Quality and Innovation

Competitiveness is the “capacity of people, organizations and nations to achieve superior outputs and especially outcomes, and in particular, to add value, while using the same or lower amounts of inputs.” (Caryannis & Gonzalez, 2003) Basically, how can you make the best of the resources you have – and produce high quality stuff while you’re at it? On the national scale, competitiveness is often assessed by how well the organizations, institutions, infrastructure and economic policies of a country (inputs) can be leveraged by people to enhance the collective quality of life (outputs). Adding value to peoples’ lives by enhancing the quality of life is the goal!

These inputs are all technologies – elements that contribute to social groups providing themselves with the material objects of their civilizations. When changes in any of them either improve or inhibit the performance of people, companies or countries, those technological outcomes also influence competitiveness. Reducing waste, improving reliability, creating new products and defining new, needed services all contribute to increasing competitiveness. However, we shouldn’t forget that improving institutions like schools and healthcare systems, improving infrastructure for transportation and communications, and sharpening the economic policy so that it supports sustainable progress are also important.

How do the candidates’ proposed innovation policies stack up against one another? Here are a few of the best resources I’ve found to help explain the differences to me:

• NEW: Rivals Visions Differ on Unleashing Innovation (W.J. Broad & C. Dean, New York Times, 10/20/2008)
• Comparing the candidates’ technology and innovation policies – summary by Fast Company (Robert Atkinson, 10/10/2008)
• Comparing the candidates’ technology and innovation policies – full report (The Information Technology & Innovation Foundation Report, October 2008)
• Obama vs. McCain: The Wired Scorecard (Nicholas Thompson, 10/12/2008)
• Can American Invent Its Way Back? (Michael Mandel, 9/11/2008)
• Does It Matter That One Candidate is Comfortable Using Technology and One Isn’t? (Robb Mandelbaum, September 2008)

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Caryannis, C. & Gonzalez, M. (2003). Creativity and innovation = competitiveness? When, how and why. In L.V. Shavivina (Ed.), The International Handbook on Innovation. Oxford: Elsevier, pp. 170-179.

Ezell, S.J. & Atkinson, R.D.(2008). Comparing the candidates’ technology and innovation policies. Report of the Information Technology & Innovation Foundation (ITIF). Available online.

I saw an article today entitled “Barack Obama’s Stealth Socialism”, syndicated by many blogs including this one. It seems that many are concerned that our nation’s foundations of capitalism might crumble and be replaced by socialism, including John McCain, who called his opponent a socialist at a Saturday, October 18 rally.

Proponents of socialism say that disparity in incomes leads to the exploitation of workers, oppression of minorities, and imperialism. Instead of maximizing profit for a minority, there is a blueprint for the economy so that profits are routed to meet the needs of the people – health care, childcare, housing subsidies, transportation, and so on. There are many socialist elements in place in the U.S. right now, including welfare and public schools.

This led me to ask: why is socialism bad? The campaign promises that resemble socialist aims – and they exist on both sides of the ticket – might seem pretty good to some people. So what’s the catch? Before you read any further, note that I’m not attempting to advocate one position over another – just to ask a difficult question that others might be asking, and see if concepts from technology management and quality management can provide some insight. With this in mind, we consider that “government”, from the perspective of technology management, is all about two things:

• setting and enforcing standards (which includes laws, regulations and policies), and
• providing a structure for decision making.

Both of these aspects play a fundamental role in setting up and operating quality systems, which are a form of government (on a smaller scale)! Government is different than a production system like capitalism, socialism or communism though. There are, however, often links between the two: for example, government can set the standards that influence both the means of production and how a country interacts with other countries through its economy. The difference between government and the production system is, loosely, analogous to the difference between strategy and tactics.

• Government: Democracy is government by the people where decision-making occurs on the basis of a vote. The voting majority wins. A republic is a government in which the people delegate representatives to represent them – and make the decisions for them. The U.S. is a republic, not a democracy (ie. your vote doesn’t really count if the electoral votes that come from your state ultimately go to “the other guy”.) Democracies and republics are both systems for decision making. Fascism is also a system for decision making – but all of the decisions are unilateral, and made by a dictator (or under some sort of dictatorial control). The process of reaching a decision depends in a large part on the standards you are using to judge the context of a problem – and the opportunities available for a solution!
• Production: Capitalism is characterized by an economy where investment and ownership in the production and distribution of goods is primarily private – through individuals and corporations. In a capitalist economy, you can start your own business and have the potential to grow without bounds. In a socialist economy, you can’t grow too much, or your excess profit is siphoned off to support social causes. Some feel this isn’t fair, and that it hinders achievement, leads to low quality products and services, and higher levels of unemployment. (The socialist agenda could be considered a reaction to inequalities in income distribution, such as those observed by Pareto’s study of the wealth distribution in Italy, from which the famous 80/20 principle was first observed – for a summary, see Levy 2001.

So why are people scared of socialism? In addition to taking the “powerball” potential out of capitalism, it also seems to be perceived as a “gateway drug” to communism (and then on to dictatorial decision-making) for the ruling parties. Previous nations that have attempted to blend socialism with dictatorships (e.g. Cuba, Russia) are held up as examples of certain doom. Other examples, such as the European socialism that’s in place today, are criticized because tax rates are oppressive at 50-60%, even though those countries blend socialism with democratic decision making. No one has “gotten socialism right,” balancing public services with reasonable costs, and doing so without eventually losing sight of fundamental human rights.

Does this mean that socialism can’t be an effective production system? No; it just means that there are no historical examples of resounding success to draw from, and the risks are palpable – which can be frightening to people. (Maybe the design of socialism in our country is just suboptimal.)

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Levy, M. (2001). Market efficiency, the Pareto wealth distribution, and the Levy distribution of stock returns. Unpublished manuscript, Jerusalem School of Business Administration, Hebrew University of Jerusalem. Available here.

On September 26, in the first Presidential debate between Barack Obama and John McCain, the candidates discussed the perceived success or failure of the war in Iraq. McCain vigorously promoted his feeling that the troop surge was a success, while Obama focused on the rationale behind invading in the first place – claiming that the tactics may be working, but the bigger picture, the strategy – was misplaced. McCain launched back with a criticism: “I’m afraid Senator Obama doesn’t understand the difference between a tactic and a strategy.”

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” — Sun Tzu, Chinese General, 500 B.C.

Pundits have questioned whether either of the candidates really knows the difference between strategy and tactics, despite some evidence to the contrary. In politics, the distinction between strategy and tactics is compounded by the fact that the military defines strategy in a very specific context where the concepts of policy and strategy can easily be entangled.

But politics aside… do you know the difference? And do you know why you should care?

The answer lies in a 1996 article in Harvard Business Review by Michael Porter entitled “What is Strategy?” – one of the classic articles in management. He argues that there is a fundamental difference between strategy, which involves striking a contrast between yourself and your competitors, and operational effectiveness, which means “performing similar activities better than rivals perform them.” All of the pillars of managing quality and productivity fall into this latter category, which explains why executives have, according to Porter, struggled to translate those operational improvements into sustainable profitability.

“Improving operational effectiveness is a necessary part of management, but it is not strategy… The operational agenda is the proper place for constant change, flexibility, and relentless efforts to achieve best practice. In contrast, the strategic agenda is the right place for defining a unique position, making clear trade-offs, and tightening fit… strategic continuity, in fact, should make an organization’s continual improvement more effective.”

Using this frame of reference, a country’s foreign policy is more akin to its strategy than war plans or their means of execution.

Why should you care? Because fighting the good fight of operational effectiveness will not necessarily win you the strategic war. Figuring out what you do uniquely, how and why you do it uncommonly well, and understanding how to align your capabilities with your mission is the secret to success. Are either of the candidates meeting these criteria? It’s your call.

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Porter, M. (1996). What is strategy? Harvard Business Review, November-December 1996, 61-78.