Services confusion

This morning, the Institute for Supply Management (ISM) released its index of nonmanufacturing activity — showing an economic rebound. That is good. But the reporting on this index is bad — and misleading. The index gets reported as “services” — as in this story Service Sector’s Rebound Reflects Strength in Exports – WSJ.com. It is not a “services” index; it is a non-manufacturing index. There is a huge difference between the two. For example, the ISM non-manufacturing index includes the following industries: Agriculture, Forestry, Fishing & Hunting; Mining, and Construction. In addition, the survey includes both what I call tangible services (involving physical activities) and intangible services (not involving physical activities). It also includes both transactional services (such as Retail trade and Transportation & Warehousing) and informational services (such as Professional, Scientific & Technical Services, and Educational Services).
The ISM gets it right — this is a measure of the non-manufacturing portion of the economy. It is the reporters and the press who get it wrong. It simply illustrates how locked in to an outmoded mentality we are. If it is not manufacturing, it must be services, right? Wrong, wrong, wrong.

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Trade secrets

While most of the focus is on patents, here is a story to show that the concept of trade secrets is still alive and well. IRobot wins injunction against competitor – The Boston Globe:

A federal judge in Boston has issued an injunction against a Chicago-area robot maker accused of stealing trade secrets from iRobot Corp. of Burlington.
In August, iRobot sued Robotic FX Inc. of Alsip, Ill., a company founded by former iRobot engineer Jameel Ahed. IRobot claimed that Ahed had used iRobot trade secrets in the building of a robot called the Negotiator, which beat out iRobot’s PackBot for a $280 million military contract.
After the suit was filed, detectives hired by iRobot witnessed Ahed trying to discard iRobot-related materials. Ahed also acknowledged shredding data CDs and erasing hard drives. Ahed said he was not destroying evidence, but US District Judge Nancy Gertner said his behavior “gives rise to a strong inference of consciousness of guilt” and “profoundly undermines Ahed’s credibility as a witness.”
During closed court hearings, iRobot discussed three areas in which it claimed the company’s trade secrets had been stolen by Robotic FX. Gertner refused to issue an injunction covering two of the areas, saying iRobot had revealed some of the information in a patent filing, thus undermining its status as a trade secret. But Gertner said there was good evidence that Robotic FX may have misappropriated iRobot technology used to make the rubber tracks that propel its robots. “While Ahed claims that he developed the track independently, this court will not credit his testimony,” Gertner wrote. Because the tracks are vital to the operation of the Negotiator robots, the injunction is a major barrier to continued manufacturing operations at Robotic FX – at least until a trial is held in April.

Of course, patents are totally out of this case. iRobots actually filed two cases — a trade secrets case in Boston and a patent infringement case in Alabama. No word on the status of that case.
There is an interesting national security twist to this. RoboticFX won a contract to build 3000 bomb detection robots for the Army — a contract which is now on hold.

Homers

No, not the blind Greek poet or Bart Simpson’s dad. Homers are, according to a study by Harvard Business School professor Michel Anteby (Homers: Secrets on the Factory Floor — HBS Working Knowledge), those things that skilled workers make at the shop for personal use:

A factory worker uses company time and materials to fashion a lamp he will take home for personal use—an artifact called a “homer.” The practice is probably illegal and clearly against written company policy. If discovered, the worker could be fired on the spot for his action.
The consequences of homer making seem cut and dried. But not so fast, says Harvard Business School assistant professor Michel Anteby. In interviews with retirees of the French Pierreville aeronautics plant, Anteby found, perhaps not surprisingly, a veil of secrecy around the practice—but also a quiet complicity between workers and management.
Perhaps most surprising of all, Anteby argues, is that the practice may help some organizations be more effective. Homer making keeps teams together and skills sharp during idle times in the highly cyclic aeronautics business, for example. Also, someone’s well-crafted homer can be a source of pride when fellow workers take note. Says Anteby: “If employers are able to tap into these drivers, and remain within the legal boundary, then they might be in a better position to allow their employees to blossom.”

As Anteby admits, homers are not just an industrial phenomena. Lisa Takeuchi Cullen amplifies on that point in her blog yesterday — I thought Homer was Bart’s dad – Work in Progress – Worklife – Workplace – TIME:

Hmm. I don’t work in a factory, and can make nothing of use with my bare hands (I can fashion a Play-Doh pony for my kid to enjoy smooshing, but, again, I said of use). But I’m sure I’ve used company resources and company time for personal needs.
Like when I was a writer at Money magazine, I used my skills and resources as a personal finance reporter to research estate planning implications for expat Americans. In fact, I did pitch and write a story on the subject—but only because I needed to apply the information to my father’s situation. I bet you I’m not alone; plenty of reporters work on stories merely to satisfy a personal need to know how it turns out. And don’t get me started on my friends at consumer magazines. The editor needs new curtains? A fall feature on draperies it is!

Anteby looks at the homer phenomena with somewhat of an industrial eye: the production keeps skills in tune during stack time. But with work and personal time blurring, the balancing act for both employees and employers has become more difficult. Working out that balance is important to the smooth operation of the new networked organization of production that is a hallmark of the I-Cubed Economy. Use of “company time” for personal activities — or, more common using company time to benefit both company and personal needs, as in the Cullen example — is a needed way of maintaining that balance.
After all, part of the I-Cubed Economy is also the “Always On” Economy. And if you are always on, you need to find some time to be off.

India gets it

Over two years ago, the India created a National Knowledge Commission. According the charter, the National Knowledge Commission is a high-level advisory body to the Prime Minister of India, with the objective of transforming India into a knowledge society. At our conference in September on The Dragon and the Elephant: Understanding the Developing Innovation Capacity in China and India , we were privileged to hear from the Chairman of the Commission, Sam Pitroda. His presentation outlined the work of the Commission in a number of areas, including education and access to information (including but not limited to issues of libraries, translation of documents/publications, information portal etc.). Recommendations in these areas were made earlier this year. Ongoing work includes increasing science and technology research and education and the application of knowledge to practical uses in agriculture and industry (including the promotion of entrepreneurship).
I was especially interested to see the focus on the dissemination of information. In a nation such as India, with multiple languages and a sprawling library system, such a focus is critical. But problems of dissemination of information are not confined to nations such as India. The US information dissemination system needs to be addressed as well. Here, the challenges are different. In some cases, it is a challenge of information overload. In others, it is the problem of the information-divide. And then there are all the issues of what should be proprietary (and private) versus what should be public. And who should have access to what information (both the issue of public access to information and the issue of privacy).
The Indian National Knowledge Commission should help that nation move into the I-Cubed (Information-Innovation-Intangible) Economy. It can also provide us with some pointers and lessons – if we bother to pay attention.

Inventions of the Year

TIME has published its list of – The Best Inventions Of The Year. In not too much of a surprise, the iPhone took top place. The list is techie-gadgets (and being an ex-engineer I still love techie gadgets). No social invention here – which I think is very limiting in its view (although Henry Ford gets credit for an organizational invention – the assembly line). Maybe next year they can broaden the categories.
But still a fun read.

October employment numbers

This morning’s employment numbers showed a surprising increase in payrolls. As the New York Times reports:

The economy added 166,000 jobs in October, the fastest pace in five months, as payrolls grew in the service sector. The report could ease analysts’ fears of a slowdown and stocks markets appeared poised to rally on the news.
The estimate of job growth, which came in ahead of Wall Street’s expectations, follows a downwardly revised 96,000 gain in September and a 93,000 gain in August, the Labor Department said. Last month’s expansion suggests the labor market is recovering from a summer slowdown, though payrolls are increasing at the slowest annual rate since June 2004.

The numbers follows a trend we generally hear every month, (from the Wall Street Journal):

The Labor Department said hiring last month in goods producing industries fell by 24,000. Within this group, manufacturing firms cut 21,000 jobs. Construction employment was down by 5,000, the fourth-straight decline. Repeating a recent pattern, nonresidential construction fared much better than residential building.
Service-sector employment, in contrast, swelled 190,000, the biggest rise since May. Business and professional services companies’ payrolls spiked 65,000. Education and health services employment advanced by 43,000. Leisure and hospitality rose 56,000, while the government added 36,000 jobs.

This data is based on payroll employment by industry. Sometimes it is more interesting to look at occupations. As part of the employment data, BLS publishes non-seasonally adjusted year to year occupational data – in this case Oct 2006 to Oct 2007.
Management, business, and financial operations occupations, Professional and related occupations, Service occupations and Production occupations all showed an increase in employment. The surprise here is with the production occupations. Sales and related occupations, Office and administrative support occupations, Installation, maintenance, and repair occupations and Transportation and material moving occupations all lost jobs. Farming, fishing, and forestry occupations and construction and extraction occupations were essential unchanged.
That presents a different picture from the standard “services up – manufacturing and construction down” scenario.
The other interesting – and some what anomalous – bit of information comes from the unemployment data. One would expect that the number of unemployed would go up in those occupations where employment went down (and visa versa). But that is not how our labor market works. The “one-side up; the other side down” dynamics only occurred in Management, business, and financial operations occupations, Sales and related occupations and Transportation and material moving occupations. In Professional and related occupations, Service occupations and Production occupations unemployment went up even though employment increased. In Office and administrative support occupations and Installation, maintenance, and repair occupations both unemployment and employment declined. Unemployment in Farming, fishing, and forestry occupations went down while employment was unchanged. In Construction and extraction occupations unemployment jumped even though employment was essentially unchanged.
I’m not sure what to make of this. Nor would I want to make too much of two data points (Oct 2006 versus Oct 2007). But it does show the dynamics of the labor force is must more complicated — and much more interesting — then the services/manufacturing paradigm would indicate.
Time to change the paradigm?

New patent regs delayed

Early last month, I noted that the US Patent and Trademark Office (PTO) had proposed new rules on continuations – the ability to file unlimited amendments to a patent application. PTO claims these rules are need to reduce the backlog of applications and speed up the process. As I noted, these rules have been greeted with skepticism and opposition. Yesterday, a federal court for the Eastern District of Virginia granted the drug company GlaxoSmithKline an injunction blocking the rules.
As the Wall Street Journal summarized the arguments:

Critics of the existing system also note that many companies use continuations to delay introduction of a product, monitor market developments and then modify their patents to take advantage of emerging trends. On the flip side, opponents of the new rules said the rules were unclear, stifled innovation and would make it more expensive for small companies and individual inventors to patent their inventions.

One critic of the changes told me that the regulations essentially blame the customer of the PTO — the applicant – for filing complicated materials in order to hide poor management. If applications have become more complex in recent years then better training and operational management is necessary.
The lead plaintiff is GlaxoSmithKline, but more are expected. As one commentator said, the “Eastern District will be awash in Amici.”
The case is not expected to be decided at this level until next year. And then there will likely be appeals. So stay tuned. This one has all the makings of a knock-down, drag-out fight.