Point of View
Point of View
June / July 2006
Volume 4 Number 3
Every day it seems there are new admonitions that the U.S. leadership in the world economy is flagging. We hear that the America has lost its edge and warnings of a gathering storm by the prestigious National Academy of Sciences. Smart and well informed people fear that America, and American companies, are losing their place in the world.
These fears are the result of seismic shifts in the global economy that few would have predicted even ten years ago. Developing countries around the world have adopted economic and market reforms, implemented advanced high-speed telecommunications, and now participate in the global economy. Newly developing market economies in India, China and Eastern Europe have added an unprecedented three billion workers to the global labor pool. The world economy has truly become a global one.
We should welcome this expansion. As a result, billions of world citizens have a chance to live much better lives and American firms have extraordinary opportunities to help them do so. American citizens stand to gain as well. Put bluntly, we at the Council on Competitiveness believe the naysayers have painted a picture that is far too bleak. As our National Innovation Initiative report confirmed, the United States today is the most competitive and most prosperous country in the world. And we can stay that way but we do need to act. In this hyper-competitive, rapidly changing environment, it is clear that firms in the United States cannot compete on low wages, commodity products, standard services and routine science and technology development. Science and technology are not enough. Lower cost and improving quality alone won't answer the new competitive realities either, as the have become merely the baseline for entry into global markets.
So what should our companies do?
Rather than undertaking rearguard actions to protect business as usual as some have called for, U.S. firms, large and small, must move full speed ahead to the rapidly flowering, high value conceptual or innovative economy. The most important competition now is one that delivers high wealth is being fought in the arena of ideas, learning and delivering new kinds of value to the marketplace. There are seven things the U.S. firms must do to succeed in this innovation-driven economy:
—€¢ First, we must lead in transforming industries and entire product segments. As an example, Apple's iPOD, iTunes and video iPOD are transforming the distribution of music, broadcasting and movies.
—€¢ Second, now that the factors of production are global and mobile, our competitiveness will be determined by how we leverage the world toolbox of assets and ideas. Isolationism makes no sense whatsoever when we can tap expertise, ideas, creativity, markets, suppliers and technology from around the world and put it to work for us.
—€¢ Third, we must stay on the leading edge of science and technology, creating new products and bringing new value to old products. An example is California-based Nano-Tex, which has developed nano-materials that can make a wide variety of textile products resistant to stains and tearing.
—€¢ Fourth, innovative companies are creating new value by wrapping manufactured products up with services, and offering tools to co-create products with their customers. For example, a global supplier of specialty food flavors has built a tool kit that enables customers, like Nestle, to create their own flavors.
—€¢ Fifth, in the innovation economy, companies must identify the leading edge of markets and get inside the head and the life of the consumer. With a growing set of choices in nearly every product and service line, the power in the marketplace has shifted to customers.
—€¢ Sixth, the United States should not give up on manufacturing but rather prepare for a profound revolution in manufacturing through the development and use of transformational technologies such as biotechnology, and nano-scale materials and devices.
—€¢ Seventh, mass customization, market fragmentation and need for speed in identifying and meeting customer needs place enormous importance on forming and managing supply chains. Value delivery networks that span the globe must be quickly assembled like tinker toys, then reassembled or modified to serve the next emerging opportunity.
At the Council on Competitiveness, we are working together with corporate, university, labor and government leaders to make sure America continues to support high and rising standards of living for our citizens (see www.innovateamerica.org for more information). At the federal level, we have catalyzed the development of the National Innovation Act and other legislation.
At the regional level, we are working with partners all across the country to craft innovation-based development strategies. We do not fear, but we must act.
Deborah Wince-Smith is president of the Council on Competitiveness.
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