Concerns that IndustryWeek raised as early as 2003, that moving production off-shore risks losing research and development, technology and innovation to our off-shore partners, are once again being debated.
IndustryWeek has long asserted that manufacturing production is a source of competitiveness for companies and the countries in which they reside. During the last decade's offshoring experiment (as it's been dubbed in a recently published book, "Producing Prosperity"), IW consistently cautioned against offshoring production as a cost-saving strategy and voiced concerns about its effects on the U.S.'s (and any developed country's) future competitiveness. However, we recognized offshoring has its place in a global manufacturing strategy -- to enter new markets, for example.
One of our major concerns centered on how separating production from research and development might weaken a company's -- and the country's -- future ability to innovate. We cautioned readers, in at least one of a series of reports, to consider: Will moving production off-shore eventually pull R&D, technology and innovation offshore as well?
Recent publications indicate that we were right to be concerned.
In their book, "Producing Prosperity," Gary P. Pisano and Willy C. Shih, professors at Harvard Business School, recount the causes and consequences of offshoring and show "how today's undervalued manufacturing operations often hold the seeds of tomorrow's innovative new products…" They call on executives and policy makers to take steps to revive the "industrial commons," by reinvesting in new product and process development at their U.S. operations.
Production in the Innovation Economy (PIE), a research project by MIT, last month reported preliminary findings that identified "holes in the industrial ecosystem as the single most challenging obstacle to creating and sustaining production capabilities in the United States that enable innovation to come to market." The holes are those left by the "disappearance of large numbers of suppliers under pressure from global competition and by the disappearance of local capabilities once provided by large corporations as part of their own business operations." They too, assert that the renewal of the lost production capabilities is necessary to ensure the U.S. gains full value from its R&D, technology and innovation.
These reports serve up strong evidence that some of the offshoring strategies that companies have implemented over the past decade have hurt both their own and the country's competitiveness. At minimum, manufacturing executives and public policy makers should review the research and reconsider how manufacturing production capability contributes to the creation of new technology and innovation -- and increases your company's and the country's competitiveness.