During the 1890’s Thomas Edison devoted most of his time to an industry few would associate with him – the milling of iron ore. In pursuit of finding an efficient way to produce iron ore for use in steel production Edison envisioned the world’s first fully-automated factory. How his efforts played out provide an object lesson in why automation is not in itself a strategy.
Why was Edison focused on iron ore? The answer is steel, specifically the steel tracks on which the booming industrial revolution economy of the late 19th century rolled. Edison noted that iron ore was scarce in the Eastern United States where steel production was centered and sensing an opportunity saught to find a way to make the most of the ore available close to its point of use. He patented a method of extracting iron using a large electromagnet, purchased land and built a huge iron mining complex on Sparta Mountain near Ogdensberg New Jersey. The complex featured twenty buildings housing giant rock crushers, magnetic separators, and a mucking process that transformed the ore into briquettes that were easier to transport.
His team worked overtime to put the factory into full scale production, but it seemed at times a sisyphean task – one step forward followed by three back. Bearings failed on the crushing machines. Buildings collapsed. Dust clogged everything. Workers died in accidents. Meanwhile the great Mesabi iron range opened up in Northern Minnesota – and prices for iron ore began to plummet, making the need to drive costs down to compete with lowering prices ever more imperative.
Edison’s approach to the rapidly thinning profit potential of the Ogdensburg operation was to seek greater and greater levels of automation, reducing the need for any manual intervention, dramatically lowering labor costs. He would eventually design and build the world’s first near fully automated ore milling facility. Theodore Waters, a reporter who visited the factory was amazed by the application of automation at an un precedented scale. “The never-ending and never-resting stream of material constantly circulates through the various buildings…and not once in its course is it arrested or jogged onward by human agency.” It was a remarkable technological achievement.
By 1898 Edison had managed through automation and other efficiences to cut his costs from $7 a ton to $4.75. But by then Mesabi range ore was selling at $3 a ton. The race to the bottom was over and Edison had lost. In 1899 operations at the mill ceased. The total revenue produced by the mill was only $180,688.
Looking back at that time Edison was quoted as saying, “I put three million dollars down that hole in the ground, and never heard it hit bottom.” Ogdensberg was a literal money pit – of epic proportions. What was worse was that Edison funded that investment by:
- Selling off his personal stock in General Electric, the company that had been built from his pioneering electrical power generation, transmission and illumination
- Mortgaging his Phonograph Works in West Orange
- And borrowing from his son’s inheritance.
Bottom line, there is no question Edison’s amazing automated mill was a technological marvel, but it was a financial disaster. Zooming in to ensure every detail of its operations were perfected, Edison failed to zoom out and realize – until it was too late – that the business strategy the operation was serving was very unlikely to succeed.
As the tools of automation become more powerful and easier to use it is more important than ever to recognize the truth that automation can be a great way to improve effiency, create scale and new value in support of a strategy. But first you need a sound strategy – taking into account the landscape, your strengths, the competition, threats and opportunities. And when we turn to automation as part of that strategy we need to take care in asking what we should automate, and why?
And it’s best to think through those questions before you start automating.
To learn about Smart ways to plan and execute your automation initiative click here.
Epilogue: Edison’s good friend and fellow inventor Henry Ford was very impressed with the achievement at Ogdensburg. It was one of the inspirations for his mass production facility for the manfacture of automobiles.
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