Is the U.S. economy at the front end of a manufacturing renaissance?

It’s a popular sentiment. A groundswell of support for a manufacturing and ‘maker’ surge seems real enough.

Others are convinced the service economy is here to stay. Nataraj Slavov of the American Enterprise Institute, and Ben Ho of Vassar College and Columbia University give voice to ‘manufacturing’ skeptics. In “Stop Wishing for the Return of Manufacturing Jobs – Lawmakers need to embrace the service economy” , they note “70 percent of the wealth created in the U.S. today comes from providing services, a 33 percent increase since 1950”, and add:

Americans already have plenty of stuff. Think for a second about what you spend your money on, and what you wish you had more of. Food? Televisions? Mobile phones? Cars? In a largely obese nation, we probably don’t need more food. We need higher quality food, better prepared food, tastier food, healthier food – but not more food. We have more televisions, mobile phones and cars in this country than we know how to use. We don’t need more devices. We need better content on those devices.

Recent research in psychology shows that for most Americans, spending money on experiences leads to greater happiness than spending money on material goods. As we get richer as a nation, therefore, growth in the economy will not be driven by more stuff, but by better health care, more education, more travel and better entertainment.

There may be more nuanced arguments. It’s difficult to see how ‘better entertainment’ will emerge as a pillar of the new economy. And the ‘higher quality food’ producers, and ‘content’ developers Slavov and Ho cite may indeed be driving the new manufacturing economy. They’re not a trivial, passing reference.

Especially, food makers. We not only “need higher quality food…healthier food….” , the world can’t get enough of it. Food is a manufacturing home-run for Colorado. For the U.S. And we’re just beginning to understand that.

It’s why the circa-1950 view of today’s manufacturing sector – the view of Slavov nd Ho – misses the mark. They’re in good company though. Boulder Soup Works, profiled today in CompanyWeek, is among other things an increasingly advanced manufacturer. Or they’re not. In their home state they’re an agricultural business.

Which of course they are. And Ag is huge. But Andrew Yang, and others, view them as strategic makers of the first order, not only businesses left to inspire only those who would more wisely consume in an otherwise service-centric economy.

Yang’s book, Smart People Should Build Things – How to Restore Our Culture of Achievement, Build a Path For Entrepreneurs, and Create New Jobs in America, starts with a bang:

“We’ve got a problem: our smart people are doing the wrong things. If we can get them to do the right things, it will transform the country.”

Yang argues that the allocation of talent in the U.S. has tilted precariously away from business and industry. He continues:

“If year after year we send our top people to financial services, management consulting and law schools, we’ll wind up with the pattern we’re already seeing: layers of highly paid professionals working astride faltering companies and industries. But if we send them to startups, we’ll get something else. Early-stage companies in energy, retail, biotech, consumer products, healthcare, transportation, software, media, education and other industries…”

CompanyWeek was in part launched on a related premise, that business media has followed the path Yang describes and become so service-centric – largely following banking and finance, law and professional services – that it’s lost sight of entrepreneurs and operators in other sectors.

Of course we also join the debate on the pro-maker and manufacturer side. Kate Brown, founder of Boulder Soup Works, and the dozens of other companies we profile here are inarguably building much-needed value, distinct from what service business offer our communities. And are largely ignored for their efforts.

Maybe it’s a third school of thought: encouraging our smartest people to build companies that build things. Service industries would benefit most.

Five months ago we introduced CompanyWeek, digital and events media conceived to take an unprecedented view of the Rocky Mountain maker, manufacturing, and built-environment economy.

Since then we’ve profiled nearly 70 companies in ten or so different industry sectors. We’ve learned a lot along the way:

· We asked each company to articulate the challenges, opportunities, and needs shaping their business. (We summarized responses in a CompanyWeek white paper; read or download it here.) Easily the top challenge in the manufacturing and maker economy is a lack of qualified employees. The steady loss of manufacturing jobs, to ‘globalization’ and the recession, has resulted in a ‘skills-gap’ today. Manufacturing will lag until we’re well underway educating the workforce for the next, ‘new’ manufacturing economy.

· Trends that favor ‘buy local’ and ‘made-in-America’ appear to be enduring; they’re also an engine for entrepreneurship and innovation here, where more and more business startups are aligned with the lifestyle attributes of the region. In manufacturing, machiners and advanced industrial manufacturers have been joined by a new and dynamic cadre of lifestyle, food, beverage, technology and software makers.

· As a result, sustained growth in regional making and manufacturing is materializing from small and midsize companies, up, while economic development efforts tend to tilt ‘top-down’ in the hunt for flagship companies and big wins. Companies we’ve profiled point to a state and local ‘promotions gap’ as a result – especially for firms not located along the Front Range. The ‘official’ story of Colorado manufacturing remains one of large, Denver-metro companies.

· Business is compensating. Industry efforts are underway to establish tools to better connect companies with each other – first regionally. Western slope companies are looking west and south to form new regional alliances. Business is finding a way.

· Companies would like to make more things here and are actively looking to do so. But costs are still to high and labor too elusive in sectors like apparel and sports accessories that would profoundly change the manufacturing equation for business. Maker companies would benefit from a concerted effort to lowering the barriers to ‘on-shoring’, in Colorado and the region.

· There’s some nervousness in Colorado’s highest-profile ‘maker’ category. Craft brewers are fretting, privately, about whether the market is still able to support the still-steady stream of new business launches. This despite a collegial atmosphere in the craft brewing community that continues to attract talent and money, and support growth from the inside out.

· Colorado’s natural food business is a model of innovation. Companies like Fresca Foods are a catalyst for growth, providing manufacturing, packing, and technical services to promising food brands. Operators like Rudi’s Organic have written new rules for brand extension. The progeny of Colorado’s natural foods pioneers are ripping it.

· Government and industry appear well aligned in support of entrepreneurship and business incubation. But for second stage companies a lack of adequate capital remains problematic. Colorado, for one, is also leading in the effort to provide business export services and expertise to help firms open new markets.

· The ‘maker’ movement is poised to explode. A hit last year in northern Colorado, with over 3000 attendees, Denver will be home to a Mini Maker Faire in May 2014. Sparkfun, Otterbox, and other name manufacturing brands are enthusiastic supporters.

Sign-up to receive the CompanyWeek e-newsletter here, delivered to your inbox every Wednesday morning. And look for an invitation to the next CompanyWeek Manufacturers Reception in your locale. Come out and support the community, as nearly a hundred companies did last week at Workplace Resource, the exclusive dealer for the iconic American-made brand, Herman Miller.

Companies don’t often have the luxury of forecasting business a decade from now, so it’s no surprise that of the 50 makers and manufacturers we profiled last year, none identified water as a challenge to their operations. Does that mean manufacturers shouldn’t care? No.

If goods-producers are focused on today’s pressing issues, like workforce development, prosperity will come only to those with water. Unfortunately, it’s an increasingly open question as to who will have enough. Some will have less. It’s the West’s greatest economic development challenge.

For their part officials here hope the Colorado Water Plan, currently under development, will provide a modern, equitable distribution blueprint. Part of the rationale, reasonably, is to encourage and codify smart use and conservation. It’s also intended, one assumes, to take a more holistic view of distribution and management, which as a practical matter may be the only way to manage a diminishing resource in the face of growing demand.

But the stakeholders who would divide Colorado’s water are drifting apart. There’s arguably less agreement today on key issues that would make or break a meaningful plan.

The water discussion here begins and ends with the Colorado River, and there’s a pervasive sentiment on the western slope that more water will be diverted to front range users, something viewed as an existential economic threat by many officials west of the divide.

Lurline Curran, county manager of Grand County, put a fine point on it at a Colorado River Basin Roundtable meeting late last year. “Don’t goddamn come here any more,” she now famously exclaimed. “We’re trying to tell you, Front Range: Don’t count on us,” Curran said. “Don’t be counting on us to make up all the shortages.”

Front range municipalities in Douglas County, and elsewhere, like ag-counties on the eastern plain and south, in the Arkansas River basin, see it differently. For one, planners believe more water can be developed from the River per the 1922 Compact. The Bureau of Reclamation, final arbiter on the issue of supply, has established Colorado is using less than its full entitlement. The state’s never used the three million acre feet or so it’s entitled.

As a result south metro officials are pushing for active consideration of new projects that would at once bring more water to the front range and enable the state to realize its full entitlement from the River, something it’s never done.

Will the plan address or sidestep other prickly issues? Ag, energy, municipalities, industry and business – compete for a finite resource. We know ag will get less, cities and towns more, industry enough to sustain short-term growth. But where is the new equilibrium?

Who will own Colorado’s share and how much is also only a piece of the larger River puzzle. What of the other parties to the Compact? The Lower Basin states are in the midst of a water crisis involving the River. At the same time California bakes in drought, it’s being forced to use less what from the Colorado River. For decades California, Arizona and Nevada overused their entitlement. With demand growing, there will be less water. And lower basin users facing imminent shortfalls will not go quietly.

How will all this impact business and industry? A friend with knowledge of northern Colorado water guessed, “If Cargill had taken a real close look at the state’s water issues, they’d never have come here”, referring to that company’s plans to locate a steel processing center in the area.

Agriculture is already losing water and being asked to reinvent itself on the fly, a challenge akin to changing a tire on a moving vehicle. Makers and manufacturers throughout the food and beverage sector should watch closely.

Can the new water reality – scarcity – disrupt industry in a positive way? Without question, it has. The culture of craft beer manufacturing is generally informed by progressive, modern conservation ethos. Growers, producers, and manufacturers – all are developing new methods and materials to use less and do more.

Can a meaningful water plan avoid consensus on major issues but further codify and be a catalyst for a new water-sharing paradigm?

Everyone, including industry, should keep a close watch.

Reaction to news last week that Magpul was finally pulling up stakes developed along familiar lines. Empathizers blamed overreaching politicians. Supporters of the 2013 legislation charged the company with economic extortion.

Both tended to sidestep the unfortunate reality that losing manufacturing jobs, under these circumstances, is a lousy development. We’re left to wonder if more could have been done to prevent it.

Manufacturing jobs matter – now more than ever. Companies that make things build wealth. They’re critical to differentiating the regional economy. And building on national leadership that Colorado businesses have earned in advanced and lifestyle manufacturing, among others, seems an imperative. Not doing so would be a huge, blown opportunity.

Most importantly for some, manufacturers also drive innovation. Brookings’ Scott Andes and Mark Muro put it this way:

“Manufacturing…is essential to the U.S. economy because it is the main source of innovation and global competitiveness for the United States. Simply put, advanced manufacturing is the U.S. pipeline for new products and productivity-enhancing processes. While the sector makes up just 11 percent of the economy, manufacturers conduct 68 percent of private sector R&D, as reported by our colleagues Sue Helper and Howard Wial last year. And … America’s manufacturing sector also fuels growth within the service sector because intermediary goods—the machines used by services (e.g. automated self check-out kiosks at grocery stores)—drive service sector productivity.”

Of course these are business rationale. Supporters of the legislation that caused the dustup point to the human side of the issue, and assert that ammunition limits will save lives. Colorado Governor John Hickenlooper and other elected officials who lined up the behind the effort do carry a heavier burden.

It’s also possible that Magpul’s decision to move was fait accompli after Aurora and Sandy Hook, that events would inevitably conspire to force the company to move. It’s reasonable to assume that even if last years guns-and-ammunition legislation had failed, advocates would have continued to press the issue in subsequent sessions.

Let’s hope the move works out for both sides. Texas feels like a great fit for Magpul. Colorado should root for Wyoming manufacturing; the entire sector will benefit from strong regional growth. And critics aside, Colorado’s progressive brand is a catalyst for manufacturing growth, on balance. The dynamic, young, active, healthy vibe here has become a magnet for talent, for entrepreneurship, and hopefully in the future, more capital.

Industry and government benefit from alignment on policy issues impacting the economy. Hopefully the Magpul episode will provide a roadmap for more effective collaboration in the future.

By any measure, Stephen Jordan’s tenure as president of Metro State University of Denver has been eventful. His mission to raise the profile of Denver’s urban university has generated its fair share of critics, some of them competitors, but even they would acknowledge that Metro State is on the ascent, more influential than before.

Jordan’s reputation as an innovator helped land him the top spot at MSU, and our interview last week left no doubt he believes the university is poised to tackle one of higher-ed’s biggest challenges – overcoming a ‘skills-gap’ that continues to bedevil industry.

It’s a black mark for Jordan’s profession: oft-quoted data from McKinsey & Company found 42% of worldwide employers believe recent college graduates are ready for work, while 72% of academic institutions believe graduates are adequately prepared. Disconnect.

Among the casualties? Manufacturing. The common challenge for companies we’ve profiled has been the lack of skilled workers.

Against the backdrop of Metro State’s much-discussed Aerospace, Engineering and Sciences cluster initiative, which promises workforce development, I asked Jordan if higher-ed is doing its part (to address the skills-gap). He’s way ahead of me.

“We’ll all say we’re trying to do that”, he says, acknowledging the numbers and challenges facing manufacturers, in particular. He describes what he sees as the problem.

“We’re pretty typical of most institutions in the way we’re structured. We’re vertically aligned, not very integrated, with schools of letters, arts and sciences, of business, of professionals separated by discipline but also physically.” He points to a map with buildings scattered around the Metro State campus.

“We teach you all the fundamentals of being an engineer, but without any specific clusters in mind. It doesn’t allow you to replicate the kinds of work environment that work actually occurs in today’s workplace.

“What we’re starting to say is if we’re going to be effective in workforce preparation, we need to begin breaking down those vertical alignments and thinking about how we align departments around industry clusters.”

Metro State has embraced this approach with its acclaimed hotel and hospitality-learning center. “We have four components – hotel, restaurant, events and tourism management – integrated in the program in a facility around that concept.”

But it’s the AES cluster initiative at MSU that holds promise for manufacturing, an idea he says was inspired in part by a visit to Washington D.C.

“I had an opportunity to meet at the White House with the individual who was leading the President’s effort to create new manufacturing initiatives, around industry clusters they’d identified. One they identified was the aerospace industry cluster. I started thinking about what I could bring together at the university, realizing we had industry here – in fact the second largest aerospace workforce in the country.” The Obama team liked the public/private approach.

Jordan emphasizes the workforce piece. “At its core it’s a partnership of institutions and the private sector – preferably an array of institutions. It’s not a research agenda – it’s a manpower development agenda. It’s about how we’re going to manufacture this stuff, and who’s going to do it.”

MSU leadership was initially skeptical. Workforce development at this level is often not viewed as the domain of universities. “Even here, when I started talking to my institutional leadership, understandably their response was, ‘that’s what the community colleges do; it’s smoke-stack stuff.’ But it’s different today. My guess is that this ‘misunderstanding’ is not unique to our university; it’s a fairly widespread misconception.”

Jordan’s faculty is now onboard. As a practical matter, the idea of pulling disparate disciplines together to advance an industry cluster has energized department like physics, the science that underpins aerospace aviation. “We came back and I told them, ‘I’ve got this crazy idea how we can create a very unique focus around advanced manufacturing. We’ll ask those doing it what they need.’ Our people have rallied around the opportunity.”

Industry is supportive, but must be for the project to come to fruition. MSU plans to build what Lockheed Martin also calls the Aerospace Advanced Manufacturing Building, a $40-50 million dollar facility. Industry will pick up a third of the tab. Jordan sees them as a full partner. “There’s no way to deliver an integrated curriculum, or mimic the kind of space people would actually be manufacturing in without their involvement. So we asked them ‘what are the hard skills and soft skills you need?’ That’s how we came up with the notion of bringing aviation and aerospace together.”

It can begin to sound like Jordan sees opportunity in disciplines favored by his colleagues in Boulder, a place he spent time and who’ve pushed back on some of Metro State’s ambitions. But Jordan sees MSU’s purview as unique.

“Our role is about workforce. It’s such a perfect fit for our university. We’re not a research institution. We’re here to create a workforce. Our student is a very different student that goes to CU or CSU. And the neat thing about it for Colorado is that we’re creating a full array of workforce: the Martin Marietta’s are still going to need the CU engineers to design those systems.”

In the end it’s hard to argue with Jordan’s energy – and vision for Metro State.

“My view is that urban institutions are the new generation of the democratization of education, that in urban America today, faculty and students will engage in problem solving, rethinking the issues of the day to the benefit of the economy of the urban area. We laid out of that vision early on, that we’re going to become the premier ‘urban land-grant’ institution in America today.”

His optimism is a sentiment that Colorado industry shares. They believe they’re capable of great things. Stephen Jordan and Metro State may help them get here.

Bart Taylor is founder and publisher of CompanyWeek. Reach him at btaylor@companyweek.com.