The Intangible Economy: September 2006 Archives

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September 29, 2006

Short takes - 9-29-06

One of the great information resources the Internet Scout Report. Here are three items from today's report which might be of interest:

The Global Technology Revolution 2020 [pdf]
The RAND Organization never shies away from complex or difficult questions,
and in one of their most recent publications, they have taken on a weighty
topic indeed. Released earlier this year, this report authored by a team of
experts addresses the ongoing technology revolution in a variety of sectors,
including biotechnology, nanotechnology, and information technology. In this
316-page work, the authors assess a sample of 29 countries across the
spectrum of scientific advancement with respect to their ability to
implement a number of key technology applications, including cheap solar
energy and wireless communications. Along with the work’s four primary
chapters, visitors can also make use of the eleven appendices, which include
explorations of related themes, such as technology and terrorism and leading
trends in information technology. [KMG]

An Agenda for Harnessing Globalization [pdf]
Getting a handle on what the phrase “globalization” means can be a bit like
trying to lasso a fast-moving cloud. Does globalization mean the cross-
pollination of different musical styles? Is it the vast geographical
expansion of major multinational corporations into remote locales? Well, of
course, it’s both of these things and quite a bit more. In a paper that
appeared in the Autumn 2006 edition of The Washington Quarterly, two
Brookings Institution colleagues articulated an agenda for harnessing the
power of globalization. In their 14-page work, Ashraf Ghani and Clare
Lockhart offer their own appraisal of globalization’s appeal (and potential
shortcomings) in terms of creating opportunity for many of the world’s
people. The paper will be of great interest to persons concerned with or
interested in substantial policy issues, political economy, and economic
development. [KMG]

Private Sector Development
The World Bank is perhaps one of the world’s premier organizations regarding
development opportunities, and they are widely recognized for their work in
the developing world. With this latest outing, they have created the Private
Sector Development (PSD) Blog, which is designed to be both quirky and
opinionated, qualities which are never in short supply as one wanders around
the web. Having said that, the site is rather erudite, as it provides
intelligent comments on topics that include disaster recovery, foreign
direct investment, and corporate governance. New users will want to browse
through some of the recent posts, and then perhaps look at the “Categories”
section on the left-hand side of the page for future explorations. As might
be expected, each post also contains links to external readings from a
diverse set of publications, such as the Financial Times and like-minded
ventures. [KMG]

From The Scout Report, Copyright Internet Scout Project 1994-2006.
http://scout.wisc.edu/

Posted by Ken Jarboe at 10:10 AM | Comments (0) | TrackBack

Tech in schools

From eSchool News online - Study: Ed tech has proven effective:

When implemented carefully--with adequate attention paid to training, support, and evaluation--technology has been found to have a significant positive impact on student learning across all areas of the curriculum, according to a new report. So, why do critics of educational technology still decry the billions of dollars being spent on ed tech in schools across the nation? For one thing, many educators have "miscalculated" the difficulty of implementing technology effectively, the report says--and ed-tech advocates also might have "over-promised" their ability to deliver a learning return on their investment.

The story goes on to talk about a new study Technology in Schools, prepared by the Metiri Group and commissioned by Cisco Systems. The report finds that:

Researchers find that extracting the full learning return from a technology investment requires much more than the mere introduction of technology with software and web resources aligned with the curriculum. It requires the triangulation of content, sound principles of learning, and high-quality teaching—all of which must be aligned with assessment and accountability.

Not exactly earth shattering news. But maybe we can move the debate now away from its techno-centric focus ("what is the effect of the technology") to a learning focus ("what information/skills do people need and what is the best way for them to learn").

Note that I said learning, not teaching. Teaching is the means - learning is the goal. New methods (and technologies) for teaching are fine. But it should be all about what the learners need (I hate to call them students, because that puts them in the passive situation) - not what the teachers need.

So lets start talking about learning styles, use of technology to enhance learning (including serious games) and access to information. Please?

Posted by Ken Jarboe at 09:28 AM | Comments (0) | TrackBack

Patent reform in 2007?

One piece of innovation/competitiveness legislation that will not be finished this year is patent reform. However, as the blog Intellectual Property Watch points out, US Patent Reform: Could 2007 Be The Year?:

US information technology companies’ push to overhaul their country’s patent system made little progress in the US Congress in 2006 due to pushback from the pharmaceutical and biotechnology industries. But the hiring of a trio of well-connected lobbyists with a history in the tort reform movement promises to amplify the debate in 2007.

What they are talking about is the creation earlier this year of the Coalition for Patent Fairness - which has authored an industry consensus white paper.

Much of the current problem revolves around the differences between the pharma/biotech and IT industries. Changes in the law that would help one could make things less attractive for the other. There is the beginning of a discussion on changing that. Today and tomorrow, the University of Michigan Law School is hosting a conference on "Patents and Diversity":

The current debate over patent reform exposes critical differences in the way that patents are used and viewed in different sectors – especially in the difference between discrete product technologies (pharmaceuticals) and complex product technologies (IT) The present “unitary” patent system is limited in its ability to account for such differences. Yet as the patent system expands in scope and significance, with many billions of dollars at stake, the assumption that one size fits all appears increasingly untenable and costly. This international conference examines the differences among innovation environments, how they are currently addressed, implications of uniform vs. differentiated treatment, and options for optimizing the functioning of the patent system across fields and environments.

The combination of political and academic may provide the horse power to get something done next year.

Posted by Ken Jarboe at 08:46 AM | Comments (0) | TrackBack

September 28, 2006

Congress update

On Tuesday, Senate Majority Leader Frist and Democratic Leader Reid introduced the competitiveness bill - S. 3936. A bill to invest in innovation and education to improve the competitiveness of the United States in the global economy. As of yesterday, the bill had almost a third of the Senate as cosponsors from both sides of the aisle.

The bill was placed directly on the Senate calendar - which means it could be taken up by the full Senate at any time. However, there was talk about moving the bill "at the appropriate time." As I mentioned earlier, I think it is doubtful that the Senate will get to it before the election. But we will see.

In any event, the Senators are to be commended for moving the issue along. Having worked as Senate staff, I know how rare it is to get a bill on such a major issue sponsored by the leaders of both sides.

Posted by Ken Jarboe at 06:03 PM | Comments (0) | TrackBack

Design and mangement II

Apropos my final comment in my last posting, Bruce has usefully pointed us to A Story You Need To Read About Innovation.

That story is by Roger Martin - Tough Love:

Design, in short, is becoming an ever more important engine of corporate profit: It's no longer enough simply to outperform the competition; to thrive in a world of ceaseless and rapid change, businesspeople have to outimagine the competition as well. They must begin to think--to become--more like designers.

Even as design gets its due, however, some business types wish the clock could be turned back to a time before all those designers were running around urging people to let their creative juices flow. And they resent that even as design is forced upon them or insinuated into their work, the designers themselves are often not held accountable for meeting firm revenue and profit targets--the primary form of business discipline.

How we train people to constructively bridge that tension is the key to sustained competitive advantage:

Managing the yin and yang of business-as-usual and business-by-design means striking a balance between any number of countervailing impulses: Give people the freedom to follow their nose, but hold them accountable for their performance. Set a high bar, but recognize that failure is an unavoidable consequence of pushing into new territory. Do everything possible not just to thrill your customers but also to wring costs and efficiencies out of vendors and suppliers. The biggest challenge for all of us, designers and businesspeople alike, is to become equally adept at quantifying the now and intuiting what's next. There's simply no other way to win.

So, where are the government programs - like all the (necessary) math and science education programs - to facilitate the creative new business-design thinking and education?

Posted by Ken Jarboe at 09:03 AM | Comments (0) | TrackBack

Competitiveness, part III

Bruce Nussbaum's take - Why The World Economic Forum Is Wrong About US Competitiveness.

Despite conventional economic wisdom, which believes this stuff, there has been no tight correlation between interest rates/dollar strength and the twin deficits. I should know because I wrote about this for a dozen years when I ran the editorial page of Business Week.

The fact is that the innovative/entrepreneurial prowess of the US attracts as much capital is it needs from around the world and its deep capital markets allow China and others to recycle their surplus dollars. We get their goods, they get our paper--and jobs and growth. So far, this has worked out. It could end, sure, if a political crisis occurred but it hasn't yet.

I do think that US competitiveness is eroding and it is because Brand USA is eroding. However you think about the Iraq war, it has generated the worst anti-Americanism around the world in many decades. The Pew polls show horrendously high percentages of people really mad at the US and not just in the Middle East but in major markets in Europe, Asia and Latin America. Are they likely to take our their anger in their buying decisions? You bet. In their investment decisions? You bet.

If you want really want to worry about US competitiveness, worry about our visa policy since 9/11 that keeps out many of the best and brightest students, scientists and immigrants. This is the very lifeblood of our innovative
economy.

I hate to disagree with Bruce, but on this one he has a good point - but is wrong on the others. His good point is that Brand America is in trouble - something I have been righting about for awhile. But the twin deficit - dollar/interest rate linkage still exists. Just because we haven't crashed yet doesn't prove we haven't fallen off the cliff (of course it doesn't prove we have either -- but the signs are beginning to look worse, see the data on investment incomes.

And I have to disagree that the most important thing is our visa policy. Yes, it is a problem. But I can think of a dozen more -- including a federal government the refuses to invest in innovation, an education system based on a 19th Century model and a patent system that has been described as "sand in the gears."

Oh and by the way, while attracting talent from outside is good, educating the talent we have is better - see my next discussion.

Posted by Ken Jarboe at 08:49 AM | Comments (0) | TrackBack

Competitiveness, part II

Steven Pearlstein has an interesting take on the new competitiveness rankings in No Longer No. 1, and No Wonder - washingtonpost.com. Pearlstein juxtaposes the WEF report with a recent NAM report:

One, the annual ranking from the World Economic Forum -- the elite business organization that runs the annual winter schmooze-fest in Davos, Switzerland -- finds that the United States has fallen from No. 1, a position it shared with Finland for most of a decade, to an unsettling sixth place.

And the National Association of Manufacturers, along with the Manufacturers Alliance, is scheduled to release an update of an earlier study today showing that the burdens of regulation, taxation, litigation and health care are even greater than they were in 2002, when the "cost gap" between U.S. companies and those of our largest trading partners was 22.4 percent.

The predictable response from the business community will be to use these studies to warn of impending economic ruin unless the government adopts the Republican agenda of less regulation, lower taxes, tort reform, and relieving companies of health-care and pension costs.

Don't be fooled. These reports speak to the embarrassing failure of a decade of Republican rule in improving U.S. competitiveness. Business taxes, as a percentage of anything you want to measure, are at their lowest level in decades. The Bush White House has subjected new regulations to rigorous cost-benefit analysis. Several reforms make it less attractive for shareholders, workers and consumers to file frivolous lawsuits, but not necessarily for businesses. And in case you hadn't noticed, businesses have already made tremendous strides in shifting health-care and pension costs to workers.

In fact, an alternative reading of the new reports suggests that the business community needs to do some serious thinking about competitiveness and economic policy.

Amen to that! I would also point out the juxtaposition of what the business community (or at least its Washington representatives) often talks about and what businesses are doing strategically. Most of business gets it -- this new era is about innovation in business models and processes, not just new gadgets. It is about finding creative ways to meet customer needs - and helping customers discover new needs. Washington's discussion is about the same old solutions.

Pearlstein also makes an interesting point about the new rankings:

Indeed, a reasonable inference from the World Economic Forum rankings is that the best way to compete is to adopt the Nordic model of high taxes, a generous social safety net and lightly regulated labor markets. Scandinavian government spending accounts for more than half the economy, as opposed to a third in the United States.

I don't advocate that position -- but you have to look carefully at what other countries are doing right. And one of the things that these countries are doing right is an emphasis on government programs to compliment private sector actions on innovation. While the Nordic countries are investing in innovation, the US is eliminating programs such as the Advance Technology Program.

Go figure.

Posted by Ken Jarboe at 08:01 AM | Comments (1) | TrackBack

September 27, 2006

Budget deficits, health care and competitiveness

The latest World Economic Forum (WEF) competitiveness rankings are out - and the US has slipped to number 6. Business Week - Is the U.S. Losing Its Competitive Edge? points to the core problem:

While the U.S. excelled in such business categories as market efficiency and innovation, its score in the World Economic Forum's annual ranking was dragged down by government-related measures. Out of 125 countries, the U.S. was 40th in health care and primary education and a lowly 69th in macroeconomy, reflecting its large budget and trade deficits. In macroeconomy, the U.S. scored lower than such nations as Vietnam, Venezuela, Uganda, the Philippines, Peru, and Nigeria. (Ouch.)
. . .
Was the deck stacked against the U.S.? That depends on whether you agree with the forum that the U.S. deserves big demerits for being the world's biggest debtor, running a large budget gap, and having a current account deficit amounting to a record 6.5% of gross domestic product. Nouriel Roubini, a New York University economist who worked on the rankings, said that the U.S. score was probably also hurt by the government's mishandling of Hurricane Katrina, relatively high infant mortality and low life expectancy, and the prevalence of AIDS.

The Wall Street Journal focused on the budget deficit:

"The U.S. remains a very competitive economy," said Augusto Lopez-Claros, the Forum's chief economist. "It leads in innovation and patent registrations, has some of the best universities in the world, and it has extremely high level of collaboration between universities and industry," he said. "However, how you manage your public finances is very important."
Serial budget deficits in the U.S. have led to rising public debt, which means an increasing portion of government spending goes on debt service. That means less money is available for spending on infrastructure, schools or other investments that could boost productivity. Heavy government borrowing, by competing for funds in financial markets with the private sector, also tends to drive up businesses' borrowing costs.

As the New Economist blog points out, Lopez-Claros summarized the keys:

The top rankings of Switzerland and the Nordic countries show that good institutions and competent macroeconomic management, coupled with world-class educational attainment and a focus on technology and innovation, are a successful strategy for boosting competitiveness in an increasingly complex global economy.

While we should not put too much stock in these types of composite rankings, the WEF Competitiveness Report should be seen as a shot across the bow - especially to Washington.

COUNTRY RANKINGS 2006-2007
1. Switzerland
2. Finland
3. Sweden
4. Denmark
5. Singapore
6. U.S.
7. Japan
8. Germany
9. Netherlands
10. U.K.
11. Hong Kong
12. Norway
13. Taiwan, China
14. Iceland
15. Israel
Source: Global Competitiveness Report, World Economic Forum

Posted by Ken Jarboe at 07:27 AM | Comments (0) | TrackBack

September 26, 2006

Innovation in unlikely places

On the Business Week blog - Learning from Informal Urban Economies: "If necessity is the mother of invention, then the residents of squatter cities will have much to teach us about resourcefulness and innovation."

From a conversation with Stewart Brand on innovation in squatter cities:

Have you witnessed a business actually tapping into a squatter city and devising an innovative product or service as a result?

Yes. The AES Corporation, a leading power company, asked me to give a talk in Latin America. While I was there, I learned that squatter cities steal their power…there are illegal power chords siphoning electricity strung for miles. In Buenos Aires, stolen power is better than no power, but it has problems. It's dirty power because it's not regulated. It can be too strong and fry a fridge or a TV. The power is flaky. And dangerous. In Caracas, four people a month are killed stealing power.

So AES sent people into the field. They wanted to see how to convert thieves into customers. They realized there are consumers in squatter cities. And people were interested in getting clean power regularly. The problem was that squatters' incomes are burst-y: They have some weeks with no money coming in, or others when they suddenly have it.

So paying a bill monthly doesn't work. So AES came up with a token system, and squatters could use power meters fed by tokens. Folks can buy power tokens when they can. This system is now in progress. And squatters are now part of the formal economy in parts of Latin America.

By the way, the electricity by token system is an old idea - and was still in use in England when I encountered it a decade ago. Sometimes, reviving an old idea is a great innovation in a new context.

Posted by Ken Jarboe at 08:24 AM | Comments (0) | TrackBack

September 25, 2006

Design and management

This from Bruce Nussbaum's blog - NussbaumOnDesign:Is Design The New Management Consultancy?. The answer is "almost but not quite." As he notes, some serious work is being done at both d-schools and b-schools. As I've noted before, North America has the potential for a breakthrough in this area, led by the trio of Roger Martin, Dean of the Rotman School of Business at the University of Toronto; David Kelly, the Design Engineering Professor at Stanford and founder of the D-School; and Patrick Whitney, the Director of the Institute of Design at the Illinois Institute of Technology, But policymakers aren't there yet in giving this change the boost it needs.

Also - check out the latest issue of Inside Innovation, the new Business Week magazine that Nussbaum edits.

Posted by Ken Jarboe at 05:26 PM | Comments (0) | TrackBack

So much for dark matter

Earlier this year, there was much ink spilled (to use an anachronistic phrase) over the issue of why the United States could continue to run an investment income surplus while we had such a large debt. The theory was advanced that there was a huge amount of intangible assets - "dark matter" - not being counted in the official statistics - a finding many disagreed with.

Well, there is a simpler answer to why we can run an investment income surplus. The answer is: we can't. As the front page of today's Wall Street Journal points out - U.S. Foreign Debt Shows Its Teeth As Rates Climb:

As interest rates rise, America's debt payments are starting to climb -- so much so that for the first time in at least 90 years, the U.S. is paying noticeably more to its foreign creditors than it receives from its investments abroad. The gap reached $2.5 billion in the second quarter of 2006. In effect, the U.S. made a quarterly debt payment of about $22 for each American household, a turnaround from the $31 in net investment income per household it received a year earlier.

The gap is still small within the context of the $13 trillion American economy. And the trend could reverse if U.S. interest rates decline. But economists say America's emergence as a net payer illustrates an important point: In years to come, a growing share of whatever prosperity the nation achieves probably will be sent abroad in the form of debt-service payments. That means Americans will have to work harder to maintain the same living standards -- or cut back sharply to pay down the debt.

"Our net international obligations are coming home to roost," says Catherine Mann, a senior fellow at the Institute for International Economics. "It's as if on our personal MasterCards we have run up large obligations and never had to make payments. You can't believe that's going to last forever."

As I showed earlier, a small change in interest rates can make a huge difference given the size of the investments relative to the debt.

Yes, our official statistics do not adequately capture our intangible assets. But our intangible assets do not constitute some mysterious dark matter that magically resolves our international financial imbalances.

Only in theatre is there deux-ex-machina.

Posted by Ken Jarboe at 10:59 AM | Comments (2) | TrackBack

September 20, 2006

Losing creativity in advertising

Steven Pearlstein's column in this morning's Washington Post asks What Happened To Creative Advertising? In it he describes the changes in the industry:

Gone are the days when gray-suited admen would commute to Grand Central Terminal from the Connecticut suburbs, walk the few blocks to Madison Avenue, spend the day concocting clever, feel-good ads, collect 15 percent commissions for placing them with the three TV networks and glossy magazines, and schmooze clients over three-martini lunches.

Today, the center of gravity has moved downtown to SoHo and TriBeCa, and much of the work is done by twentysomethings in jeans and T-shirts. They earn less and work harder to peddle niche products through a fragmented media market to savvy consumers who tune out messages they find boring or irrelevant. The cushy commissions have been replaced by stingier, cost-plus-fee schedules imposed by numbers-driven corporate marketing officers who care less about the creativity of advertising than its return on investment.

The results, he argues is an attack of the bland:

Creative-services firms have proven ill-suited to the demands of public shareholders and analysts, with their fixation on quarterly earnings targets and double-digit growth. The emphasis on cost-cutting and meeting financial goals dampened the enthusiasm for risk-taking at the heart of creative advertising.

"The mantra became 'Figure out what the client wants, do it, and get paid,' " explains Lee Clow, the legendary creative director at Chiat/Day. And because agencies are generally paid on the basis of fixed retainers, hourly billing rates and media commissions, there is no financial difference between delivering a blockbuster ad and delivering a mediocre one.

Not all the blame for bland, formulaic advertising, however, lies with the advertising industry. Many clients are also to blame. Chief marketing officers, with an average tenure of less than three years, have become loath to take risks. And in their drive to meet growth targets and cost-accountability, they rely heavily on research techniques such as testing ads in front of focus groups -- leading, inevitably, to least-common-denominator ads.

I'm not sure I would completely agree with Pearlstein implied assumption that things were more creative before. The "good-old days" never struck me as an outpouring of creativity. And I have seen some very creative ads in recent years. (My favorite is the EDA "herding cats" ad which aired during the 2000 Super Bowl - which was followed the next year by the not-so-great "running with the squires" ad.)

I would agree with his closing statement:

Because so much time and money is shifting to the Internet, none of the old rules applies. Now, it is the clients who are pushing the agencies for change, and the agencies are finally examining how they are organized, how they are paid and how they conceive of their jobs. As a result, after a decade of fighting changes, the industry is coming around to embrace them. Changes once seen as frightening are now being viewed, at least at the top of the ad business, as opportunities.

But it is not just the shift in technology that is causing a change. One of the hottest new areas of advertising is product placement. To overcome that problem of "savvy consumers who tune out messages they find boring or irrelevant", more and more advertisers are looking to place the message inside the story. Is that Bombay Gin that 007 is using to make his martini? Was that a Coke or Pepsi can that Arnold had in his hand? The creative test for such "ads" will be how to weave the product into the story line - not just have it show up on the screen. And how to make sure the product is not associated with the wrong part of the story (while, according to wikipedia, Ruffino Riserva Ducale (Chianti Classico) appears many times on the table of Tony Soprano, I don't think company wants a bottle of its red wine on Hannibal Lecter's dinning table?)

This change is a perfect example of an innovative business model, i.e. a non-technological innovation. It will be innovative actions like that which will bring creativity back to the advertising industry.

Posted by Ken Jarboe at 10:37 AM | Comments (2) | TrackBack

September 19, 2006

Congress in competitive pause?

Most Washington insiders don't expect much to happen legislatively before the November election. As the Washington Post put it, Congress Bustles With Busywork:

With 10 days left before the scheduled Sept. 29 recess, Congress's much-trumpeted national security agenda is becalmed and awaiting a stiff wind to get it to port. This week, there doesn't even seem to be a gentle breeze on the horizon.

My guess is that Congress will attempt to finish the Defense and Homeland Security spending bills - and that is about it.

Left on the table for either the lame-duck, or more likely next year, is the competitiveness agenda. For all the hype early on, the momentum on this has been slowed. Last week, Senate staff convened a group of interested parties to discuss the composite Senate bill -- meddling together the various components from at least three Senate Committees. The unanswered question is whether the bill can make it to the Senate floor before recess (possible, but not likely) and if it does, whether it can be matched with the various piece of House legislation by the end of the year.

There is an old saying that a camel is a horse designed by a committee. Well, the competitiveness camel was very much on display. That is not to be taken as a criticism of the staff and committee's work. The bill is admittedly the plain vanilla version. It has a lot of good things in it, including the establishment of a Cabinet-level Council on Innovation Policy and a concomitant outside advisory panel (as you may know Athena Alliance has advocated for the creation of a Commission on the Future of the US Economy - similar to the Young Commission on competitiveness in the 1980s). The bill also has some questionable items in it, specifically the elimination of the Commerce Department’s Technology Administration. There is also a lot missing – such as an expansion of the Manufacturing Extension Partnership to innovation and design issues. The legislation also does not address immigration and patent reform.

On the whole, it is a good piece of legislation – and one that deserves to be enacted.

But, it doesn’t really do that much to address our innovation and competitiveness challenges. A good step, but only one step. And if it becomes a way for folks to say “done that,” then it will have done the country a disserve.

Whether this bill passes or not, look for the issue to heat up next year. There will be two drivers, both coming out of the Senate Finance/House Ways & Means Committees: extension of the R&D tax credit and the expiration of trade negotiating authority. It is not clear in my mind whether the next Congress will be able to address these two issue. But if they do move forward, they become powerful locomotives to pull the rest of the innovation/competitiveness agenda along. A similar dynamic happened in 1987-88, and history has been known to repeat itself.

Posted by Ken Jarboe at 08:37 AM | Comments (1) | TrackBack

September 15, 2006

Creative Man

According to the Copenhagen Institute for Future Studies, we are now in the era of the "Creative Man":

Who is Creative Man? Creative Man is, of course, both genders. Creative Man embraces both creative people and innovators. Creative Man is both the person full of brilliant, exciting ideas, but who seldom, if ever, carries them out; and her counterpart who can take an idea – his or someone else's -- and put it into practice.

New trends arise when needs meet means. When people have a need for personal development or gratification, and a technological or cultural innovation offers to fulfil that need, a new social trend results. This also applies to industrial trends, where new technological and social means fulfil new needs on the market and in the workplace.

From a social perspective, the rise of "Creative Man" is born of a need for greater personal growth, a need that our research indicates is becoming greater and greater. That need is being matched by the growth of new technologies that allow greater self-expression.

In the same way, increased automation is shifting workers out of the service industries. We believe that the same advances in technology will give these workers a home in creative and innovative industries.

The trend towards greater creativity and innovation, as expressed in ‘Creative Man’, has roots in both the social and the commercial evolution. So it makes sense for us to look at the most prominent needs and means that form the foundation for Creative Man. And we will look at what the rise of Creative Man logic will mean in the workplace, the marketplace, and to mass media.

For a more detailed discussion, see the website.

Posted by Ken Jarboe at 10:06 AM | Comments (0) | TrackBack

September 13, 2006

July trade in intangibles

According to yesterday's BEA trade data, our trade surplus in intangibles was basically unchanged in July, increasing by only $54 million to $7.98 billion. Revised data shows that the surplus in June declined by almost $300 billion after reaching a record $8.23 billion in May. In general, however, the latest revisions show a slightly higher monthly surplus during the first half of the year than reported earlier.

The deficit in Advanced Technology Products dramatically worsened in July, rising by $2.1 billion to a deficit of $4.6 billion. The increase in the deficit was due almost exclusively to a decline in exports in aerospace, information & communication technology, and life sciences.

Note: we define trade in intangibles as the sum of "royalties and license fees" and "other private services". The BEA/Census Bureau definitions of those categories are as follows:

Royalties and License Fees - Transactions with foreign residents involving intangible assets and proprietary rights, such as the use of patents, techniques, processes, formulas, designs, know-how, trademarks, copyrights, franchises, and manufacturing rights. The term "royalties" generally refers to payments for the utilization of copyrights or trademarks, and the term "license fees" generally refers to payments for the use of patents or industrial processes.

Other Private Services - Transactions with affiliated foreigners, for which no identification by type is available, and of transactions with unaffiliated foreigners. (The term "affiliated" refers to a direct investment relationship, which exists when a U.S. person has ownership or control, directly or indirectly, of 10 percent or more of a foreign business enterprise's voting securities or the equivalent, or when a foreign person has a similar interest in a U.S. enterprise.) Transactions with unaffiliated foreigners consist of education services; financial services (includes commissions and other transactions fees associated with the purchase and sale of securities and noninterest income of banks, and excludes investment income); insurance services; telecommunications services (includes transmission services and value-added services); and business, professional, and technical services. Included in the last group are advertising services; computer and data processing services; database and other information services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; industrial engineering services; installation, maintenance, and repair of equipment; and other services, including medical services and film and tape rentals.

Posted by Ken Jarboe at 11:01 AM | Comments (0) | TrackBack

September 11, 2006

Economic resilience and 9-11

One of the United States' most important intangible assets is our resilience. The events of September 11, 2001 proved that in many ways and on many levels. Speaking as someone who was in the US Capitol complex, I watched as panic was replaced by resolve.

One of the areas of resilience was our economy. As today's Wall Street Journal points out, Economic Fears After 9/11 Proved Mostly Unfounded:

After terrorists attacked the U.S. five years ago, many worried that the economy would lose its hard-won vitality. Companies would need to hire security staff instead of production workers, build up costly inventories and face delays as goods moved across tightened borders.

This is what has happened instead: The number of security guards on business and government payrolls has declined, companies are holding less inventory, and the amount of freight moving though the nation's ports has soared. Not only has the economy grown, it has become more efficient. And office construction in downtown New York and Washington has continued.

The reasons they cite for this outcome are manifold:

Several forces are behind the surprising turn. In 2001, years of heavy spending on technology had already begun paying dividends for many companies, permitting them to become more efficient even as they had to divert some resources to security. Massive government stimulus -- hastened by an economic downturn that was in place before the attacks -- helped the economy crawl out of its slump and get on a sustainable growth path. The medicine included steep interest-rate reductions, tax cuts, emergency spending increases and a federal backstop for terrorism insurance -- meaning the U.S. would front part of insurers' losses in the event of a major attack. Meanwhile, crime rates were falling, reducing security needs in some places even as fears of domestic terror rose.

We got a lot of things right economically directly after the attacks of 9-11 -- even if a lot more policy went wrong afterwards, in my opinion.

So, let us use today to pause and reflect. And tomorrow get back to that task of making things better.

- - -

I will be off for a couple of days – it is primary election day tomorrow in DC and I am actively working on a campaign. For those of you in DC, remember to vote!

Posted by Ken Jarboe at 08:42 AM | Comments (0) | TrackBack

IBM gets it - Washington doesn't

From an new IBM Benelux blog on innovation - Next Level Weblog 2006: Do you still believe your R&D department is your main source of Innovation ?

Attentive listening feeds our brains with input and provides fuel for ideas. That’s why listening is a primary catalyst for creative thinking and innovation. How does that fit in the real world of business?

To paraphrase John Patrick, an early Internet pioneer at IBM, on the evolution of business: The old model was plan, build, deliver. The new model is iterative – sense and respond, sense and respond. In other words, it’s listen and change.

IBM gets it.

So when will policymakers understand that this is not your grandfather's innovation system? Where are the programs and policies that foster innovation, as opposed to R&D labs?

Don't get me wrong - R&D labs are important and are an important governmental function. But we need to move beyond that model.

But we can't seem to be able to do that. The real tragedy in Washington is that we can even get a basic R&D policy in place, in order to move on to the rest of the innovation agenda. This year's modest competitiveness agenda seems stalled - to the point where business groups felt the need to remind lawmakers about it. Washington Wire » Business Groups Push Competitiveness Plan:

Business lobbyists make post-Labor Day push for President Bush’s “competitiveness” agenda, dropping off lunch boxes — each filled with a “back to work” check list on competitiveness — at the offices of lawmakers on Capitol Hill.
The Business Roundtable, the Chamber of Commerce and the National Association of Manufacturers, among other groups, are pressing for quick action. Their slogan: “Back to School…Back to Congress…Back to action on U.S. Competitiveness!”
The Bush agenda, unveiled in this year’s State of the Union, has stalled in Congress amid election-year debates over larger issues. The 10-year, $136 billion package of spending and tax breaks is designed to stimulate business investment and boost federal funding for math and science education. The corporate campaign includes radio and print ads urging action, as well as lobbying. The Business Roundtable issues a statement urging lawmakers to “seize upon the limited window of opportunity offered by this fall’s congressional session.”

And already, Congress seems more interested in playing politics with the R&D tax credit than taking meaningful action. As the Wall Street Journal reports in Washington Wire » If It Quacks… on the possibilities during the post-election lame-duck:

Another possibility aside from immigration: extension of the research and development tax credit, a top priority for high technology businesses and a key element of President Bush’s competitiveness initiative. So far, the tax credit has been stalled as part of the so-called trifecta bill encompassing cuts in the estate tax and an increase in the minimum wage.
Frist says he intends to keep that controversial package intact through the election and not permit separate action on the R&D credit, which has bipartisan support. But a top Republican aide predicts it may be passed individually in the lame-duck session if Republicans keep control of Capitol Hill.
If Democrats take over, the aide says, Republicans would likely hold back on the extension so that it could “became an opportunity” for the party in the next Congress.

No wonder business is so far ahead and Washington is so far behind in adapting to the I-Cubed Economy.

Posted by Ken Jarboe at 07:38 AM | Comments (0) | TrackBack

September 07, 2006

IPR - useful or useless

Amy Rowe has a great summary of the guts of the IPR debate on her blog - Do Intellectual Property Rights Help or Hinder Innovation? - Innovate Forum

Her bottom line:

Put another way, it’s what you do with the technology or intellectual property that matters – not the technology or intellectual property itself. In this regard, the philosophy “go ahead, let them copy us,” applies. Toyota, in particular, is noted for opening its doors to allow competitors to learn more about The Toyota Way, for example. Why aren’t they worried? Because by the time the competition catches on to what they’re up to, Toyota has already moved on, and is working on the next breakthrough product idea or innovation.

The reality is that Toyota, and other firms like it, are successful not because of a particular unique engineering or design feature – but because, overall, the company’s reputation for quality and customer satisfaction is off the charts. In short, it’s not because they own the rights – it’s because they own the market.

In other words, it’s the innovation embodied in the IP that matters, not the IP itself.

Only in one small area do I disagree. It is important to distinguish between core innovation and non-core. Core innovation is that which helps you own the market. In this case, maintaining strong IPR may or may not be the most important feature. Utilization is. And strong IPR may or may not protect that utilization. In such cases, IPR is essentially defense (but not in the sense that term usually applied). Your patent, for example, keeps someone else from patenting the technology in order to block you from deploying it in your utilization strategy. On the other hand, you might just as easily (and probably have to) license other parts of the technology in order to make your utilization strategy work. As Rowe points out in the article, there may be better mechanisms than the "I own it - you can't have it" model of current IPR.

For non-core innovation, there is different reason to own the rights - outside revenues. As IPR becomes a commodity to be monetized, then owning the patent is important to maintaining the royalty stream.

I suspect that this latter reason is behind the push for stronger and stronger IPR. In an age of continuous improvement and constant innovation, innovators don’t necessarily need an own-it-forever lock on their ideas. They need enough protection to keep others from using their (and others) ideas as a blocking device which would prevent the next innovation. Investors do need that strong protection. After all, they need some assurance that they can recoup their investment with a reasonable profit. As monetization grows, it will become more and more important to find a balance between these competing pressures.

Posted by Ken Jarboe at 07:50 AM | Comments (0) | TrackBack

September 06, 2006

Learning system

Robert Samuelson has discovered the American learning system (as opposed to the education system) in How We Dummies Succeed:

The school system is what most people think of as "education." It consists of 125,000 elementary and high schools and 2,500 four-year colleges and universities. It has strengths (major research universities) and weaknesses -- notably, lax standards. One reason that U.S. students rank low globally is that many don't work hard. In 2002, 56 percent of high school sophomores did less than an hour of homework a night.

The American learning system is more complex. It's mostly post-high school and, aside from traditional colleges and universities, includes the following: community colleges; for-profit institutes and colleges; adult extension courses; online and computer-based courses; formal and informal job training; self-help books.

As he highlights in the rest of his column, a key part of the learning system is our vast community college system. However, many people would consider the community (2-year) college as part of the formal education system. They are certification and degree granting institutions. Granted, they more attuned to practical skills than other parts of the education system, such as research universities. This is a point that Samuelson harps on:

The knowledge that is favored (specialized and geared to specific jobs) often doesn't show up on international comparisons that involve general reading and math skills. As early as the 1830s, Alexis de Tocqueville observed that Americans are addicted to practical, not abstract, knowledge. That's still true.

But community colleges are still part of formal education. Interestingly, before it went on its summer recess, Congress passed the re-authorization of our vocational education law, the Perkins Act. While the Administration called for the elimination of vocational programs, Congress gave these programs overwhelming approval. The legislation embeds the vocational system even more in the formal education by requiring states to develop "model sequences of courses from high school through college."

What Samuelson and other should explore more was the rest of the learning system -- the on-the job training and mentoring. He states, "Workers and companies develop new skills as the economy evolves." That evolution takes place in a complex web of organizations and interconnections -- within a company, with a company working with the formal educational system (including community colleges), and individually and collectively by workers.

Both parts of the system need our attention. It is wrong to imply, as Samuelson does, that what he calls the learning system is enough to insure that "we dummies can succeed." Strengthening our formal educational system, such as redesigning high schools, is one aspect of the knowledge and skill creating task facing us. Building on the rest of that informal system is the other. Only a combination of the two will give us the skills need for the I-Cubed Economy.

Posted by Ken Jarboe at 07:39 AM | Comments (0) | TrackBack

September 05, 2006

Innovation nation

Business Week is running an interesting story on the US as an Innovation Nation:

What were the innovations, technologies, and inventions that enabled the settlement of a vast country and growth of a population that size? We set out to identify 10 innovations, large and small, that played parts in ways both plain and surprising.

Unfortunately, they are stuck in gadget mode. The one non-gadget innovation they cite is tract housing. That is good, but what about all the other non-technological innovations that changed the nation? As I have asked before, which was more important to the growth of the suburbs - the streetcar and the automobile (a technology), tract housing (a design innovation) or the 30 year mortgage (a financial innovation)?

We really need to stop thinking about innovation as only gadgets and start taking a much broader view. After all it is an Intangible Economy and many of our innovations are - of course - intangible.

Posted by Ken Jarboe at 02:04 PM | Comments (0) | TrackBack

Overstressed

Is the Intangible Economy the overstressed and overworked economy? Maybe, but it is because of our faulty performance measures - according to a story in yesterday's Washington Post:
In Today's Rat Race, the Most Overworked Win:

If employees are unhappy and overworked, and employers are having to pay more for unhappy employees, why does the situation persist in a rational economic marketplace?

Some economists, sociologists and psychologists say the paradox arises because of the changing nature of the workplace. In a growing number of professions, especially those that involve thinking and social skills, managers and owners find it difficult to measure the day-to-day performance of employees.

When employees make tangible products, it is easy to measure performance based on the quality of the products. But when work is intangible and involves aesthetics, judgment or social networking, employers do not have easy ways of measuring how important such activity is to the bottom line, Cornell sociologist Marin E. Clarkberg said.

"When you have an undefinable product, there is a temptation to measure output in terms of hours," she said. "In law and a lot of amorphous professions, when you are trying to win a case or being a professor, you are doing things like thinking. It's not like little widgets you produce which you can count."

For partners at big law firms, the simplest way to track the performance of junior lawyers is to see who bills the most hours above and beyond what is officially required, leading to what Case Western Reserve University economist James B. Rebitzer calls an "arms race" of hours.

When it comes to getting promoted at law firms, associates who work long hours are far more likely to make partner -- even if they are no more talented than others, said Renee M. Landers, who teaches law at Suffolk University in Boston and has studied the world of big law firms, where she once worked. In turn, these new partners will evaluate their juniors according to the same criteria, setting up a spiral to see who can work the longest hours.

The focus on hours sets up a rat race at many companies, where most people want to work shorter hours, but no one is willing to step forward to ask for them, because the first person to make such a move will be branded as insufficiently committed to his or her job. (This is the case with any arms race: It is unproductive because you have to run just to stay in place. Everyone would benefit if the race is called off, but no one can afford to be the first to slow down.)

Better measures of intangible outputs would help -- as the article implies. But that is not the entire story.

This is one more example of our left over industrial age mentality. The factory floor ran by the number of hours worked - not by how many items were created (that was for the managers to know - not the workers). The factory system based on hours replaced an earlier system of piece work production - where individuals were paid based on how many items they produced, usually in their home workshops. While often touted as an example of a better work/live balance, the piece work system was notorious for overwork, as the price was set low enough to force workers to work long hours. The factory system with defined hours - especially once the unions were able to institute a 40 hour week - were much more humane. One the flip side, the factory did take away individual’s control over their work lives, to the detriment mostly of the skilled workers.

So even with better output measures, organizational structures matter. It is not clear that existing organizations would be any different in their reward structures. After all, the industrial age had very tangible outputs - but gave us the "punch the clock" system of pay. It was in the nature of the production system (the assembly-line) which required strict adhesion to the clock. And even though most people don't work on factory assembly lines, they are subject to the clock in the office assembly line.

In the I-Cubed Economy, the nature of production has changed. But, neither the organizational structure nor the pay/reward systems have caught up.

Or maybe they have? Is the law office, were everyone competes with everyone else the prototypical I-Cubed Economy organization? Or the software start-up where everyone works 200 hours a week? Or the rising untenured professor who puts in long hours on research as well as carrying a full teaching load?

That's a scare thought!