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Lijit Search

Thank you, Doug Fletcher, for sending me a copy of Walter Allessandrini's speech at the recent Engenuity '04 conference in Columbia South Carolina.  Mr. Allessandrini's comments served to remind me that the market moves faster than we do. If we're to succeed, we need to aim ahead of the curve. We're shooting skeet; we're not shooting at a stationary target with a bow and arrow:

As we have worked together in the past years to move South Carolina from a manufacturing economy to an information and knowledge based economy, we have not been the only ones in the world to take on this endeavor. Most of the other states in the U.S. have been doing the same, as well as many countries in the world. Everybody is moving fast, and one country in particular, China, is progressing by leaps and bounds, at incredible speed.

We must move much faster than we had, in the future. We must learn quickly how to put together a large team of people who can best contribute to our plan, get this team to work consistently close together, and lead this team to achieve short term milestones that can move us through quick progress in achieving our objectives.

Related: Wealth Creation in the 21st Century; Why Rural Communities Can't Succeed Economically...

3:52:07 PM  

I made the following assertion in a previous posting:

Factor costs, by themselves, indicate nothing about competitiveness absent information regarding productivity.  As Martin Wolf, chief economics commentator for the Financial Times, put it, “Chinese labour is cheap because it is unproductive…If an American worker produces $81,000 dollars of value added annually, a German worker $80,000 and a British worker $55,000, while a Chinese worker produces only $2,900, it is not at all difficult for the workers of the high-income countries to compete, even if their wages are vastly higher.

I went on to observe:

In other words, novel, creative, and innovative tasks tend to be done in very specific places characterized by unique accumulations of human, physical, social, and financial resources.  However, as the tasks become more familiar, routine, and codified over time, productivity becomes less sensitive to location, and the cost of doing business comes to the fore.  Not surprisingly, the greater the “commoditization” of a task, the greater the emphasis on the cost of doing business.  As a consequence, innovative tasks tend to originate in high-cost, but highly productive, urban areas and then spread to other regions.

Here's some real world evidence from a recent article on seattlepi.com:

For the past five years, Bellevue-based AskMe Corp. has sent development work to about 10 programmers in Pune, India. But Udai Shekawat, the 35-year-old chief executive of AskMe, said the overseas operation has little to do with the software company's success.

"If I look at the five major reasons that we lasted through the bad times and became profitable, (the center in India) would not only not make the top five; it would not make the top 10," said Shekawat, who hails from Jaipur, India.

The company has no plans to add staff in India, partly because the most innovative product development, sales and marketing efforts occur in Bellevue (emphasis added).

Shekawat also sees the benefit of having engineers and sales professionals working in close proximity in one centralized office, especially after a larger offshoring effort failed.

"I would be hesitant to add people in Chicago or New York," said Shekawat, whose company employs about 35. "I love to be in a room where I can see people at all times and communicate and we are on the same page."

So why have the operation in India?

Shekawat said it was established in the early days because the founding team knew talented people there. It did help the company get off the ground and provided much needed revenue during the lean times, he said. But the Indian group, which customizes software for AskMe's growing list of Fortune 500 customers, now accounts for just 5 percent of the company's revenue.

"Ultimately it makes sense if you can do some things like product support and low-level things," he said. "But when you talk about leading-edge innovation, inventing new software categories or new medicines, that sort of stuff is very hard to do out there because it is a combination of science and art and half magic (emphasis added)."

12:48:30 PM