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- Special Report: The Business of Sustainability
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Hard skills from a soft scienceImprovisations
Debating Offshoring’s Impact
Too often, discussions of contemporary economic issues end up either overly simplified for popular consumption — or too jargony and technical to be followed by anyone but economists. A new book, Offshoring of American Jobs: What Response from U.S. Economic Policy? avoids both extremes — and instead finds an informative, nuanced middle ground on an important issue. This brief but thought-provoking book offers insights into economists’ thinking about offshoring.
In the book, edited by Benjamin M. Friedman of Harvard and published by MIT Press, two prominent economists –Jagdish Bhagwati of Columbia University and Alan Blinder of Princeton — debate the impact that the offshoring of jobs (particularly white-collar jobs, such as computer programming) will have on the American economy. (The book includes commentary from other economists, as well.)
Bhagwati complains of ”episodes of media frenzy” despite economists’ consensus about the benefits of free trade, while Blinder worries about the impact of offshoring of service jobs on the American populace and American politics. Here’s a small sample of what each has to say in Offshoring of American Jobs:
BHAGWATI: “In an op-ed titled ‘Technology, not Globalisation, Is Driving Wages Down’ in the Financial Times (January 4, 2007), I argued that the vast numbers of empirical studies…had shown that trade with poor countries had a negligible impact on our workers’ absolute real wages (as against the relative wages of the skilled and the unskilled)….The New Democrats who continue to believe nonetheless in this imaginary downside of free trade are not doing anyone any good.”
BLINDER: “I can’t help believing — and this is what makes me a worrywart rather than a relaxed, business-as-usual guy — that the gross job losses [from offshoring] in the rich, English-speaking countries will a) continue for decades, b) eventually be huge, c) pose a variety of difficult adjustment problems and d) dominate the political landscape for years.”
Whatever your own views on offshoring and its economic and political impact, chances are good you’ll learn something from the discussion presented in this book.
Bank Bashing, Courtesy of a Banker
Two of us at MIT Sloan Management Review grabbed good seats at yesterday’s MIT Sloan campus-event headliner: a downwind reflection on fallout from the financial crisis. Featured attraction: a high-level round of bank bashing, with a high-level banker on hand to help do it. OK, it wasn’t only banks that were bashed. Ungenerous attention was paid to politicians, insurance firms, mortgage companies, and the general ethical standards of business people, as well. The usual suspects, in other words.
But the hall was overstuffed because the two speakers were not usual: a candid Lawrence K. Fish, longtime (now former) Citizen’s Bank CEO, and, as his interlocutor, MIT Sloan prof Simon Johnson, the former IMF chief economist and co-founder of acclaimed global economy blog The Baseline Scenario. The conversation was part of the Dean’s Innovative Leader Series. Along with heat, it generated a fair quotient of light. Plus some activist heckling.
We’ll post an edited version of the entire chat in weeks ahead, but for now, some brief highlights:
ON “JUST HOW BAD” THE FINANCIAL CRISIS WAS:
Note, first, the past tense. “It was really bad,” said Fish, “but we’re coming out of it.” TARP has actually helped, and the government will end up ahead, he said. “The returns will probably mean that the government will make money.”
Will a crisis happen again? “Yes.”
ON REGULATORY REFORM (OR NON-):
“I’m worried we’ll overreact,” Fish said. “We need better regulation, not more regulation.” Two big risks: “One, competitiveness globally [of the U.S. financial services industry]; and two, we may protect consumers so well that consumers can’t borrow.”
Johnson argued for aggressive reforms (see his blog), but Fish thinks that’s a nonstarter. “Profound regulatory reform—of the kind Simon is talking about—is probably a political unreality” because the financial services lobbies are too good and donate too much money to be countered.
ON ETHICS, LACK OF:
“There are no B-pluses in ethics, it’s pass/fail,” said Fish. And it’s not hard to assess the grade. “You know what’s right. You know.”
He added for illustration: “It makes me crazy that someone gets a $100 million bonus.” (He mentioned, more than once during the hour, the “platinum trader” who gets a bonus that’s 50% of the $200 million in trading revenues he or she generates.) “Who needs that much?” he said, rhetorically—begging the question of just how much is the right reward in a market economy where incentives are created to produce outcomes.
If not $100 million, then what should be the reward for producing $200 million in trading revenues? Fifty million? One million? Five thousand dollars and a good steak?
We joke, but not entirely. We can all decry the “obscene” bonus (though some wouldn’t), but naming the “right” amount is less easy. Where’s the line?
We’ll ask Fish, and get back to you. And, if you want more Fish while you’re waiting, see his MIT World talk.
Management by Kindle?
A tech research firm CEO recently tweeted: “After six months with my Kindle I can now report that the damn thing is indispensible. This Amazon toast was perfectly
cooked.” I wish I had the version he seems to have. In mine, which seems to be the standard model, the screen isn’t bright enough, the lack of a touch screen makes it quite unbooklike, you can’t download any Saul Bellow, and don’t get me started on the digital rights restrictions it locks you into. For personal use, the latest version of the Kindle is decidedly undercooked, useful mostly when you’re traveling and want a lighter load. As Nicholson Baker noted in The New Yorker, reading Kindle books on an iPhone is a much more pleasant experience. There are, though, plenty of business purposes for the Kindle and similar competing devices, ranging from easy access to documentation of complex items (you try walking around the Boeing factory with a 30-pound aircraft manual) to relatively lightweight distribution of PDFs (as long as they’re mostly text).
But what about the Kindle as management tool? New devices, be they PCs in the 1980s or BlackBerrys right about now, rise to prominence in business when they are effective ways for managers to communicate and get work done. It’s no accident that business purchases of iPhones took off after Apple made it easier to connect to Exchange-based office systems. Anyone who has paid attention to the book business in recent years knows that a $300 device devoted solely to books is unlikely to be a blockbuster. You can read Kindle books on an iPhone, but it’s surely not the main reason anyone buys one. It’s unclear where Amazon wants to go next with the Kindle. A $500 large-screen version seems focused on reaching academic and periodical-reading markets, although I suspect that getting people already abandoning newspapers to buy a $500 device to read them will not reverse that slide.
What is clear is that the device won’t be a success among managers in its current incarnation. The device is great at selling books (it’s from Amazon; what did you expect?) but it’s not very good for reading or communication. Consider the web browser. There is one built into the Kindle, but it’s hidden in an “experimental” menu and it’s not very good. There’s no incentive now for Amazon to improve it, since the primary purpose of the device’s free connectivity is to download books and Amazon eats the bandwidth cost. Fixing the web browser will require software improvements (more self-evident controls), hardware improvements (touch screen, at the very least), and a business-model improvement: a subscription model. By making the software and hardware improvements, Amazon can make the Kindle more useful to managers. And by making the Kindle a subsidized device with a regular, reliable income stream, like a phone, Amazon can sell the Kindle to businesses in ways businesses understand. Without business buy-in, a decade from now we’ll be talking about the Kindle the way we now consider the Apple Newton.
Do you have a Kindle? Are you getting some management use out of it? Let us know what you’re doing in the comments.
We read The Economist so you don’t have to
We here at MIT Sloan Management Review are voracious readers. After all, part of our service is to read management literature so you don’t have to read all of it. But it’s not only academic journals that are full of smart management ideas you can act on. This week’s issue of The Economist has a pair of articles in particular that hit the spot:
In “Creative Tension,” the magazine looks at ways Google is trying to make sure that the inevitable bureaucracy that comes with having 20,000 employees doesn’t stifle innovation. The example in question is Google Wave, a still-in-development mix of email, chat, and file-sharing that some think might unseat Microsoft’s SharePoint. How different was the development of Wave from what the company does usually? Quite a bit. “Some Googlers felt this was a betrayal of the firm’s open culture.”
“A Maket for Ideas” looks at how the Eli Lilly startup Innocentive has created an “innovation marketplace.” “Seekers” post problems and quote a fee; “solvers” compete to answer them. It’s turning out to be a successful model, even as the parent Eli Lilly is cutting jobs.
Finally, the magazine also debuted a new column on business and management that it’s calling “Schumpeter.” As you might expect, the column kicks off with an entry on why it is named after Joseph Schumpeter, who the column identifies as “one of the few intellectuals who saw business straight.” We’re curious to see how this new page tries to do the same.
Customers and service innovation
A new working paper looks at customers' role in innovation in a service industry: banking. Read more »
A new look at older technologies
Conventional wisdom has it that companies whose markets are being transformed by disruptive new technologies need to figure out how to switch to the new dominant technology. But two researchers argue that an alternative strategy --one that involves rethinking opportunities for the old technology -- can sometimes make sense. Read more »
Developing an optimal innovation strategy
If one innovation approach is helpful, you might think using more than one approach to innovation would be even more productive. Not necessarily, write Frank T. Rothaermel and Andrew M. Hess in the new issue of Business Insight, MIT Sloan Management Review's collaboration with The Wall Street Journal. Read more »
Overcoming innovation hurdles
What's one of the challenges to successful management or process innovation in an existing business? The array of organizational structures that are designed to keep current processes running smoothly. Read more »
Asia, the U.S., and innovation
There's plenty of optimism to be heard about Asia's innovation future -- but less optimism about the U.S.'s ability to maintain its historical innovation leadership in the 21st century. Read more »
New opportunities for data analysis
"We're rapidly entering a world where everything can be monitored and measured," Erik Brynjolfsson, director of the MIT Center for Digital Business, said in an article in The New York Times. Read more »
Innovation reading
Two innovation links of note:
1. The new issue of Deloitte Review features an interview with Eric von Hippel of the MIT Sloan School of Management — on the state of open innovation. In the interview, von Hippel covers topics ranging from “open hardware” to why companies often resist open, user-led innovation. Definitely worth reading.
2. In an article titled “Honda’s New CEO is also Chief Innovator,” BusinessWeek highlights a new engineer-CEO: Honda’s new CEO, Takanobu Ito, is also the company’s director of R&D. According to BusinessWeek, Ito will at least temporarily retain both roles, as Honda seeks to better align its technology direction and business strategy.
Improving your innovation skills
A new book includes some interesting observations about the personal characteristics of successful innovators -- and what managers can do to strengthen their innovation skills. Read more »
The importance of tolerating failure
A new working paper explores the relationship between tolerance for failure and innovation. Read more »
Collaboration — or competition?
When working with external innovators, should companies seek to organize the innovators into communities -- or into competitive markets? Read more »
Innovation as a process
In an informative new book, two Wharton professors look at innovation from a process management perspective. Read more »
Innovating with a community
In a new article, Erik Simanis and Stuart Hart offer an interesting perspective on innovation. In particular, they offer a vision of a world in which businesses and communities are more closely intertwined. The authors contrast "structural innovation" that companies have traditionally practiced -- a transaction-oriented model where companies try to create better products to satisfy markets' unmet needs --with a model they refer to in terms of "business model intimacy" and "embedded innovation." In this model, a business innovates by entwining closely with a community to improve people's lives. An example is Grameen Bank, with its microlending program in Bangladesh that grew out of founder Muhammed Yunus' personal experience with Bangladeshi villagers. Write Simanis and Hart: At its foundation, business ... Read more »
Redeploying finance talent
The bleak labor market for finance professionals may create an unexpected opportunity -- for environmental sustainability efforts. Read more »
Morphing the Web
The new Summer 2009 issue of MIT Sloan Management Review includes an interesting article on websites that "morph" -- by adjusting their content to the cognitive style of their visitors. Read more »
Data reuse on the Internet
Who owns data available on the Internet? An article in MIT Sloan Management Review examines that question. Read more »
Understanding the geography of venture capital
A new study explores the relationship between venture capitalists' location and their investments -- and finds some quite intriguing results. Read more »
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From The Magazine
Fall 2009
Special Report: Sustainability
8 Reasons That Sustainability Will Change Management
Michael S. HopkinsTransparency, accidental innovation, trust, collaboration — as sustainability affects how the world works, so will it affect how business works in the world.
Intelligence: Management
Debunking Management Myths
Martha E. MangelsdorfIn this interview, Henry Mintzberg questions some of the conventional wisdom about managerial work.