More on government reorganization

In an earlier posting on the State of the Union Address, I drew attention to the President’s plan for government re-organization. Yesterday, the White House announced that Deputy OBM Director Jeffrey Zients to head up the government reorganization efforts. Zients is also currently also the federal government’s Chief Performance Officer (CPO). The announcement noted that “Our first focus will be looking at trade and exports to see how we can better reform these functions to give American companies a leg up in the global economy.”
This is a good step forward. But there are other steps the President can take immediately to push forward the competitiveness agenda.
As I mentioned earlier, Center for American Progress (CAP) published a report outlining a number of process steps the Administration could take to address policymaking on competitiveness. In that earlier posting, I highlighted the coordination and planning activities recommended in the report — based on the national security model. I will come back to those recommendations.
However, the report (A Focus on Competitiveness) also addressed the reorganization question, with the following suggestion:

To address the fragmented responsibility for key competitiveness functions, the president should also ask the National Academies panel to study the needs of interested parties and evaluate an executive branch reorganization plan that could include:
* Creating a Department of Business, Trade, and Technology by combining relevant agencies within the Department of Commerce with trade and business focused agencies and offices, including the Office of the United States Trade Representative, the Small Business Administration, the Export-Import Bank of the United States, the Overseas Private Investment Corporation, and the U.S. Trade and Development Agency. Separate evaluations would determine where to put existing Commerce “administrations” not closely aligned with the new department’s mission. Specifically, these evaluations should assess:

– Whether the National Oceanic and Atmospheric Administration is a better fit in the Interior Department, whose mission includes protecting America’s natural resources and heritage. NOAA distributes environmental information, manages coastal and marine environments, and conducts applied scientific research on ecosystems, weather, climate, and water.
– Whether the Economics and Statistics Administration (including the Bureau of Economic Analysis and the U.S. Census Bureau) should be moved along with other federal statistical agencies to a new crosscutting U.S. Statistical Agency. Another option is to create two separate statistical agencies–one for demographic, economic, and business information, and another for environmental information, leaving other unrelated statistical functions where they are. As these options are being evaluated, we recommend the president issue an executive order that directs the design and implementation of a “virtual” U.S. Statistical Agency. (See box on page 28)

* Creating a more expansive “competitiveness agency” by adding to the new department described above job training and higher education programs from the labor and education departments
* Creating an even more comprehensive competitiveness agency by also including programs that promote science for economic development purposes, such as those in the departments of energy, transportation, and housing, and some science coordination functions from the White House Office of Science and Technology Policy

I doubt very much that the Administration will look to hard at the last two options of an expansive “competitiveness agency” or a super-agency. Those, especially the latter, are probably a bridge too far. President Nixon once tried the super-agency approach, but it never received serious attention.
But the creation of a Department of Business, Trade, and Technology is within the realm of possibility, as is the creation of a U.S. Statistical Agency. Although, the centralization of statistical functions has its own problems and pitfalls (I know — I looked into this back in the 1980’s as part of my role in the last attempt to create a Department of Trade and Industry).
While I may support such as reorganization (and clearly support the Administration looking at the options), let me add a note of caution. No form of reorganization will completely solve the coordination problem. I’ve noted before in the context of both financial regulation and homeland security that we don’t necessarily need to create new hierarchical structure. We need to empower the network.
In that regard, I hope the Administration will look very carefully at the parts of the CAP report I highlighted earlier:
• A Quadrennial Competitiveness Assessment by an independent panel of the National Academies whose objectives are to collect input and information from many sources and perform a horizon scan that identifies long-term competitiveness challenges and opportunities
• A Biannual Presidential Competitiveness Strategy that lays out the president’s competitiveness agenda and policy priorities, and captures the attention and buy-in of cabinet principals
• An Interagency Competitiveness Task Force led by a new deputy at the National Economic Council that develops the biannual strategy, oversees White House coordination of competitiveness initiatives, and monitors their implementation by agencies
• A Presidential Competitiveness Advisory Panel of business and labor leaders, academics, and other experts who assist the administration in developing policy details.
A version of the last point is taken care of with Council on Jobs and Competitiveness. I suspect that the Interagency task force might be in the works. The first two — the assessment and the strategy — can be implemented by Executive Order. In fact, the President can build upon the strategy report mandated in the reauthorization of the AMERICA Competes Act.
Reorganization is tricky and will use up a fair amount of political capital. In contrast, creating a Quadrennial Competitiveness Assessment and a Biannual Presidential Competitiveness Strategy is easy. And I suspect will have a greater long term impact.
The President should go ahead immediately with these two actions. It will show how serious he is about the competitiveness agenda. And it will start the process moving. Otherwise his agenda risks getting bogged down in the seemingly endless debate over budgets and government reorganization.

Canada gets it on manufacturing in the knowledge age.

Canada gets it. Or at least Tony Clement, Canadian Minister of Industry, gets it when it come to understanding that the manufacturing and knowledge economy are one.
Here is a quote fro a recent article in Site Selection magazine:

Asked how important manufacturing continues to be in the digital age, Clement said, “I really do believe we have to continue to make things. When I first came to our department as minister, I found in speeches this false dichotomy between the knowledge economy and the old manufacturing economy. I really altered that message, because to me the two are very much connected. Yes, in ICT, you can move forward on the knowledge economy in and of itself. But the knowledge economy primarily is a means to an end — it’s how you do agriculture, oil and gas, greentech or manufacturing better.”


GDP up in 4Q 2010

GDP estimates from BEA for the 4th quarter of 2010 shows that the economy grew by 3.2%. This compares with a 2.6% growth rate in the 3rd quarter. For the entire year, GDP was up by 2.9%. (Remember that this is an “advanced” estimate based on incomplete data, including trade data. It will be revised twice in future months and should be treated accordingly.)
Good news, but there is a worrisome detail in the data on fixed investment. Investment in equipment and software was up, but not as much as previous quarters. This investment grew by only 5.8% in the 4Q, compared with 14.6% in 4Q 2009, 20.4% in 1Q 2010, 24.8% in 2Q 2010 and 15.4% in 3Q 2010. However, almost all of that slow down is in investment in transportation equipment. Investment continues to grow in IT equipment and software and in industrial equipment. In the case of IT equipment and software, investment grew by 20.7% in the 4Q, although investment specifically in software grew by only 6%. Whereas investment in transportation equipment dropped by 9.3% and investment in industrial equipment grew by 4.2%.
Unfortunately, the GDP numbers do not offer any guidance on investment in intangibles other than software. So we do not know whether companies have increased their investment in important areas such as human and organizational capital. But that is a discussion for another time.
Bottom line: the economy seems to be picking up. But not as good as it could be. As the New York Times notes, “While an improvement, the latest output number was slightly below analysts’ expectations of 3.5 percent.” Nor is it anywhere near the levels of previous recoveries at this point in the cycle. So more needs to be done.

Changing nature of innovation – business executive's view

The GE Global Innovation Barometer 2011 – a survey of business executives – is out with some interesting findings:

The “GE Global Innovation Barometer” found that 95 percent of respondents believe innovation is the main lever for a more competitive national economy. But just how to accomplish that will take a uniquely 21st century path, as respondents are prioritizing technology that addresses local needs; looking for innovation from smaller organizations; and pursuing strategic partnerships to make tangible innovation happen. All of these areas are converging as problems are now bigger — which involves a wider system of players.
Beth Comstock, chief marketing officer and senior vice president, GE, said the study illustrates that the rules around innovation are changing. Companies must “embrace a new innovation paradigm that promotes collaboration between all players — big, small, public, and private — fosters creativity, and emphasizes solutions that meet local needs.”

Here is some details:
“Today Innovation is more driven by people’s creativity than by high level scientific research”
27% Strongly agree
42% Somewhat agree
22% Somewhat disagree
6% Totally disagree
“The way companies will innovation in the 21st century is totally different than the way they have innovated in the part.”
39% Strongly agree
36% Somewhat agree
17% Somewhat disagree
5% Totally disagree
And the biggest difference they see is the need for partnerships among several players rather than a single organization.
So, where is the public policy to foster this new paradigm of collaborative, beyond-science-based innovation?

Dun & Bradstreet and the intangible of reputation

Here is an interesting tidbit from BusinessWeek about the future plans for D&B. The credit reporting part of the business has been spun off as Dun & Bradstreet Credibility Corp. The CEO, Jeff Stibel, want to move the company into the business of reputation management. According to the story,

“What we’re trying to do now is show a holistic picture” of what makes a business appear trustworthy, he says. “Credit is just one component…. D&B’s largest competitors these days are Google, Facebook, and Twitter.”
. . .
Credibility Corp.’s first new offering will collect comments and reviews from sites such as Twitter, the Better Business Bureau, Yelp, and Citysearch.
. . .
“Businesses are confused and paralyzed,” he says, “because they don’t know where to start” managing how they are perceived online.

Unfortunately, the same can probably be said for how small businesses manage most of their intangible assets — not just reputation.

Patents (and the State of the Union Address)

There has been a lot of bandwidth wasted (my update of the old “ink wasted”) in reaction to the State of the Union. But here is an interesting side comment worth highlighting. Over at the IAM Blog, Joff Wild takes the President to task for claiming that the US issues the most patent. Joff notes that China issues far many more patents, but there are unexamined design and utility patents.
Now here is where it gets interesting. Joff does on to say:

However, the numbers are not really that important. It would be a huge mistake for the Americans to think that they are and to try to gauge how they are doing based on such a misleading measure. Instead, what matters is that patents being granted enhance the competitive position of their owners, and/or help them raise finance, and/or build new products, and/or enable expansion, and so on. A patent is just a piece of paper until it enables the patentee to do something it would not otherwise have been able to do. If the patents being granted by an office are not enablers then that office is merely spending time and money on handing out worthless pieces of paper. [Emphasis added]

That part I’ve put in bold is especially important — and something we often forget. It is not that patent that has value — but what the patent helps you do. And to push the point even further, remember that a patent is not a right to do something — it is a right to stop others from doing something. And that is a right that can be abused when it does not “enhance the competitive position of their owners, and/or help them raise finance, and/or build new products, and/or enable expansion, and so on.”
So, as we talk about innovation policy — and its subset innovation metrics, let us please try to keep this fundamental point in mind. And thanks to Joff for reminding us.

Daniel Bell

Sad news has come that Professor Daniel Bell has passed away. Bell was an early and profound influence on my thinking through his seminal book, The Coming of the Post-Industrial Society. That book shaped the discussion of our economic transformation for generations of thinkers. And generations of policymakers. If you scratch the surface of the debate over the changing nature of our economy, you will find it is built on the framework constructed by Bell.
While I now disagree with some of the concepts Bell elucidated in his work, I am profound grateful for his contribution. His path-breaking work helped us all better understand the world we live in. May he rest in peace.