Posted: February 7, 2007

How revolutionary nanotechnology will affect commerce

(Nanowerk News) On the Harvard Business Review's list of 20 breakthrough ideas in 2007 is "Business in the nanocosm", a contribution by Rashi Glazer, a professor of marketing at Haas School of Business at the University of California, Berkeley, and a codirector of the Center for Marketing and Technology.
The scientific and technological revolution that may occur as a result of nanotechnology has been much discussed. Generally unappreciated so far, but of potentially much greater impact, are the sociocultural and business implications. Nanotechnology may change society over the next few decades just as much as information technology has over the previous few—and in ways that are still hard for our minds to grasp.
Nanotechnology is distinguished from other forms of technology, past and present, by the infinitesimal size of the materials involved (less than 100 nanometers wide) and by its method of operation. Conventional manufacturing carves or distills a purpose-suited device from a mass of raw materials. Nanotechnology, like nature, assembles objects atom by atom, following a design that calls for only what is needed: a place for every atom and every atom in its place. This method of constructing objects (which themselves do not have to be small) will reshape the future not only of manufacturing but also of distribution, retailing, and the environment.
Because conventional manufacturing begins with large and unformed inputs, it needs scale, and economies of scale push factories to become larger and more centralized. If, however, manufacturing is “additive” (assembling products atom by atom) rather than “subtractive” (distilling them from a mass of materials), factories can be quite small—small enough to be no more than a set of tiny machines and production blueprints—and can be operated almost anywhere. The marginal production costs of these factories should approach zero, and their production processes should create no pollution or waste.
These developments also challenge accepted notions of the economic place of durables—products with a shelf life independent of their utilization. At present, much economic activity amounts to providing “permanent” solutions to ephemeral problems. Thus, the plastic cover placed on a Starbucks cup solely to prevent the purchaser from spilling the scalding contents is of no use whatsoever to a stationary consumer once the brew cools off. Thanks to nanotechnology, however, many products would endure no longer than the need that gave rise to them.
Industrial or business-to-business markets are likely to embrace this technology first, given their quest to reduce costs throughout the value chain, which they could accomplish by eliminating several of its links. Already what are called synthesizers, assemblers, or automated fabricators have been developed to create items, such as prosthetics, using nanotechnology’s additive approach. In the next few decades, we may see the domestic, user-friendly successors to these machines—personal manufacturing units, or PMUs—become standard home appliances.
Consider this scenario: In preparing for a dinner party the following day, a couple decides to create a new set of dishes. They sit down at the console of the family PMU (essentially a keyboard, a display screen, and a manufacturing chamber containing the atoms to be assembled). Working with design software (the manufacturing blueprints), they input the instructions and watch as the atoms in the chamber are organized into plates, bowls, and cups. Since the number of atoms used to manufacture the dishes is the same as the number composing them, all the costly steps—extraction or collection of raw materials, transportation, transformation, waste disposal—that currently precede a product’s use or consumption are eliminated.
Ever since Adam Smith laid out their essential characteristics, market economies have been understood to rest on specialization: Individuals are producers of one thing and consumers of everything else. In what is sometimes called the nanocosm, by contrast, consumers could become the sole producers of finished products of all kinds. Consequently, they would continually evaluate whether to make or buy. We are all aware of the decentralizing and personally empowering effects of PCs and the Internet. By making individuals largely self-sufficient, the nanocosm would push these effects to the extreme, in essence creating a Robinson Crusoe economy.
Nanotechnology would thus hasten the trend away from manufacturing prowess and physical assets (hardware) as sources of competitive advantage. Obviously, the vast number of companies that offer durable or even disposable items would be at risk—as, ultimately, would those handling inventory and logistics or offering after-sale customer service, maintenance, and repair. In short, the ability of end users to perform for themselves functions now performed by other economic agents would wipe out large segments of the value chain.
Competitive advantage would lie in knowing the customer and designing the manufacturing blueprint and software. We might also anticipate the emergence of a new entity, midway between the traditional make-and-sell, command-and-control organization and the more modern sense-and-respond, adaptive organization. This new entity would function as a systems integrator, focusing on “menu design,” component acquisition and assembly, and efficient coordination of the activities and interactions of the market-savvy designer, the PMU maker, the PMU operator, and the provider of the atomic building blocks.
Source: Harvard Business Review
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