in Innovation

Manufacturing crisis

Innovation sometimes springs from crisis: a company sees a dire threat and takes drastic steps to recover. But what if one person perceives this threat before it becomes obvious to the organization? Can this person manufacturer crisis to initiate change?

It seems that’s what Thomas Friedman is doing with his book The World is Flat, changing the conversation about offshoring to one about fixing our national innovation capabilities…

And it is our ability to constantly innovate new products, services and companies that has been the source of America’s horn of plenty and steadily widening middle class for the last two centuries. This quiet crisis is a product of three gaps now plaguing American society. The first is an ”ambition gap.” Compared with the young, energetic Indians and Chinese, too many Americans have gotten too lazy… Second, we have a serious numbers gap building. We are not producing enough engineers and scientists… And finally we are developing an education gap. Here is the dirty little secret that no C.E.O. wants to tell you: they are not just outsourcing to save on salary. They are doing it because they can often get better-skilled and more productive people than their American workers.

  1. Victor,

    So the manufactured crisis you’re referring to would be the lack of innovation capability to meet future demand in the US?

    Niti

  2. Yes, or more accurately the lack of innovation capability in general in the US. There’s enough people in India and China to meet the demand.

    Although I don’t necessarily agree with Friedman’s argument. In “The Lexus and the Olive Tree” he argued almost the reverse: that the open, diverse workforce in countries like the US was inherently better for innovating. It’ll be interesting to see how American businesses adjust in the next 10 years and which Friedman is right.

  3. I haven’t read the Lexus and the Olive tree, though I have read the Flat World, but keep in mind that the two books were written a few years apart. Even 7 years is a lot of time for the changes that have taken place. Since 1998 we’ve had the tech boom/bust cycle, the rise and fall and ? of the bay area, innovations that led to the flat world (per friedman) etc

    The US could always import more Indian and Chinese engineers and scientists like they did in the late 60’s. Do you know applications from those two countries are down approximately 30% for graduate programs in Science and Engineering due to the change in visa rules?

  4. The visa rules are definitely a problem.

    The Wall St Jounal recently ran a piece about the shortage of engineers in the US, echoing Friedman’s assertion that we need to encourage more students to become engineers. But the mail they received from engineers said the supply of engineers is not the problem. The pointed out that engineers simply aren’t paid well in the US, and that if US engineers were actually that valuable and rare the laws of supply and demand would push up their compensation. Because there are plenty of engineers elsewhere at lower cost, that’s where the money goes. Until the world actually flattens economically, there won’t be much economic incentive for students here to pursue engineering.

  5. Perhaps another threat to add: the “herd instinct”. Offshoring is the latest to sweep through the boardrooms and exec suites. “They’re doing it, so we have to or we’ll fall behid”. Suggestions become edicts; edicts turn into programs and voile, the lemmings are off.
    Shame is, there are numerous tools and analytics to support thorough evaluations of whether offshoring makes economic sense, for a component, product, product line or business. They take some expertise and time to complete. Problem: their conclusions may not be seen as politically acceptable, so many (most?) are aborted.
    Matching sourcing to the served markets, with sound economic analysis (repeated periodically to sense changes) is the way we can improve decisions on where and what to produce. Much better than following the crowd.

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