to imagine how individuals can innovate on processes, materials, and products if they do not have the chance to see and interact with the manufacturing process, said Bud Peterson, president of the Georgia Institute of Technology. Ken Gabriel gave an example from his experience at Akustica, a technology company he cofounded, illustrating how physical proximity can be important even with advanced communications technologies. A performance issue arose with the production of microphones, he explained, and the engineering team in Pittsburgh worked with the manufacturing team in China for weeks, via web-based conference calls and pictures of the production process, to try to find the problem. Finally, the company sent a staff member to China, Gabriel said, and in 30 minutes the problem was identified.

Willy Shih, professor of management practice at Harvard Business School, observed that many companies have replaced geographic colocation with frequent air travel. In the 1980s, colocation was much more common. But once China opened up its economy, the production costs were so low, Shih said, that “managers threw that out the window and said, ‘We will fill the sky with planes because it is cheaper.’” It’s possible that colocation will again become more important.

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