Looking up, seeing ceilings: MAGNET’s approach to innovation for small to mid-sized manufacturers

When Dan Sauder took a hard look at the future of Sauder Woodworking, his furniture manufacturing company outside Toledo, Ohio, he identified a number of threats, including a lack of innovation, clunky processes, and a too-concentrated customer base. Like many small and medium-sized manufacturers in Northeast Ohio’s post-industrial economy, Dan faced significant price pressures, overseas competition, aging equipment, and limited access to investors. And though he envisioned launching new product lines that would attract more customers, he wasn’t sure how to find creative ideas, much less how to research, design, and bring products to market with his constrained resources.

As he moved through his assessment, Dan found the consulting services of the Manufacturing Advocacy and Growth Network (MAGNET), part of the National Institute of Standards and Technology’s Manufacturing Extension Partnership (MEP) program. MAGNET facilitated an ideas session that generated 85 actionable possibilities, which were narrowed down to the single idea of leveraging Sauder’s furniture expertise to focus on ceiling aesthetics.

Over the course of 18 months starting in 2008, MAGNET supported and guided Dan through the design, market analysis, and sales phases of development that in the end produced a multimillion dollar product now found in buildings across 13 states. After its success working with Sauder and other firms, MAGNET decided to scale the same consulting services regionwide in 2011 with the launch of PRISM (Partnership for Regional Innovation Services to Manufacturers).

Small and medium-sized manufacturers today face multiple pressures that hamper their ability to invest and grow. On the heels of multiple recessions, companies have had to shed all but the most essential components of operation. They confront ever-increasing cost pressures from customers and intensifying overseas competition. By connecting firms with regional expertise and resources, such as university research, local experts, and the NASA Glenn Research Center, PRISM helps address these barriers and works with firms to improve products and processes. For manufacturers, this assistance translates into added potential to grow revenue and jobs. For Northeast Ohio, it means a more competitive manufacturing sector and sustainable regional growth focused on leveraging existing assets.

To date, PRISM has worked with 40 companies, and its approach has shown strong initial results. One client, a private jet rental company, utilized PRISM’s holistic consulting services to launch an aircraft remanufacturing process that eventually spun off into a separate company, Nextant Aerospace. And when Vitamix faced exponential growth in its high-end blending products, PRISM helped the company implement lean processes so that it could reach its potential. Over 200 new jobs have already been generated in Northeast Ohio from the first 10 PRISM companies alone.

But given the long-term nature of the challenges facing Northeast Ohio’s manufacturers, developing a sustainable funding approach for PRISM is a high priority. Drawing on Northeast Ohio’s ecosystem of philanthropic and community partners, PRISM is working with six philanthropic lenders, including the Fund for Our Economic Future and the Cleveland Foundation, to pioneer the use of program-related investment (PRI) loans to help put its work on a “pay for performance” basis. PRISM uses the PRI funds to pay itself, thus allowing cash-strapped, risk-sensitive manufacturers to unlock significant innovation and growth without high front-end costs. The value proposition is simple: PRISM gets paid only if it helps the business grow.  Early successes have demonstrated the power of offering this fee mechanism, which will also promote the program’s sustainability.

The initiative featured here is related to work supported by the Brookings-Rockefeller Project on State and Metropolitan Innovation. Brookings recognizes that the value it provides is in its absolute commitment to quality, independence, and impact. Activities supported by its donors reflect this commitment and the analysis and recommendations are solely determined by the scholar.