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Extreme Innovation
The challenge
from China and India is that they pay their workers far less than we
do for the same work.
U.S. labor
unions say that this will create a race to the bottom. All that has
been gained in the past will be lost when far lower wage levels are
forced upon workers by firms wishing to remain — or become —
competitive in world markets.
The reality
is:
1.
Incomes in China and India will increase dramatically.
Globalization and free trade act like giant antipoverty programs for
developing countries.
2.
The purchasing power of Americans will increase
through lower prices on virtually all traded goods, from textiles to
computers. This will put a damper on inflation, and induce the
Federal Reserve to seek a lower interest level than would have been
possible otherwise. This will also add to American wealth.
3.
Eventually, wages abroad will approach American wages. That
will create enormous markets for American exporters and
opportunities for American investors.
Economics tell
us that free trade will lead to income equalization worldwide. This
is great if you live in a developing country. It is, perhaps, less
desirable if you live in the US.
But economics
also provides some qualifiers: Income equalization (or in technical
terms, factor price equalization) depends on a number of other
factors, such as transportation costs, the health and education of
the work force, and — most important — constant technology.
It is this last
exception that will allow Yankee ingenuity to enable Americans to
have their cake — and eat it, too. This country must remain a
technology leader.
Americans only
have to focus on three tasks to maintain or expand the wage level
differential with other countries:
1.
Produce something more cheaply than anyone else
does.
2.
Produce something better than does anyone else.
3.
Produce something no one else can produce.
All
of this requires what we may call extreme innovation.
It is the opposite of extreme lean, which standardizes
whatever is being produced to seek cost savings. While
extreme lean may produce temporary cost savings, it's the
implementation of extreme innovation that will
increase income and wage differentials over time.
Extreme
innovation is always about ideas. It is about ". . . the eye that,
eternally young and eternally burning, sees the possibilities."[i]
It is always questioning what exists, always improving upon what you
do, and about looking for what will change the world for the better. |
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India is selling cars in boxes to be assembled by the
buyer -- at a fraction of the cost of a regular car.
IKEA allows you to buy roomfuls of well-designed
furniture at a reasonable cost. Corporate airplanes on
a regular schedule allow you to fly inexpensively in
first class accommodations. Software programs take you
through preparing your own income tax returns, last
wills and testaments, hotel and travel reservations, and
grocery purchases, all at far less expense
than before.
An
innovator reads what everyone has read and sees what no
one else has seen. That is the eye that sees the
possibilities.
This is precisely America's key competitive advantage.
This is why we have been awarded nearly forty percent of
the Nobel Prizes[ii].
This is why we start a million new companies every
year. This is why this country honors and respects
entrepreneurs like Jeff Bezos, Howard Schultz and Bill
Gates (isn't it amazing that all of these come from
Seattle?). And this is why the world looks to the US as
the country that will figure out a way to solve the most
pressing problems on this planet.
The world of extreme innovation is not a safe world.
It is a world of challenge and turmoil, full of danger
and opportunity, and a world that creates more
excitement than calm.
But in its wealth creation power, extreme innovation
offers something no other strategy can.
It
provides the resources that will allow us to create the
world we want to live in -- any world -- and the human
beings who will be maximally contributing to that
world. If we so decide it could be a world without
poverty, without disease, and with no war or conflict.
For eleven years, I served as either President or
Chairman of the World Confederation of Productivity
Science. Our motto is: "Peace and Prosperity through
Productivity." I believe in that vision. And the more
I travel and talk to leaders of this world, the closer
we seem to be to its realization.
As
Ferdinand Finne once wrote, "The road forms as you walk
it."[iii]
When we walk into the unknown, any road may do. But
the one that relies on our highly developed talents and
contributions to a better world seems to be the more
satisfying course. It will lift our spirits. And it
will take us to a land that we promised to ourselves and
to those who follow us.
[ii] Source: Nobel Foundation.
Between 1901 and 2002, US citizens have taken
home 270 of the 684 Nobel Prizes awarded.
Online. Available:
http://www.nationmaster.com. October 13,
2005.
[iii] Finne, F. Veien blir
til mens du går. J.M. Stenersens Forlag.
Oslo. 1986.
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