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


The Technical Manager's Survival Guides

THRIVING IN THE 21ST CENTURY ECONOMY
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


© 2013, ASME, 2 Park Avenue, New York, NY 10016, USA (www.asme.org)
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Library of Congress Cataloging-in-Publication Data
Subramanian, K. (Krishnamoorthy), 1949Thriving in the 21st century : transformational skills for technical professionals
/ Dr. K. (Subbu) Subramanian, president, STIMS Institute Inc., Lexington, MA,
USA, prof. U. Srinivasa Rangan, Luksic Chair professor of strategy and global
studies, Babson College, Wellesley, MA, USA.
pages cm
Includes bibliographical references.
ISBN 978-0-7918-6016-8
1. Engineering--Vocational guidance. 2. Technical education. 3.
Business and
education. I. Rangan, U. Srinivasa. II. Title.
TA157.S8484 2013
620.0023--dc23
2012051159


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ix

Series Page
Foreword
Acknowledgements
Biographic Sketch

1.

Introduction

1

2.

Workplace Transformation: The Impact of Globalization and
Business Model Revolution

9

3.

A New Economic Order: From Binary Company to Binary Economy 25

4.

Transformational Skills: The Tools Necessary for Sustainable
Jobs and Careers

57

5.

Common Language and Core Capabilities: Skills to Identify and Foster
New Solutions
75

6.

Knowledge Integration: Skills to Develop New Solutions By Integrating
Knowledge From All Available Resources
117

7.

Achieving the Maximum Impact Across the Globe: Transformational
Skills to Exploit New Solutions.
159

8.

Conclusion: Where Do We Go From Here?

iii

183


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
Goncalves (2007)
Vol. 4 Conflict Resolution Concepts and Practice, by Marcus Goncalves
(2008)
Vol. 5 Global Management Strategies: Sales, Design, Manufacturing &
Operations, by Marcus Goncalves and Brian E. Porter (2008)
Vol. 6 International Project Management for Technical Professionals
(2009) Brian E. Porter
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)

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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.

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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.

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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,

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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 midcareers, as they face the challenges of the Binary Economy is the goal of this
publication.

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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.
He founded his company, STIMS Institute Inc., (WWW.STIMSInstitute.com) to
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

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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/JosseyBass, 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.

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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.

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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

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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 wellqualified technical professionals who can create New Solutions, or for lowskilled, 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.
In Chapter 3, we lay out the concept of a Binary Economy.


Economy 1: Those few professionals who create and implement New
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 de-skill and delocalize 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).
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

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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 nonphysical 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.

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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 threedimensional (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 sciencebased 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

5


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

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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 PTintensive 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

7


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 XPrize 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.

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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.

9


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

10


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.

11


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.

12


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 farreaching 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

13


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.

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