The underappreciated and undervalued industrial-technology sector could be a future source of US economic prosperity and stability.
During a McKinsey Live webinar, partner Kimberly Borden and senior partner David Ebenstein discussed a group of companies whose performance rivals, or exceeds, that of Silicon Valley’s tech giants. In the industrial technology sector, these “titanium economy” companies tend to be small and midsize private companies that aren’t household names but make a wide range of everyday products, from product packaging and lawn furniture to recycling technology. They are creating high-quality jobs, building a sustainable future, and positioning themselves to meet the challenges of the future.
In their new book, The Titanium Economy, McKinsey authors Asutosh Padhi, Gaurav Batra, and Nick Santhanam say that these companies are vital to the success and growth of the US manufacturing industry and the overall US economy. Their research determined that titanium economy companies have these six initiatives in common—and execute them exceedingly well:
- Leading with digital. These companies invest heavily in digital (AI, quantum computing, etc.) to advance manufacturing innovations and streamline operations.
- Innovating products. Successful titanium economy companies are agile, leaning into external macrotrends and shifting their product mix to capture value from a changing economic environment.
- Executing programmatic M&A. Even in economic downturns, these companies have used cash balances to fuel strategic acquisitions. To improve margins, accelerate growth, and build a platform for future expansion, they target well-managed companies in specialty markets.
- Telling their story. A clear, purposeful story can help raise a company’s visibility and foster external and internal trust. Top titanium economy companies use their stories to engage investors and the media, and attract investment, talent, and new customers.
- Developing their workforce. In the face of a national labor shortage, these companies invest an outsize amount of time and money in their workforce, taking a holistic approach to employee development. They partner with trade schools, create apprenticeships for new and potential employees, and establish internal pathways for employee advancement and retention.
- Prioritizing sustainability. Successful titanium economy companies are at the forefront of decarbonizing operations and accelerating the cost-efficient scale-up of new, green businesses.
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For more on this topic, see the article “The Titanium Economy: An introduction” and the interview “Author Talks: How industrial technology is creating a more inclusive economy” at McKinsey.com. The book The Titanium Economy: How Industrial Technology Can Create a Better, Faster, Stronger America is available online and from local booksellers.