Globalization & Technology is why 28% US workers may remain in low paying jobs in 2020

According to the Economic Policy Institute 28% US workers will remain in low paying jobs in 2020 which is the same as in 2010. Globalization & technology is the reason as some previous blog posts have indicated and this post gets into some more details. But first let's  understand the different levels of skills and pay that is involved in a service ecoonomy.

  • Low-skill physical presence jobs: These are the jobs that make up the 28% The jobs include retail salespeople,  store clerks,cashiers and food service workers. But set to grow are occupations such as farming, personal care, building and grounds maintenance andhealthcare unskillled support. And these occupations pay less than the hourly poverty wage, which is why it is so hard to attract local apple pickers in Washington State, for example. These jobs don't really need a college degree and yeat there are large numbers of employees in retail for example, who have college degrees just because they can't find better paid jobs.
  • Mid-Skill-Middle Class jobs: These started disappearing from the early 2000's with the onslaught of technology and globalization. Manufacturing moved overseas and many services moved to technology (eg. tax software) or when it was routine it was outsourced overseas. And this was before the recession.
  • High Skill-Physical Presence Jobs: As the CNN report points out, there are simply not enough jobs in this category. For example an advanced plastic prototype making plant, or involved in biotechnology can employ only an order of dozens of  employees. A very much lesser number than the old steel plants. Even in this category high skill high pay work can be outsourced to low-cost locations. A famous example is of radiologists reading x-rays from Bangalore India. And even in radiology, routine stuff is being handled by technology. 

Low-skill and low pay is likely to stay but overqualified college educated folks in low-skill, low-pay jobs need to be able to find better opportunities. Contact StratoServe.

India Power Outage: why possible opportunities for the global electricity industry

India suffered two consecutive power grid failures that plunged 700 million people into darkness and that is one tenth of the 7 Billion humanity on the planet. It's important to understand why there are huge opportunities in India for the global electricity industry…..

US media repeated this blackout news and pointed that none of the BPO (Business Process Outsourcing) work was affected as these suppliers all need to have  back-up generator supply to overcome this endemic risk. Indians were embarrassed given their sixth largest economy status in the world and to the credit of the Indians there are no reports of looting as in the New York power outage of 1977.

Adding insult to injury was the need for New Delhi to buy power from tiny neighboring Bhutan (the Happiness Country) just to start up the stranded Metro and clearly the Indian public is now planning big changes at their next elections. For the country has moved from basic election issues like food,clothing and shelter  in the sixties and seventies ( in Hindi : Roti,Kapda,Makan) to the next level of  Electricity,Roads and Drinking Water (In Hindi: Bijli,Sadak,Pani). Elections are certainly being lost if politicians are not able to deliver these infrastructure items. Ever since the unshackling of the Indian economy in the early 1990's the public energy and entrepreneurism is very high as is the endless internal consumer demand for everything.   And without electricity you cannot run the computer and soon are unable to charge your all important  cell phone.

"Electricity" is at very top of the electoral demands of the Indian public and you can be sure that all political parties have got the message after this massive blackout. And this means huge opportunity for global players, both large and small, and time to step up their India market efforts. And here are some thoughts about possible opportunities:

  • Power Generation: Whether coal,water,wind or nuclear it's not just about your technology but your ability to deal with the travails of land acquisition for the plant. An upfront realization of the challenges here can help.
  • Generation Technology: More digital, more compact the better. And don't worry about relatively  low cost high skilled workers. 
  • Distribution: Has huge opportunity, consider wireless technology for billing, meter reading given the huge cell phone penetration.
  • Pricing politics: The pricing of power is highly politicized with large voting groups of farmers always asking for subsidies from politicians. Having specialized dedicated folks to deal with all the vociferous demands of a vibrant democracy is probably a good idea.

In you are a foreign company already in India and in the power sector, you business is about to zoom! Contact StratoServe.

Lessons learnt: Internal Organizational Culture and the CMO- Joel Ewanick ousted at GM

The Chief Marketing Officer (CMO) is outwardly focused always looking at the market and customers- right? Wrong if you see the recent ouster of Joel Ewanick the CMO at GM. This blog had noted some of  the  game changing moves at GM by Ewanick like not advertising on Facebook and Superbowl. It now turns out that as CMO, Joel Ewanick made radical changes in the Ad Agency relationships that GM had. He replaced legacy GM advertising agencies and for Chevvy cobbled together an unusual 50:50 alliance between mega agencies Interpublic and Omnicom.The latter to deploy maximum creativity into the Chevvy brand.

One can speculate that all these changes in GM’s B2B relationships i.e. old ad agencies out, distributors asked to do different stuff must have affected the GM internal old timers. And this is an important idea… if you make changes in external B2B relationships there are internal relationships that get altered. For example, a change in the the way dealers  run promotions means training your field sales force. And parts of the sales force may not have time to understand and therefore buy-in to the advertising and promotion changes  that need to happen at the dealers’.

Also old timers did not like it when Ewanick questioned  the need for the GMC brand as a separate brand for high end trucks.

From news reports available so far, it was details of the penalty clauses in the Manchester United and GM sponsorship deal that seems to have forced  Joel Ewanick’s resignation.

But it is the underlying internal organizational culture at GM that probably caused Ewanick’s abrupt departure given that just two weeks ago he was being praised by all.

So if you are a CMO trying to change stuff here are some lessons learnt from the Joel Ewanick and GM story:

  1. Do not assume that all folks want change.
  2. Carefully track your internal supporters.
  3. Do not assume that just because your actions are “external” like B2B changes among ad agencies and dealers internal folks won’t mind.
  4. Spend 60-80% of your time making sure that you understand the internal organization dynamics. Sounds strange but true because while GM regained the title of the world’s largest automaker in 2011, the mid 2012 difference in sales between Toyota ( 4.97 million) and GM ( 4.67 million) is not that much. Particularly when Toyota had to contend with the Japan earthquake in 2011.
  5. As any high value (more than $1 Million)  B2B marketer will tell you the above point of only spending 20-40% of your time in “external marketing” and 60-80% time in “internal marketing” is what works.

The good part of the episode is that people like  Joel Ewanick will be in demand, anyway. About StratoServe.

US drought and Mississippi river transport cost : reduce 17 tons cargo for every inch decline

As the US drought gets worse, one  does not realize that barges transport  60 % of US crops of corn,soy and wheat  to Louisiana for worldwide distribution over the Mississippi. The river is declining so rapidly that the barges might get grounded. So the barge industry is reducing 17 tons of freight for every inch of decline in the Mississippi's depth. This means, more trips for the barges leading to higher transportation costs. And if barge traffic stops due to a dry Mississippi, the land transport costs for produce will just zoom. This will make US exports less competitive in the global markets as the video alongside explains.

The 1988 drought closed the Mississippi waterway for a week, but since then the Army Corps of Engineers has been dredging the river and things are much better. Let's hope that there is rain in the drought struck mid-west and southern  US. Contact StratoServe.

Simple is always better than complex for your innovation ideas to fly

Simple is always better than complex for innovation adoption but managers are led to believe that complexity is impressive. The bigger corporations hire highly qualified folks with graduate or doctoral degrees. The latter are trained to read, understand and then extend their discipline’s knowledge. So you would hope that these folks come up with new ideas. And guess what – they do – but these ideas do not fly as high as they could within and outside their organizations.

[ Note: This post was published on July 25, 2012 and updated for formatting issues on February 6, 2021. The next paragraph pertains to Apple in 2012. It turns out that keeping the user experience “simple” has worked for Apple as of 2021 !]

The trouble is that very few innovators are able to keep all the complexity in the back end like Steve Jobs of Apple. This despite some recent (2012) disappointment  with Apple’s performance.  Steve Jobs figured out that there are very large affluent  global market segments who do not want to become techies but yet want to use technology and are willing to pay. For these folks Apple products provide cutting edge technology at the back end and a wonderful user friendly design and great user experience at the front end. Thus, the Apple engineers and designers have all that complexity training from graduate school and are able to pull together the next frontier of knowledge and deploy that knowledge into their products. It’s not entirely clear whether the back end of Apple technology is the simplest possible, for example, that they consider putting the least number of soldering or screws to make it easy to manufacture and now repair with their extended warranty programs. We do know that the front customer experience simplicity came from the fanatical insistence of Steve Jobs.

Generally its desirable to keep things as simple as possible. In this context the Mark Twain quote ““I never write Metropolis for seven cents because I can get the same price for city..”.. is  great advise. For if you stay simple for whatever your work output, it has a better chance of getting understood and enjoyed. Obviously Twain had figured out that using the word “city” in place of “metropolis” would give him more traction with his readers.

Everett Rogers also emphasized that simplicity helps innovation diffusion which is one of the five factors of innovation diffusion.

So the next time you or your team  are making a presentation, putting out an idea or just producing some work output think about making it simple and easy for your customer even when the customer is an internal one. This way, you are likely to get far more traction for your innovation efforts.

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Divisional time limits for Product Innovation Charters (PIC’s)

Divisions or SBU’s should have Product Innovation Charter (PIC) that comes with a time limit or expiration date. In a highly cited research paper Galunic and Eisenhardt (2001) mention that a manager interviewed at the SBU level who  suggested that the time dependent nature of the PIC is a critical characteristic of a good PIC. The PIC is a statement of innovation goals that specifies the market segment and customer need and the task the New Product  Development (NPD) team is charged with.

In multi-division companies and conglomerates the PIC should tie in with the holding company’s PIC and should match the mission statement of the overall organization and appear to contribute to the overall vision of the company. But this might change and readers of this blog must have experienced multiple revisions of mission and vision statements in their organizations. Most of these changes seem to happen with new CEO’s or the CxO and it might be necessary given highly volatile markets and competition. Nevertheless, the mission statement should mimic timeless documents like a country’s constitution that sets out the ideals, hopes and aspirations of the organization and is amended as rarely as possible.

The PIC however is not sacrosanct in terms of its shelf life and thus needs to have a time limit or valid upto date on it. When a PIC is formulated, the top management is telling the operating NPD team that here is the task, here is the market and customer profile and importantly here is a soft budget indicator, now get it done within the time specified.

By just imposing a time limit, and setting the NPD team free, can unlock entrepreneurial energy in the team. For the NPD team it is empowering to see a PIC signed off by the CxO’s. It assures co-operation across functions and units and unlocks the energy of everyone else who might play a part in the NPD project in the organization.

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Outsourcing transfers the perishability risk to the provider

As outsourcing becomes an important issue in the US Presidential elections- it's interesting to look at the perishability risk of services and how the provider or vendor takes over managing that risk. But first about perishability in services.

Services have been differentiated from goods in terms of service characteristics that include intangibility,perishability,inseparability and variability.  The idea of perishability seems to come from the food supply chain where unless you refrigerate and have a good reliable cold chain perishable foods like dairy,produce including meats literally perish. Thus, the example of trying to sell last minute, seats on an airplane or rooms in a hotel. Once the plane leaves the empty seats represent perishability and  lost revenue as does the empty hotel room. Keep in mind that all the operating costs of the airline or hotel stays constant, it's just that the revenue disappears. Thus, you have the last minute deals that try to get some revenue in.

Now let's think of service outsourcing and perishability. Consider a manufacturing organization that  outsources  its cafeteria. The cafeteria is managed by a contractor who is in the "running cafeteria" business and probably runs several of them and has figured out the processes, routines and solutions to common problems that come about for different clients. Meanwhile, the client company does not bother about the cafeteria and focuses its leadership and management attention to its core manufacturing business. The managerial focus and attention is a scarce kind of "perishable" commodity. Let's imagine the same business has an in-house catering department and you can be sure that all the catering employees will have all those HR needs as the folks on the shop floor. So HR will spend time as will the CEO and other CxO's and don't be surprised to find eventually a Vice President of Catering who will need time to discuss the menu for next week at review meetings while the CFO questions why all those extra bags of vegetables perished and need to be written off and how auditors would object ! Replace the catering function with any other non-core outsourced function like call center,software, and you can visualize how managements separate an activity because of the problems of managing the perishability of that service. If you don't own the call center your HR is not sleepless over training and employee attrition and instead is thinking about training the folks at the core of your business for innovation and growth.

In other words, the hassles of managing perishability in services makes outsourcing attractive.Outsourcing transfers the perishability risk to the provider. The providers have their own industry and very highly specialized skills in that industry. Thus a company that provides cafeteria services belongs to an industry which really knows how to provide the right food at the hospital, in the factory night shift or at the college cafeteria. And unless you decide to get back to catering when you are in manufacturing your company will not create more jobs. What happens when the provider is overseas will be the subject of a later post. Contact StratoServe.

Character not personality: why 7-Habits Steven Covey is followed across the globe

7-Habits  author Steven Covey passed away yesterday and it was just  the previous week when a friend and  visiting  Indian CEO mentioned that Steven Covey’s 7 Habits is a great inspiration for him. And this was before the news of Covey’s passing so it led to this post about why Steven Covey’s ideas resonate across countries and cultures.

“Character not personality” is why 7-Habits – Steven Covey is so popular across so many countries in the world. And this popularity is right from the sidewalk bookseller,selling copies of the “7-Habits” which is much harder that zeroing in on the CEO’s of the Fortune 500.  The character ethic got replaced by the personality ethic in America and appearances became more important. But personality is merely the tip of the iceberg and particularly in B2B relationships it is rather easy to find out about the “character” of the buying or selling organization. And when the underlying character of the organization and its members is not well formed and reinforced it shows in B2B relationships and leads to the common trust deficit problem.Trust deficit leads to recruiting multiple suppliers and smaller buy quantities and all kinds of defensive postures by the supplier like quicker payment terms etc.

But why should an old underlying concept like “character” so help the global popularity of  7-Habits? I guess Steven Covey identified this “Character vs Personality” base for the 7 Habits that resonates across cultures,religion and over time. Personality and appearances are important clarifies Covey. Just because it is summer you don’t show up for a formal business meeting in Bermuda shorts ! However, the core character elements that follow from the mission statement ( also product innovation charter ) must receive buy-in from all organizational members. If organization members understand and champion the character principles, it is fairly easy to adjust to changes in terms of mergers. new suppliers or customers, moving across technology leaps like mobile and social media. If your core character and principles are clear and non-negotiable, you should be able to deal with whatever challenge or change comes your way.  RIP Steven  Covey.

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US Textile Industry and the outsourcing of US Olympic team uniforms by Ralph Lauren

The outsourcing of US Olympic team uniforms by Ralph Lauren to China seems to cause a great deal of angst among US politicians as you can see in the Wall Street Journal video alongside.

The reality is that if you checked out any clothing or home furnishing at the apparel section of Walmart, JCPenney or Macy's it will be hard to find a garment, or for that matter undergarment, made in the USA. Only perhaps  the design and certainly the marketing is  done from the USA. Much of the rest of the value/supply chain for textiles is either overseas or taken over by technology.

Take the cotton example. USA  is the second largest grower of cotton.It exports half of its product overseas and the rest is converted to yarn or thread and then exported after value add. Weaving mills are overseas because of labor costs. In any case agriculture,spinning and weaving have become highly developed and automated industries and therefore employ less people who are more technically skilled.There is literally no low skill job like  watching over the spinning machine because computers do so.

The US Textile industry overall has declined every year since the 1950's when the textile and apparel industry was 2.8%  of the economy to merely 0,45% of the economy in 2001. The US textile industry has tried to go up the value chain and manufacture high tech/high end products like space suits. Here again the demand is obviously not booming as the middle markets of Asia and in any case employs very few  folks who are highly skilled and qualified.

It is however possible to export value added yarn from the USA instead of just shipping the cotton in bales. For example, by locating the spinning mill near the cotton growing farms,  Zagis was expected in 2010 to create 160 jobs and 645 indirect jobs by 2012 in Lousiana. Mere outrage at Ralph Lauren getting the US Olympic uniforms made in China is not the answer.Contact StratoServe.

Creating American jobs with inevitable outsourcing should be the presidential election debate

Creating American jobs with inevitable outsourcing should be the presidential election debate from both parties. This given the recent speculation that GOP candidate Romney might have helped the global outsourcing boom while  at Bain Capital. Consider the following:

  • Global outsourcing as a debate in academia has progressed from when to outsource to how to manage outsourcing for innovation and intellectual property since the last twenty years, even before the Internet! Just search "global outsourcing" in Google Scholar. In other words, a variety of academics from diverse disciplines like Business,Economics,Engineering etc. have been conducting enormous quantities of research that is published and repeatedly  cited.Almost all of these now thousands of research articles open by mentioning the inevitability of outsourcing including in the research done by this blogger.
  • Globalization and technology makes outsourcing inevitably attractive for organizations of all types including private,public and non-profits.The Internet allows all manner of outsourcing 24/7 because you can get work uploaded and done 24/7 by partners all over the world, at much lower cost. It's just that if an organization can get work done of comparable quality at much lower cost overseas, it will do so for the sake of its shareholders. Ask yourself : how likely are you to buy everything local just to help the economy in case there were much cheaper imports of comparable quality? Mahatma Gandhi tried to promote handlooms to help weavers in India but the modern textile mills overtook the handloom as did peoples' preferences for machine manufactured cloth. Denying outsourcing sort of parallels the idea of trying to go back to wooden handlooms when high speed  spinning machines and automatic looms are here.
  • Internet and globalization cannot be stopped unless we re-think the notion of free trade. Free trade evolved when we thought of the global economy in terms of goods. With services and the Internet it becomes necessary to focus the debate on free trade and issues like price distortions due to currency controls by particular countries.

By not facing the fact, upfront, of outsourcing both presidential campaigns are not able to focus on the fundamental question of where American jobs will come from? The Smiley Model of innovation probably does not address the very large number of jobs that are needed immediately. Unless both candidates quickly and frankly address the inevitabilty of outsourcing the American job problem will not be vigorously and realisticalluy debated in public. And the American job question will be unresolved even after the November elections. Contact StratoServe.