Mobilizing for a U.S. Technology Strategy
Now that the parades for returning Gulf War soldiers are over, we must turn our national will toward winning a battle of even greater consequence, and one we have been losing — the battle for economic security.
Our country's security depends as much on its economic performance as on its military strength. But having recently completed six years overseeing many of our country's efforts in the scientific and technical arena, I have great concerns about whether we can compete unless we get serious about stopping the erosion of our human resource, technology and manufacturing bases.
Ten years ago the United States exported three to four times as many high-tech products as it imported. Today such imports and exports are roughly equal. Our positive trade balance in computers has been virtually wiped out, and our share of the world semiconductor market has tumbled from 57 percent to 35 percent. Our position is declining even in commercial aircraft manufacture, where U.S. dominance recently seemed as impregnable as it was in automobiles 25 years ago.
We have lost or are losing the battle for advanced ceramics, precision bearings, laser devices, fuel-efficient engines, optical information display and storage systems, and many other critical technologies.
Some see this trend as inevitable, saying the United States could not possibly maintain the technological supremacy it enjoyed after World War II. But the danger we face is not others catching up with us. That occurred a long time ago. The issue today is that other countries have surpassed and are continuing to surpass us in optical glasses, industrial instrumentation, electronic consumer products and their underlying technologies, and many other fields. We cannot do without a presence — or even be second — in the basic technology and manufacturing sectors of the 21st century without simultaneously foregoing our political leadership.
While industry has the primary responsibility for developing new technology and products and for earning market share, the policies and activities of the federal government have a major impact. Traditionally, Washington has supported technological development mainly through military and space programs, leading to early U.S. leadership in aerospace, computers and semiconductors. With the end of the Cold War and the emergence of the civilian sector as the main source of technological innovation and initial usage, this approach to technology policy is inadequate.
President Bush and Congress must acknowledge this new reality. Just as we crafted a national science policy a half-century ago — a decision that led to our becoming the unquestioned world leader in basic research and higher education — so should we develop a technology policy to reverse the decline of our civilian technology base. Otherwise, as foreign competitors aggressively pursue public-private initiatives, further erosion is virtually assured.
The U.S. government now spends more than 60 percent of its research and development budget on defense. Changing this to a 50/50 split would bring our civilian effort closer to that of our major foreign competitors.
Nearly a third of the government's R&D funds go to support federal laboratories, mostly for defense applications. Although often doing outstanding work, the labs are underutilized. Some of them should work more closely with industry to develop U.S. leadership in generic technologies of strategic importance, such as electronics, biotechnology or advanced materials.
Federal agencies should support collaborative development of generic technologies by industry and universities, and fund better mechanisms to transfer ideas from the laboratory to the marketplace. Several recent initiatives, such as the semiconductor industry's SEMATECH consortium, Engineering Research Centers, and new regional manufacturing technology centers, provide possible models for such partnerships. Collaboration among government, industry and universities can be pursued without undue worry about ''picking winners and losers.'' Unsubstantiated concern about interfering in the marketplace must not become a rationale for doing nothing.
Technology policy also needs to support education, help upgrade the skills of existing workers, and provide tax credits and other financial incentives to promote research in industry.
We are at a turning point. Our science and technology policies are based on the realities of the 1950s, not those of the 21st century. They are obsolete and should be replaced by a strategy of collaboration among the sectors of our society, one that will stem the continuing loss of American technological leadership.
August 4, 1991
Erich Bloch recently completed six years as director of the National Science Foundation.
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The Globalization of Technology
Gerald P. Dinneen
Whether it's a McDonald's in Moscow or a Michael Jordan poster in Tokyo, we hear a lot about the "globalization" of our political system, culture and economy. But the gap between the United States and the rest of the world also has narrowed in a way that is widely misunderstood — and unnecessarily feared.
This narrowing is in the field of technology. The technologically unipolar world dominated by the United States has given way to one in which we are, at best, first among equals. It's no secret that many products are manufactured abroad, but what's far less obvious is how much of the technology used to make these products is now developed overseas.
Many U.S. firms are turning to foreign engineers to design automobile parts or electrical devices. Software companies are springing up in India, Taiwan and Brazil. Researchers in Japan no longer are just copying American technology but are blazing the trail in such critical fields as microelectronics, optics and materials. The Pentagon is shopping abroad for the components of some high-tech weapon systems.
Overall, the days of American technological pre-eminence are over. This change is of profound significance when one considers how essential technology is to the economy, the military, the environment, health care and our children's future.
The trend has its good side. When Honda produces automobile engines that offer better gas mileage, or Toshiba devises clearer screens for laptop computers, American consumers benefit. But the rapid growth of foreign technical competence and competition challenges our own ability to grow or capture the high-tech industries we need to prosper.
Some observers say the solution to our diminishing technological edge is to get tougher about protecting the expertise we still retain, making it harder for others to apply our know-how. But putting a fence around knowledge in an era of fax machines and jet planes is an exercise in futility. It
also misses the point that the United States increasingly has as much to gain from technology exchanges as it stands to lose. In a recent report, the National Academy of Engineering concluded that technological convergence and industrial interdependence among nations are essentially irreversible and, on balance, actually positive for the United States.
Globalization enables us to take advantage of technological resources and skills from abroad. Our automobile, steel and computer manufacturers, for instance, all have adopted technologies and management techniques from Japan. Increasing technological sophistication abroad also has opened up new markets for our own goods and services, and provided American consumers with a wider range of high-quality products at reasonable prices.
So the benefits are substantial, but only if U.S. companies and federal policy-makers stop being so preoccupied with home-grown U.S. research and development. We need to take advantage of technological advances no matter where they originate. In a high-tech, interconnected world, prosperity follows not only from creating technology but from harnessing it effectively, regardless of its national origin.
In practical terms, the United States must develop the human, financial, physical, regulatory and institutional support systems to increase its attractiveness as a location for firms to perform the full spectrum of advanced technical activities. Just as California's Silicon Valley competes with Boston's Route 128 for high-tech business, our technological community as a whole now is competing with the rest of the world.
Private companies must lead the charge, but they cannot win this battle alone. Government at all levels must play a bigger role. State and federal policy-makers should do much more to help promote technological "best practices" and commercially significant generic technologies throughout private industry. The federal government must become more aggressive about reaching an international consensus on trade, antitrust regulations and other sensitive questions that affect the flow of technology.
Over the long term, we will remain competitive in the technological arena only by investing in the public educa-
tion, job training and other activities that will allow us to harness the world's expanding technology base as well as, if not more effectively than, our trading partners. Unless Americans gain the necessary skills, the rest of the world will do more than catch up to us in technology; it will leave us behind.
November 17, 1991
Gerald P. Dinneen, a former vice president of technology at Honeywell Corp. and assistant secretary of defense, is foreign secretary of the National Academy of Engineering.
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How to Keep Factory Jobs from Moving Overseas
Laurence C. Seifert
The check is in the mail.
Let's do lunch sometime.
Gee, that gift was exactly what I wanted.
To these dubitable statements add: "American factories are fleeing overseas to take advantage of cheap wages and benefits."
It's an argument heard all the time, especially amid the debate over the North American Free Trade Agreement. Television commercials depict Americans losing jobs to poor workers in the developing world. Economists say the United States is having trouble competing in manufacturing because its workers are too well-off and inflexible.
By and large, the argument is wrong. The problems facing U.S. manufacturing are not due primarily to low wage rates in third world factories.
A committee of the National Research Council, which I chaired, reported recently that there are more significant factors involved when companies decide to open facilities abroad. Labor costs are critical when manufacturing products are essentially commodities. But increasingly, U.S. manufacturers are looking abroad primarily to gain access to new markets, manufacturing processes, technologies and components.
Our study focused on three industries often cited as examples of the conventional wisdom: automobiles, consumer electronics and semiconductors. In each case we found other factors to be more important than labor rates in corporate decisions about where to build new facilities.
In the automobile industry, production remains concentrated overwhelmingly in companies' home markets. Ford and General Motors have a strong presence in Europe, and the Big Three also manufacture in many developing countries to meet "local content" requirements. But most U.S. auto production is done at home. By contrast, Japanese auto makers have opened major plants in North America and Europe, mainly to respond more quickly to market changes and customer requests. Toyota is producing station wagons in Kentucky for sale in Japan.
In the 1970s and 1980s, many U.S. companies did move facilities overseas to take advantage of low wages. But these were mainly simple assembly operations. Today's high-tech, automated manufacturing depends much less on human labor. AT&T has been producing consumer telephones in Singapore since 1984, but a recent study showed the operation's success is due more to access to lower materials costs than to cheaper wages. Toshiba began producing color picture tubes in New York in 1985 mainly to gain closer access to the U.S. market, and structured it to be its least costly operation.
Wage rates remain critical for labor-intensive semiconductor packaging. But even in the semiconductor industry, success depends more on manufacturing prowess, proximity to customers and political factors such as trade barriers than on low wages. U.S. firms also open foreign facilities to learn
the innovative production techniques pioneered in Japan and elsewhere.
So arguing that the United States has become too expensive for manufacturing is inaccurate. Higher wages are a deterrent, but more often our country offers features that companies most desire, including a large market of affluent consumers, skilled workers, a strong technological base and a tradition of innovation.
Blaming our problems on poor foreign workers only diverts us from more germane concerns. Although U.S. manufacturers have made progress during the past few years, many still have not adapted to a world in which quality, flexibility and speed are essential. Their failure puts American jobs at risk.
The federal government, meanwhile, could be doing more to make the United States an attractive choice for manufacturers. This country needs favorable tax and trade incentives, and should avoid any restrictions that inhibit U.S. producers' access to new technology, whatever the source. It also must ensure that its workers are better educated and have the job skills that manufacturers require. Protecting the jobs of underskilled workers through political means is an equation for long-term economic disaster.
American companies sometimes have good reasons to open facilities overseas. To protect American jobs, the first step is to stop hiding behind the myth that cheap foreign wages are both paramount and insurmountable. Neither argument is true. With the right incentives, skills and resources, and with enlightened management, manufacturers based in the United States can compete with anyone. Our manufacturing problems begin at home. If we get busy solving them, we'll do just fine.
October 4, 1992
Laurence C. Seifert is vice president of global manufacturing and engineering at AT&T.
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Designing for Prosperity
Charles W. Hoover Jr.
One reason why the economy lingers in recession, with millions of Americans unemployed, has little to do with the usual causes we hear on the news. It's that so many companies haven't figured out how to design products that people will buy.
Not "design" in the sense of the Reebok Pump sneaker having a pump shaped like a basketball, or AT&T's new laptop computer sporting an aerodynamic design. From the dashboard of the Plymouth Voyager to the soft lines of Black & Decker's Dustbuster, aesthetic concerns such as these get plenty of attention from manufacturers and consumers alike. American companies do not always succeed in designing attractive products, but they try.
Where they lag badly, however, is in a kind of design much less obvious but even more important. And their failure in this arena hurts anyone who is looking for a job, owns stocks, has a pension or cares about our country's economy.
This is "engineering design" — the process of turning a concept into a finished product, of figuring out how to make the new toaster, dress or computer as efficiently as possible. I co-chaired a committee of the National Research Council that recently examined engineering design in the United States, and we found the overall quality to be poor. Unless it improves, our companies and workers face real trouble.
Consumers see only the retail price of a product. But long before the product reaches the store, 70 percent or more of its cost is determined by its design. One reason IBM had such success with its "Proprinter" a few years ago, for instance, was that a designer named Charley Rogers led a team that found a way to build the printer from a few parts that could be assembled with simple vertical motions. The printer was not only easier to build but less likely to break. It sold like hot cakes.
Simplifying the design is not the only way to improve the
quality and speed of manufacturing. Computer-aided design and engineering has evolved from a promising concept into a powerful tool for conceptualizing possibilities and evaluating costs. New "benchmarking" techniques enable designers to help win business by setting performance standards exceeding those of competing goods. Improved accounting approaches quantify the true contribution of designers, helping them get needed resources.
More important than any specific technique, however, is simply recognizing the importance of changes like these. Our automobile and consumer electronics industries learned the hard way, by losing business to foreign competitors. Yet there continues to be widespread denial among other U.S. manufacturers that their design practices are outmoded. Because of managerial indifference rather than any technical barriers, many companies are unwilling even to try new design practices.
In an era of Toyota cars, Armani suits, Canon copiers and countless other foreign products, such complacency virtu-
ally guarantees further decline of U.S. competitiveness. What's needed is a complete rejuvenation of engineering design. Hewlett-Packard, Ford, Xerox and a handful of other U.S. companies have shown how to achieve this, implementing new design practices that yield shorter development times, lower costs and more desirable products. These pioneers typically needed between five and eight years to change their habits, and many of them now are willing to share their know-how to help other U.S. firms. But these others first need to wake up to the problem.
Companies need help. University engineering departments should be working closely with them to develop new design methodologies and to train the next generation of design engineers. Yet many engineering schools now give these concerns short shrift. Professors generally have little significant industrial design experience, understanding of current manufacturing, or contact with companies. Relevant textbooks are scarce. Research in the field is inadequate. Mechanisms for transferring new ideas from campus to companies are lacking.
For the sake of millions of American workers, all this must change. The need to revive engineering design must be recognized both in the corporate suite and on campus. If we don't learn to make better products, we can look forward to foreign companies' taking away ever more jobs and sales from Americans. Our continuing failure to take engineering design seriously is itself the perfect design for economic decay.
June 23, 1991
Charles W. Hoover Jr. is professor of manufacturing engineering at Polytechnic University in Brooklyn, N.Y.
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Short-Term Thinking in a Long-Term World
Donald N. Frey
Recent reports indicate that spending on research and development by U.S. companies is falling while foreign firms increase their R&D efforts. The reports are an alarm bell for our future. If the current recession has taught us anything, it's that we cannot focus just on immediate profit to the exclusion of longer-term success without risking our jobs and prosperity.
U.S. businesses obviously need to be responsive to short-term challenges and opportunities. But they cannot survive over the long haul unless they also pursue new technologies and innovation. The heart pacemaker took 32 years from original concept to realization. The video tape recorder took six years — much faster but still beyond the current planning horizons of many of our companies. It's no wonder foreign competitors often cash in on these advances.
Some U.S. firms, such as those in the pharmaceutical, aerospace, chemical and food industries, have become adept at deliberately pursuing and profiting from long-term innovation. But a committee that I chaired for the National Academy of Engineering reported recently that a shorter-term focus too often remains the norm and a major source of competitive disadvantage. The recent R&D figures from the National Science Board are subject to differing interpretations, but other data indicate that U.S. firms spend relatively less than their foreign counterparts on new equipment, machinery, and non-defense R&D.
Corporate executives, who report to stockholders, can be encouraged to take a longer view. They now often are rewarded for acting short-sightedly.
Imagine that you are a business leader deciding whether to start a new product development that could help your company beat its foreign competitors. Initiating the project will reduce profits this year and thus cut the size of your own performance bonus.
It would take a person of considerable vision — or, even better, wealth — to accept such a personal loss in favor of the company's long-term vitality. Yet that is precisely what many executives are expected to do. They are given little incentive to commission research or other initiatives likely to blossom after they retire. Their pay and reputation are based upon what they accomplish now.
For the sake of millions of American stockholders (and workers), corporate boards should develop compensation plans that induce their executives to adopt longer time horizons. How? Managers might be given stock options that cannot be exercised for several years, incentives tied to long-term company performance, and penalties for cashing out sooner.
More-sensible compensation packages are only part of the solution. Firms also should pursue ''patient'' investment capital to give themselves more flexibility. They should take advantage of joint ventures that spread risk among several players, making it easier for all to pursue untested innovations.
On a national level, we need to lower the cost of investment capital. Potential measures include cutting the federal deficit, reducing capital gains taxes and "double taxation" of corporate profits, and promoting personal savings. The federal government also should improve the efficiency of its regulatory, patent and licensing procedures.
Although the recent R&D figures are sobering, there are signs that at least some companies are getting the message. One corporate board on which I sit recently had a meeting at which someone suggested that the company's R&D budget should be reduced. A fellow board member replied indignantly, "What do you mean cut the R&D budget? If you try to increase earnings by doing that you're just liquidating the company!" That's something I'd never heard before in a board meeting.
Nor until recently had I heard a board ask to review the firm's research budget, or an employee take time to describe some new machinery in the factories. In the past, the discussion rarely got beyond financial matters.
So there's reason to hope that some companies finally are focusing on these nuts-and-bolts concerns involving technology, quality and the shape of the future. But regardless
of what the federal government does, our country's prosperity depends on many more firms extending their investment horizons still further. We've learned the hard way that a relentless focus on short-term profit is a shortcut to failure in a long-term world.
March 15, 1992
Donald N. Frey, professor of industrial engineering and management sciences at Northwestern University and former chief executive officer at Bell and Howell Co., chaired a National Academy of Engineering committee that studied "time horizons and technology investments" in U.S. industry.
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A New Partnership in American Science and Technology
Richard F. Celeste
After a spring marked by urban violence, plant closings and recession, state officials across the country are under intense pressure to come up with new ideas for revitalizing their ailing economies. One approach, which became popular during the 1980s in many state houses, is to create high-paying, high-tech jobs by nurturing local expertise in science and technology.
The same idea is now gaining favor within the federal government, which has begun looking beyond its traditional support of basic scientific research to helping companies actually make use of innovations.
The United States leads the world in scientific research. But Japan and other nations, often with the active support of their governments, have proven more adept at putting new ideas to work on the factory floor and in products ranging from automobiles to VCRs.
Although the initiatives are welcome, federal and state officials could easily trip over one another as they seek to get science and technology out of the laboratory and into the marketplace. As Adm. Hyman Rickover put it, "Trying to make things work in government is sometimes like trying to sew a button on a custard pie." This must not occur; the stakes are too high and resources too scarce.
A decade ago, state spending on science and technology was scant, going mostly for agriculture. But these investments have skyrocketed to nearly $1 billion in 1990 alone.
Some states, like Massachusetts, are providing seed money for local businesses. Others, such as Utah and Pennsylvania, have established research and technology projects that capitalize on the strengths of local universities. New Jersey is backing research based on its leadership in pharmaceuticals and electronics. Alaska is supporting projects involving everything from DNA tracking of salmon to generating energy with waterwheels. Other states are placing their bets on research parks that provide growing firms with laboratory space and other facilities.
The federal government necessarily takes a broader view, focusing less on the specific needs of any region than on the scientific and technical strength of the country as a whole. The National Science Foundation, the National Institutes of Health and other federal agencies support most of the basic research in the United States. Usually the goal is knowledge for its own sake. However, Washington also supports applied research for the military, health care and other vital fields. In addition, it has begun joining with private firms and others in supporting research aimed at commercializing innovations.
In other words, both state and federal entities are moving beyond their traditional roles. And their efforts have the potential to create new industries, jobs and hope for American workers.
Wasteful overlap must be avoided. In general, the federal government should maintain its commitment to basic science and engineering research and to meeting national needs. The states should concentrate on applied research and the diffusion of technology to meet local economic development objectives.
Rather than fighting over turf as these distinctions increasingly fade, federal and state officials should search for ways to build on each other's efforts, inventing new forms of cooperation.
Michigan, for instance, has begun taking advantage of a new center established by the state and the National Science Foundation. One new local company is using technology from the center to manufacture devices that apply diamond-thin coatings to cutting tools.
Illinois is helping local firms commercialize technology developed at Argonne National Laboratory, located outside Chicago. The University of Chicago also is involved in the effort.
The Cleveland Advanced Manufacturing Program, with support from the U.S. Department of Commerce, is helping small-and medium-sized firms to retrain employees to use advanced new equipment.
There is no simple recipe for this kind of cooperation. The main thing is for everyone — government officials, business executives, university researchers and others — to push in the same direction.
Science and technology alone cannot put an end to our country's serious economic and social problems. But they are an essential part of the solution. As the federal government and the states both seek to help U.S. companies become more innovative and competitive, they must learn to dance together instead of ignoring one another or, even worse, stepping on each other's toes.
American workers won't be helped by bureaucratic turf wars. They need jobs.
June 21, 1992
Richard F. Celeste, former governor of Ohio, chairs the Government-University-Industry Research Roundtable of the National Academy of Sciences, National Academy of Engineering and Institute of Medicine.
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Work and Family
Ever taken a sick day off work? Try this quiz. What percentage of workers in the United States do you think are offered paid sick leave by their companies: (a) 46 percent, (b) 67 percent, or (c) 88 percent?
Now a question for working mothers. Among married women with children under the age of 6, how big an increase would you guess there has been since 1960 in the number of those who have joined the formal labor force? Has the percentage: (a) gone up by half, (b) doubled, or (c) tripled?
A final question: Who generally gets more holidays and vacation days: workers in western Europe or those in the United States?
The answers suggest that the health care crisis and the continuing economic recession are not the only middle class issues likely to loom large in the 1992 presidential election. Millions of Americans also are straining with another problem: juggling work demands with family responsibilities.
The first question has two correct answers, neither of which is reassuring. Only 46 percent of employees in small firms have paid sick leave; 67 percent do in large firms. The answer to the second question is (c). Among married women with young children, the percentage in the labor force has risen from 19 percent in 1960 to 57 percent in 1988. As for international differences, workers in western Europe not only get more holidays and vacation days but also are more likely to receive extensive family leave and publicly subsidized child care.
An expert panel of the National Research Council on which I served reported recently that employee benefits have failed to keep pace with a labor force increasingly composed of people balancing work demands with family responsibilities. About half of American workers care for children, elderly parents or other family members. Fewer than a third of employees have a spouse at home full time.
Our panel analyzed data from a wide variety of sources and looked beyond political rhetoric to determine what the situation really is with parental leave, flexible hours, health insurance and other benefits. We found a clear need for more attention to the family concerns of American workers. Although more and more firms offer family-related benefits, many legitimate needs are not being met. For instance:
The majority of employed women have no paid leave for pregnancy or childbirth, and many lack unpaid leave as well.
Roughly 12 million children lack health insurance, even though they live in families that have at least one employed person.
Only 15 states have enacted parental leave laws, and these laws generally exempt small businesses.
Minorities and women raising families alone are especially likely to lack benefits since they tend to work for small firms and in seasonal or part-time jobs. Smaller firms create many new jobs and are somewhat more likely to offer part-time work and flexible schedules. But they also usually pay less and have fewer benefits; more than half do not provide paid sick leave.
Many readers undoubtedly know from their own experience what these numbers mean in human terms. Millions of Americans struggle every day to perform well on the job while finding time to care for a sick child, help an elderly parent or manage family crises. Particularly for single-parent families, there is evidence that economic and psychological stress has negative development effects on children. Employers suffer, too; data suggest that family responsibilities exacerbate absenteeism, tardiness and other work-related problems.
It is clear that the current system of employee benefits in the United States is inadequate for the diverse labor force of the 1990s and beyond. Improving the situation will not be easy, especially with many companies simply seeking to survive the current recession. But employers, unions and policy-makers must devise new ways to provide workers with family leave and paid sick leave, with more flexible schedules and work locations, with greater resources to help
care for children and elderly or disabled relatives, and with adequate health care coverage.
Perhaps specific solutions will emerge in the upcoming election campaign. The numbers leave no doubt, however, that millions of Americans are feeling the strain between the conflicting demands of work and family.
December 22, 1991
Lotte Bailyn is professor of organization psychology and management at the Sloan School of Management at the Massachusetts Institute of Technology.