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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
iv v vii
Series Page Foreword Acknowledgements Biographic Sketch
Workplace Transformation: The Impact of Globalization and Business Model Revolution
A New Economic Order: From Binary Company to Binary Economy 25
Transformational Skills: The Tools Necessary for Sustainable Jobs and Careers
Common Language and Core Capabilities: Skills to Identify and Foster New Solutions 75
Knowledge Integration: Skills to Develop New Solutions By Integrating Knowledge From All Available Resources 117
Achieving the Maximum Impact Across the Globe: Transformational Skills to Exploit New Solutions. 159
Conclusion: Where Do We Go From Here?
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)
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 midcareers, as they face the challenges of the Binary Economy is the goal of this publication.
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
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.
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 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
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.
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
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 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
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.
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 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
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.