Thriving in the 21st century economy transformational skills for technical professionals

In the Binary Economy, one mode requires technical professionals with high levels of education, advanced technical skills, and certain Transformational Skills to create and implement New

The Technical Manager's Survival Guides

Transformational Skills for Technical Professionals

Dr K (Subbu) Subramanian

President, STIMS Institute Inc

Lexington, MA, USA

Professor U Srinivasa Rangan

Luksic Chair Professor of Strategy and Global Studies

Babson College, Wellesley, MA, USA

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2 Workplace Transformation: The Impact of Globalization and

Business Model Revolution

3 A New Economic Order: From Binary Company to Binary Economy

4 Transformational Skills: The Tools Necessary for Sustainable

Jobs and Careers

5 Common Language and Core Capabilities: Skills to Identify and Foster New Solutions

6 Knowledge Integration: Skills to Develop New Solutions By Integrating Knowledge From All Available Resources

7 Achieving the Maximum Impact Across the Globe: Transformational Skills to Exploit New Solutions

8 Conclusion: Where Do We Go From Here?

iv v vii ix

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Series Page

Series Editor

Marcus Goncalves

Other titles in the series:

Vol 1 Team Building, by Marcus Goncalves (2006)

Vol 2 Managing Systems Development 101, by James T Karam (2007) Vol 3 Change Management Concepts and Practices, by Marcus

Vol 7 Natural Negotiation for Engineers and Technical Professionals,

by James S Jetton, Contributing Author Brian E Porter (2010)

Vol 8 Fundamentals of Agile Project Management An Overview, by Marcus Goncalves and Raj Heda (2010)

Vol 9 The Knowledge Tornado: Bridging the Corporate Knowledge Gap, Second Edition, by Marcus Goncalves (2012)

Foreword

Engineers were asked the following question in a recent survey: “How much of

a role do you think the government, industry, universities, and professional societies should play in the development of a national lifelong learning infrastructure?” The results of the survey, reported in the National Academy of

Engineering (NAE) publication titled Lifelong Learning Imperative in

Engineering: Sustaining American Competitiveness in the 21st Century, show

that four out of five engineers expect businesses (industries) to play an important or leading role in developing the national lifelong learning infrastructure In other words, most engineers seem to believe that employers

have or should have a responsibility to ensure continuous education for their engineers Is this realistic in the 21st century, which is likely to be characterized

by rapid technological evolution, growing importance of entrepreneurial business models, and the continuing trend of globalization?

In this book, the authors point to an alternative approach for science, technology, engineering, and mathematics (STEM) professionals They believe that self-help is the best help and thus technical professionals should take ownership of their future in a strategic way, just as businesses and corporations rely on a strategic approach for their long-term survival and success

In the same report cited above, it was also noted that, “An overwhelming

majority (three out of four) felt that universities and professional societies also have a significant role to play.” Therefore, it is appropriate that ASME Press, one of the leading professional societies for engineers, has chosen to publish this work

This book is a compilation of the observations of two professionals who have a similar starting point, but have taken different paths in their professional journey for the past three decades After obtaining his Sc.D from MIT, Dr Subramanian has pursued a career in industry He has worked with many firms, big and small, from steelmaking to high technology He has also mentored scores of technical professionals from around the world Professor Rangan got his doctorate from Harvard Business School, and then pursued an academic career, teaching

strategy and global business Strategic Alliances: An Entrepreneurial Approach

to Globalization, a book Prof Rangan co-authored, has been named a classic by getAbstract.com, an executive book service based in Europe

Both these professionals are passionate about looking at the world from the point of view of “what it can be?” rather than “what it has been?” In this book, they have compiled their observations and advice for the future of technical professionals worldwide

Acknowledgements

K (Subbu) Subramanian would like to acknowledge the support from and collaboration with scores of technical professionals from different industries and across the globe during his professional career Many of them are lifelong friends Several of them were fellow professionals at Saint-Gobain during Subramanian’s long career in the company The achievements as well as struggles of all these technical professionals motivated Subramanian’s work on this book He would also like to acknowledge the colleagues and friends who gave their time and patience when many of the ideas in this book were debated and put to test The list is long but a few are mentioned here: Shyam Samantha, Patrick Redington, David Graham, Ed Lambert, S Ramanath, Alain Zanoli, Mason Zhang, Rama Vedantham, Marcello Sasaki, Prof Galip Ulsoy, Prof Ramesh Babu, Prof Joao Fernando, N.K Dhand, Prof Kevin Rong, Jinsheng Wang, Bruce Kramer, Pattabhi Raman, Prof Kasturi Rangan, Said Jahanmir, Luke Glinski, Marc Tricard, Mike White, Mike Cromer, Stan Huffman, John Indge, Thomas Ardelt, Aldric Barbier, Jim Spohrer, Tim Finn, Doug Pietrick, Dave Dodd, Doug Wakefileld, Eswar Katarinagaraj, Charu Joshi and many others Subramanian would also like to acknowledge the younger generation, which includes his son Ganesh Subramanian and many of his friends and his fellow students Many conversations or debates with them extensively on the nature of education and its relation to workplace needs provided new perspectives and shaped the thoughts and guidelines expressed in this book Special thanks to his wife Durga Subramanian, who is also a technical professional She has also been working in the industry for the past three decades Countless kitchen table conversations and debates with her over the years helped Subramanian to recognize the common evolving need for the Transformational Skills for all technical professionals These skills are outlined

in this book Finally the collaboration with Srini has been special Lengthy discussions and systematic exchange of views and the long meetings at Starbucks at Wellesley, MA among the authors will be in Subramanian’s cherished memory for a long time!

U Srinivasa Rangan would like to acknowledge the support of Babson College while he worked on this book In particular, he is most appreciative of the support and encouragement received over the years from Len Schlesinger, college president; Shahid Ansari, provost; Deans Carolyn Hotchkiss and Dennis Hanno; Management Division chairs Bill Nemitz, Ashok Rao, James Hunt, Keith Rollag, and Nan Langowitz; and his colleagues, especially Stephen Allen,

Allan Cohen, Sam Hariharan, and Peter Cohan He is also grateful to Andronico Luksic, who funded his endowed chair professorship, which allowed Professor Rangan to devote time to this book He also conveys his special thanks for all the support and help from his wife, Sudha, while he was working on this book The authors acknowledge Shekhar Chandrashekhar of ASME for seeding the idea for the publication of this book They gratefully acknowledge the patience and sustained motivation from Mary Grace Stefanchik and the support from Tara Smith, both from ASME, during the preparation of this book They would also like to thank Farah Ameen for her help with editing the manuscript and thus making the book reader-friendly!

This book is dedicated to all technical professionals It is their output that enables the capabilities, comforts, and conveniences enjoyed in our industrial society The success of technical professionals, especially those in their mid-careers, as they face the challenges of the Binary Economy is the goal of this publication

Biographic Sketch

K (Subbu) Subramanian is the President of STIMS Institute Inc., a Knowledge Integration company Subramanian has worked for more than 34 years in various positions in the industrial sector While serving at Saint- Gobain, he conceived and implemented a network of Technology Centers

in the U.S., Germany, China, and India, as well as other facilities across the globe These Applications Technology Centers foster the Core Technology for surface generation processes used in a variety of industries, ranging from Semiconductors, Steelmaking, Automotive, Aerospace, Precision Engineered Components, Bio-medical Components, Ceramics, Optics, LED Lighting, PV, etc These centers promote innovation and Knowledge Integration through R&D and technology-based alliances with worldwide customers, suppliers, universities, and all other sources of knowledge These alliances have been used for new product development, technology-driven market development, as well

as education and mentoring of technical professionals Subramanian has published extensively on technical and management-related topics He holds several patents, many of which have been commercialized He has presented talks worldwide on various topics, including Surface Engineering, Innovation, Technology-Driven Market Development, and Career Development Strategies for professionals in the Global Economy Subramanian has published a book

titled The System Approach—A Strategy to Survive and Succeed in the Global

Economy , Hanser Gardner, 2000 Subramanian obtained his B.S (M.E.) degree

from Osmania University, India, and Doctor of Science degree (M.E.) from MIT, USA He worked at Ford Motor Company and International Harvester Company, prior to joining Norton Company, which is now part of Saint-Gobain

develop and implement new business models based on Knowledge Integration, Science-Based Industrial Process Solutions, Education and Mentoring of Technical Professionals, as well as to build alliances with technical, academic, and business professionals worldwide Subramanian is a Fellow of the American Society of Mechanical Engineers (ASME) and the Society of Manufacturing Engineers (SME) His views on life and living can be read at his blog site:

WWW.Sipractce.com

Professor U Srinivasa Rangan holds the Lukšić Chair Professorship in Strategy and Global Studies at Babson College, Wellesley, MA, USA His teaching, consulting, and research focus on competitive strategy, globalization, and alliances A recipient of several teaching awards, Professor Rangan has been a consultant as well as a designer and deliverer of executive programs for several firms He has taught in such programs at Babson, Helsinki School of Economics, Stockholm School of Economics, Amos Tuck School (Dartmouth), Rotman School (Toronto), Indian School of Business, and Indian Institute of Management, working with senior managers from North and South America, Europe, and Asia in a wide range of industries He also worked with Professor Michael Porter of Harvard Business School to advise the Indian government on the economic development policies to pursue in order to ensure national competitiveness Currently, Dr Rangan serves on the board of an information technology service company in India Dr Rangan is the co-author

of two books (Strategic Alliances: An Entrepreneurial Approach to

Globalization , HBS Press, 1995; and Capital Rising, Palgrave Macmillan, 2010) and the co-editor of a third (Global Strategies for Emerging Asia, Wiley/Jossey-

Bass, 2012) His first book was nominated one of the top 30 business books of the year in both the U.S and Europe and, more recently, was named a management classic His second book deals with how entrepreneurial ecosystems of countries and global capital flows interact to change the global competitive landscape The third book looks at how global firms are trying to compete in Asia Author of several best-selling case studies on global strategic management published by HBS, IMD, and Babson, as well as chapters in edited volumes, Dr Rangan has also published articles in academic journals He has been a speaker at several practitioner-oriented conferences and forums Before moving to academia, Professor Rangan served as a manager in industrial and international finance with the State Bank of India in India and in England Professor Rangan holds graduate degrees in physics (University of Madras, India), economics (London School of Economics), and business (IMD, Lausanne) He received his doctorate from Harvard University

Chapter 1 Introduction

This book is about you, your job, and strategies for your career development This is not a book about how to hunt for jobs, how to improve your résumé, or how to ace interviews This book is also not about “How to win friends and influence people,” which is explained lucidly by Dale Carnegie in his book; it does not provide training on the art of negotiations to meet your goals Of course, these are all very important skills, and there are plenty of readily available resources on these topics

This book is about using all the professional skills you have acquired through years of study in high school, college, and beyond It is about collating all the knowledge obtained through your work experience This book is about making you relevant and valuable in a way that is also rewarding

It is very likely that you spend a lot of time and effort developing strategies for innovation and the success of the business or company you work for At least you have heard a lot about such strategies to benefit your employer You have probably learned the tools of Project Management, where the goal is to deliver the end result in a timely and cost-effective manner You have others—

“management”—to watch and guide you In turn, the management rewards you for your results and penalizes you when they are not produced But in today’s globalized economy, when it comes to your job and career, you are on your own! This book should help you to develop a logical approach toward your career

The assumption is that you are a professional: someone who gets paid for services offered There is also an assumption that the professional brings to the job certain skills that are superior to those of an amateur Most professionals have an academic degree or are certified by a board or agency composed of peers They belong to societies that address the common needs of a group of professionals We start with the premise that the professionals of the 21st century

do not merely respond to the request for services Instead, they identify a need, describe it as an opportunity with a solution, develop the complete solution, implement it, and make sure the impact is fully realized! This book outlines the need for this change in outlook and how to go about that

The assumption is also that you are a technical professional, i.e., a scientist, engineer, or manager with an interest in physical sciences and their use While much of the information in this book applies to any professional, we focus mainly on technical professionals They are generally described as science, technology, engineering, and mathematics (STEM) professionals We believe this book may serve the needs of all professionals, not just STEM professionals Chapter 2 begins with a broad description of the landscape the technical professionals face We describe an evolution in new business models, thanks to the forces of globalization In this landscape we do see industrial organizations that need the services of technical professionals These organizations are also relentlessly focused on creating New Solutions, with the goal of putting these solutions into practice as fast as possible In parallel, we also see large organizations that are engaged in their constant effort to replicate known solutions They employ a large number of workers with limited technical skills Both types of organizations are increasingly separated from each other They are binary in terms of their goals as well as the worker skills required The demand for advanced technical skills from the organizations creating New Solutions and the systematic de-skilling of the workforce in large organizations engaged in Replication Solutions have evolved in the last three decades of the 20th century For 21st century technical professionals, it is a way of life!

The multilayered organizations of the past (where New Solution creation and replication were part of a continuum) are giving way to two sets of flat organizations that have fewer levels of hierarchy Since these organizations have few layers, and their structure is binary, the career path for 21st century professionals is no longer a well-established progression within a company Doing your job well in one company and “growing with the company,” or staying put in one place for lifelong employment, are no longer the options Instead, professionals have to be more nimble and entrepreneurial: They will be rewarded for the identification, development, and implementation of a constant stream of New Solutions

These parallel sets of organizations are also global—employers will be using resources from across the globe as well as serving customers worldwide In the past, technical professionals could focus on the structure, alignment, and organization of resources readily available through their employers These employers also relied heavily on their long-term resources—experienced technical professionals—to create such structure and resources inside the company With their access to global resources, employers now have multiple pathways to access and create resource structures across the globe This implies

that technical professionals will also require dual strategies: They have to use the employer-provided structures and organizational resources, and also create their own network and resources from global sources!

Thus we see the binary nature of employment and the demand for either qualified technical professionals who can create New Solutions, or for low-skilled, low-wage technicians who work in highly structured and standardized assignments focusing on replicating those solutions This evolution in the binary nature of employment is widespread

well-In Chapter 3, we lay out the concept of a Binary Economy

Solutions better than anyone else across the globe are richly rewarded (and hence can afford the highest standard of living anywhere in the world) These top professionals are improving sector productivity by using advanced technology based on physical sciences as well as digital tools/applications Sometimes they also establish new sectors that may provide jobs for a relatively small number of top professionals (locally)

or create a larger number of low-skilled jobs elsewhere (globally)

 Economy 2: There is a constant and unending effort to skill and localize all jobs This results in tasks that can be automated or accomplished by a large number of low-skill, low-wage workers from low-cost regions across the globe Technical professionals engaged in these jobs find a constant downward slide in their wages and rewards (tending toward the lowest sustainable wages across the globe)

de-Such evolution of a Binary Economy is not a chance event We lay out the economic reasoning for its development in this chapter

In the Binary Economy, one mode requires technical professionals with high levels of education, advanced technical skills, and certain Transformational Skills to create and implement New Solutions relentlessly and also ensure that their value/merit is recognized In the second mode, the economy requires many workers with relatively low-level professional skills to replicate (in larger quantities) solutions that are already known Those with the Transformational Skills needed to identify and seek out value-addition opportunities for New Solutions may find career opportunities and success in the Replication Solutions mode There is no room for the middle, no room for high-end technical professionals to tend to partially developed solutions that can mature with time (and continue developing), or high wages for professionals with the skills to execute specific tasks There is no room for high rewards for anyone who can

merely handle general information-driven tasks, their aggregation and dissemination (since 80% of the information is already available through the Internet, search engines, networks, databases, enterprise resource planning (ERP), and other Digital Technology (DT) solutions In other words, when you hear “the smart is the new rich,” the “smart” refers to those professionals with Transformational Skills that they blend judiciously with their academic education and industry/sector specific skills

In Chapter 4, we describe the sources of knowledge—academic education, industry/sector specific know-how, and Transformational Skills—and their hierarchy as it existed in the early 20th century, as well as how and why this hierarchy was reversed by the end of the 20th century? We conclude that in the

21st century, technical professionals need to use these three sources of knowledge as building blocks, and thus acquire additional knowledge in all three areas as part of a lifelong learning process Then we proceed to outline these Transformational Skills for 21st century technical professionals

We begin this chapter with a discussion on the three categories of work:

Physical Labor, Information Processing, and Professional Solutions Technical professionals rely heavily on Professional Solutions on the job These are the benefits professionals pass on to their employers, which begs the question:

“What is a solution?” We distinguish between solutions based on physical and non-physical processes Physical processes lead to Products, Processes, or Use/Application These are the means with tangible outcomes, i.e., goods and services enabled by Physical Technology (PT) These are the outputs enabled by technical professionals Non-physical processes mostly involve information and logistics tasks and related solutions

By the end of the 20th century, developments in DT were largely applied to physical processes This resulted in enormous improvements in cost and productivity of the non-physical processes used for efficient replication of known physical processes and solutions These options for investors or employers are likely to continue for decades The 21st century technical professionals are required to use Transformational Skills to identify, create, implement, and validate the impact of New Solutions based on physical sciences These Transformational Skills also enable the professionals to develop alliances within the company and the industry, and then aggregate resources available across the globe The ability to integrate knowledge from all available resources will transform technical professionals into the Global Intellect, enabling them to deploy their intellectual capital, just as investors benefit from global resources through Global Capitalism

non-)

In Chapter 5, we begin with the Transformational Skills necessary for identification of New Solutions within a company or organization This starts with a common language that risk-averse investors and managers—who prefer Economy 2 opportunities over Economy 1 solutions—find easy to understand This type of common language is also necessary to aggregate core capabilities at many levels within the company We discuss the pathways to identify the core capabilities of individual professionals, their team/departments, and those of the company We also discuss the approaches available to technical professionals for the orderly integration of core capabilities at all levels through products, projects, and new business development initiatives Such skills to develop a common language and use them for aggregation of core capabilities are essential

to identify and promote New Solutions and their impact Then we address the Transformational Skills necessary to develop a larger perspective of the technical professionals’ job based on such common language: the three-dimensional (3-D) view of core capabilities These skills are necessary to foster closer alliances within a department or business function, across functions inside

a company, as well as for aggregation of core capabilities in the industry The quest for New Solutions at this stage becomes a constant search for core capabilities at each level and their suitability New Solutions are needed wherever core capabilities are not adequate or when the available core capabilities are not properly exploited With these essential skills, an employee can have a greater impact on his/her company as well as the industry

Chapter 6 describes a set of Transformational Skills under the broad umbrella of knowledge integration It begins with the description of a solution as an aggregation of physical and service processes Physical processes are amenable

to the laws of physical sciences All solutions require the basic capability to address each process as “input/transformation/output” system For this, we describe the System Approach, a methodology that directs technical professionals away from task execution to the definition and resolution of every problem as a system This approach is essential for utilizing all the skills of all technical professionals to develop or solve the problem as a whole It guides the professional away from methods only limited to statistical solutions and continuous improvement, and fosters deterministic approaches and science-based solutions with step-change or quantum improvements in outputs as the goal

In the System Approach, solutions and the “transformation” enabling them are not treated as “black box” or statistical events Instead, technical professionals are committed to probe the transformation, the physical phenomena behind the

processes, using the tools of science and engineering This increases their need for portable diagnostic tools

Future technical professionals may have a working arrangement similar to that

of today’s medical professionals! They may have their own offices with specialized diagnostic tools, some of which may be portable They will have visiting and/or practicing rights to take care of the “problems” or address the solutions necessary for their employers, just like the working privileges assigned

to medical professionals in hospitals Some of the companies employing advanced technical professionals may be set up as today’s teaching and research hospitals These changes will require technical professionals to deviate from their task-oriented practice of doing what they are asked to do and transform them into system thinkers and solution providers They will be the true knowledge workers, integrating knowledge from all sources and applying them toward comprehensive solutions for a series of identified needs in rapid succession

Next, we talk about the arrangement of the core capabilities (the transformers) that are discussed in Chapter 5 as a “T,” where the horizontal leg addresses the skills required for breadth and the vertical leg describes the deep knowledge required for every solution In this model we can describe the physical processes

as the core of every solution and service processes as the activities surrounding

it In other words, the domain specific knowledge required for the physical processes is at the core or nucleus of every solution; the service processes (rich with information-related tasks) are domain neutral This leads us to the concept

of developing a technology value chain through integration of Core Technology

or domain specific knowledge The supply chain is a means for integration of information or data through common DT platforms The supply chain solutions based on DT use are nearly independent of the domain specific know-how of technical professionals Technical professionals can use the Core Technology platform to build a common ecosystem that connects suppliers, end users, academic research resources, and government policy makers

After the New Solutions are identified and developed, they should be implemented with identifiable large-scale impact Today, innovation is pursued

in isolated silos of ideas or discovery/research and development (R&D), development (production), and impact (sales/marketing) This leaves technical professionals mostly at the front end of the innovation chain with a deep disadvantage They need a model for innovation where the idea is pursued successfully into the development phase and its logical conclusion, leading to commercial impact This unbroken chain (of idea X development X use) is

called End-to-End Innovation All technical professionals in the 21st century will

be required to adapt End-to-End Innovation as an implicit part—as a culture—of their professional practice Co-creation of value is a well-established innovation strategy for many leading-edge companies Yet, co-creation is founded on a simple principle: “Do what is good for your customers, which in turn is also good for your company.” Technical professionals should adapt the same principle and models at the individual level We call this Emotional Intelligence for New Solutions (EINS)

Earlier, we described New Solutions (rich with demand for technical professionals’ skills) and Replication Solutions (enabled by de-skilled jobs and a low-wage workforce) as the binary modes of the 21st century economy As a result, professional skills are preferentially required to develop New Solutions in only one of the binary modes Thus, technical professionals have to find ways to get the attention and resources necessary from employers and investors to focus

on such opportunities, They also need the skills to cross over to implement their New Solutions and replicate them in larger quantities, where standardization, structure, and de-skilling of the work (to reduce cost), as well as outsourcing and offshoring are the drivers Working with ease on either side of the Binary Economy and walking the plank across these modes as required is not natural or easy The 21st century technical professionals will require unique skills for the flexibility required to achieve maximum impact In Chapter 7, we describe EINS and how it can be used to foster a culture for End-to-End innovation

In Chapter 8, the conclusion, we address the role of the investors/employers, management, academia, and national policy makers Their collaboration and engagement are necessary for a number of reasons There is an urgent need for society as a whole to drive the growth in Economy 1 in order to mitigate the adverse effects of the growth limited to low-wage jobs in Economy 2—and the resultant slipping away of the middle class It is also needed as the growth engine for the Economy 2 of tomorrow, essential for the long-term economic vitality and for full employment in the nation as a whole! To expand the opportunities in Economy 1 (create and implement technically advanced New Solutions), society must shift gears Today, executives in Economy 2 (intent on replicating known solutions and constantly driven to reduce cost, de-skill, outsource, and automate) are likely to sideline anyone with “big ideas” for PT-intensive New Solutions None of the big ideas—technical, engineering, and scientific solutions—that enabled the U.S to become the advanced nation would have progressed if market-driven economics were the sole criteria at the starting gate The nation that aspired to be the world leader in the 20th century also found the national consensus and resources to put man on the moon, develop the

Internet, build interstate highways, dams, and bridges, as well as support advances in medical research These initiatives helped employ STEM professionals in droves The 21st century Binary Economy does not give the same degree of freedom and latitude for unlimited funding of such new initiatives What is necessary is a better balancing of the two modes of the economy between society’s desire to be on the cutting edge (and thus create Economy 1 jobs for a larger number of skilled technical professionals) and the need to be economically sound and fiscally prudent by leveraging growth opportunities in Economy 2 (presented by replicating more of the same worldwide) These are the shared responsibility of national policy makers as well as technical professionals The recently announced U.S Big Data initiatives, the efforts by NSF to promote Engineering Research Centers, the X-Prize for innovation, all of the above strategies for energy resources, etc., are encouraging signs On the education front, in addition to teaching technical disciplines and training students on today’s industry sectors/systems, we need to emphasize Transformational Skills Finally, in order for technical professionals

to gain the most from their jobs and to align with the limited few Economy 1 opportunities, they need to seek and acquire structured education and knowledge

on the Transformational Skills outlined in this book

Chapter 2

Workplace Transformation:

The Impact of Globalization and Business Model

Revolution

Over the last four decades, the workplace, especially in the West, has undergone

a rapid transformation due to two major trends in the Global Economy Since the late 1980s, the world has been in the throes of intense globalization It is now trite to say that the global flow of capital and goods and services is fast transforming the world of work for all of us What is often not recognized is that

an additional factor is increasingly at play: There is a business model revolution that is mainly the result of the DT revolution of the last four decades The interplay of globalization and business model revolution is leading to a more bimodal workplace, especially in the developed world In other words, STEM professionals need to adjust to a professional life that is characterized by a Binary Economy and the bimodal distribution of jobs available, skills needed, and rewards reaped

The Impact of Globalization

The globalization of the world economy is a not a new phenomenon It has been

suggested that, globalization is an historical process that began way back when

human migration began out of Africa (1) Others have suggested that several other

factors such as trade, religion, warfare and adventurism have played a role in shaping a more integrated global world (2) But what we are concerned about is the recent version of economic globalization and its result in terms of business

integration across the globe In recent years, and in many industries, demand for

goods and services, followed by competition, and finally the supply base, have become globalized (3) The globalization of the world economy has been a major cause of the way jobs and skills utilization have been redefined for technical professionals worldwide In particular, globalization has led to the relocation of much of the routine work of technical professionals to newly industrialized countries, even as global firms try to keep innovation-related work in the developed world This bimodal distribution of STEM jobs is now a reality across the globe

The Evolution of Globalization

Three decades ago, Professor Ted Levitt of Harvard Business School argued that

the emerging global firm of the future would operate under the assumption that

consumers across the world, be they in developed countries or in developing countries, would demand similar products (4) Today, this is a truism People in San Francisco, Stockholm, Singapore, Shanghai, and Sao Paulo demand the same iPod and iPad, listen to the same music, and watch the same YouTube videos Industrial consumers are no different: Be it semiconductors, computers, automation equipment, or power-generating systems, industrial corporations look for similar performance and specifications Thus global corporations recognize this convergence of tastes and needs as the globalization of demand

They operate “as if the entire world…[is] a single entity” and “to sell the same

things in the same way everywhere.”(4) As economic development accelerates more and more in today’s poor countries, the convergence of preferences will become more pronounced; hence globalization of demand is also likely to accelerate (5)

As global firms recognize this growing convergence of customers’ preferences and demand, they find it advantageous to compete across the globe rather than

on a country-by-country basis As national firms move abroad to sell to global

customers taking advantage of the convergence of demand, they begin to find the same rivals in market after market, suggesting that to counteract rivals’ competitive moves these firms must develop the ability and willingness to respond globally rather than at individual country levels Such competitive interdependence has been widely recognized in the business literature.(6,7,8) This willingness to compete globally leads to strategies where companies decide to maximize profits on a worldwide basis rather than on a country-by-country basis

Globalization of competition and strategies for profit maximization have a profound effect on the operational strategies of firms and thus on the way global division of labor and supply chains are organized As companies recognize interdependence in global competition, they respond by understanding and manipulating how cross-border interdependencies could be exploited Three

types of cross-border dependencies are of interest: scale, operational, and

scope (3) Economies of scale are easy to understand: By centralizing production

in a few plants in one or more countries, a company may be able to lower costs

of production, export to other markets, and compete with a lower price Operational dependence takes the scale argument to the next level As companies operate in different countries, they come to recognize that there are

country-based advantages.(9) This allows them to disaggregate their production

of components, parts, and even finished goods—based on where they could be produced most cost-effectively—and haul them across the globe Finally, we see the scope or knowledge interdependence when companies begin to learn from different markets, internalize the learning, and use it to enhance their strategic position in the global marketplace This cross-border knowledge interdependence is an opportunity to be exploited, as well as a challenge to be overcome, by 21st century technical professionals

Global Dispersal of the Value Chain

Globalization has led to two related developments: the spread of the value chain and the use of external suppliers Value-added activities are proliferating through imaginative disaggregation of such activities Once disaggregated, they are handed over to external suppliers Previously, all such work was done within

a company This approach to value-added activities has led to the rise of firms in newly industrialized countries that have begun to achieve technological parity in key areas with firms in industrialized countries This, in turn, has resulted in the significant development of outsourcing, which allows firms to focus on their core competencies and lets other firms control many of the inputs, ranging from components and parts to embedded software and some aspects of service In other words, globalization of supply has allowed firms to be more focused, more innovative, and more competitive.(10, 11) The outsourcing referred to here is not just the mere movement of goods and services, but also the cross-border and intercompany exchange of knowledge resources

Indeed, as described above, the net result of globalization is that it allows firms

to specialize in various parts of the value chain In Chapter 4, we discuss in greater detail the distinctions between the supply chain and the value chain.Such specialization means that higher value-added activities can be kept in one part of the world while lower value added-activities can be kept in another part Usually, the high value-added activities tend to be at the innovation end of STEM-related work and low value-added activities at the replication end of the spectrum

An excellent example of this division of labor is how Apple produces its iPhone One can gather the following details from the published sources.(12, 13) To keep it simple, let us ignore the sales and distribution aspects of the business that are under the control of Apple At the production end of the iPhone, there are three critical activities: design, procurement, and manufacturing Apple controls the design part of the value chain as it is critical to its customer value proposition

Apple purchases or procures most of the components for the iPhone from a vast network of suppliers, including the Korean company Samsung, German company Infineon, and Taiwan’s TSMC, which supplies semi-conductor components Companies in Germany, Taiwan, Korea, and Japan supply memory chips and microprocessors Korean and Taiwanese firms supply display panels and circuitry European firms supply chipsets, while African and Asian firms are sources for rare earth metals Apple has recognized that most of the components are closer to commodities that have multiple potential suppliers In other words, its suppliers are largely involved in manufacturing routine products or replicating large volumes of components that have been innovated and designed

by others Moving further down the value chain, in the case of manufacturing, Apple largely outsources to firms in Mainland China, where it is reported that 700,000 people are engaged in engineering and assembly Again, this part of the value chain calls for standardized production approaches based on replication of manufacturing and assembly principles developed by companies and academics over several years Such singular focus on key value-added activities and aggregating them from a few select sources allows Apple to capture much of the value of the final sale price of products such as the iPod, iPhone, and iPad.(14) It should be no surprise that Apple, by some estimation, earns over $400,000 in profit per employee, a figure that exceeds the same metric for Goldman Sachs, Exxon Mobil, and even Google

There are implications to such a division of labor between Apple and its partner firms First, Apple needs to employ only a small number of engineers in the U.S.; its hardware design team for iPhone is reported to consist of only 100 engineers (13) Of course, Apple also employs a large number of software engineers in the U.S., although some of its embedded software is produced in India In all, Apple directly employs only about 43,000 people in the U.S.—mainly in the sales and marketing departments—and about 20,000 overseas Only a small portion of Apple’s employee base in the U.S consists of engineers and STEM professionals But they are involved in cutting-edge, innovation activities Apple’s overseas STEM professionals work mainly in routine replication of the output of these cutting-edge workers A few decades ago, those technical professional positions would have been in the U.S Not anymore The bimodal distribution of STEM jobs—a few in the West and a lot more in newly industrialized countries—working on different sets of challenges (New Solutions versus replication activities) is here to stay in a globalized world

The Impact of Digitization and New Business Models

Globalization is not the only force driving the bimodal distribution of technical professional positions worldwide In recent years, a newer and more far-reaching change is also afoot: the digital revolution DT has influenced all professions through two mechanisms: First, it has allowed the disaggregation of the value chain into finer components and enabled it to be dispersed worldwide based on cost In that respect it has been a globalization facilitator In turn, this has led to much of the more routine STEM-related work being relocated to newly industrialized countries, even as global firms try to keep the discovery and growth aspects of professional work in the developed world Second, digitization and the accompanying information revolution have changed the paradigm of business itself At its core, a new business model allows entrepreneurial (and often new firms) to rethink an old business or create an entirely new one Typically, the new business models rely heavily on digitization and IT from the beginning, which means they need fewer technical professionals than traditional businesses as much of the documentation and transfer of know-how are automated Consequently, the kinds of demand, often based on identification, development, and exploitation of New Solutions, tend to

be of a higher order than STEM professionals are used to Again, the net result

is that few highly talented STEM professionals reap huge rewards while a large number of them are left on the sidelines

Digitization

Digitization is fundamentally about information and its transformation Going back to the earliest times, information generation and its transformation have been at the heart of civilization Much of the advances in science and technology can be attributed to this process of generating information, transforming it to yield useful capabilities, and then utilizing them to grow the economy And yet, for the longest time, information transmission suffered because of physical limitation If information were generated in China, for example, unless someone like Marco Polo went there physically, it could not be transmitted to the West This is precisely why Guttenberg’s invention of the printing press so radically transformed societies, as it allowed information and the associated knowledge to spread rapidly across the globe The printing press also meant that individuals who hoarded knowledge written down on palimpsests lost their advantage The ease with which multiple copies could be made ensured that democratization of information and expanded use of knowledge became a reality And yet, books themselves were physical objects and thus physical limitation to the spread of

information and knowledge was still substantial But then DT came along and transformed the world of information and knowledge

What is digitization? It simply means that any kind of information—data, images, writings, speech—can now be digitized, collected, processed, disseminated, edited, reused, or recycled at the speed of electrons and across the globe Collection, aggregation, and processing of large sets of data, once considered impossible and on rare occasions accessible only to those working in large organizations and governments, is now readily available to anyone via Google, Yahoo, Bing, and other search engines As more people access information, they are able to transform it to useful bits of knowledge and then put it out again on the web The process repeats itself ad infinitum Many considered this explosion of information availability and knowledge creation as exponential

Digitization and Global Dispersal of Value Activities

The first impact of DT today is in the area of work organization Traditional industrial organizations evolved based on division of labor tasks and their assignment to employees with specific skills The output of these employees—blue-collar workers—was aggregated and the results conveyed upward through several layers of Information Processing workers, generally called white-collar labor The strategy and investment policies were determined by a few at the top—the senior or corporate management—and fed downward to all the workers through plans, schedules, and budgets There were several layers in the middle for supervision and administration of the flow of information both upward and downward These were called the middle management This organizational structure, generally large and multilayered, provided a variety of employment opportunities for technical professionals This traditional organization is shown

on the left-hand side of Figure 2.1, below

Figure 2.1 Traditional Industrial Organizations and Decomposition of Their Work Content

An important characteristic of the traditional organization is that every layer has

a strong information function For example, for a manufacturing firm to succeed

in the marketplace, it had to perform R&D to discover new products and processes; it needed a strong engineering department to translate the newly designed products and processes for manufacturing departments; and the manufacturing department, in turn, broke down the information received from engineering into usable pieces for supervisors and technicians They, in turn, worked closely with the blue-collar labor on the shop floor to implement daily manufacturing activities In this long chain of information translation and transmission processes, miscommunication was often possible Thus, it required workers to check and cross-check information to be sure there were no such errors or that they didn’t grow over time Also, many steps in the process were implicit and rarely written down by midlevel supervisors, technicians, and managers To access that information, many layers in the organization—blue-collar workers, white-collar workers, and even middle management—had to be co-located DT changed all that

Using DT, information could now be extracted readily from every level and every step of the various processes and then stored centrally for easy access There were fewer translation and transmission mistakes as reproduction of information became easy, routine, and automated

Indeed, by the end of the 20th century, DT allowed firms to reinvent the organization using digitization Senior managers recognized that jobs at all levels could be divided into four categories: Physical Labor, Information

=

+

+

+Physical Labor Information Work

Professional Work

Investors (Corporate and Finance)

Processing, Professional Solutions, and Corporate Strategy (including finance) The new division of work is shown schematically on the right-hand side of Figure 2.1

Such information-based division led to an important insight for senior managers The traditional organization had overlapping information content Not anymore Now senior managers could undertake a radical reorganization of the factory work By breaking down the work content into four buckets—physical labor, information-related work, professional work, and corporate management—managers could dramatically change the roles and responsibilities in the firm, free themselves of the need to co-locate functions and responsibilities, and lower the cost This division of labor enabled the following steps:

 Physical labor could be disaggregated into smaller steps calling for no more than repetitive performance of specific jobs devoid of any complex information Then those jobs—standardized and repetitive—could be located in the lowest-cost country

 As work was de-skilled and its content stripped of all information tasks,

a few people were entrusted with the responsibility of standardizing information and liaising between new information generators (see below) and the Physical Labor Much of the information gathering became repetitive and could even be automated and outsourced

 A few highly talented professionals could now be expected to work independently—often far from the places where physical labor or information intermediaries were located—on the creation of new products and processes or new breakthrough solutions using their unique knowledge This approach rendered these professionals and their capabilities as the only core capability for most industrial organizations

 Investors and corporate management reduced their supervision of all aspects of the business, becoming increasingly removed from the daily functioning of the organization Instead, they focused on seeking new low-cost productions locations, recruiting professionals to develop better and newer solutions, and scanning the world for acquisitions that would augment their solutions base

This is the new world of organizations with few solution developers and a large number of solution replicators There are small start-ups, venture capital (VC) initiatives, R&D teams, and incubator organizations They employ very few professionals whose job and survival depend upon identification, development, and implementation of New Solutions Then there are firms that specialize in

Replication Solutions The best-known example might be Wal-Mart, which produces nothing by itself but manages a huge supply chain employing a large number of low-paid, low-skilled workers While many of Wal-Mart’s products are manufactured elsewhere, the company uses identical processes to procure, transport, stock, and sell hundreds (if not thousands) of items All these products are mere stock-keeping units (SKUs), and the PT involved in their design and manufacture (activities and jobs of concern to technical professionals) may be of little or no interest to Wal-Mart But in these types of organizations, there is hardly any need for traditional middle management Their role in information transfer—upward, down, and sideways—and all related functions can now be automated thanks to DT application solutions In effect, now all these organizations have fewer hierarchical levels, requiring fewer professionals to cover a larger span of activities and also assume more responsibility

These two modes of organizational structures, which evolved at the end of the

20th century and are now entrenched in the 21st century, are schematically illustrated in Figure 2.2

Figure 2.2 Bimodes of Organizational Structures in the 21st Century and Their requirements for Technical Professional Skills

Thus, the first impact of DT is to facilitate faster globalization of the world economy By allowing information to be abstracted, codified, and organized for use within an organization at a low marginal cost, digitization has enabled faster disaggregation of value chain activities and their dispersal worldwide It permits firms to specialize in a few select activities, such as innovation and creation of New Solutions, and leave the mundane task of cost-effective Replication Solutions to others—either overseas within the same firm or other firms abroad that are willing to serve as offshore suppliers This phenomenon is often expressed as “conversion of fixed costs into variable costs.” Caught in this conversion are many middle-aged, mid-career technical professionals whose salaries (fixed cost) are high relative to the availability of their services at lower cost and on-demand outsourced resources (variable cost) Of course, as specialization increases, it allows firms to significantly improve their profitability Simultaneously, this also means that fewer technical professionals are needed at the “headquarters” and they specialize in creating New Solutions

A large number of STEM professionals who used to do more mundane tasks such as information collection, translation, and transmission find themselves facing a mid-career crisis

New Business Models and Their Impact on Technical Professionals

As discussed earlier, DT has accelerated the globalization of value activities and has led to a major disruption in the work content of technical professionals Interestingly, digitization has also led to what many consider an entrepreneurial revolution, variously dubbed “the Internet boom,” “the dot-com revolution,” or the “entrepreneurial explosion.” These new entrepreneurial firms often spearhead business models that have a profound effect on the work and opportunities of STEM professionals

DT has led to two types of entrepreneurship: The first involves an entrepreneur simply reimagining an existing business using the technology He/she brings about the creative destruction of an industry of the kind Adam Smith envisaged The second, more recent kind involves developing entirely new businesses using

DT Both types of entrepreneurship involve creating new business models and thus have an impact on work organization

The first type calls for a series of interrelated steps(10, 11): rethinking an existing business, reconfiguring its value activities, leveraging other firms’ resources, creating new strategic options, and developing organizational innovations to create sustainable long-term value Perhaps the best way to illustrate our entrepreneurship paradigm is through a well-known example: Consider the way

Jeff Bezos went about transforming the book retailing industry to create Amazon.com, the world’s pre-eminent Internet book seller He reasoned correctly that he could use the Internet to disaggregate the chain of value activities in retailing Next, he realized that the value activities could be reconfigured, as some activities—such as book wholesaling and book delivery—could be transferred from his firm to other firms This meant leveraging the resources of other firms that had the expertise as well as the asset investment needed to serve Amazon’s requirements Bezos persuaded book wholesalers and publishers to hold stocks on his behalf, which reduced Amazon’s need to invest

in large inventories He also asked express delivery firms such as UPS and FedEx to help Amazon deliver on the promise of quick fulfillment of book orders Such reconfiguration of value activities and leveraging of other firms’ resources allowed Amazon to redirect much of its scarce resources toward software and systems development for Internet acceptance of orders to fuel rapid growth As Amazon grew, heavy investments in software and systems development led to the creation of new strategic options, including retailing of other products Finally, as Amazon went about mastering this entrepreneurial approach, the company was able to create organizational innovations such as how to forge, structure, and manage strategic partnerships with firms ranging from book publishers to book wholesalers to toy retailers.(15)

Although we have discussed entrepreneurship in the context of a start-up like Amazon, it is obvious that the same process could apply to any established firm Such evolution can also occur in any industry or sector that is heavily engaged

in physical sciences and their exploitation Increasingly, large firms are seeking the development of corporate entrepreneurship within their companies as they recognize that corporate rejuvenation is critical for long-term survival.(16) What are the implications of this type of entrepreneurship? In the first place, as

we saw with respect to DT, this allows firms to redefine the workplace by decomposing the work content into physical labor, information content, solution development, and senior management In the case of Amazon, for instance, the warehouse where order fulfillment takes place is also where much of the Physical Labor is used The warehouses are also highly automated, which helps the Physical Labor to rapidly deal with order fulfillment Much of the information content resides in a knowledge management software module that is constantly updated The solutions experts—systems engineers and software professionals—are a small elite group based in the U.S and backed by another group of software developers in countries like India Witness how this new business model for entrepreneurship has followed the same script as that of digitization in other industries This model accommodates higher levels of

global outsourcing even in the areas of information management and solutions development It is flexible enough to accommodate vertical integration of such cross-border value-chain activities as well as outsourcing of parts of the value chain.(17) Thus, this type of entrepreneurship and new business models tends to reinforce the division of traditional work and globalization of value activities, thereby accelerating the creation of bimodal distribution of STEM-related work There is a small group of highly skilled solution developers in one country and a larger group of solutions replicators often located in other countries

The second type of entrepreneurship is more recent and is truly a child of DT The proliferation of digitization and the Internet have spawned a whole slew of businesses Ranging from Apple and Microsoft to Google and Expedia to Facebook and LinkedIn, these businesses are IT-driven Interestingly enough, unlike Amazon, which could be thought of as a book retailer of a different kind (although it has now morphed into a portal), there are no equivalents for these businesses in the period before the 1980s Google is a child of DT and it responds to a specific need to organize information that is widely available on the Internet There are equally attractive developments for New Solutions based

on DT in genetics, biopharmaceuticals, medicine, and materials science The emerging fields of business analytics, service science, health care solutions, and others are all examples that attempt to blend the power of digitization with advancements in the physical sciences

Perhaps the most distinguishing feature of these new businesses is that they tend

to employ relatively few people even as they grow in terms of sales and profits Take the case of the photo-sharing service firm Instagram, which was acquired

by Facebook in April 2012 for more than a billion dollars At the time of acquisition, Instagram had only 13 employees.(18) Indeed, research suggests that for all their revenues and profit size, digital-economy firms like Google, Facebook, and LinkedIn function with far fewer employees than traditional firms rooted in physical sciences (and related goods and services) like General Motors, GE, and ExxonMobil This is not an accident—the newer businesses have learned to apply the art of dividing the work right from the beginning They specialize in creating solutions that require only a few highly skilled technical professionals They let the other employees, often based in low-wage countries, function as replicators of those solutions Digitization, it seems, has helped the newer firms to traverse the same path that the established companies and industries have traveled for the last four decades: globalization of value-chain activities, reliance on a small core of solution developers, and a larger group of solution replicators

Summary

In 1991, Robert Reich, who later served as the secretary of labor in the Clinton administration, argued that in the future, symbolic analysts who were highly trained professionals (often STEM professionals) would be the key employees in global firms.(19) As strategic brokers, problem identifiers, and problem solvers, they would be the key value creators While high-value production would remain in developed countries, developing countries would gain much of the high-volume production Much of the routine work, Reich envisaged, would move to developing countries In his view, as global webs become the dominant form of organization for businesses, many of the routine production jobs would

be lost to the Third World In turn, this would lead to a serious divergence of incomes between the symbolic analysts and the less fortunate routine producers and in-person servers In this formulation, STEM professionals, who are the quintessential symbolic analysts, were to be big winners Our analysis in this chapter suggests that this may not be the case any longer

Two decades after Reich’s forecast, we find that digitization and globalization have begun to affect symbolic analysts as well These two trends allow firms to divide tasks in a way that enables them to work with fewer highly qualified technical professionals for most of the solution creating and move the routine solution-replicating work abroad Indeed, as more STEM professionals graduate from developing countries, Replication Solutions at a lower cost but with higher-quality workers becomes both feasible and attractive This reduces the demand for STEM professionals even further in the West, thereby shrinking the size of an average firm in the U.S For one thing, newer firms tend to be smaller

It is reported that businesses that were three years or younger in 2007, employed fewer than 10 people on average.(18) What is more, larger firms may also be moving toward employing fewer workers, especially in the U.S Technical professionals may have to learn to cope with the reduced demand for their services, even as opportunities open up for the highly talented among them Indeed, in 1991 Reich argued that more of the income in the economy would accrue to the symbolic analysts or STEM professionals in our formulation He pointed out that in 1920, more than 85 percent of the cost of an automobile went

to pay routine laborers and investors.(16) By 1990, these two groups received less than 60 percent, with the remainder going to designers, engineers, stylists, and planners He went on to specify that in the case of semiconductors, more than 85 percent of the cost of the semiconductor chip was allocated to specialized design and engineering services Our analysis suggests that fewer STEM professionals

would generate this large percentage of added value in the future; all other STEM professionals would deal mainly with Replication Solutions

These bimodes of an organization may extend well beyond the physical entities

it manages Traditional terms such as internal versus external projects, line management, supervision, cost centers or activity centers, and R&D centers are giving way to open source innovation, team management, influential leadership, excellence centers, multiuser technology centers, etc Many of the midlevel jobs such as supervision, middle management, mid-tier workers, and so on are also disappearing rapidly

We call this emerging economy, which is bimodal and universal in so many ways, the Binary Economy It is independent of the industry, nation, or region of the world Creation of New Solutions (using the best technical talent available) and replication of known solutions (using the lowest-cost resources across the globe) are the bimodes of this economy The large range of jobs for transition functions, which in the past supported the continuum between these two extremes, seems to be disappearing Lost in this transition are also hundreds if not thousands of jobs that technical professionals could occupy with their traditional education and industry/sector specific experience Their opportunities are now limited to a narrow window To recognize this window and benefit from such limited opportunities requires a set of skills beyond academic and industry/sector specific skills These are the Transformational Skills detailed in subsequent chapters of this book The rewards for employees as well as their organizations seem to mirror the binary nature of this economy We shall address these economic aspects in the next chapter

References

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2 Bound Together: How Traders, Preachers, Warriors and Adventurers

Shaped Globalization, Nayan Chanda (2007) Yale University Press, New

Haven, CT

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Michael Yoshino and Srinivasa Rangan (1995) HBS Press, Boston, MA,

6 Sovereignty at Bay, Raymond Vernon (1971) Basic Books, New York,

NY

7 Oligopolistic Reaction and Multinational Enterprise, F.T Knickerbocker

(1973) Division of Research, Harvard Business School, Boston, MA

8 Oligopolistic Imitation and European Direct Investment in the United

States, E.M Graham (1974) DBA dissertation, Harvard Business School,

Boston, MA

9 Competitive Advantage of Nations, Michael Porter (1991) Free Press,

New York, NY

10 “Entrepreneurial Globalization: Lessons From the Off-shoring

Experiences of European Firms,” U Srinivasa Rangan and P

Schumacher, in The Offshoring Challenge: Strategic Design and

Innovation for Tomorrow’s Organization, L Bals, P Jensen, and T

Pedersen (eds.), Springer-Verlag, London (forthcoming in 2013)

11 The Offshoring Challenge: Strategic Design and Innovation for

Tomorrow’s Organization, L Bals, P Jensen, and T Pedersen (eds.),

Springer-Verlag, London (forthcoming in 2013)

12 “THE iECONOMY—Part 1: An Empire Built Abroad—How the U.S

Lost Out on iPhone Work,”

http://ba201w2012.blogspot.com/2012/01/close-look-at-apples-value-14 “Capturing Value in Global Networks: Apple’s iPad and iPhone,”

Kenneth Kraemer, Greg Linden, and Jason Dedrick, University of

http://pcic.merage.uci.edu/papers/2011/Value_iPad_iPhone.pdf

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So Sour: Online, Retail Powerhouses Clash in Court Over Tie-Up;

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19 The Work of Nations, Robert B Reich (1991) Vintage Books, New York,

NY

Chapter 3

A New Economic Order:

From Binary Company to Binary Economy

As we saw in the last chapter, globalization and new business models have changed the work world dramatically Even as value activities are disaggregated and distributed globally, based on the cost of performing each one, entrepreneurs are taking advantage of technological advancements to foster new business models and change the way value activities are performed Together, these developments signify a new economic order called the Binary Economy, which naturally emerges as more companies transform into Binary Companies With the advent of the Binary Economy, a vast chasm opens up between opportunities and rewards available to solution providers and to solution replicators Over time, a smaller group of highly talented, creative technical professionals tend to dominate the solution-providing role while the vast majority of technical professionals, many of whom work in newly industrialized countries like China and India, function as solution replicators As more firms adopt this new binary model, the economy as a whole becomes binary, meaning

a few highly trained and motivated STEM professionals are responsible for most

of the solution providing, while a vast majority of other STEM professionals migrate to the Replication Solutions role As globalization takes hold, the entire binary model for the companies and the economy migrates to a single unified model

The Emergence of a Binary Company

The easiest way to understand the evolution of a Binary Economy is to comprehend how workers in these companies deliver their output We focus on the nature of employment as we study the evolution of a Binary Company All employees execute their job in three ways: through physical effort (labor), through contribution to the collection, processing, and dissemination of information (information tasks), and through professional skills (that are unique and yield a much-needed output to users) The physical effort or labor is the major part of a factory laborer’s work, whereas a large part of “office work” pertains to processing information Armed with their computers, PDAs, e-mail, and the Internet, most professionals are caught up in a vicious 24-7 cycle Professional skills are necessary for work that requires an aptitude for problem solving, leading to a complete solution For example, think of the carpenter who

makes a chair, table, or some other piece of furniture His job involves a concept (design), selection of proper wood, and processes such as cutting, shaping, polishing, assembly, staining, etc Finally, the furniture has to be of an acceptable design, quality, and cost so that someone is willing to pay for it If the price of the furniture does not yield a profit for the carpenter, he/she cannot make a living!

The work of the carpenter mentioned above involves physical labor and information, but there is also a “critical thinking” or creative component as well

as specialized knowledge pertaining to carpentry and furniture making In other words, professional skills stripped off labor and Information Processing tasks still contain a certain level of academic knowledge and industry/sector/domain specific knowledge The same can be said of a plumber who fixes leaks in pipes

or a cardiovascular surgeon who fixes a block in the artery Of course, the perceived value of a heart surgeon is much larger than that of an average plumber

Figure 3.1 Sources of Income for All Workers and How They Are Impacted by Globalization (Enabled by DT Applications and Global Capitalism)

Irrespective of the nature of the work, each of us executes our job with three sets

of skills: Physical Labor, Information Processing, and Professional Solution (enabled through academic and industry/sector/domain specific knowledge) Figure 3.1 shows these three sets for a Factory Worker, Office Employee, and Professional Worker The Factory Worker relies more heavily on his/her physical effort (labor), while the Office Worker relies on Information Processing

Factory Worker

Professional Worker

Middle Beginner Middle

Middle Advanced Advanced Beginner

100%

Physical Labor - C

Information Processing Skills - B

Professional Skills

(Worker skills based on

the “knowledge” from

academic education and

industry/sector specific

know-how and their use.) - A

Demand for Worker Skills Impacted by Globalization

skills We described the Professional Worker earlier as someone who is accountable for a complete solution

At this point it is valuable for each reader to ask the following questions:

 What tasks, activities, or solutions do I create or contribute to?

 How much of what I do belongs to Physical Labor, Information Processing, and Professional Solution?

the skills I have acquired on the job (industry/sector/domain specific knowledge)?

There will be a tendency to count larger fractions of the work as “professional work.” If you are attending to your e-mails and looking through your Blackberry, you should make sure all that effort does not merely constitute Information Processing Similarly, if you travel all the time and keep hopping from one place to another or from one meeting to another, you want to make sure your actions do not constitute just Physical Labor (with additional information tasks) and that they are not mistakenly considered professional work In fact, an objective analysis would show that almost everyone is increasingly engaged in Information Processing and Physical Labor related tasks and less in activities related to professional work The sooner you realize this, the faster you will seek methods and approaches to increase the fraction of your effort enabled by your professional skills

If we assume that all the work of technical professionals, i.e., STEM jobs, called for professional skills composed of academic education and industry/sector specific know-how and their use (A), Information Processing related white-collar skills (B), and Physical Labor (C), then the total effort for a given job adds up to A+B+C Thus we can define the term “Professional Effectiveness” as:

Professional Effectiveness = A/(A+B+C)

In many respects, Professional Effectiveness may be thought of as something analogous to process efficiency or multifactor productivity, frequently used as the measurement tools in operations management The difference is that the Professional Effectiveness factor accounts for the efficient deployment of professional skills by individual technical professionals As long as the three components of the denominator were indistinct or difficult to separate, the work

of technical professionals was seen as a whole, i.e., as an individual’s contribution to the task, project, or program on hand Higher levels of professional’s effectiveness were identified based on the perceived impact Such perception was largely in the hands of the manager or the supervisor Those individuals who were identified as “high potential” were moved up to the top of the organizational pyramid In the absence of any means to identify such effectiveness, the mere acquisition of higher education or industry/sector know-how was considered one of the measures of higher Professional Effectiveness Over the past several decades, information and logistics technology have evolved to the point where we can now isolate and automate component B (information tasks) There is also an increased level of standardization and de-skilling of human-centered tasks In turn, the physical work component (C) can also be de-localized and outsourced and/or offshored This progressive reduction

in the demand or need for individual professional workers’ skills pertaining to Physical Labor and information tasks is highlighted as the shaded area in Figure 3.1

Now, let us trace the evolution of Professional Effectiveness and its demand as a function of the number of jobs over the past few decades Our goal here is not to establish precise quantitative relationships; that will be the focus elsewhere based on detailed economic models Instead, our focus here is to describe a certain evolution in the nature of jobs with respect to Professional Effectiveness

in a qualitative manner The resultant phenomenological conclusions are more important to our discussion

In the beginning of the 20th century, as industrial organizations and companies took hold, there was massive employment of workers with all types of skills Most of the industrial jobs for technical professionals required a minimum education, such as a high school diploma or associate’s degree As soon as they were hired, there was adequate training and on-the-job mentoring inside the company for most if not all such employees Of course workers with a higher level of college education were also hired as needed Thus, one can envision a distribution of the number of jobs versus Professional Effectiveness in the early

20th century, as illustrated in Figure 3.2

Figure 3.2 Professional Effectiveness Versus Early 20th Century Employment From the very beginning, the strategy of most companies was to be both a solution provider and a solution replicator: As their higher-level technical professionals worked with client companies to develop New Solutions, the companies were quick to replicate them for users who faced similar problems Their human resource policies dovetailed this strategy STEM professionals hired by the company were extensively trained and were given adequate support staff, i.e., technicians The engineer/technician group grew as a team and worked

on a few projects, often for a few years They had dedicated R&D resources, and could also use factory equipment as needed There were many engineers in the factory, trained and supported mostly by the R&D team Thus R&D resources were respected and sought after to handle special problems in the factory In turn, these resources had unlimited access to factory equipment for their trials Lifetime employment and specialization in specific areas were the order of the day—there were enough people to handle the details Institutional knowledge grew through detailed documentation and technical reports Knowledge was transferred to foreign entities largely through technical transfer documents, product-line-based projects, and annual meetings at the company’s world headquarters

This strategy and the human resources policy stemming from it resulted in a bell-shaped distribution of STEM-related jobs with respect to Professional Effectiveness (defined earlier in this chapter) Whether this distribution of jobs was normal or skewed depended on the product lines and their technical content For simplicity’s sake, let us assume this as a normal distribution With a strategy that encompassed both New Solutions and Replication Solutions, the companies needed a few highly talented STEM professionals to create solutions and a large number of less-skilled STEM professionals to replicate them This distribution

of jobs is schematically shown Figure 3.2