I have great admiration for Andy Grove -- not just for his previous leadership of Intel but for his business insight. But his piece in today's Wall Street Journal (What Detroit Can Learn From Silicon Valley) gets it wrong -- and right at the same time. His main argument is that the government intervention in the auto industry represents a effort to prop up a failing business in a effort to protect jobs. He compares what is needed to the transformation of the PC industry in the 1980's:
The other part that Grove omits from his story is the parts of the automotive strategy which are geared toward the transformation of the industry. If the take over was only a massive jobs program, then why is the Administration taking all the heat from the dealers? And for other down-sizing activities?
Grove is right on one part. The nature of the value added drivers is changing from the current internal combustion engine drive train assembly to the battery technology electric motor combination (as I have noted before). But he fails to even acknowledge any of the US effort in that area.
Grove is also right that China is making its' bet on battery technology - although I think any China watcher would be assumed over Grove's statement that "It's not clear precisely how the Chinese government influences industrial strategy." It is clear to almost all that Chine has an industrial policy.
But the current situation is not due to the Obama Administration's actions. Rather there are the result of decades long denial that the US should have an industrial policy as well.
Finally Grove offers a very interesting analysis of industrial structure. He thinks the auto industry needs to adopt a more horizontal structure similar to the PC industry. It is interesting to speculate what the auto industry would look like if it did so. Would a quasi-monopoly emerge similar to the Microsoft-Intel (Win-tel) dominance of the PC industry? Would we see more offshore production, as was perfected in the "cross border production networks"? We may already be headed that way given the situation in battery technology. It is also interesting to speculate where such a system would be any different from the system that has already evolved - with its vast independent (but captive) supplier base.
In short, I too believe that there may be lessons to be learned in Silicon Valley. But there are lessons to be learned elsewhere as well. And the lessons from Silicon Valley may not be the same ones as Andy Grove thinks there are. Correction: The text has been modified to the correct spelling of Mr. Grove's name -- Grove not Groves. We regret the error.
Imagine if in the middle of the computer transformation the Reagan administration worried about the upheaval and tried to rescue this vital industry by making huge investments in leading mainframe companies. The purpose of such investments would have been to protect the viability of these companies. The effect, however, would have been to put the brakes on transformation and all but ensure that the U.S. would lose its leadership role.I think he is right on what would have happened. But Grove strangely omits the history of what did happen. In the middle of the Reagan administration the government did make major investments that shaped the future of the industry. One was the creation of Sematech -- one of the first public-private partnership that has defined technology policy for the last two decades -- and led by Grove's old boss Robert Noyce. The second was the massive research and procurement support that created (and then opened up) the Internet.
The other part that Grove omits from his story is the parts of the automotive strategy which are geared toward the transformation of the industry. If the take over was only a massive jobs program, then why is the Administration taking all the heat from the dealers? And for other down-sizing activities?
Grove is right on one part. The nature of the value added drivers is changing from the current internal combustion engine drive train assembly to the battery technology electric motor combination (as I have noted before). But he fails to even acknowledge any of the US effort in that area.
Grove is also right that China is making its' bet on battery technology - although I think any China watcher would be assumed over Grove's statement that "It's not clear precisely how the Chinese government influences industrial strategy." It is clear to almost all that Chine has an industrial policy.
But the current situation is not due to the Obama Administration's actions. Rather there are the result of decades long denial that the US should have an industrial policy as well.
Finally Grove offers a very interesting analysis of industrial structure. He thinks the auto industry needs to adopt a more horizontal structure similar to the PC industry. It is interesting to speculate what the auto industry would look like if it did so. Would a quasi-monopoly emerge similar to the Microsoft-Intel (Win-tel) dominance of the PC industry? Would we see more offshore production, as was perfected in the "cross border production networks"? We may already be headed that way given the situation in battery technology. It is also interesting to speculate where such a system would be any different from the system that has already evolved - with its vast independent (but captive) supplier base.
In short, I too believe that there may be lessons to be learned in Silicon Valley. But there are lessons to be learned elsewhere as well. And the lessons from Silicon Valley may not be the same ones as Andy Grove thinks there are. Correction: The text has been modified to the correct spelling of Mr. Grove's name -- Grove not Groves. We regret the error.
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