The Productive Edge: How U.S. Industries Are Pointing the Way to a New Era of Economic Growth [Hardcover]

Richard K. Lester (Author)

Book Description

Publication Date: May 1998

Case studies of U.S. industrial performance show how recent gains in productivity in key sectors can serve as models for renewed growth in the economy as a whole. Compared to the early years of this decade, when concerns about the global "competitiveness" of U.S. industries reached an anxiety-laden peak, the past few years have looked positively rosy: inflation and interest rates under control, millions of new jobs created, the federal budget deficit well off its peak, and the stock market rising to unprecedented heights. At least one dark cloud still lurks on the horizon: the lagging overall rate of productivity growth, which has been stuck in low gear since the 1970s, retarding concurrent improvements in living standards. Recently, however, significant new productivity gains have been reported in many important industries, both old and new, including automobiles, semiconductors, steel, electric power generation, and cellular communication. What is it about such industries, and individual firms in those industries, that has enabled them to buck the general trend--in effect, to regain their productive edge? In this wise and illuminating book, a leading authority on this crucial issue searches five recent success stories for clues to shape a new national strategy for economic growth.

Editorial Reviews

Amazon.com Review

Alan Greenspan was quoted in 1998 as saying "the current economic performance ... is as impressive as any I have witnessed in my near half-century of daily observation of the American economy." With inflation down and corporate profits pouring in, it's hard not to share in this optimism. But in the early '90s, things weren't quite this rosy. Richard Lester opens his book The Productive Edge with a recounting of that embarrassing day in Tokyo in 1992 when George Bush coughed up "the barf heard around the world" onto the lap of his dinner companion, the Japanese prime minister. At the time, American industry was in a funk, cowering before the economic might of Japan and Germany. Today, the roles seem reversed, but are they really?

Lester believes that the insecurity and volatility that marked those years is masked but still with us today. He points out that a decade of downsizing, corporate restructuring, and new management techniques has not improved the rate of productivity growth, which he believes to be the "most important measure of any nation's economic performance." The book first looks at the dismal state of productivity in the U.S., then considers examples and extracts lessons from companies in the automobile, steel, semiconductor, and cellular communications industries that have successfully bucked the trend. Lester attacks the total quality movement and corporate reengineering as ineffective and argues that to increase productivity and to lessen the insecurity and volatility lurking just below the surface of the bubbling economy, both business and government must spend more, not less, on research, development, and people. The Productive Edge will open your eyes to the problems inherent in today's economy and offer solutions useful to anyone in business and government. --Harry C. Edwards

From Scientific American

One decade ago the Massachusetts Institute of Technology assembled a Commission on Industrial Productivity to examine the reasons American dominance of high-technology industry was experiencing a serious competitive decline. The commission's 1989 book, Made in America: Regaining the Productive Edge, documented the problems in a number of industries--problems that were evidenced by poor product quality, noncompetitive production costs and excessively long product cycles, as compared with best practice in Asia. The most painful part of this realization was that the decline affected not only steel, textiles and automobiles, but also the high-tech microelectronics, computer and communications industries. This book was a call to arms. What were Americans doing wrong? How could we fix it? Now the leader of the team that wrote Made in America has come out with a sequel, borrowing the title from the subtitle of the earlier study. But the question now being asked is not what did we do wrong, but what are we doing right? Lester examines the easy answers and finds some truth in all of them: Our most threatening competitor, Japan, was struggling with the rupture of the "bubble" economy and no longer had almost unlimited access to capital. After the profligate public borrowing of the Reagan administration, politicians of both parties committed themselves to bringing the federal budget into balance. Exchange rates had altered dramatically throughout the 1980s, with the U.S. dollar losing half its value against the yen. And most important--and clearly a matter of serious concern for the future--U.S. wages had reversed their traditional course. Union membership in manufacturing was declining; firms were reducing costs by laying off middle managers who could find only lower-paying jobs. But these answers, which imply that the favorable conditions industry now enjoys may not last forever and may not be acceptable to the population at large, failed to explain the steps managers had taken to change corporate culture. Lester looks into corporate experience with the "marginal manifestos" offered by an explosion of business management books. He evaluates two approaches that did attempt to address the total performance of the enterprise: Total Quality Management (TQM) and Corporate Reengineering. About two thirds of some 500 firms surveyed by Arthur D. Little were disappointed in these approaches. Lester notes that many firms did not appreciate how profound change had to be and how long it would take for the benefits to be evident. The truth can be best understood in the strengths and weaknesses of American culture: our tendency to complacency and hubris (my word, not Lester's) and our ability to accept challenges when they finally get our attention and to come up with innovative solutions. American managers seemed slow to react when high-tech trade started to go south around 1970. But once the erosion of U.S. market shares got their attention, many managers brought a level of flexibility and innovation to both organization and strategy that allowed them to respond much more quickly to competitive threats. The key elements of success are basic and easy to understand. They include loyalty, focus, innovation and a willingness to take risks. But they must be deeply and comprehensively embedded in corporate culture. This explains, at least in part, why it took so long for the turnaround to produce visible results at the macroeconomic level (although some firms, of course, were able to transform their behavior earlier). Once American industry had broken away from the mass-production model and given up hope that exposing everyone to a TQM class would do the trick, the rate of recovery, assisted by financial troubles in Japan, has astonished almost everyone. The groundwork for the recovery was in large measure already coming into place before the 1990s. Many firms had placed their priorities where they saw the most entrepreneurial opportunity, whereas Asian strategies aimed at commoditizing products to leverage their superior handling of process technology, factory management and cost. While Japan and Korea were placing their bets on commodity memory chips and were failing to master the software business, American entrepreneurship was alive and well. Engineers were leaving semiconductor companies and starting application-driven businesses that could add more value to the electronic hardware. The U.S. software industry not only grew in size but began to take from hardware the role of defining and delivering function for the user (witness the extraordinary position now occupied by Microsoft). Businesses paid new attention to total customer satisfaction by delivering a complete system of hardware, software and service. Like IBM, many discovered that offering service may bring more profit to the firm and more value to the customer than simply selling hardware whose price continues to fall. But until companies began to pay attention to their product quality and cost and recognized that a high-tech product built in a low-tech factory could not compete, the more value-added strategy of American firms could not show through in the economic statistics. Another important factor in the rebirth of manufacturing competitiveness is the power of information technology, which has allowed everyone in the firm to seize the initiative from management and permitted flatter, more flexible organizations. But the Internet, like TQM and Reengineering, proved to be no silver bullet. Its contribution to management and to new business innovation is real and highly significant. But the long time required to realize the benefits of information technology simply points up the rightness of Lester's focus on culture change. A Harvard University study of supply-chain integration in the automobile industry revealed that the automaker and its primary suppliers had great difficulty using well-known computer design and networking technology to integrate their product development until they were able to create a project-driven, collaborative culture. In short, there is no "one size fits all" solution for U.S. manufacturing. Lester notes in six industry case studies that each industry, and often individual firms, found unique solutions to the risks produced by more open global markets and ever more sophisticated and determined competition. Furthermore, he is not fully satisfied that industry's problems are all solved or that Americans would be satisfied with the solution. He leaves us with two problems. Lester dares to ask the hard question: Is the turnaround an illusion? He observes that manufacturing productivity stopped growing at about 2 percent a year around 1973 and has been stuck at less than 0.5 percent ever since. Is this a reflection of the difficulty economists face in measuring productivity? the result of the admixture of services and manufacturing as firms become more responsive to customer needs? or the result of a more competitive economy in which margins continue to be pressed by the most productive performers, and the workers laid off by one firm struggle to find productive roles in another? The optimists among us might feel that as long as the stock market soars, high-tech market shares are growing again and the federal budget is in balance, we can tolerate a lagging productivity rate. But Lester doesn't leave us much room for a rebirth of complacency. He finds that much of our business success has been bought at the expense of an inexorable growth in income disparity in the American workforce and a deep sense of personal vulnerability to the uncertainties of a market-driven, global economy. He worries that the massive research investments made by government in the past, which provided the intellectual resources for American innovation, may be curtailed. He recognizes that the firms exhibiting best practice are not typical. He is especially concerned about low savings rates and rates of investment. But underlying all the threats and uncertainties about the future is a pervasive empowerment of individuals, together with a great increase in the demand for personal responsibility. Lester asks us to think about how this call for a "new economic citizenship" can enable a continuation of economic success and at the same time reduce the income disparities and sense of vulnerability that deprive many Americans of the full fruits of that success.

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Product Details

• Hardcover: 368 pages
• Publisher: W W Norton & Co Inc; 1St Edition edition (May 1998)
• Language: English
• ISBN-10: 0393045749
• ISBN-13: 978-0393045741
• Product Dimensions: 9.6 x 6.4 x 1.3 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Amazon Best Sellers Rank: #1,262,524 in Books (See Top 100 in Books)

More About the Author

Richard K. Lester is Japan Steel Industry Professor and Head of the Department of Nuclear Science and Engineering (NSE) at the Massachusetts Institute of Technology, where he is also the founding director of the MIT Industrial Performance Center (IPC). His teaching and research focus on innovation management and policy, with an emphasis on the energy and manufacturing sectors. He has led large-scale studies of national and regional competitiveness and innovation performance in North America, Europe, and Asia. He has also written extensively on the management and control of nuclear technology. In addition to his latest book, Unlocking Energy Innovation, other recent books include Innovation - The Missing Dimension (with Michael J. Piore), on the sources of creativity and innovation in advanced economies, and Making Technology Work, based on a popular MIT course on "Applications of Technology in Energy and the Environment" he co-taught for many years with his colleague John M. Deutch.