17 Mar 2011
Make or Break for the USA?by Garry EmmonsTopics:
As the global economy grows ever more competitive, American manufacturing is at a critical juncture. The country has been surrendering jobs, production capacity, and know-how to other countries at an alarming rate. The answers to this dilemma aren’t as obvious as they might appear. For example, Germany, despite having the highest labor costs in the world, also enjoys the world’s largest export surplus, at 7 percent of GDP. The United States, by contrast, ranks lowest among the world’s largest manufacturing nations in “export intensity,” the ratio of domestically produced goods sold overseas. Can U.S. manufacturing ever regain its once robust and thriving condition?
The current issue of the Bulletin, which focuses on U.S. manufacturing and competitiveness, finds some optimistic signs amid intensified competition. But it’s clear there’s still a long way to go to achieve the turnaround that was hoped for back in 2003, when the December Bulletin’s cover was titled “Manufacturing’s New Reality: Will Innovation Save the Day Again?”
Several HBS alumni have recently been asked by the White House to help figure out how to fix these problems. A year ago, Boeing CEO Jim McNerney (MBA ’75) was appointed chairman of the President’s Export Council, charged with advising President Obama on trade and export expansion. (McNerney is interviewed in the current Bulletin.) In 2010, Ron Bloom (MBA ’85) was tapped by the White House to be its in-house point man for promoting manufacturing. And earlier this year, Barack Obama appointed General Electric CEO Jeff Immelt (MBA ’79) to head the President’s Council on Jobs and Competitiveness.
Historically, HBS and its alumni have played a key role in the country’s manufacturing and industrial sector, as is documented in a 1991 Bulletin issue devoted entirely to manufacturing (and featuring Kim Clark, Steve Wheelwright, Bob Hayes, and Roy Shapiro as youthful professors, along with older hands such as Wick Skinner). After its founding in 1908 (the same year Henry Ford introduced his assembly line), the School, led by faculty members such as General Georges Doriot and his legendary class in Manufacturing (a thinly disguised guide to life), went on to produce some of the 20th century’s leading industrialists and manufacturing executives. Somewhere along the way, that began to change. In the current issue of the Bulletin, in an interview with HBS professors Gary Pisano and Willy Shih, Pisano says, “One of our key messages is to get students to appreciate that manufacturing involves a lot of knowledge work. There has been almost a whole generation of MBA students and managers who have been brought up on a false idea that manufacturing is kind of the brawn and not the brain.”
Maybe their message is getting through. Of the 31,971 HBS alumni who report that their “office country” is the United States, 1,076, or roughly 3 percent, identify themselves as being in manufacturing. By contrast, from the MBA Class of 2010, 26 percent chose “manufacturing industries” over service industries.
Notes Pisano, “For many years, people like Bob Hayes, Kim Clark, and Steve Wheelwright were arguing that manufacturing mattered to competitiveness. So what Willy and I are saying today is a continuation of a core theme taught here for twenty years. And we plan to stay at it for another twenty years.”
Class of MBA 1975, Section B
Class of MBA 1985, Section G