronic equipment, pharmaceuticals, and auto products—at five to seven percent of world trade.

This one really scares me. The U.S. Food and Drug Administration estimates 15 percent of the pharmaceuticals that enter the United States each year are fakes, with that number having increased 90 percent since 2005 (Counterfeit Drugs: Real Money, Real Risk, Wellescent.com). Some are manufactured domestically, but more than 75 percent of these drugs come from India (Counterfeit Drugs: Real Money, Real Risk, Wellescent.com). Frequently, online pharmacies that distribute fake drugs purport to be located in Canada, but a recent study conducted at the University of Texas found that of 11,000 online sites that claimed to located there, only 214 were actually Canadian (Counterfeit Drugs: Real Money, Real RiskWellescent.com). According to an article published on the Secure Pharma Chain Blog on March 22, 2008 (Counterfeit Pharmaceutical StatisticsSecure Pharma Chain Blog), 60 percent of all counterfeit drugs have no active ingredients, and the U.S. Food and Drug Administration warns that “even a small percentage of counterfeit drugs in the drug supply can pose significant risks to thousands of Americans” (FDA: Drugs: FDA Initiative To Combat Counterfeit Drugs, retrieved November 11, 2011).  Moreover, counterfeit drugs are commonly made and distributed by criminal gangs (Bad Medicine in the MarketAEI Outlook Series, Institute for Policy Research, American Enterprise Institute, retrieved November 11, 2011).

OFFENDERS:

Who are the biggest offenders?  Offenders in foreign countries are the principal source of the threat to United States IP. Production of infringing goods is conducted primarily outside the United States and these items may cross numerous borders prior to delivery to consumers in the United States. The one notable exception is the production of pirated works in the United States for domestic production. The magnitude and type of threat to United States interests varies from country to country. Offenders in China pose the greatest threat to United States interests in terms of the variety of products infringed, the types of threats posed (economic, health and safety, and national security), and the volume of infringing goods produced there. The majority of infringing goods seized by CBP and ICE originated in China. Offenders in China are also the primary foreign threat for theft of trade secrets from United States rights holders. China‘s push for domestic innovation in science and technology appears to be fueling greater appropriation of other country‘s IP. The U.S.-China Economic and Security Review Commission (China Commission) has cautioned that China‘s approach to faster development of sophisticated technology has included the ―aggressive use of industrial espionage   As the globalization and growth of multinational corporations and organizations blurs the distinction between government and commerce, it is difficult to distinguish between foreign-based corporate spying and state-sponsored espionage. Although most observers consider China‘s laws generally adequate for protection of IPR, they believe China‘s enforcement efforts are inadequate. Despite some evidence of improvement in this regard, the threat continues unabated. Offenders in India are notable primarily because of their increasing role in producing counterfeit pharmaceuticals sent to consumers in the United States. Offenders in the tri-border area of South America are a noteworthy threat because of the possible use of content piracy profits to fund terrorist groups, notably Hizballah. The most significant threat to United States interests from offenders in Russia is extensive content piracy, but this is principally an economic threat as the pirated content is consumed domestically in Russia. Distribution and sales of infringing goods are the principal violations in the United States. Except for pirated content, there is limited domestic production of infringing goods. Physical pirated content is commonly produced in the United States because it is more cost effective to create this content domestically than import it from overseas. Printing of sports apparel and paraphernalia for last minute sports events, such as the World Series or Super Bowl, also is common in the United States because there is not enough time to import these goods from other countries.

CONCLUSIONS:

What can be done to halt theft?  Rigorous prosecution of “local” property theft can be accomplished if the theft results from companies originating in the United States.  That must be done.  Off-shore theft from companies around the globe and counterfeiting is much more difficult but could be handled if we were so inclined to do so.  It’s purely political.

As always, I welcome your comments.

R & D SPINOFFS

March 12, 2016


Last week I posted an article on WordPress entitled “Global Funding”.  The post was a prognostication relative to total global funding in 2016 through 2020 for research and development in all disciplines.  I certainly hope there are no arguments as to benefits of R & D.  R & D is the backbone of technology.  The manner in which science pushes the technological envelope is research and development.  The National Aeronautics and Space Administration (NASA) has provided a great number of spinoffs that greatly affect everyday lives remove drudgery from activities that otherwise would consume a great deal of time and just plain sweat.  The magazine “NASA Tech Briefs”, March 2016, presented forty such spinoffs demonstrating the great benefits of NASA programs over the years.  I’m not going to resent all forty but let’s take a look at a few to get a flavor of how NASA R & D has influenced consumers the world over.  Here we go.

  • DIGITAL IMAGE SENSORS—The CMOS active pixel sensor in most digital image-capturing devices was invented when NASA needed to miniaturize cameras for interplanety missions.  It is also widely used in medical imaging and dental X-ray devices.
  • Aeronautical Winglets—Key aerodynamic advances made by NASA researchers led to the up-turned tips of wings known as “winglets.”  Winglets are used by nearly all modern aircraft and have saved literally billions of dollars in fuel costs.
  • Precision GPS—Beginning in the early 1990s, NASA’s Jet Propulsion Laboratories (JPL) developed software capable of correcting for GPS errors.  NASA monitors the integrity of global GPS data in real time for the U.S. Air Force, which administers the positioning service world-wide.
  • Memory Foam—Memory foam was invented by NASA-funded researchers looking for ways to keep test pilots cushioned during flights.  Today, memory foam makes for more comfortable beds, couches, and chairs, as well as better shoes, movie theater seats, and even football helmets.
  • Truck Aerodynamics—Nearly all trucks on the road have been shaped by NASA.  Agency research in aerodynamic design led to the curves and contours that help modern big rigs cut through the air with less drag. Perhaps, as much as 6,800 gallons of diesel per year per truck has been saved.
  • Invisible Braces for Teeth—A company working with NASA invented the translucent ceramic that became the critical component for the first “invisible” dental braces, which went on to become one of the best-selling orthodontic products of all time.
  • Tensile Fabric for Architecture—A material originally developed for spacesuits can be seen all over the world in stadiums, arenas, airports, pavilions, malls, and museums. BirdAir Inc. developed the fabric from fiberglass and Teflon composite that once protected Apollo astronauhts as they roamed the lunar surface.  Today, that same fabric shades and protects people in public places.
  • Supercritical Wing—NASA engineers at Langley Research Center improved wing designs resulting in remarkable performance of an aircraft approaching the speed of sound.
  • Phase-change Materials—Research on next-generation spacesuits included the development of phase-change materials, which can absorb, hold, and release heat to keep people comfortable.  This technology is now found in blankets, bed sheets, dress shirts, T-shirts, undergarments, and other products.
  • Cardiac Pump—Hundreds of people in need of a heart transplant have been kept alive thanks to a cardiac pump designed with the help of NASA expertise in simulating fluid-flow through rocket engines.  This technology served as a “bridge” to the transplant methodology.
  • Flexible Aeorgel—Aeorgel is a porous material in which the liquid component of the gel has been carefully dried out and replaced by gas, leaving a solid almost entirely of air.  It long held the record as the world’s lightest solid, and is one of the most effective insulator in existence.
  • Digital Fly-By-Wire—For the first seventy (70) years of human flight, pilots used controls that connected directly to aircraft components through cables and pushrods. A partnership between NASA and Draper Laboratory in the 1970 resulted in the first plane flown digitally, where a computer collected all of the input from the pilot’s controls and used that information to command aerodynamic surfaces.
  • Cochlear Implants—One of the pioneers in early cochlear implant technology was Adam Kissiah, an engineer at Kennedy Space Center.  Mr. Kissiah was hearing-impaired and used NASA technology to greatly improve hearing devices by developing implants that worked by electric impulses rather than sound amplification.
  • Radiant Barrier—To keep people and spacecraft safe from harmful radiation, NASA developed a method for depositing a thin metal coating on a material to make it highly reflective. On Earth, it has become known as radiant barrier technology.
  • Gigapan Photography—Since 2004, new generations of Mars rovers have been stunning the world with high-resolution imagery.  Though equipped with only one megapixel cameras, the Spirit and Opportunity rovers have a robotic platform and software that allows them to combine dozens of shots into a single photograph.
  • Anti-icing Technology—NASA has spent many years solving problems related to ice accumulation in flight surfaces.  These breakthroughs have been applied to commercial aircraft flight.
  • Emergency Blanket—So-called space blankets, also known as emergency blankets, were first developed by NASA in 1964.  The highly reflective insulators are often included in emergency kits, and are used by long-distance runners and fire-team personnel.
  • Firefighter Protection—NASA helped develop a line of polymer textiles for use in spacesuits and vehicles.  Dubbed, PBI, the heat and flame-resistant fiber is now used in numerous firefighting, military, motor sports, and other applications.

These are just a few of the many NASA spinoffs that have solved down-to-earth problems for people over the world.  Let’s continue funding NASA to ensure future wonderful and usable technology.

EXOSKELETONS

March 7, 2016


I have a dear friend and neighbor whose oldest son suffers with chronic back problems.  Several years ago he was involved in an automobile accident that left him with significant issues relative to mobility.  He has undergone three surgeries over the past few years, all of which have not improved his condition.   He is in constant pain.  On his best day, he can walk to his wheelchair. Chris is forty-six years old.

When I first read of medical exoskeletons I became very interested in the technology simply thinking that one day my friend may be able to walk comfortably with aid from these devices.  The progress made over the past few years is striking with technology improvements constantly in the news.

There is a huge need for applications designated for our “wounded warriors”.  According to the Paralysis Resource Center, relative to military involvement:

  • 54% of those who reported being paralyzed were males, while 46% were females.
  • 61% of those who reported being paralyzed due to a spinal cord injury were males, while 39% were females.
  • Males were nearly twice as likely (1.77) to incur a spinal cord injury as females.

“According to a study initiated by the Christopher & Dana Reeve Foundation, there are nearly 1 in 50 people living with paralysis — approximately 6 million people. That’s the same number of people as the combined populations of Los Angeles, Philadelphia, and Washington, D.C. And that number is nearly 33% higher than previous estimates showed.”

It means that we all know someone — a brother, sister, friend, neighbor, or colleague — living with paralysis.

A team of researchers in the Control Systems Laboratory, Department of Advanced Science and Technology, Toyota Technological Institute, Nagoya, Japan, have recently unveiled a new exoskeleton designed as a multipurpose assistive device that can be used for both power augmentation and passive and active robotic rehabilitation tasks.

While the overall mechatronic hardware was built several years ago, the control algorithm and software that is being used was built recently finalized.  If you are unfamiliar with the term mechatronic, I would like to offer a definition at this time as follows:

Mechatronics is a multidisciplinary field of engineering that includes a combination of systems engineering, mechanical engineering, electrical engineering, telecommunications engineering, control engineering and computer engineering.

Mechatronic Image

You can see from the logotype above, mechatronics involves several engineering and computer disciplines, all working together to provide operational ability to any electro-mechanical device.  Now, back to our story.

According to Barkan Ugurlu, PhD, who is co-leading the research activities at the Toyota facility, there are three design objectives:  1.) The exoskeleton is multipurpose, 2.) wearable and lightweight, and 3.) inexpensive to manufacture. To address wearability and weight, the researchers used laser molded resin in the upper body with an overall system that can be worn by an individual.  The system has adjustable link lengths to accommodate varying wearer heights. To contain costs, they kept the exoskeleton design simple. The system is actuated via electrical motors, with the control algorithm is built on top of a sensorless architecture. The researchers also used off-the-shelf joint-level compensation and control techniques that are already in the manufacture of robots and robotic devices.  Several designs may be seen as follows:

Exo Hardware

Exo Hardware (2)

While clinical experiments have not been performed, the system performance has been tested with able-bodied individuals, as well as with individuals who are obese and who are underweight. The system performance is not easily influenced by human-wearer parameters, Ugurlu said.

Soldier and Exo

You can see from the JPEG above an application used by an Army Captain to aid mobility.  These applications are happening each day with significant improvements each year.  The need is definitely there as you can see from the following fact:

In considering mobility, companies designing and providing the hardware have also considered lack of mobility for upper-body motion.  The digital below will indicate what is now available.  Please note, lighter, stronger and improvement relative to range of motion is the desired goal.

Exo and Upper Body

The exoskeleton development for the most part is still in the first prototype stage.  Researchers indicate they intend to introduce improved models as their work evolves, such as a model that can help patients with paraplegia walk. “I am specialized in humanoid locomotion and we are going to introduce some of the key techniques from this field to exoskeleton-based paraplegic walking support,” Ugurlu said. “This study is still an ongoing process….”

Upper and lower exoskeleton devices show how engineering and medicine combine efforts to improve the quality of life for individuals otherwise wheelchair-bound.  This is only one example of how technology is addressing human needs.


Some of the information for this post was taken with the January/February 2016 issue of R & D Magazine.  This is a marvelous publication and I recommend it to you as a source of viable information relative to research and development.

I certainly hope everyone realizes the remarkable benefits derived from R & D funding.  The vision comes first, then the hard work of research to prove or disprove viability of the proposed project.   Some R & D efforts yield results definitely before their time.  We see this again and again in industry and commerce.  Great ideas but due to lack of funding for commercial development or possibly an idea is just before its time.

Let’s take a look at what might be in store for funding during the 2016 year and then a projection as to what might occur through 2018.  We will do so for the United States and for other countries.

Research and development (R&D) is defined as the process of creating new products, processes and technologies that can be used and marketed for mankind’s benefit in the future. The R&D processes and their costs vary from industry to industry, from country to country and from year to year.  The 2016 Global R&D Funding Forecast this year is sponsored by the Industrial Research Institute (IRI), Washington, D.C.  This study reveals that global R&D investments will increase by 3.5% in 2016 to a total of $1.948 trillion dollars.  This equates to purchasing power parity (PPP) values for more than 110 countries having significant R&D investments greater than $100 million. If we take a look at spending for 2014, 2015 and proposed spending for 2016, we see the following:

R & D Funding

Let me explain the two categories North America and the U.S.  The North American “bucket” includes Canada, the United States and Mexico.  This is somewhat nebulous from the chart that’s the breakdown.

For 2015 and 2016, R&D investments in the U.S. continue trends started five years previous. These include: 1.) restrictions on total federal government spending for R&D, 2.) the resultant decline in federal government support of academic R&D investments (and their struggles to compensate), and 3.) the slow increase in industrial R&D spending (and its share of the total R&D “pie”). Despite these ‘drags’ on R&D support, the U.S. continues to be the largest single country in R&D investments with slightly more than a quarter of all global R&D spending.  These R&D programs are supported by industrial, sixty-six percent (66%), federal government twenty-five percent (25%) and academic/non-profit seven percent (7%) investments. There are substantial changes being seen in the character of the U.S.’s industrial R&D makeup. Life science R&D, for more than ten years, has been the largest sector in the industrial technology arena.  This is very surprising to me but demonstrates the great need, at least in the United States.  For 2016, many of the large players in this sector—Novartis, Pfizer, Merck, Sanofi, Astra Zeneca, Eli Lilly, GlaxoSmithKline, Bristol-Myers Squibb and more (not all are U.S.-based, but most have large U.S. installations).  All are expected to reduce their large multi-billion dollar annual R&D investments in 2016. A reduction of products in the R&D pipeline, increased regulatory pressures and consumer resistance to high-priced drugs are some of the reasons that pharmaceutical companies are likely to see reduced revenues and a reduced ability to continue funding mega-scale R&D programs.

Much of the R&D growth in a country is driven by that country’s economic growth, which is measured by the gross domestic product (GDP). GDP growth, as documented by the International Monetary Fund (IMF) is forecast for a 6.3% increase for China in 2016, a 2.8% increase for the U.S. and significantly smaller increases for European countries—China’s GDP growth is still significantly larger than all other potential competitors for the immediate future. India has larger GDP growth expectations—7.3%for 2015 and 7.5% for 2016, but its GDP is less than that of China or the U.S., as are its R&D investments(less than 1% of its GDP).   India’s recent strong GDP growth and commitment to R&D currently rank it as the sixth country on the list for overall R & D expenditures.

You can see from the graphic below the relative differences in funding from each segment of our globe.  North America, by far, exceeds other areas, but please notice China.  R & D efforts from China are definitely on the rise and much of the R & D funding involves military weapons and expansion of their desire to dominate the Pacific Rim.  I am also impressed by funding undertaken by Japan and South Korea.  The Pacific Rim is on board and making great progress in the number of international patents awarded to academia and industrial concerns.

American Dominance

If we “drill down” and look at countries specifically, we see the following graphics.  Please note:  GERD = Gross Expenditures on Research and Development and PPP = Purchasing Power Parity (used to normalize R&D investments)

US--Belgium

Mexico--Total

I know this is a bit of an eye chart but does give a very detailed accounting of who has spent the most from 2014 to 2015 and what is projected for 2016.  Please note also the “Global R & D Expenditure” is almost two trillion US dollars.

Looking at the digitals below, we see trends in spending that reflect economies across the world.  Money is very tight. Banks are only looking at low-risk projects that have guaranteed payback.  There is a very limited venture mind-set relative to lending institutions.  Researchers over the world are looking for “angles” to fund their ventures and those angles are few and far between.   It also pays to be well-connected and communicate with your favorite lobbyist.

What Changed

Can you depend upon the US government to fund your project?  I have been waiting on an SBA loan for over one year.  I’m still being encouraged but to date have no real assurance the loan will become available.  Nothing is a “slam-dunk” even though the probably of project success in my case is well over fifty percent (50%).  Still, no bananas.

Will Govt Funding

You will note the Fed seemingly has no problem in funding the various federal branches shown below. I have no problem with this, although the waste and fraudulent practices are really troublesome to me.  Those have been adequately documented by other non-Federal enterprises.

Top U.S. Federal R & D

The chart below gives us a glimpse of what prognosticators feel are the most viable technologies through 2018.  I can agree with all of these categories.  I would say that if you have a son or daughter interested in a profession within the STEM fields, he or she might look into the ones given below.  Every category below needs trained professionals.  These fields of study will not welcome high school graduates and in most cases the most important work will be accomplished by individuals with Masters or Doctoral degrees.  This is where we are with technology.

As always, I welcome your comments.

Important Technologies by 2018

 

BREAD AND CIRCUSES

March 3, 2016


“Panem et Circensus”, literally “bread and circuses”, was the formula for the well-being of the population, and thus a political strategy. This formula offered a variety of pleasures such as: the distribution of food, public baths, gladiators, exotic animals, chariot races, sports competition, and theater representation. It was an efficient instrument in the hands of the Emperors to keep the population peaceful, and at the same time giving them the opportunity to voice themselves in these places of performance.

Does this sound familiar?  If you have read my postings over the past few years you know I concentrate strictly on all things STEM (science, technology, engineering and mathematics). Even though I just voted, I keep my political views to myself because that’s just not my focus. YOU are intelligent enough to listen to the candidates or game show contestants as the case may be, make up your mind, and VOTE.  You do NOT need my help in deciding who’s who in the zoo.

I am very disappointed with the considerable lack of substance on both sides of the aisle this time around.  Basically, at this crucial stage of the game, we are sending in the clowns.  It does not come as any surprise that the campaign for the Presidency of the Unites States has barely acknowledged many of the challenges we face, including industrial issues and the manpower needed to fill critical jobs within the industrial environment. Industry is desperately seeking talent and respite from regulations that literally choke invention and creativity.  The Institute for Supply Management released data that indicates a tough start to 2016.  Let’s take a very quick look.

  • Production and raw materials inventories in manufacturing sector were all contracting.
  • The employment index was down 3.2 percent from the month of December.
  • The rate of expansion dropped twelve percent (12%) from November 2015
  • Capacity utilization was off twenty-six percent (26%).
  • New orders for equipment in the material handling sector dropped two percent (2%). Not that much but still a drop.
  • Future orders were down three percent (3%)
  • Exports were off thirty-five percent (35%)
  • Seventy percent (70%) of respondents in manufacturing organizations polled have greatly struggled to find acceptable talent to fill open jobs. This problem is epidemic in manufacturing companies.

These facts were the direct result of negligance on the part of our elected officials.

REGULATIONS:

Are you ready for this one?  2015 was a record-setting year for the Federal Register, according to numbers from the Competitive Enterprise Institute in Washington, D.C.

In 2015, daily publication of the federal government’s rules, proposed rules and notices amounted to 81,611 pages.  The graphic below will indicate the scope of the problem.

Federal Regulations

OK, how much added cost to industry and the public at large do Federal regulations costs? This year, 2015, the Wallstreet Journal cited The Competitive Enterprise Institute (CEI) claiming the annual cost of federal regulations is nearly $1.9 trillion.   This “works out to a staggering $14,976 per household per year”: Americans send $1.4 trillion to Washington each year in individual income taxes.  The report found that the federal bureaucracy—made up of 60 agencies, departments, and commissions—has 3,415 regulations in the process of being finalized, meaning that the number of regulations far surpasses the number of laws passed by Congress.

JOBS AND THE SKILLS GAP:

A recent report called “The Skills Gap in U.S. Manufacturing 2015 and Beyond” projects that, “Over the next decade, nearly three and a half million manufacturing jobs will likely need to be filled, and the skills gap is expected to result in 2 million of those jobs going unfilled.”  The urgency of the problem was described as far back as 1990 by the National Center on Education and the Economy, with its report, “The American Workforce – America’s Choice: High Skills or Low Wages”. Right now, American manufacturing companies cannot fill as many as 600,000 skilled positions—even as unemployment numbers hover at historic levels—according to a new survey from Deloitte and The Manufacturing Institute, Washington, D.C. In determining the numbers, a representative sample of 1,123 executives in the United States within manufacturing companies recently revealed that five percent (5%) of current manufacturing jobs are unfilled due to a lack of qualified candidates.  As we mentioned above, approximately seventy percent (70%) of manufacturers have a moderate to severe shortage of available, qualified workers,” said Craig Giffi, vice chairman and consumer and industrial products industry leader, Deloitte LLP. “Moreover, fifty-six percent (56%) anticipate the shortage to increase in the next three to five years”.  Emily DeRocco, president, The Manufacturing Institute, noted that “these unfilled jobs are mainly in the skilled production category—positions such as machinists, operators, craft workers, distributors, and technicians. Unfortunately, these jobs require the most training and are traditionally among the hardest manufacturing jobs to find existing talent to fill,” she said.

Have you heard about this during the recent debates?  I don’t think so.  Does anyone really expect any of the candidates to discuss these problems over the next months leading up to the November election?  I don’t think so.  It’s not glamorous! Too productive! Too important to our national well-being.  And the media—it’s all about ratings.  The best reality show in town is the race for the White House.  I have briefly touched on two issues we have; regulations and the skills-gap.  We could mention at least fifty more, both domestic and foreign in nature.  We need a work horse in the Oval Office and not a show horse and I don’t see one in sight.

OK, I’ve vented.  Now back to STEM subjects.  I’m over it.

INDUSTRY 4.0

March 1, 2016


Industry 4.0” is the brainchild of the German government, and describes the next phase in manufacturing — a so-called fourth industrial revolution. The four phases consist of the following:

  • Industry  1: Water/steam power.
  • Industry  2: Electric power.
  • Industry  3: Computing power.
  • Cyber        4:  Connecting physical systems.

We are in the third “revolutionary” period right now but transitioning to the fourth revolutionary period.  This will be the industrial internet of things or IIoT. Connected automation and analysis enable smart factories to function more efficiently, with significant reductions in scrap and off-quality products and with considerably less cost and overhead than is being experienced at the present time.

A smart factory using IIoT can accomplish the following:

  • Produce up to twenty-five (25) variations in one product allowing for complete satisfaction of the consumer population.
  • Ten percent (10%) increase in productivity
  • Thirty percent (30%) decrease in inventory
  • A significant return on company investment (ROI)
  • The ability to make production change-overs quickly and with fewer on-line mistakes

The graphic below will indicate the four phases of production and show the upcoming Industry 4.0 systems.  The three boxes in the fourth phase represent computer inputs wirelessly transmitting and receiving data from two robotic systems.

FOUR STAGES OF INDUSTRY

Industry 4.0 is the rapid transformation of industry, where the virtual world of information technology, IT, the physical world of machines, and the Internet become one physical entity. It centers on the integration of all areas of industry enabled by IT.  Technologies improve flexibility and speed, enabling more individualized products, efficient and scalable production, and a high variance in production control.  Machine-to-machine (M2M) communications and the improved machine intelligence lead to more automated processes, self-monitoring, and results in real time control.

Characteristic for industrial production in an Industry 4.0 environment are the strong customization of products under the conditions of highly flexibilized (mass-) production. The required automation technology is improved by the introduction of methods of self-optimization, self-configuration, Self-diagnosis, cognition and intelligent support of workers in their increasingly complex work.  The largest project in Industry 4.0 at the present time (July 2013) is the BMBF leading-edge cluster “Intelligent Technical Systems OstWestfalenLippe (it’s OWL)”. Another major project is the BMBF project RES-COM, as well as the Cluster of Excellence “Integrative Production Technology for High-Wage Countries”.   In 2015, the European Commission started the international Horizon 2020 research project CREMA   (Providing Cloud-based Rapid Elastic Manufacturing based on the XaaS and Cloud model) as a major initiative to foster the Industry 4.0 topic.

IIoT devices should work to bring about Industry 4.0 manufacturing in five ways as follows:

  • Decentralized Intelligence—Where as much intelligence and control capability as possible is placed in the machine, or individual drive axis, rather than handling all activity from one central processing unit or CPU.  Holding process data at the machine level, and deciding what to do with it, reflects the belief that a machine can be equipped to do something with the data and improve the processes on its own. NOTE:  This is completely independent from the “cloud”.
  • Rapid Connectivity—Systems that facilitate instant vertical or horizontal connectivity to allow data to flow freely across the enterprise structure need continual investment and improvement.
  • Open Standards and Systems—Open standards allow for more flexible integration of software-based solutions—with the possibility to migrate new technologies into existing automation structures.
  • Real-time Context Integration—In Industry 4.0 factories, it will be possible to draw on real-time machine and plant performance data to change how automation systems and production systems are managed.
  • Autonomous Behavior—Real-world initiatives can make production more connected and demand-driven.  Technology helps the production line to become autonomous.  The goal is to have workstations and modules that can adapt to individual customer or product needs.

One HUGE concern:  Industry 4.0 must have engineers, production specialists and technicians to bring this to pass in the fourth generation of the Industrial Revolution.  Over the next decade, America faces one of its most critical tipping points. The U.S. Bureau of Labor Statistics indicates that by 2012, there was be a shortfall of nearly three (3) million skilled workers in America.  By 2020, that number will be ten (10) million in manufacturing-related industries alone, with millions more in nearly every sector of the American economy. The average age of American skilled workers is 55 years old. These essential workers will retire soon, and there’s not enough young people coming through the skilled training pipeline to fill the gap. This gap is already costing billions from the American gross domestic product. The multiple implications for the wholesale insurance industry due to the “skilled shortage” will be profound. Expanded liability issues and new potential claims in a worker-shortage environment may arise against the backdrop of strained capital reserves and a soft premiums marketplace.  WHAT DOES THE “SKILLED WORKER SHORTAGE” MEAN?   The skilled worker shortage has practical and potentially devastating consequences for our economy. At the height of the recession, thirty-two percent (32 %) of U.S. manufacturers reported that they had jobs going unfilled because they could not find workers who have the right skills. This shortage has far-reaching consequences. For example, our country’s infrastructure requires major upgrades and repairs. Municipal water and sewer systems are failing, with leakage reaching as high as 20 percent. Many bridges and overpasses are unsafe, leading to potential injuries and deaths as well as long-term traffic and business delays. The shortfall of 500,000 nationwide welders is causing huge delays or cancellations for repair projects that are already funded. Heavy construction equipment, such as cranes, must be built in America to meet the demand. Finding the skilled workers to build cranes is a major hurdle. Once built, a crane requires skilled operators, as well as skilled repair and maintenance workers to keep the cranes operating. This scenario is typical of virtually every industrial enterprise in the nation. From aviation to energy, the skilled worker gaps are enormous. This also has dangerous implications for our national security. In order to maintain the world’s most sophisticated military, we must produce systems, parts and hardware in America. Without domestic manufacturing operations, some critical component work has actually been moved to other countries as a stop-gap measure. The hard costs are painful, too. A 2011 survey by The Nielson Company among executives from 103 large U.S. manufacturing firms found that on average, the shortage of skilled workers will cost each company $63 million over the next five years, some as much as $100 million. These costs include training and recruiting, followed by problems caused by lower quality and resulting decreases in customer satisfaction. Manufacturers and builders cannot afford to utilize under-skilled workers without increasing many types of severe liability risks. Negative media images of skilled workers – what I call “essential workers” – pervade our culture and are contributing to the problem by discouraging young people from pursuing careers in the skilled trades. Educators, employers and community leaders are slowly becoming engaged in efforts to counter this dangerous trend that often portrays “blue collar workers” in TV shows and movies as thugs, drunks and murderers. Advertisers can be alert to these cultural stereotypes and use advertising dollars to support TV shows and movies that show respect for skilled workers. It is in America’s interest to mobilize the public to restore the dignity of essential skilled workers. Another contributing factor to the coming shortage is that most of high school vocational arts programs so popular in the ’50s and ’60s have been closed in the >> change our business model. That will be devastating for America. Although general unemployment remains high, many employers are desperate now for skilled workers to fill essential jobs and this problem will grow as veteran workers retire. We can already see how the skilled worker shortage is causing us to lose the production edge that has fueled America’s economy.  EDUCATORS AND MANUFACTURERS MUST ADDRESS THE SKILLED-WORKER SHORTAGE.  It is critical to our economy and national security.

OK, now back to the fourth industrial revolution.

The fourth industrial revolution will affect many areas in our daily lives and certainly will be felt on the facility floor. A number of key impact areas emerge:

  1. Services and Business Models.  The ability to produce rapidly and with minimal defects will definitely affect the business model and make company products much more marketable.
  2. Reliability and continuous productivity
  3. IT security.  IT security is a must.  Systems must be put in place to guard security because a great number of commands received and sent will be from wireless devices.
  4. Machine safety.  Machine safety is always critical.  Safety must be taught to employees and those managing employees.
  5. Product lifecycles.  Product life cycles will shorten due to flexibility of production capabilities.
  6. Industry value chain
  7. Workers (See above.)
  8. Socio-economic.  The workforce will need additional training and this will drive labor rates upward.  In my opinion, this is a good thing provided individuals will take on the challenge.
  9. Industry Demonstration: To help industry understand the impact of Industry 4.0, Cincinnati Mayor, John Cranley, signed a proclamation to state “Cincinnati to be Industry 4.0 Demonstration City”.
  10. A recent article suggests that Industry 4.0 may have beneficial effects for a developing country like India.

As you can see, we are living in fascinating times.  Industry 4.0 is coming and those relegated to a spectator position will lose market share and will cease to be competitive.

As always, I welcome your thoughts.

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