Corporate Renewal Through Cooperation and Critical Technologies

Most financial institutions, and many well-known companies, have not yet fully appreciated the profound nature of the technology-driven "paradigm shift" in management strategy now required for industrial competitiveness--even survival. Several basic premises are involved: * Wealth no longer will be measured primarily in terms of ownership of fured physical assets, many of which can be obsolete in a few years. * Alternatively, wealth increasingly will be measured in terms of ownership of (or timely access, through strategic alliances, to) knowledge-intensive, high-value-added, technology-driven systems that are primarily designed to increase productivity. * Current accounting methodologies, consequently, do not adequately reflect the true value of either existing business operations or of new business opportunities. The profound nature of this paradigm shift mandates a process of continuous corporate renewal structured specifically to manage continuous change, and to simultaneously involve all elements of management (marketing, production, technology, legal, and financial). This is often called concurrent engineering, task force, or modified matrix management. The need for continuous corporate renewal is driven primarily by the rapid emergence of "next-generation" advanced technologies, which have collapsed product and process half-lives often to less than five years, making equipment and facilities obsolete long before their useful lives can be reached. Other irreversible forces also are involved: * The communications revolution now allows capital and information to flow with the speed of light anywhere in the world, with technology rapidly following. * Any rice paddy in the world now can be transformed in less than a year into a state-of-the-art facility operated by $2-an-hour labor, leading to excess capacity worldwide in many industries. * Foreign nation "targeting strategies" assemble vertically integrated consortia, which, with heavy government subsidies, are designed to capture market share in existing businesses through "predatory pricing." The "targeting" and "rice paddy" syndromes are zero-sum strategies that carve the same pie into smaller pieces, overbuilding world capacity in the businesses involved (steel, aluminum, automobiles, semiconductors, etc.) and destroying profitability for everyone. The constructive alternative is one that develops next-generation "critical technologies," which will dominate the 21st century and which can expand the pie and raise the quality of life for all nations. CTITICAL TECHNOLOGIES AND CORPORATE RENEWAL Adam Smith pointed out in 1776 that investment creates new wealth, and progress does not have to be a zero-sum game that "beggats thy neighbor" (1). In the 21st century, profitable operation will require not only annual incremental improvements (10 percent to 20 percent per year) in existing businesses (just to maintain cash flows), but also simuEtaneozls investments in next-generation systems deliberately designed to make obsolete current operations before a competitor does, and often before their useful lives can be realized. Fortunately, an historically unprecedented opportunity now exists to implement both of these strategies. This unique situation has resulted from a trillion.dollar investment over the last 40 years in the U.S. academic infrastructure of universities and government laboratories. Following World War II, Vannevar Bush in his report to President Truman defined research as "the endless frontier" (2). Creation of the National Science Foundation followed, with subsequent buildups in medical research, aerospace and high energy physics, electronics, communications, and the material sciences. Today, the U.S. spends over $25 billion for basic research, 10 times more than any other nation has the in-place capability to match. This unique level of investment has resulted in most of the Nobel Prizes, and most of the seminal technical discoveries, which are the basis of the 20-plus "critical technologies" recently defined by various government agencies (3). …