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Re: Why is the Automation market declining?
Sep 18, 2000 3:04 pm, by Jim Pinto
Text :
Michel A. Levesque commented :
>I believe that the global market is not declining.
>Maybe if one looks at just the major market (NA), but not the
>entire worldwide industry. If the entire industry is on the decline
>then why are we (list members) not out looking for other jobs?
Jim Pinto responds :
Ah! But, many in the industry *are* laid off and looking for new jobs. Take a look around you. The consolidations among the majors are causing a lot of divestitures and cutbacks.
This remind me of a joke-truism :
When someone else is laid off, it's a Recession.
When *you* are laid off, it a Depression".
Michel :
>The industry as a whole may be sagging, but the long term trend
>is up.
Jim:
Sorry, Michel, the long term trend is *not* up. It's flat, or down. Many people have asked - is this temporary, until the "return to normal". Is this only until the "next big thing" ?
Answer : Sorry, folks - there will not be a return to normal. Please review again my comparison with "farming".
Quote from the original article (please read it) :
This is not an accident - it's part of the evolutionary process. Farming, which once employed a major segment of the population,
now employs less than 2% in the US; there are few rich and innovative American farmers. Similarly, manufacturing employed over 35% in the US less than a century ago and this is steadily reducing to about 15% today.
Michel continues :
>Another juicy item from Jim is the level of R&D funding.
>R&D. In a technology driven market such as
>automation, manufacturing companies who are not putting at least
>10% back into R&D are doomed to fail.
Jim :
I agree wholeheartedly!
Engineering and R&D is the lifeblood of a company.
Look at any company that has less than about 10%, and you have a declining business. A growing business puts a much higher percentage into new products.
Michel :
>We see this all the time, the big boys buying up the
>smaller boys with good products...
Jim:
This is because - and I quote :
"It is difficult, if not impossible, to generate real innovation midst the bureaucracy of a large company. The only way to get it seems to be by
buying smaller companies. "
This has spelled the death-knell of large, corporate central engineering.
Michel :
>If the industry is declining, the failure to find the next big thing
is the main reason for this decline.
Jim:
Amen!
Michel concludes :
>Go on to greener pastures.
>Either go global, or stay local. But, if you stay local the market
>will dry up as the technology saturation progresses...
Jim :
Amen! Amen !
Cheers:
jim
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Jim Pinto
email : jim@jimpinto.com
web: www.JimPinto.com
San Diego, CA., USA
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Re: Why is the Automation market declining?
Sep 20, 2000 12:40 pm, by Ralph Mackiewicz
> Michel A. Levesque commented :
>
> >I believe that the global market is not declining.
> >Maybe if one looks at just the major market (NA), but not the
> >entire worldwide industry. If the entire industry is on the decline
> >then why are we (list members) not out looking for other jobs?
>
> Jim Pinto responds :
>
> Ah! But, many in the industry *are* laid off and looking
> for new jobs. Take a look around you. The consolidations
> among the majors are causing a lot of divestitures and cutbacks.
Yes, but this, by itself, does not mean that the overall IA market is declining. It means only that the fortunes of the "majors" is declining. As I said before, we are doing more systems these days with less "IA" content (PLCs) and more generic technology content. The stuff being used as replacements is not purchased from the
majors. Does this mean the overall IA market is declining or is the decline a statistical fluke caused by an over dependence on the assumption that the overall IA market is defined by the majors?
> This is not an accident - it's part of the evolutionary process.
> Farming, which once employed a major segment of the population,
> now employs less than 2% in the US; there are few rich and innovative
> American farmers. Similarly, manufacturing employed over 35% in the US
> less than a century ago and this is steadily reducing to about 15%
> today.
Yes, but just because the market changes does not mean it is declining. While there may have been some "real" declines in manufacturing, there are many many people working in manufacturing that are not classified as being employed in manufacturing. As most manufacturers have gotten focused on their core businesses they have
restructured by shedding employees involved in many other aspects of their business (IT, IA, clerical, etc.). They then hire back a
significant percentage of these employees (in terms of head count) from subcontractors ostensibly in the "service" industry. This is
called "outsourcing". The result is a statistically visible decline in manufacturing employment. However, I would suggest that a good
portion of this decline is a statistical fluke due to the fact that either 1) the early numbers were inflated because it counted support people not directly involved in manufacturing or 2) the new numbers are depressed because many employees supporting manufacturing are now classified as service.
The same kind of affect could be happening in the IA industry. The 'majors' just aren't in a good position to take advantage of the change so they undertake M&A activities to fight this off. But the facts that sales at the majors are flat or declining and that they are involved in M&A is not necessarily by itself indicative that the
IA market overall is declining.
I'm not suggesting that you should put your head in the sand and ignore the changes that are occurring that are discussed in the article. But change at the majors is not necessarily a decline
overall. Change at the majors can mean real growth in areas that they aren't serving.
Regards,
Ralph Mackiewicz
SISCO, Inc.
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Re: Why is the Automation market declining?
Sep 20, 2000 12:32 pm, by Dave Ferguson
Jim:
Companies today are playing the Stock Market investor game and we are all part of it. If my 401K doesn't produce, I switch to another never thinking about the people that I lay off across the country.
First comes the wave of re-managing, then automation, then consolodation to save money on infrastructure (duplicate accounting, payroll, purchasing, sales etc) then layoffs etc. The only issue is in the meantime, no-one is making better products and you get knocked off the top of the hill.
As you said there are a number of examples farming, steel etc. We are experiencing it in the paper industry. The only issue I have is R&D gets hatcheted as one of the first. And innovation slowly dies and in the end sooner or later YOU HAVE TO MAKE A BETTER PRODUCT, it might not be this year or next but sooner or later .......... This is what keeps getting forgotten in the crazy stock prices world. There is a great Dilbert with Wally and Dilbert watching everyone get laid off and downsized and the next frame looking at their computer and saying "Stock price ....... up three
points" and high fiving each other.
We are reaping what we sowe (SP) so to speak in this country. We have all heard, who will buy the product when we are all automated .............. I say who will by our product when we have stripped out all the resources to make it better ...........................
Stock price ............... Up Three Points ....... Yeh
Dave Ferguson
Blandin Paper Company
UPM-Kymmene
DAVCO Automation
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Re: Why is the Automation market declining?
Sep 20, 2000 11:45 am, by Mark Blunier
> Quote from the original article (please read it) :
> This is not an accident - it's part of the evolutionary process.
> Farming, which once employed a major segment of the population,
> now employs less than 2% in the US; there are few rich and innovative
> American farmers. Similarly, manufacturing employed over 35% in the US
> less than a century ago and this is steadily reducing to
> about 15% today.
I wasn't going to comment on this, but since you felt it was important enough to draw extra attention to this. You seem to be suggesting that
that innovation makes people rich, or that farmers are not innovative. While I disagree with either premise, as a farmer I find the latter
offensive.
As far as the former, I find that to be in error as well. Along with innovation, several other things need to take place. For instance, patents or secrecy, so that you don't have to share your
innovations, and a market for high return from the innovation. Most of the innovative farmers share their innovations. When they try different practices, that they find to be successful, they share it with their neighbors, university research, and farm publications. They don't try to keep it for themselves.
Also, your statistics are loaded to give a false impression. While their are some innovative farmers, once they apply their innovations, they are no longer farmers. For example Murphy Farms came up with a system to mass produce hogs. They are no longer farmers, but a corporation. Or farmers selling seed come up with better seed varieties, become more successful, then there focus becomes more on producing seed, that business grows into a seed company. Thus many farmers with successful innovations become non-farmers, ie, not in the 2% any more.
Mark Blunier
Any opinions expressed in this message are not necessarily those of the company.
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Re: Why is the Automation market declining?
Sep 22, 2000 8:00 am, by Jim Pinto
Original comment from Jim Pinto :
>> Farming, which once employed a major segment of the population,
>> now employs less than 2% in the US; there are few rich and innovative
>> American farmers. Similarly, manufacturing employed over 35% in the US
>> less than a century ago and this is steadily reducing to
>> about 15% today.
Mark Blunier was offended :
>You seem to be suggesting that that innovation makes people rich,
>or that farmers are not innovative. While I disagree with either premise,
> as a farmer I find the latter offensive.
Jim :
My apologies, Mark - I didn't quite mean it as it came out.... My comparison with farming was to indicate that the total population involved in farming has reduced significantly. There are indeed many innovative and wealthy farmers today - I know several personally, in avocado, chicken and hog farming. But, I also know a lot of
farmers in Idaho and N. Dakota who are "paid" by the Government to allow fields to lie fallow. Farming productivity produces a surplus in the
US.
Mark :
>Most of the innovative farmers share their innovations. When they
>try different practices, that they find to be successful,
>they share it with their neighbors, university research, and farm
>publications. They don't try to keep it for themselves.
Jim :
Yes, that is a clear example of the change in paradigm that occurs when a business (like farming) achieves a new and different paradigm.
Mark :
>While their are some innovative farmers, once they apply there
innovations,
>they are no longer farmers. For example Murphy Farms came up with a
>system to mass produce hogs. They are no longer farmers, but a
corporation.
>Or farmers selling seed come up with better seed varieties, become more
>successful, then there focus becomes more on producing seed, that
business
>grows into a seed company. Thus many farmers with successful innovations
>become non-farmers, ie, not in the 2% any more.
Jim :
Excellent examples of the metamorphosis that occurs from conventional practices to the birth of new ways to innovate and develop the market,
as Ken Crater has suggested in his earlier comments.
Ken (previous) :
But, in aggregate, it is anything but market stagnation. It more closely resembles the chaos described by Thomas Kuhn in his "Structure of
Scientific Revolutions", in the period between when an old theory/technology is exhibiting its limits and when a new theory/technology becomes accepted. People cast about for new ideas, many different approaches are tried, and ultimately one or more of these new ideas come to the fore.
Jim :
I like this discussion a lottttt. It is bringing out a lot of new and different ideas, comments, suggestions, thinking!
Cheers:
jim
----------/
Jim Pinto
email : jim@jimpinto.com
web: www.JimPinto.com
San Diego, CA., USA
----------/
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Re: Why is the Automation market declining?
Sep 20, 2000 9:14 am, by Bruce Axtell
from Jim Pinto's message
Answer : Sorry, folks - there will not be a return to normal.
Please review again my comparison with "farming".
Quote from the original article (please read it) :
This is not an accident - it's part of the evolutionary process.
Farming, which once employed a major segment of the population,
now employs less than 2% in the US; there are few rich and
innovative American farmers. Similarly, manufacturing employed
over 35% in the US less than a century ago and this is steadily
reducing to about 15%
today.
Jim: If you compare manufacturing against a century ago (1900) you should expect to see a decline in manufacturing. Much of today's manufacturing is going offshore to cheaper labor markets. To offset this, the demographics of the labor market has shifted to the service, data, and information industries, which are growing.
Secondly, there was really no "automation" industry in the 1900s. Manufacturing-yes, automation-no.
I haven't bothered to check it, but my guess is that manufacturing has increased from 1900 in Malaysia, Taiwan, Mexico, or most any other offshore country you would care to name, particularly in the last 35 years.
Michael Griffin's post raised some of the same comments I have, so I won't reiterate, but technology also drives down sales dollar volume, which I think can be misleading.
For example, What in the past may have taken a PLC, a communications module at each end of the link, etc. is now integrated into one package. I can buy a PC today for less money than I paid for my 286 in 1985, that includes a CD-RW, Ethernet card, modem, and DVD drive, floppy drive, more RAM, bigger hard drive, etc. In the past, many of these would have been options, and the price would have been much higher. Thus, more PC, more devices in it, less money.
Many functions are melded into a single package, which sells for less than the individual components would have. So is sales dollar
volume an accurate indicator, or just one of several indices that should be looked at in the big picture? Would units sold be a better indicator (e.g., number of starters, drives, etc.)?
Wouldn't this partly explain the reason the automation folks are busier than ever, as pointed out by Michael Griffin, and yet the dollar volume is declining? Or maybe there are just fewer people doing the same amount of work that makes us so busy?
Bruce Axtell
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Re: Why is the Automation market declining?
Sep 20, 2000 8:26 am, by Al Pawlowski
Robert Lucky had some interesting comment on this in his Sept. 2000 IEEE Spectrum column.
>Jim: (Pinto)........................
>
>This is because - and I quote :
>"It is difficult, if not impossible, to generate real innovation midst the
>bureaucracy of a large company. The only way to get it seems to be by
>buying smaller companies. "
>
>This has spelled the death-knell of large, corporate central engineering.
Al Pawlowski, PE
al@almont.com
dba ALMONT Engineering
Baton Rouge, LA USA
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Re: Why is the Automation market declining?
Sep 19, 2000 1:14 pm, by Ken Crater
Jim said:
>Farming, which once employed a major segment
>of the population, now employs less than 2% in
>the US; there are few rich and innovative American
>farmers.
Hmm, I think that the *percentage* of U.S. farmers who are rich and/or innovative is at its highest point ever. As a *result* of this, we need far fewer of them. This, folks, is what *success* looks like, not failure. Think of all those former farmers who have now been freed up to build computers and surf the web .
The automation market is a bit of a different case. I think it is becoming highly segmented and specialized, hence the proliferation of companies, products and technologies. To a major supplier, this looks like stagnation (and, to them, indeed it is). It also looks like stagnation to analysts, for whom only the major suppliers are visible.
But, in aggregate, it is anything but market stagnation. It more closely resembles the chaos described by Thomas Kuhn in his "Structure of Scientific Revolutions", in the period between when an old theory/technology is exhibiting its limits and when a new theory/technology becomes accepted. People cast about for new ideas, many different approaches are tried, and ultimately one or more of these new ideas come to the fore.
I wonder what the automation market will look like 20 years from now?
Regards to all,
Ken Crater, President
Control.com Inc.
ken@control.com
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Re: Why is the Automation market declining?
Sep 22, 2000 7:57 am, by Jim Pinto
Ken Crater mentions :
>I think that the *percentage* of U.S. farmers who are rich and/or
>innovative is at its highest point ever. As a *result* of this, we need
far
>fewer of them. This, folks, is what *success* looks like, not failure.
Jim Pinto responds :
Yes, indeed !
Fewer farmers feed the country, with a surplus!
Ken :
>Think of all those former farmers who have now been freed up to build
>computers and surf the web .
Jim :
This is happening in a big way in most countries.
The sons of the scions of farming are the owners of successful technology companies!
Ken :
>The automation market is a bit of a different case. I think it is
becoming
>highly segmented and specialized, hence the proliferation of companies,
>products and technologies. To a major supplier, this looks like
stagnation
>(and, to them, indeed it is). It also looks like stagnation to analysts,
>for whom only the major suppliers are visible.
Jim :
Ken makes a key point. When the dinosaurs stagnate, the little companies innovate and prosper.
Ken :
>I wonder what the automation market will look like 20 years from now?
Jim :
Totally different ! And the prospect is indeed exciting! Reflect on the change in the computer business in the past 20 years - from domination by IBM main-frames, to CISCO and SUN.
Cheers:
jim
----------/
Jim Pinto
email : jim@jimpinto.com
web: www.JimPinto.com
San Diego, CA., USA
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Re: Why is the Automation market declining?
Sep 20, 2000 3:32 pm, by Seib, Larry
On 15 Sep 00, at 18:34, Ken Crater wrote:
> Jim said:
> >Farming, which once employed a major segment
> >of the population, now employs less than 2% in
> >the US; there are few rich and innovative American
> >farmers.
>
> Hmm, I think that the *percentage* of U.S. farmers who are rich and/or
> innovative is at its highest point ever. As a *result* of this, we need far
> fewer of them. This, folks, is what *success* looks like, not failure.
> Think of all those former farmers who have now been freed up to build
> computers and surf the web .
Productivity has certainly increased. The U.S. has been able to grow much more than its population needs for many decades now. However most nations have a great fear of becomeing dependant on others for food, and thus they heavily subsidize their farmers. Such was the case here in the U.S.for many years, but recently it has been dramatically reduced. Many farms are now corporate, and there are still many
struggling to survive. It is difficult to sell grain to a country when your competition is heavily subsidized, while you are not.
Larry Seib, lseib@kuh8b.cc.ukans.edu
Lawrence Seib
Director
X-ray Laboratory
The University of Kansas
Malott Hall
Lawrence Kansas 66045
Phone (785) 864-4347
LSeib@kuhub.cc.ukansas.edu
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Re: Why is the Automation market declining?
Sep 20, 2000 2:11 pm, by Walt Boyes
An astute observation, Ken.
This is not the first time this has happened in the automation industry either. It seems to go in about 30-35 year cycles. First there is
consolidation of big companies, accompanied by stagnation. Then some little startups come up with a biig idea, like, oh, a really good differential pressure transmitter, for example (Rosemount) and they start out in somebody's garage, but they grow. We are in the third such wave of ferment in the automation industry.
Walt Boyes
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Re: Why is the Automation market declining?
Sep 21, 2000 5:04 pm, by Matthew da Silva
Good points, both.
Walt boyes said:
Then some little startups come up with a biig idea, like, oh, a really good differential
pressure transmitter, for example (Rosemount) and they start out in somebody's garage, but they grow.
And, don't forget that those guys who started Rosemount were former Honeywell employees who took off to recycle their intellectual property in
an environment more conducive to experimentation. Same thing happened in Australia Honeywell where the Plantscape system was designed. It would have
been tough to try developing such a system in the U.S. due to corporate internal tensions; but it could happen in an affiliate remote from the
center. This leads nicely into Ken Crater's quoting of Tom Kuhn's seminal work, a stunning essay describing the mechanisms surrounding advances in science. He points out that change is the exception rather than the rule. The 'rule' is for existing paradigms to be exercised to the maximum of their capacity. In the systematic elucidation of any theory, eventually weaknesses are made clear. New techniques for measuring these weaknesses emerge and become technologies (that are applicable elsewhere also). Eventually, somebody stumbles onto a new idea, which is tested for robustness in a sort of 'hazing' and is not accepted until it has been
repeatedly resolved to identical or very similar outputs, in multiple independent experiments. A paradigm shift occurs where enough of these
discoveries force larger, monolithic beliefs to be adapted in order to fit the new data.
I don't agree in the decline theory ;) but I do think that the manufacturers should be looking at improving their market research techniques and also in communicating their advantages.
> But, in aggregate, it is anything but market stagnation. It more closely
> resembles the chaos described by Thomas Kuhn in his "Structure of
> Scientific Revolutions", in the period between when an old
theory/technology is
> exhibiting its limits and when a new theory/technology becomes accepted.
> People cast about for new ideas, many different approaches are tried, and
> ultimately one or more of these new ideas come to the fore.
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