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Capturing Your Competitive Future In A Global Economy

  • Date: 11/19/2002
  • Author: Dr. Luis M. Proenza (President, The University of Akron)
  • Location: Stow-Munroe Falls Chamber of Commerce (11/19) & Business-to-Business Luncheon Green Chamber of Commerce (11/21)
  • "That we live in interesting times" is the understatement of our modern age.

    "Seismic rumbles of change," to use Chuck Vest's phrase, are transforming our traditional paradigms in everything we do.

    Increasingly, as if on a roller coaster, we are thrown into peaks and valleys and sudden twists and turns - sometimes only to end up where we started.

    While change is the one constant and central theme in all of human history, change also is seen by many as something to be avoided.

    An editorial in the Atlantic Journal had this to say about change: "The world is too big for us. Too much going on, too many crimes, too much violence and excitement."

    "Try as you will, you get behind in the race, in spite of yourself. It's an incessant strain to keep pace . . . and, still, you lose ground."

    "Science empties its discoveries on you so fast that you stagger beneath them in hopeless bewilderment . . ."

    "Everything is high pressure. Human nature can't endure much more."

    I am sure you will agree that this editorial represents a prevalent sense of our world today. But you need to know that the material I just read to you was published in 1833, nearly 170 years ago!

    Whether then or now, somehow, the prospect of change always seems to raise a sense of excitement and, simultaneously, a sense of risk.

    For some, risk becomes anxiety. And quite often, particularly in academic and political circles, anxiety leads to "analysis paralysis" . . . a condition whereby a problem or opportunity is analyzed without action, or is simply ignored, until it passes you by or becomes intolerable.

    But remember that risk and anxiety are two quite different conditions.

    A simple story will illustrate the point:

    The Surgeon General tells us that cigarettes kill more than 150-thousand Americans each year, and automobiles on our highways kill more than 50-thousand people per year. But, nobody seems to be afraid of cigarettes or automobiles.

    However, according to the Deputy Director of the National Institutes of Health, everyone is afraid of sharks.

    The Navy says that there are about 50 shark attacks worldwide each year. The National Bureau of Health Statistics doesn't even keep a record of shark attacks because there are so few. (They know how many people are killed by bee stings, but not shark bites.)

    The best guess is that sharks kill two or three people each year in the United States.

    But, the fact is that if you went to a crowded beach and shouted "shark" - everyone would race out of the water, jump into a car, light up a cigarette, and drive home!

    That's the difference between anxiety and risk.

    Each of us feels this way about various things and some activities in our society.

    How nice it would be if we could put risk and anxiety into perspective, and move to better distinguish the "sharks" in our lives.

    Indeed, where reason and calm prevail, there is always optimism, and much that can be accomplished for the common good.

    With these thoughts in mind, let me now share with you some perspectives on this Age of Global Change.

    By Global Change I mean to have you understand the process of globalization - a process by which the peoples of the world are moving increasingly towards one another.

    Indeed, Globalization involves dimensions of social, cultural, technological, and economic change, which characterize the movement of our civilization away from the parochial and toward the global or universal.

    Dimensions that involve the vast array of technological change, our movement to a global economy, and the pervasiveness of new information tools . . . all creating for us radically new sets of capabilities and the kind of social adjustments so well articulated by Peter Drucker in his Atlantic Monthly magazine article entitled "The Age of Social Transformations".
    (Atlantic Monthly, "The Age of Social Transformations", 1994)

    Just think about your own experience. About how, in your own lifetime, technology has affected what you do today, what you have yet to learn, and how rapidly other things are looming onto your radar screens . . . the rate of progress has become so fast, in fact, that we have to "construct artful analogies" . . . and tell interesting stories . . . because that is the only way to . . . "comprehend the explosive acceleration of speed and capacity" . . . in this age of Global Change.

    And where the nature of social transformations on a world-scale are concerned, perhaps no story tells it better than the one about the two global company executives returning to the U.S. in the first class cabin of the airliner . . .

    After a few drinks, they begin to relax and to contemplate their careers, where upon one turns to the other and says, "You know . . . I have finally figured out what this global economy is all about."

    "And what is that?" asks his colleague.

    "Well, I am finally going to get paid what I am worth . . . and I am scared to death of it!"

    Indeed, what we are worth is dependent upon our emotional resiliency to adapt to a changing economy.

    In his Wall Street Journal article, "Drucker on Management: Sell the Mailroom," Peter Drucker points out that the key to the future is flexibility.

    As new technology and innovation change the way we do business, companies must retool and sometimes unbundle parts of their workforce, which creates new job responsibilities and subsequent training.
    (Peter Drucker, "Drucker on Management: Sell the Mailroom," The Wall Street Journal, July 25, 1989, p. A16)

    We must realize that the growing economy adds new jobs at a rate just a bit faster than it destroys old jobs - and therein lies the lesson of continued learning.

    As we expand our knowledge, we expand our worth, and like the global businessmen in our story, we begin to grasp the concept of globalization.

    Peter Scott, vice chancellor of Kingston University in London, points out that "The terms globalization and internationalization are often used interchangeably."

    Scott tells us that the term globalization often displaces internationalization "because it sounds more modern."

    However, each refers to very different phenomena that, in reality, "are actually opposed."

    In his recent article, "Globalization and Higher Education: Challenges for the 21st Century", Scott argues that "Internationalization reflects a world-order dominated by nation states."
    (Journal of Studies in International Education, "Globalization and Higher Education: Challenges for the 21st Century", Spring 2000, p.3-10)

    Globalization, on the other hand, transcends international borders and political subdivisions. Globalization reflects the rise of market capitalism around the world, and involves an "intensified collaboration" as well as "a global division of labor."
    (Journal of Studies in International Education, "Globalization and Higher Education: Challenges for the 21st Century", Spring 2000, p.3-10)

    According to Scott, "Globalization implies a radical reordering of the status quo as new regional blocs emerge and old enemies become new allies (and vice versa) and national boundaries are rendered obsolete by the transgressive tendencies of high technology and mass culture."
    (Journal of Studies in International Education, "Globalization and Higher Education: Challenges for the 21st Century", Spring 2000, p.3-10)

    Scott goes on to say that "The forces of globalization are refashioning not only economic structures and life-styles; they are also challenging the authority of the nation state (in which so many of our notions of civic and democratic rights are embedded); they are penetrating deeply into the private world of informal associations, communities, families - and even deeper still, into the intimate world of personal identity."
    (Journal of Studies in International Education, "Globalization and Higher Education: Challenges for the 21st Century", Spring 2000, p.3-10)

    And much of the same phenomena are affecting individual nations, states, counties and communities that are shaping a new way of thinking about our economy.

    I have been privileged for many years to work with the Council on Competitiveness in Washington, and I currently serve on a steering committee for the Council's Clusters of Innovation Project, which is headed by Michael Porter of Harvard.
    (see, e.g., his recent book "On Competition," Harvard University Press, 1998, pp 197- 287)

    Porter tells us that "Cluster boundaries rarely conform to standard industrial classification systems, (because such systems) fail to capture many important actors in competition as well as linkages across industries."
    (Ibid, p. 204)

    Economies transcend artificial political boundaries and reflect regional concentrations of industrial activity that capture strengths and economies of scale.

    If you look at a night satellite photo of Northeast Ohio, you will see many lights. What you do not see, however, are boundaries - no boundaries to define Akron, or to separate Summit, Cuyahoga and Stark Counties. We are one region.

    Moreover, Business Week magazine reports that globalization could well become the great equalizer. "(It) has created millions of jobs from Malaysia to Mexico and a cornucopia of affordable goods for Western consumers."

    "It has brought phone service to some 300 million households in developing nations and a transfer of nearly $2 trillion from rich countries to poor through equity, bond investments, and commercial loans."

    "(Globalization) has helped topple dictators by making information freely available in once sheltered societies."

    "And now the Internet is poised to narrow the commercial and cultural gulfs separating rich nations from poor even further in the decade to come."
    (Business Week, November 6, 2000, p 72-100)

    Indeed, science and technology speak the universal language that is the driving force behind globalization. By making possible the sharing of vast amounts of information virtually instantaneously, advances in telecommunications and computers offer the world unprecedented opportunities to increase the international standard of living.

    Globalization should bring new opportunities for higher education. In today's knowledge-based economy, education is society's infrastructure, because education has become the basis for everything we do to make our society work and for progress to take place.

    It is sobering, however, to consider whether the United States will have the continued capacity to accept the challenges of global change as other countries move ahead.

    In 1983, Terrell Bell, then-Secretary of Education, released a report entitled, A Nation at Risk, prepared by the National Commission on Excellence in Education. It warned that for the first time in its history, the United States could well graduate a generation that was less well prepared than its parents.

    And in equally powerful language, it noted that, "If an unfriendly power had attempted to impose on America the mediocre educational performance that exists today, we might well have viewed it as an act of war."
    ("A Nation At Risk: The Imperative for Educational Reform," National Commission on Excellence in Education, April 1983)

    Indeed, the Organization for Economic Cooperation and Development notes that the world dominance that the United States has enjoyed during this past century is being eclipsed by the achievements of other countries.
    (Education at a Glance - OECD Indicators, 2000 Edition, Organization for Economic Cooperation and Development Centre for Educational Research and Innovation)

    Thus, the U.S., which was the first nation to have compulsory secondary education, now lags 22 other countries in the percentage of its population that completes secondary education.

    The U.S. now also lags in higher education. Indeed, the dramatic increase in college graduates that was spurred on by the G.I. Bill and made the U.S. an economic powerhouse has now been overshadowed by three countries.

    Today, Britain, Denmark, and the Netherlands all boast of a higher percentage of their population participating in higher education than does the United States.

    If we are to effectively compete in a global-knowledge economy, education must serve as the basis for our new infrastructure, and we must be willing to use our universities as engines of economic development, because of the three major roles they play in our economy.

    Those roles are: producing an educated and skilled workforce, attracting federal and industrial investments, and providing innovation and the production of new knowledge.

    As Derek Bok, the former president of Harvard University, often said: "If you think education is expensive, try ignorance."

    Let me focus on universities as engines for economic development through research and the production of new knowledge.

    Indeed, economists agree that creation of new technological knowledge through research is our most direct economic avenue for acquiring added value.

    When that new knowledge is quantified in a market environment, it creates fuller employment, capital formation, growing profits, and surpluses for reinvestment.

    In other words, it is from research that new companies are born; that new jobs are created; it is from research that the economy expands and new wealth is created.

    The creation of new wealth is not a generally understood principle in economic development circles.

    Typically, the traditional approach to economic development is to attract companies from other states or to enhance existing businesses.

    However, this is largely a zero-sum game, because what happens is that existing economic activity is relocated or market shares are shifted.

    In either case, no new wealth created.

    So, how is new wealth created?

    The best way for me to tell you is by offering an analogy to that of the "birds and the bees."

    Surely, all of you had this discussion with your parents, or may have recently had to use it with your children.

    Of course, in today's knowledge economy, chances are your children may have a thing or two to teach you!

    So, in the analogy to the "birds and the bees," new wealth is created because research begets new companies!>

    In other words, sex is to babies as research is to new wealth creation.

    In both cases, conception is the common element.

    In today's global-based economy, knowledge is universal, and staying close to the source of knowledge creation is not just a good idea; it is a business necessity.

    Here is how Tim Ferguson put it in Forbes magazine: "In Cleveland('s) heyday, . . . proximity to water or rail mattered a lot. Today, proximity to a university campus matters a lot."
    (Tim Ferguson, Forbes, May 31, 1999)

    That is why Donald Alstadt, the chairman and C.E.O. of the Lord Corporation, has maintained an office at each of 10 or 15 universities, so that he can be the first to "mine" new knowledge and technology and thus gain a competitive edge for his company.

    Indeed, it was knowledge creation and its transfer that enabled the agricultural and industrial revolutions at the turn of the last century. And during World War II, research, including the Northeast Ohio based synthetic rubber initiative, was vital to the Allied war effort.

    Such research laid the groundwork for technological leaps in medicine, aviation, energy, electronics - developments that today affect virtually every realm of our human endeavors.

    And with the development of transistors, the era of microelectronics began and sowed the first seeds of the Silicon Valley; and from such modest beginnings, we are now immersed in the information age.

    The research we did related to the Space Race not only resulted in Americans walking on the moon...but also gave rise to the Space Industry and enabled new technologies in satellite communications, computer science, robotics and miniaturization.

    As recently as 1970, a single discovery in molecular biology initiated the new industry of biotechnology, an industry from which we are now seeing dramatic advances in medical science and the introduction of effective new technologies such as the production of human insulin by factories of microorganisms.

    And at The University of Akron, research provided the intellectual property that served to fuel and diversify the industrial base of Akron, transforming it from the rubber capital into the polymer capital of the world and helping to reinvent our regional through its discoveries in polymer research.

    In this global, competitive environment, the winners enjoy success because of their ability to create and sustain new wealth. And the key to that success has been a more highly educated populace.

    Indeed, investing in our future means investing in education, research and infrastructure.

    And that is imperative, because science and technology will continue to play an increasingly important role in our future if we are to effectively compete in that fast-changing marketplace - if we are to capture our fair share of economic progress.

    And as the process of globalization advances, we must remember that the future is what we make of it, and I believe that the challenges of global change bring new opportunities.

    We must be sure that we can distinguish the "sharks."

    Thank you!

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