What innovation advantage? Chinese and Indian companies aren't leaving design to the North Americans.

The following is an article published in BusinessWeek (January 16, 2006):

What innovation advantage? Chinese and Indian companies aren't leaving design to the North Americans.

By Roger L. Martin

There is a romantic notion in North American business that its future lies in design and innovation, while India and China will be the home of less skilled, lower-paying operations churning out the products and services the U.S. comes up with. It is a nifty twist on David Ricardo’s seminal 19th century theory of “comparative advantage,” which explained why cloudy and cool England exported woolen goods to sunny and hot Spain, which in turn exported wine to England.

The problem is that the theory didn’t ring true when I rode through the streets of Hyderabad, Bombay, and Bangalore on visits to major Indian companies. At Tata Consultancy Services’ 23-acre campus in Bombay, for instance, I learned about its central goal of providing customers with not just an acceptable-quality service but also a user experience that delights and surprises. To accomplish this, its tech professionals also are taught how to manage client change.

AT ANY GIVEN TIME on Satyam Computer Services Ltd.’s (SAY ) 120-acre campus on the outskirts of Hyderabad, 1,000 staffers are in intensive training. Plenty of the instruction is eye-glazing, info tech jargon: “J2EE Development using JBOSS.” But there’s also a “Finding a Better Way” sequence that includes sessions on creative problem solving and managing innovation – hardly low-end stuff. Likewise, ICICI Bank (IBN ) management in Bombay is obsessively assembling talent that exhibits passion, perseverance, and bias for action rather than a willingness to perform routine tasks in front of a terminal. Meanwhile, Infosys Technologies (INFY ) is ramping up recruiting at the world’s leading business schools.

These globally oriented outfits are not entrusting all creativity, design, and innovation to “first world” opponents while they huddle over their workstations. True, they have staggering cost advantages over traditional competitors. But that doesn’t mean they are incapable of design and innovation. (Their North American rivals just wish they were.) The Ricardian logic, based on so-called natural endowments, simply doesn’t apply.

This is not the first time the theory has been applied with checkered results. For decades, America’s Big Three carmakers reasoned that Japanese manufacturers would stick with their “natural advantage” in small, inexpensive cars and allow them to dominate the lucrative high end. But Detroit painfully learned otherwise as Japan ultimately became a fierce competitor in almost every market segment.

More recently, companies like Solectron (SLR ), Flextronics (FLEX ), and Celestica (CLS ) grew spectacularly in the 1990s by making equipment designed fully by big names such as Dell (DELL ), IBM (IBM ), and Nortel. (NT ). But they dismissed Taiwanese manufacturers like BenQ, Hon Hai Precision Industry, and HTC, which designed and built mainly low-end gear for “no-name” PC vendors, as being nothing but unskilled low-cost players. Wrong. The Taiwanese companies actually had more engineers, held more patents, and performed more research and development. And in recent years they’ve dominated ever-more-sophisticated segments of the industry.

Assuming that capabilities are static and advantages are permanent is a mistake. Natural endowments of climate, location, and mineral resources may be enduring, but company-generated capabilities are quite fluid. It is as much an error to assume that competitors won’t attempt to develop a capability because it seemingly conflicts with an existing one – in this case low cost vs. innovation expertise. The general rule: If the opposite of a capability sounds stupid, competitors won’t try to acquire it – they’ll pursue the reasonable one. For example, the opposite of choosing to be “customer-oriented” is to elect to ignore your customers, a truly daft proposal.

Since lackluster design and staid conformity are obviously bad ideas, it is safe to assume that compelling design and potent innovation are going to be almost universally sought. So North American companies, many of which have pretty dreary design, are wrong if they assume their Asian rivals will pay no attention.

In the end, design is about refusing to accept apparent trade-offs and instead innovating around them to produce creative resolutions. If North American businesses genuinely want to ward off Indian and Chinese rivals, they’d better start by rejecting the notion of an apparent trade-off between low cost on one hand and design and innovation on the other.

Roger L. Martin is Dean of the Rotman School of Management at the University of Toronto and a columnist on BusinessWeek Online's Innovation & Design channel.

As much as I hate to admit it, it is very true. We Americans misguidedly believe that we still have a considerable edge over other countries on technology. Unfortunately, it is fast diminishing. Al though the article primarily focuses on Information Technology (IT) prowess evinced by the Indians and Chinese, there is far more sinister possibility just down the road - basic sciences - chemistry physics, biology, mathematics, and allied fields. The Chinese and Indian have had well-established programs in these fields and have pioneered many of the theories in the past. It is about time we took a long, hard, and objective look at our standing in the science and technology fields and assess our SWOT (Strengths, Weaknesses, Opportunities, and Threats). Immediately thereafter, we must modify our strategic thinking to regain our preeminence in the world. Nanotechnology is one field that encompasses all these "discrete" disciplines. I just wish that our (the U. S.) Government would really do the needful.

Best,

Nanoguru.

“70-20-10” - U.S. Security Still Needs A Focus on Technology

The following are the article (Commentary) that appeared in the Wall Street Journal on May 25, 2006 and the Letters in response to it:

Within hours of the 9/11 attacks, land, air and sea ports were either closed or severely restricted. Given the imponderables, this response to the crisis was understandable. Five years later, however, too many people remain committed to a port and border security paradigm that is short on risk analysis and offers little or no value to the nation. Members of Congress, including Democrat Ed Markey and Republican Chris Shays, are actively urging 100% inspection of all 12 million containers entering the U.S. Legislation to this effect would require X-ray and radiological scans to ensure that no WMD is inside. But even if these programs work flawlessly – at a cost of billions – America will be no more secure. Arguably we will be less so, because the money could have been spent on programs with a far better return on investment.

We are dealing with a thinking enemy who is patient, uses extensive surveillance and carefully selects the means and methods of attack. Thus we must answer two questions: What materials – weapons – would terrorists want to bring across our borders, and how would this be accomplished? A thinking enemy will not be deterred by deadbolt locks on America’s front doors (our seaports) when our windows and back doors (7,000 miles of virtually unguarded land borders and 95,000 miles of shoreline) remain wide open.

Consider these types of weapons of mass destruction: chemical, biological, radiological or enhanced conventional explosives. A terrorist does not need to bring these into the U.S. – because they are already here. According to an EPA document which was removed from the Internet shortly after 9/11, there are at least 123 chemical facilities in the U.S. that could put a million people at risk if attacked, and more than 700 plants that could put at least 100,000 people at risk. A study in the late 1990s conducted by the Defense Threat Reduction Agency demonstrated that the equipment required to build a sophisticated biological weapon could be purchased off the Internet for less than $250,000, and would fit inside a standard two-car garage.

The material required to build a “dirty bomb” is readily available at medical facilities, research institutes, universities and major construction sites. Trucks containing large quantities of cesium-137 drive between hospitals in Southern California with no security protection. Why bring radiological material into the U.S. to attack us? It’s already here. All a terrorist need do is blow up one of the large X-ray machines we’ve installed to “secure” our ports. As for enhanced conventional weapons, future terrorists will have no more problem building them inside the U.S. than did Ramzi Yousef, who built the bomb that hit the World Trade Center in 1993 – or Timothy McVeigh, who parked a homemade diesel-fuel fertilizer bomb in Oklahoma City in 1995. Al Qaeda training manuals, in fact, say it is preferable to build weapons inside the country to be attacked, as they did in the attack on the trains in Spain, the subway in London and the hotels in Indonesia.

In other words, a 100% success rate for “scan before sail” and similar programs will simply not reduce the likelihood of chemical, biological, radiological or enhanced conventional attacks.

What about nukes? I asked nuclear physicists and security professionals at a Homeland Security panel: “If you were advising al Qaeda on how to smuggle a Hiroshima-type bomb into the U.S., how many of you would suggest renting a 40-foot container and putting it on a ship bound for a U.S. seaport?” No hand was raised. Even if terrorists were to put a nuke in a container, don’t you suppose they’d also be smart enough to put lead around it? This makes a Hiroshima bomb virtually undetectable by screening.

The best strategy for preventing a nuclear device from entering the U.S. has little to do with examining containers by X-ray machines and radiological scanners – despite the idea’s appeal to citizens and their elected officials. The formula for success is rather “70-20-10”:

• 70% of money appropriated in the name of “securing America against nuclear terrorism” should be spent “upstream”: thwarting efforts to obtain weapons-grade nuclear material. This includes increased funding for programs such as Nunn-Lugar Cooperative Threat Reduction. Furthermore, we must ensure that nukes are the intelligence community’s highest concern. The recent Report from the Commission on the Intelligence Capabilities of the United States Regarding Weapons of Mass Destruction stated: “It is obvious that intelligence on loose nukes is not a high priority for the intelligence community.” What could possibly be a higher priority?

• 20% of funding should be allocated to the pursuit and recovery of material and devices should weapons-grade materials fall into terrorists’ hands. This should be a multinational effort led by the U.S. Funds for research and development of new-generation, rapidly deployable detectors would be included here.

• 10% should be spent on response and mitigation capabilities should a nuclear detonation occur. Developing pre-positioned equipment (as does France) for responders and the American population is required.

Since 9/11, the administration and Congress have spent too much time thinking at a tactical level, and too often technology has driven their strategy. No one doubts their good intentions, but this is a backward approach. Wasting money with good intentions make us no more secure.

Mr. Larsen is director of the Institute for Homeland Security and author of “Our Own Worst Enemy,” forthcoming from Warner Books.

U.S. Security Still Needs A Focus on Technology

June 1, 2006; Page A19

Randall Larsen is right that a terrorist chemical, biological or radiological threat probably would be made in the U.S., rather than imported (“‘70-20-10’,” editorial page, May 25). He is also right that the first part of our defense against terrorist nuclear weapons must be to control the proliferation, dispersion, and potential loss of weapons and materials. But he is wrong to discount the threat of a nuclear weapon in a shipping container, and wrong to say such a weapon could easily be shielded from detection. Nuclear weapons, especially primitive ones, are big and heavy. They cannot be smuggled across the Rio Grande or through the north woods in a backpack. While a shipping container could contain ample shielding, that isn’t as simple as wrapping a bomb in lead (lead absorbs gamma rays but not neutrons). More important, the presence of a shield is readily detected by radiography, and would itself be an indication that a container needs to be opened and inspected. We require a defense in depth. That begins with controls over the production and distribution of nuclear material. But these are unlikely to be perfect (prior to September 11 we thought our commercial aircraft were secure against hijacking). They must be backed up by a program to inspect, using radiographic technologies now becoming available, cargo destined for the U.S. at its point of embarkation.

Jonathan Katz

Professor of Physics

Washington University

St. Louis, Mo.

Mr. Larsen is of course correct in calling for strategic, as well as tactical thinking. But he is quite wrong in stating that “too often technology has driven their strategy.” U.S. strategy has not been sufficiently tech-based; in fact, it often fails to incorporate fundamental advances in technology. All evidence points now to a major technology inflection in our capabilities to see, sense, identify, track and deter threats. While 9/11 has accelerated a market for security technologies, the tech boom of the past two decades fortuitously set the stage for the current maturation and expansion of the tools, materials and software in our digital economy that enables capabilities heretofore limited to high-tech suspense fantasies.

Mark P. Mills

Chief Technology Officer

ICx Technologies Inc.

Washington

I agree with most of the observations made by Randall Larsen, Jonathan Katz, and Mark Mills. However, some of the salient points must be elucidated. For instance, gamma rays from nuclear armaments could be shielded from detectors by using certain conventional materials that are readily available on the commercial market. ( I will not elaborate on those, lest my comments be exploited.) A determined adversary, who has no regard for lives – including his/her own – is very difficult to vanquish easily. There is a dire need for forward-looking, proactive research and development in detection and neutralization of chemical, biological, and nuclear threats. I am afraid that we (the U. S.) are deeply concerned only about nuclear threats. However, there is a more sinister, emerging threat from biological and chemical weapons. To make matters worse, these weapons are unimaginably even more destructive; advances in nanotechnologies could be exploited by nation-states AND individuals without access to high-tech centrifuges, advanced pieces of equipment, etc. Nanomaterials and nanotechnologies are so ubiquitous and all-encompassing that they cover all applications. For instance, anthrax spores could be nanosized to significantly increase their lethality; chemical agents could be nanosized, or adsorbed on the surface of the nanomaterials, to effectuate the same results, if not more lethal. The applications are essentially limitless. I, for one, truly believe that we should spend adequate (certainly more than what is currently being done) resources on conventional processes and technologies and derive substantial detective and protective measures. Furthermore, today’s state-of the-art mass spectrometers deployed at the airports cannot detect most biological species, much less nanosized weapons-grade materials. Even ordinary materials could be turned into conflagrant, pyrophoric explosives. These nanomaterials cannot be detected as threats by current standards. I earnestly hope that the U. S. government would foresee and perceive the need for research into such seemingly mundane and conventional materials.

Best,

Nanoguru.

Growing Sino-India Military Ties

SUPERPOWERS

Growing Sino-India Military Ties
 

by Kushal Jeena
New Delhi (UPI) Jun 07, 2006
Indian defense minister Pranab Mukherjee's recent visit to Japan, China and Singapore indicates the emergence of a creative regional security strategy that boosts New Delhi's global image, Indian defense analysts said Tuesday.

"Mukherjee's recent visit to three Asian countries, particularly China, has consolidated the new strategy by expanding the military ties with China and deepening security cooperation with Japan," said A.B. Mahapatra, the director of the Centre for Asian Studies, a New Delhi based think tank.

Mahapatra said Mukherjee capped it all at the end of his visit in Singapore, where he unveiled a comprehensive defense strategy that was aimed at reinforcing India's traditional claim of a central security role on the Asian continent and Indian Ocean.

In a landmark development, India and China inked a pact to expand military cooperation between two Asian giants during defense minister Mukherjee's recent three-nation tour.

As part of the second leg of his visit, Mukherjee arrived in Beijing June 4 to sign a military accord, which the Indian defense establishment said would institutionalize training, exercises and other contacts between the two countries.

"During the visit, India and China signed a memorandum of understanding on exchanges and cooperation in the field of defense," the Indian foreign office said in a statement. On the military pact, the Indian defense ministry said it was aimed at developing a strategic and cooperative partnership for peace and prosperity between India and China.

During his Monday visit to Beijing, Mukherjee held discussions with his Chinese counterpart, Cao Gangchun, and foreign minister Li Zhaoxing. The Indian embassy in Beijing said the two sides held talks on wide ranging issues, including military and security cooperation.

"My efforts will be to have a much larger participation in joint military exercises, more exchange visits by armed forces personnel and an expanded mutual training program," Mukherjee said.

The Indian defense minister said the visit was an important milestone and a major confidence building measure in Sino-India relations. The defense agreement signed during the visit could become an instrument for a regular and sustained dialogue between the two sides on issues relating to defense.

The relations between the two countries have never been as cordial as they are today. Diplomatic ties between the two were severed after they fought a small but bitter war in 1962, which ended in India's defeat. India took the initiative in the early 1990s to improve relations, but they have yet to resolve a long-standing boundary dispute.

The India-China military pact assumes significance on the heels of reports that China has been providing military assistance to India's archrival Pakistan.

The two principles at the core of the defense doctrine Mukherjee presented to China are India's determination to become a major power on the Asian continent and the designation of the Indian Ocean as a peace zone.

Following remarkable improvement in its relations with the United States and other western countries, India has been working hard to raise its standing in matters of Asian security. Analysts say the Indian strategy to achieve this goal is to engage with all but align with none, and Mukherjee's three-nation visit was part of this strategy.

During his China visit, Mukherjee was given an in-depth presentation of China's military modernization program by Gen Guo Boxiong, vice chairman of the central military commission of China. "We both reiterated that reform of the military should not be seen as a threat to each other," Mukherjee said after the presentation.

In Japan, Mukherjee was apprised of Tokyo's concerns regarding China's military build-up. Japan also sought India's support in calling for greater transparency in Beijing's defense program for the sake of overall Asian stability.

Mukherjee told the Japanese that China had been an important military power from the beginning. "We are fully aware of it, but every country has its own perception of the development and modernization of their armed forces," Mukherjee said.

Chinese authorities welcomed the argument of Mukherjee, saying India has distanced itself from the Japanese viewpoint of Beijing's military build-up, which Tokyo says is posing a threat to the stability to the Asian continent.

Source: United Press International

 

This is another indication that the U. S. needs to be mindful of the immense influence that the regional powers (read: potential superpowers) can wield over international status quo. (Needless to say, China and India educate more of their populations than the rest of the world combined.) We MUST devote more than adequate resources to protect our standing and slight technological edge. Nanotechnology and nanomaterials have very serious (both positive and negative) direct and collateral impact on a nation's defense and security. For instance, even a small terrorist organization, or cell, can exploit nanomaterials to deliver much greater effect (than conventional-size materials) on its intended target using very simple, conventional materials. They do not really need nuclear weapons to inflict terror and damage on the populace. Hence, it behooves us (the U. S. and other "peaceable" nations) to study these technologies beforehand and obviate the negative consequences, while we are ahead in the game.

Best,

Nanoguru.