Editor’s Note: Making the grade

Spokane-based Itron has a tradition of hiring CEOs steeped in manufacturing technology. Its no wonder. The company, which had more than $2 billion in revenues last year, has 30 manufacturing facilities around the world, including one in South Carolina. But for its latest choice, Itrons board selected Philip Mezey, a man whose career began with writing software (page 46).

Its not that manufacturing is no longer important. Far from it. Mezey says its essential to continue to make products in the United States so Itron can be more responsive to its domestic customers and maintain close interaction between those developing the products and those building them.

But while manufacturing good-quality, low-cost products is absolutely necessary for success, its no longer enough. To compete with countries where wages, while rising, are still a small fraction of what we pay in this country, businesses must increasingly invest in innovative technology, whether its to make their assembly lines more flexible and capable of producing many different things in lower volumes, or to add new features that increase the value of their end products. General Electric discovered that lesson when it began moving production of many of its appliances back to the United States.

Its clearly important to keep manufacturing in this country and in this state. In the spring of 2010, in the depth of our great recession, Washingtons manufacturing sector continued to employ 257,000 workers. That number was down only about 10 percent from the sectors employment high in early 2008. By comparison, construction employment plunged 36 percent from 211,000 in June 2006 to 135,500 in June 2011. (Incidentally, that industry hit bottom just two months after we forecast a turnaround in a story by Bill Virgin published in April 2011.) Manufactured goods dominate our exports and have among the highest multiples of any job type in terms of creating spinoff jobs in marketing, research and development and capital investments.

But to keep manufacturing in our state, we have to be a leader in innovation. That goal means having a well-trained labor force. Programs like FIRST, in which high school students design and build robots that are entered in regional competitions, are important in getting high school students excited about math and science. We must continue to expand engineering and science programs at all our institutions of higher learning.

But manufacturers themselves also have to commit to upping their game year after year to continue to explore new ideas, new markets and new product areas. As Virgin says in his introduction to this months feature on the Washington Manufacturing Awards (page 27), The pages of business history are strewn with the names of companies that achieved fleeting fame and fortune that didnt last because they couldnt come up with the second idea, the additional improvement, the next generation of innovation.