Archive for February, 2006

Listening to Understand

Tuesday, February 28th, 2006

by Tammy Hart

As we head into 2006, we are moving towards what some are calling the “Empathy Economy,” and “Design Thinking” is all the rage. Consumers are demanding empathy from corporations, and companies are doing everything they can to deliver (and then some.) The focus is shifting from just making a product to creating an entire experience, which might include things that the customer never considered.

This new concept of “Design Thinking” is focused on each customer’s deep personal needs, and addresses complex problems by creating and discovering new solutions beyond what people expect. Design Thinking requires a diverse team of skilled people with great passion for finding resolutions to problems. In today’s economy we need to focus on the entire customer experience, break away from habitual ways of working, and strive for continuous design and innovation.

Successful customer service associates understand the importance of building relationships with clients to retain their business. In Dale Carnegie’s book, How to Win Friends and Influence People, he suggests that you can make more friends in two-month’s time by becoming interested in other people than you can in two years by trying to get other people interested in you. That makes sense to me. What becomes challenging for some is being genuine about their interest.

In his book The Seven Habits of Highly Effective People , Stephen R. Covey talks in depth about trying to understand someone else before focusing on being understood. Most of us, Covey notes, listen to others with the intent to reply, composing our responses rather than really listening. It seems natural to share your related experience with the speaker as they are telling the story, but according to Covey, it’s best to hold back from projecting your own experiences into the conversation too quickly. I would have to say the majority of us are guilty of doing this, but at least by being aware of it, we can try to improve our communication skills.

Synergy is also another word that is getting a lot of attention these days. Experts suggest that if you can win someone’s trust through empathetic listening, the natural effect is positive synergy. Learning to appreciate diversity and understanding the value of differences in others’ ideas, perceptions and interpretations is very important in creating positive synergy.

Oftentimes people who are insecure have a tendency to feel threatened about sharing knowledge or giving duly earned recognition. There is a difference between a person with respect who is willing to cooperate and has a moderate level of trust and a truly synergistic person who is interested in gathering as much information as they can through diversity, and the ones who sincerely appreciate others are the ones who will excel.

Sources:

www.fastcompany.com

www.msn.com

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Offshoring is Gaining Speed and Intensity

Tuesday, February 28th, 2006

by Pete Julius

The United States has experienced a dramatic drop in the number of new and expanded facility announcements over the past few years. This is nothing new, but unfortunately it is a reality. One of the main reasons for this destructive trend is the pressure companies are under to streamline costs to improve profitability. In response to this pressure, companies have opted to locate facilities to lower-cost countries such as China and India . Some are even outsourcing work to lower-cost countries. However, several surveys and articles indicate that cost is not the only factor. The 9th Annual Price-Waterhouse Cooper’s Global CEO survey and A.T. Kearney’s 2005 FDI (Foreign Direct Investment) Confidence Index indicate that there are in fact more reasons for establishing facilities in low-cost countries than just cost-reduction measures. Their work indicates that the following causes are motivators for companies investing overseas.

•  Penetration of new markets

•  Serving existing customers better

•  Increased capacity

•  Access to a higher skilled labor force

•  New large markets

•  Access to export markets

•  Government incentives

•  Favorable cost structure

•  Infrastructure or macroeconomic climate improvement

•  Educated labor force

•  Management talent

•  Rule of law

•  Cultural affinity

• Regulatory environment

Though there are lots of reasons for locating overseas, cost still seems to be the main driver. Research and working knowledge of corporate real estate executives, site selectors, brokers, economic development professionals and other consultants have proven this point. However, economic development professionals need to become more knowledgeable and have a greater understanding of these motivators as they try to position their communities for expansions and new facility projects. Globalization is making retention and attraction projects exceedingly difficult, and they will only become more difficult. We are still at the early stages of these trends. China and India have seen most of the recent activities, but they are only the tip of the iceberg.

Most of us know and understand that the real size of an iceberg is beneath the water’s surface. Imagine China and India at the tip of the iceberg and the rest of the developing world underneath. Brazil and, believe it or not, Russia (eastern) are becoming popular locations for foreign direct investment. The numbers are staggering. According to the PWC annual global CEO survey, 54% of the respondents indicated that they were going to establish facilities in China . The next three preferred locations are Russia (48%), India (44%), and Brazil (35%). Russia is the big surprise with a greater expectancy for projects even over India . This is just one indicator of this disturbing yet opportunity-rich trend. To further exemplify this trend, nearly 80% of global investors, according to A.T. Kearney, plan to offshore their operations, whether with an actual facility or outsourcing of operations, over the next three years. By now, we all know that this trend will still be a part of our future. The next thing that needs to be understood is what work and which industries are going overseas.

How does virtually anything and potentially everything sound? This globalization trend started with companies moving commodity-based manufacturing overseas in search of a low-cost location in hopes of becoming more profitable. This was followed by service jobs that are routine-based, which usually consist of operational and back-office jobs going overseas. Now value-added manufacturing and service-based jobs and research and development positions are going overseas. Most of the R&D activity will occur in Asia and Eastern Europe . North America and Western Europe , which used to be the core of R&D, are fading fast in their life cycles. A.T. Kearney’s research also shows that just about every industry will be offshored. The list includes information technology, call centers, business processing, distribution, knowledge management, R&D and manufacturing. A little worrisome, but there are certainly plenty of opportunities.

Communities can do a number of things to combat this trend. For starters, economic development professionals and others involved in retention and recruitment projects need to understand not just why this trend is occurring, but some of the obstacles that companies face in making the decision to locate or outsource work overseas. The 2005 World Investment Report, compiled by the United Nations Conference on Trade and Development, identifies the following barriers to offshoring:

•  Price volatility of petroleum and other raw materials

•  Protectionism

•  Exchange rate volatility

•  Global terrorism threat

•  Slow growth in industrialized countries

•  Political instability and civil war

•  Financial instability of major economies

Positioning will be pivotal. We cannot stop this bleeding trend, because it is only gaining speed, strength, and momentum. The question is not how to stop this trend, but rather how you adjust to this trend to make your community more prosperous. The key is in positioning. The first step is to understand what’s going overseas and what’s staying here. Next, what are the trends behind this activity, why is it going overseas, and what are the challenges of offshoring. From here, communities will begin to learn the competitive advantages that need to be leveraged in making their retention and recruitment strategies more successful in the future. Additionally, partnerships and learning how to co-operatively work and exist with these offshore locations will be very, very important. Our local communities are beginning to learn about the importance of working together on a regional level. Now communities must learn to adjust and expand that boundary to the national and international levels. It is far easier to cooperate and collaborate than it is to compete. Everyone has something to learn from someone else. In addition, by working together and leveraging each others’ strengths, everyone and every place will eventually be successful in finding their respective missions.

Sources:

PWC Annual Corporate Survey:

Download the 9th Annual Global CEO Survey

China vs. India , a visual essay:

http://psdblog.worldbank.org/psdblog/foreign_direct_investment/index.html

FDI Confidence Index 2005:

http://www.atkearney.com/main.taf?p=1,5,1,169

World Investment Report 2005:

http://www.unctad.org/Templates/webflyer.asp?docid=6087&intItemID=3489&lang=1&mode=downloads

World Economic Forum: http://www.weforum.org/site/knowledgenavigator.nsf/Content/_S15084

Foreign Direct Investment on the Upswing:

http://www.atkearney.com/main.taf?p=5,1,1,114,10

Chinese Outward Investment: http://store.eiu.com/index.asp?layout=pr_story&press_id=630001863&ref=pr_list

Additional Links:

Organization for Economic Co-operation and Development : www.oecd.org

Foreign Direct Investment: http://rru.worldbank.org

Bureau of Economic Analysis: www.bea.gov

United Nations Conference on Trade & Development: http://www.unctad.org

Development Gateway: http://topics.developmentgateway.org/fdi

United Nations Conference on Trade & Development: www.unctad.org

International Monetary Fund: www.imf.org

World Bank: www.worldbank.org

World Trade Organization: www.wto.org

World Economic Forum: www.wef.org

TRADE AND DEVELOPMENT REPORT 2005:

http://www.unctad.org/Templates/webflyer.asp?docid=6086&intItemID=2068&lang=1&mode=downloads

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New and Improved Regulation?

Tuesday, February 28th, 2006

by Jami Miedema

The Department of Transportation has proposed a regulation which aims to change the standards of the corporate average fuel economy (CAFE) regulatory program. The standards would be increased, relative to the size of the truck as indicated by its “footprint” (wheelbase multiplied by track width), to accomplish the fuel savings, safety promotion, and more favorable economic outcomes. Implementation of this reform would be underway during the transition period for model years 2008-2010, with maximum standards reached in model year 2011 trucks.

Under the unreformed regulation, manufacturers must comply with fuel efficiency standards of 22.5 miles per gallon (mpg) for 2008, 23.1 mpg for 2009, and 23.5 mpg for 2010 model year light trucks. The reformed proposal set its sights on increasing those standards, while recognizing that all light trucks cannot be lumped into the same category. Smaller light trucks achieve more fuel economy than larger trucks. The new CAFE standards address this issue by setting a range of acceptable targets, with consideration to vehicle size. These targets for 2008, 2009, 2010, and 2011 are 20.4-26.8 mpg, 21.0-27.4 mpg, 20.8-27.8 mpg, and 21.3-28.4 mpg, respectively.

Furthermore, after extensive exploration, DOT analysts found that the $7.5 billion in benefits outweighs the total costs of undertaking this project. Total costs were estimated to be about $6.2 billion.

Comparison of Incremental Costs and Incremental Benefits for the Proposed Reformed CAFE Standards [In millions]
MY 2009
MY 2010
MY 2011
MY 2012
Total Incremental Costs*
505
1332
1802
2656
Total Incremental Benefits*
694
1633
2144
3069
*Relative to the 22.2 mpg standard for MY 2007.

Although consumers will be paying more for their vehicles, they will be “paid back” in a time frame ranging anywhere from 37-47 months through fuel savings. Of course, this projection assumes a fuel price per gallon in the $1.50 range, a price we may never see again! Also, it assumes the “owner” uses the vehicle regularly for over 37 months, which disregards leases of less than three years. Either way, these higher standards will save up to 10 billion gallons of fuel, a good thing for our economy and hopefully our pockets!

Source: “Average Fuel Economy Standards for Light Trucks; Model Years 2008-2011.” Federal Register 70 (2005): 51413-51466.

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Dennis Burnside joins Whittaker Associates

Tuesday, February 28th, 2006

Dennis Burnside has recently joined Whittaker Associates as President of its Real Estate Advisory Services Group. In his role Dennis will be focusing on developing relationships and providing services to the real estate service community, institutional owners, developers and investors. Additionally, Dennis will provide a specific suite of services to end-users of real estate. Dennis will also work closely with Whittaker’s corporate and economic development clients.

Dennis has over 25 years of experience in the real estate services industry, having held senior positions with Grubb & Ellis, Colliers International and Equis. Much of his career has been spent representing corporate real estate clients and institutional and regional developers. He has experience representing clients throughout North America and internationally.

Dennis sees the Whittaker Associates platform as a unique opportunity to serve a broad and diversified client base.

“Whether we are supporting the client in the process of a relocation, expansion or disposition, identifying lead tenants for a new development, or supporting the property-specific marketing efforts of a brokerage firm, Whittaker is uniquely positioned to have a positive financial impact on the result of the assignment,” according to Burnside.

Dennis is a resident of Shaker Heights, Ohio, and will split his time between Shaker Heights and Holland, Michigan, headquarters of Whittaker Associates.

Burnside has been an active member of various professional organizations, including CORENET, NAIOP, IREM, and BOMA. Additionally, he is a trustee of the Cleveland Zoological Society, North Coast Community Homes, and the Cleve

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Research and Development and Higher Education

Tuesday, February 28th, 2006

by Ryan Kelly

Recently outsourcing and off-shoring has moved to higher skilled jobs-particularly in research and development (R&D). A recent study sponsored by the US Ewing Marion Kauffman Foundation stated that “emerging countries such as China and India will continue to be major beneficiaries of R&D expansion over the next three years as companies seek new market opportunities, access to top scientists and engineers, and collaborative research relationships with leading universities.” The study concluded that the quality of R&D talent and collaboration with universities will continue to be strong factors in the future. Surprisingly, cost (including labor cost) did not factor high on the list.

One important aspect of the study was that while many US companies either have or are intending to relocate R&D in developing countries, the majority intend to keep new and innovative research in the United States . According to the study, only 22 percent of R&D work in developing countries is for new science. The reason is the lack of IP (Intellectual Property) protection. Lesa Mitchell, vice president of Advancing Innovation at the Kauffman Foundation, stated that in cutting-edge research the United States has a comparative advantage because of greater IP protection.

Some think that even this comparative advantage is at risk. The government of Singapore has recently created a new Genome Institute. In 2001, the institute was able to lure away Edison Liu (director of the division of clinical sciences at the National Cancer Institute). Husband and wife cancer researchers Neal Copeland and Nancy Jenkins are leaving the National Cancer Institute after two decades to also reside in Singapore. The top reasons for leaving were less bureaucracy and more available funding (both lead to more freedom of research).

There are positive developments within the United States . The mayor of South Bend, Indiana, recently announced that the city is moving ahead with Notre Dame to establish a research and technology Park near the university’s campus. The Charlotte Research Institute at the University of North Carolina will also begin work on a new facility that will enable scientists and students to work on the most cutting-edge technology available. Both are examples of a broader effort by universities to become more effective agents of regional economic development.

Throughout the United States, governments and universities are realizing that more needs to be done to keep a comparative advantage in new and innovative research. For R&D to continue to thrive in the United States into the 21 st century, the United States will have to solidify its comparative advantage and give corporations a reason to not only keep current R&D facilities in the United States, but also to expand R&D facilities within US borders (creating more jobs in the process).

To accomplish this goal, adequately funded universities with close and effective relationships to the private sector will have to lead the way. In the words of Marie Thursby, an author of the Kauffman study and a faculty member at Georgia Tech’s college of management, you need “an environment that fosters the development of a high quality workforce and productive collaboration between corporations and universities if America wants to maintain a competitive advantage in research and development.”

Sources:

www.corpwatch.org

www.time.com

www.insideindianabusiness.com

www.localtechwire.com

Finfacts Team: www.finfacts.com

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