The country is less famous for manufacturing these days, but here’s what some may not know: We still make things — a lot of them. And what’s leading the way? Thousands of industrial technology companies, members of what we call the Titanium Economy, which are thriving across the country.
Those companies are foundations of American competitiveness, innovation and resilience. They provide millions of high-paying, rewarding jobs, including many that don’t require college degrees, and help communities prosper from coast to coast. Most also deliver strong returns to investors.
A Titanium Economy factory might be humming near you right now, churning out world-class products and profits — and very little smoke. But you may not even be aware of it because these companies don’t get much attention, accounting for only about 1% of venture capital and even a smaller share of media coverage. But everyone should know a few things about these hidden stars of the U.S. economy.
Growth through innovation
A typical Titanium Economy company competes in one of 90 “micro-verticals” — clusters of companies that play crucial roles across supply chains. Each company succeeds based on how deeply it understands its customers’ needs and how quickly it can innovate to meet them. In the process, they often disrupt their own sectors.
One such company is Welbilt, a manufacturer of industrial kitchen equipment founded in 1929. In 2018, the company’s new CEO had a big idea: to allow customers to monitor and control all its products remotely using a single user-friendly digital interface. This advance would go on to help save restaurants fortunes, for example by keeping refrigerators at the right temperature to avoid spoilage, and improve food quality by running ovens and fryers more precisely.
By 2021, Welbilt had reengineered every piece of equipment in its production line to speak a common digital language and use a centralized information architecture. That year, net sales were up 92% from the prior year, with net earnings of $31.6 million.
Expanding via acquisitions
Many companies in the Titanium Economy make strategic acquisitions to gain new capabilities and lead in their micro-verticals. Heico
HEI,
an aerospace and electronics company based in Florida, specializes in making products for commercial aircraft that require high-skilled labor and are difficult and expensive to produce.
In 1999, the company acquired Thermal Structures, a manufacturer of heat shields and other specialized products for commercial and military aircraft. Thermal’s innovations included the invention of 35,000 tools to build custom high-performance products, and it was home to a strong talent base.
The acquisition of Thermal Structures cemented Heico’s position in the aerospace and defense electronics manufacturing micro-vertical. Thermal’s sales have grown significantly since the deal, rising from $17 million to $90 million in the span of two decades.
Titanium companies pay more
A young entrepreneur today may be more inclined to launch a coffee franchise or social media app than a machine shop — but the latter actually has a better chance of success, statistically speaking.
Employees tend to earn more in a machine shop or factory, too. Median annual pay in manufacturing is about $63,000, compared to $30,000 in the service industry. Factories also provide jobs with meaningful advancement opportunities, including many for people without college degrees — and, on average, they earn about 13% more than workers without degrees in other industries. Many companies in the Titanium Economy build their own talent by offering in-house training and subsidizing or paying tuition costs. Some have no choice, since vocational and trade schools do not provide the specific types of training required.
And they help communities thrive
Many Titanium Economy companies are based in small and medium-sized communities, including places that have been through hard times. These companies tend to put down deep roots, helping towns prosper as they attract other companies looking for talent and business-friendly environments.
Ideal Industries is one example. Still family-run after more than a century, the company manufactures tools and supplies for the electrical market, among other products. Headquartered 60 miles west of Chicago in Sycamore, Illinois, Ideal also has operations in Colorado Springs; Durham, N.C.; Racine, Wisc.; and Sterling, Mass.
The founder “felt that treating people well mattered,” says Meghan Juday, a fourth-generation leader of the company and former board chair. She said he named the company Ideal to show “the sort of relationships he wanted with employees, customers, communities and suppliers. “And here we are,” she added, “106 years later, still going strong.”
The Titanium Economy matters. It can help address some of the nation’s most pressing challenges, including driving innovation and competing in fast-moving global marketplaces, bolstering American communities with financial security and career opportunities, and accelerating sustainable and inclusive economic growth at home and abroad, and strengthening America’s supply chains, resiliency and position on the world stage.
The country can do more to bolster the Titanium Economy and keep pace with our competitors overseas, where governments and consortiums support industrial technology with funding, trade schools, apprenticeships and more. The time to act is now.
Asutosh Padhi is a senior partner and the managing partner for McKinsey & Co. in North America. He is the co-author (with Gaurav Batra and Nick Santhanam) of “The Titanium Economy: How Industrial Technology Can Create a Better, Faster, Stronger America” (Public Affairs, October 2022). David Ebenstein is a senior partner at McKinsey and a collaborator on the book.
