Outsourcing Port Management and Country of Origin Effects

The  outsourcing of US port management to a Dubai firm has created a furore. As the story unfolds Emily Messner has done a wonderful summary of the issues in her Washington Post blog. From a purely managerial sense  Dubai port is exceptionally well managed. As my friends in the transportation business tell me, it’s frustrating to have your truck (or ship) stuck with delays in loading/unloading and inefficient ports are both inexplicable and yet  rampant worldwide.  To get a ship in and out quickly ( and safely without any “trojan” elements!) is really the key. As Messner points out Dubai has much more to loose than gain in messing up American port management contracts. But what do you tell everyone who are understandably so concerned about terrorist threats? Reminds me of a stream of Internationalization  Research involving expansion  into foreign markets.

Called the Country of Origin (COO) Effect (eg. Bilkey and Nes, 1982  ) this involved the notions people have about countries from which goods are exported and how these notions get transfered to the products that are being marketed by the exporting country. Interestingly, roughly 25 years after this had been pointed out for products we are seeing the COO effect working against Dubai in delivering a management service. There will have to be long explanations before Americans are convinced that all will be well if the deal moves forward…

About StratoServe.

Parents see kids college education as “investment” not “expense”

A profound bit of analysis in Business Week caught my attention. The American Economy is doing better than the numbers say. For example the expenditures on higher ed by families is considered as expense by federal economists and statisticians. Ask any baby boomer Dad and Mom about their take on their kids college expenses. These baby boomers will tell you that they are "investing" in their kid’s careers. They are investing on making their kids becoming more capable in "learning how to learn." This profound shift in how families view college expenditure is reflected in the totally changed attitude of today’s American parents ( the baby boomers) to their kids – the Echo Boomers, also called the Millenials and the Y-Generation. This attitude is radically different from American Parents of the sixties and seventies who basically expected kids to grow up and take care of themselves from 16 or 18.

Strangely enough the relatively new kids’ "college as investments " phenomena is not fully understood as the BW article alludes to. In any case this is a very welcome change for American parenting when it comes to preparing American kids for a global knowledge economy…

5 Top Careers- more integrator & capstone skills

CNN Money interviewed Spherion and came up with 5 careers that are hot at the moment. It set me thinking about the personal career plans my MBA students had come up with in the Global Outsourcing class – last fall. The top careers in the CNN story really make sense for American students.

Take accounting, obviously Sarbanes-Oxley implementation and oversight is hot right now and everyone is deluged. A good SOX implementer must understand the accounting of buying,making and selling. In marketing and sales New Product Development (NPD)  and Product Management skills are important and outsourcing of parts of the NPD process and the American managers ability to integrate stuff should be an in-demand  skill indeed. Patent Lawyers who have Science and Technology backgrounds are in high demand, no surprise  that for the moment top Law firms are hiring Bio-Informatics Ph.D.’s from Yale to bridge the "gap" in the patent law firm. In Technology Software Quality checking skills are hot. It again brings in the integrator role where the Quality person needs to understand parts and how the parts fit to make the system work. In Manufacturing "Lean is in" and lean needs the manufacturing manager to be similarly clued in to various parts of the system i.e. machine,labor,utilities and control systems and how they work together.

In academe these skills are supposed to come in through "capstone" classes of each discipline . However, in my experience students who have actually worked somewhere, anywhere, seem to "get it" better  and quicker…

Why Ford looses US jobs and Toyota makes them up?

Ever since the announcement of Ford’s 30,000  job losses  and closure of 14 plants, I have been feeling intrigued. No one can argue that health costs per American car are high at $1500 per car. No one can also argue that net jobs in the Auto industry in the US are probably unchanged as Toyota etc. open plants paraphrasing auto industry guru and scholar Womack  from the NY Times.

What is inexplicable is the unwillingness of Detroit to see the underlying innovation problem. Scholars have been studying the auto industry in Japan and US for over 20 years and have been repeatedly emphasizing the differences. For example Japanese automakers outsource components and not knowledge of machine making as do American automakers. Japanese auto engineers know more about the domain than their suppliers while the reverse is true of US automakers. US executives love to commoditize parts and love reverse auctions and don’t stay loyal to suppliers. Consequently suppliers are unable to invest in money, time and effort for US Auto industry buyers.

The world has changed from Henry Ford’s time when everything was in-house starting from iron ore. Today when Japanese and Korean companies enter foreign markets they bring their supplier teams to set up factories of components, if necessary. Agility which Bill Ford seeks for Ford motors today is not simply a function of internal operations at Ford. It is how well it can mobilize its suppliers and partners. The sad fact is that even if Ford cars were $1500 cheaper ( equal to the so called medical cost per car) customers will not make a beeline for its product. More customer focused new products are needed and with much less cycle time if the US auto industry is to avoid extinction. The supplier equation has to change – but that is something scholars have been saying for over 20 years.

Business Week- Transformational Outsourcing

I was busy working on some research proposals related to  outsourcing when I picked up the January 30, 2006 issue of Business Week. As subscribers would know, Business Week like other subscribed paper magazines come with a thick paper cover which generally exhorts the subscriber to "Renew Now!." It is probably because of the cover that I really got around to opening the magazine on Sunday, a day after it actually arrived. In any event the cover story is on "The Future of Outsourcing".

Naturally, this spiked my interest and I combed through the issue to check out interesting stuff. The BW issue is probably among several Cover Stories that BW has run on outsourcing. It however has a significantly different take. Outsourcing is transforming industries like the Paper Converting Industry. Mid Western manufacturers like PCMC have opened a 160 member engineering design team at Chennai(Madras) India and hope to speed up NPD by collaborating 24/7 with the WI plant. Manufacturing that had been shifting to China and eroding US jobs is likely to remain at Green Bay, WI and PCMC is likely to become more competitive as they become faster to the market with new products and services.

The new buzz is "transformational outsourcing" according to Business Week. This is what this blog is about…

“Don’t be evil” and Consumer Trust

I was just running out of interesting things to blog about when I read the Martin Wolk’s MSNBC  story about Google’s resistance to the Government subpoena for search records. The mere fact of protesting sends a strong signal to Google users as Wolk writes. Marketing theorists now agree unanimously that "trust" is a vital part of any successful buyer-seller relationship. Operationally trust means that the supplier will do what is promised for the customer and the customer will reciprocate, in both B-to-C and B-to-B contexts. More importantly both buyer and seller will look out for each other’s interests, within the bounds of law, and both need not worry about back-stabbing by the other. As the relationship marketing literature will tell you , this theory is based on the theory of long term human relationships like marriage.

With a motto like "Don’t be evil" and a a search philosophy that is changing how  students learn Google is set for great things. Revolutionary beta products like "Google Scholar" are now on university library websites and scholarly databases. Scholars check out each other ‘s citations and really have something to (somewhat!) agree about. Since fall 2005 I have been harping on Google as the first stop for my students and I do mildly regret at not buying Google shares. Perhaps I will start Google Ad-Sense on this website.; eventually.

DOW crosses 11,000, the Geely Car and Sir Howard the SONY chief

"Outsourcing" somehow continues to be a very charged kind of word. The public automatically associates it with "job losses" in the US. Therefore companies don’t want to talk about it and yet need to do it. I am trying to find articles that explore outsourcing savings with the rise of the DOW over the 11,000 mark- but I do think that there is at least some connection as is the connection of outsourcing with lowering of the US unemployment rate.

Along with the Dow’s rise is the glum news from US Automakers and the unobtrusive showing of "Geely" the first Chinese car under $10,000 unveiled at the Detroit show. Detroit executives continue to be "unconcerned" even as poor Andy Rooney recovers from a barrage of mail when he criticized American cars.

SONY, the Japanese Company,  wants to come out of the innovation woods and wake up to the assault from iPOD and Steve Jobs. To do this they have hired a British Knight Sir Howard Stringer who has mostly trained as a media executive in the US.

What a great Global start to 2006!

NPD outsourcing in Engineering

It was timely to read the AMR Research article by Lance Travis and David O'Brien who mention that Engineering Services for NPD is likely to go up to 41% in the next 1-2 years compared to 29% this  year.

New Product Development (NPD) involves some steps as the PDMA will tell you. My New Product Development MBA students probably get tired of the 7 steps ( from Willsey's delightfully short and crisp article) that forms the bedrock of the NPD process in my classes. These steps include:

 

  1. Generating Ideas
  2. Screening Ideas
  3. Developing and Testing Concepts
  4. Conducting Business Analysis
  5. Product Development
  6. Test Marketing

     7.    Launch and Commercialization

 

The aim in NPD is to reduce the cycle time of NPD to the market and the Engineering industry is really waking up to the possibilities of outsourcing parts of the NPD process ( particularly sub parts of step 5 above). GE had figured this out very early and other Engineering majors like UTC are doing the same. The big companies can off course start their own subsidiaries overseas and several top companies have opened their Engineering design branches overseas. The question is – how do the smaller manufacturing companies re-deploy their workforce into the early and later steps ( Idea Generation- Steps 1-4 …and Launch and Marketing 6-7) while reducing cost and time in step 5 (Product Development) through Outsourcing of Engineering Services. Contact StratoServe.

 

See Steps in Engineering Outsourcing : What goes out – must come back

Self Governance and the Web

To learn that Brian Chase wrote the piece in Wikipedia (see below) as a joke was really encouraging. CNN reports that apparently Brian Chase did not know that Wikipedia is used for serious research and wanted to just fool around for his own very peculiar reasons. With this incident I think couple of great and good things about the web and human beings become apparent. John Seigenthaler Sr. is not proposing action against Brian. Brian seems sorry for what he did. The Web and Wikipedia should be able to redeem itself from this mess. That folks feel responsible is so refreshing… is the Web able to govern itself ?

Wikipedia and answers on the web

After a brief interlude involving the hectic end of semester activities I found myself snowed in today and watching C-SPAN from sometime after 9 am for the latter part of John Seigenthaler Sr. ‘s interview. The reason I stayed on the channel was the references that were being made to Wikipedia which I think is great. Understandably John Seigenthaler Sr. has a problem with the "anonymous" writers of Wikipedia. I did not understand what his actual problem was since I had missed the first part of the program. Nevertheless when I read the USA today piece I was both alarmed and glad. I was alarmed because I have been a big proponent of "Google" in my classes where Wikipedia and Answers.com frequently come up as a near the top hit. If there are inaccuracies like what John Seigenthaler Sr. mentions my students could be misled on occasion. I am glad that I have been asking my students to check out a couple of sites on the Web to have some kind of triangulation with conclusions. In addition, I have been vigorously advocating to become more specific by going into Library Search Engines like PROQUEST that allow you to search articles that are scholarly refereed. In the idea and theory building business of academe there is great comfort in knowing that what you are reading is a refereed scholarly article, vetted and sometimes brutally attacked and vigorously defended/adapted in the review process. The fact that this is now available electronically through library databases and can be downloaded into bibliographic software directly is a miracle of the Internet. Dubious anonymous authors and irresponsible folks can certainly be checked and Librarians and Profs. really need to tell students how.