Sports = or ≠ Social Responsibility?


This week, NYU’s Tisch Institute for Sports Management hosted what it called the first-ever conference on Sports and Social Responsibility.  When I heard that it was the first ever, I thought “no way” and then googled to find that, sure enough, that’s correct. Noting but articles on the subject dating back to 2006.  Executives across the multimillion and multibillion dollar sports leagues – MLS, NBA, WNBA, NFL, NASCAR, MLB, LPGA, PGA, and NHL – are hungry to address this topic. They turned out to pay rapt attention, alongside corporate and foundation leaders.

The conference opened with a challenge to the leadership and involvement of iconic figures in sports.  It turned to a discussion that concluded:

  • Sports figures are highly visible, often watched more closely than movie stars
  • Every sports organization should encourage sports figures to be socially engaged
  • Some may be too young or not quite ready. In that case, organizations should make social engagement available without forcing it.

The most memorable moment came when Dikembe Mutombo, global ambassador of the NBA (and a hero of my husband’s), passionately echoed the main premise of the day.

“If a player does not want to be engaged socially, they should not be part of the organization,” he remarked. “Social responsibility is part of the equation.”

Mutombo, who grew up in the Democratic Republic of the Congo and gives generously to charities there, added,  “It is every organization’s responsibility to help players get there, and if they can’t, then get them off the team.”

He then went on to describe his sense of the NBA:

“The NBA recognizes the power to serve as part of our culture.  That means every player, retired player, coach, and employee of the NBA has ridden an elevator up and needs to be committed to sending an elevator back down to someone else who needs it.

“There are people all over the world who need a lift. Social responsibility and giving back is at the heart of everything we do at the NBA.  We tell every new player, ‘I hope you want to be part of an organization that takes this seriously and cares so deeply.’

“There is enough of a program that when you take the elevator to the top we help everyone send it back down.”

His closing line:. “If you don’t think you have some moral responsibility to the community, that is ridiculous.’ ”

How many organizations that call themselves socially responsible have a culture that helps people engage socially, builds a consciousness that recognizes the power and importance of social responsibility in everyone in the organization? How many of them get rid of the people who don’t follow these simple rules?

Or, put differently, how many of our sports leagues, companies, and even schools can learn from this standard?

That day, on the NYU campus, my husband’s hero became my hero.

Dikembe Mutombo: Georgetown graduate; 18-season player with the National Basketball Association, and thought to be one of the greatest defensive players of all time – a four-time defensive player of the year AND an eight-time All-Star champion. Retired from the Houston Rockets at the end of the 2009 season.  Built a hospital, dedicated to his mother and focused on preventing people from needlessly dying at a young age, in his home country, The Democratic Republic of the Congo. Personally invested $25 million and years of his life to the hospital, which is now a self-sustaining medical facility. The hospital has served more than 180,000 patients. Heads the Dikembe Mutombo Foundation and is a global ambassador for the NBA.

History Matters: The Scanlon Challenge

Elizabeth Haas Edersheim, NYCP Founder

Where are you, Joseph Scanlon? The bonds that hold Americans together seem to be breaking apart as the 99 percent confront the 1 percent, or politicians highlight the 47 percent “who believe they are victims,” and as  outsourcing and downsizing stir resentments.

I’m convinced we desperately need the genius of Scanlon, a professional boxer turned accountant and organizational innovator. By helping workers and management find common cause, Scanlon did more than almost anyone in the past century to save American companies and their jobs.

Scanlon is rarely mentioned these days,  so a brief background:  In the 1930s, he was an accountant at an Ohio steel mill, where tenselabor-management relations and challenging economic times had driven the business near  bankruptcy. He proposed that the company president take the unusual step of attending a steelworkers union meeting.  The result was a groundbreaking agreement: workers promised to find ways to produce higher quality steel more efficiently, while cooperating with managers on deciding how  to measure improvements and defining success for the company. The savings would show up on paychecks; everyone would have a tangible stake in jointly making the company more competitive.

The union and management had to  go beyond simply cooperating; they had to trust each other, test and learn from new ideas together. The result:  the company was resuscitated, the mill stayed open, and everyone’s jobs were saved.

Scanlon became a local union president, and then research director for the National Steelworkers of America. His approach spread far beyond that Ohio steel town. A machine tool company in Massachusetts soon copied it, as did many other companies.  Professor Douglas McGregor invited Scanlon to teach at MIT, where he developed the “Scanlon Plan.”

Much of the gains at these companies was built not on the formula, but on Joe Scanlon’s broader perspective on labor-management cooperation. With greater transparency in their organizations,  he believed, workers would become involved in problem-solving. Breaking from the views of many management experts of the early- and mid-century, he argued that money was not the only motivator; workers wanted to believe in their company and take part in changing it. Workers yearned  for greater involvement and recognition.

No one in the nascent field of management studies caught the imagination of the media and the public like Scanlon.

“The most sought-after labor-relations adviser in the U.S. today is Joe Scanlon, 56, onetime prizefighter, open-hearth tender, steel company cost accountant, union local president and now a lecturer in industrial relations at Massachusetts Institute of Technology,” a glowing profile in Time magazine proclaimed in 1955. “Wearing an open-neck sport shirt and studding his shop lingo with four-letter words, Joe Scanlon looks and sounds like anything but what he is: a fervent evangelist for the mutual interests of labor and management, who knows how to sell the idea to both sides.”

Although he had a notable impact a century ago, what does Joe Scanlon have to offer in the digital age? We live in a different world.  Those workers were doing repetitive tasks, sometimes on complex machines, unlike today’s growing legions of  knowledge  workers.

Still, the basic problems Scanlon addressed persist, with a 21st century twist:

Many executives fail to understand  how to make the most of the impact of knowledge workers on their organizations – how to capture the ideas of engineer in the GM research lab or the salesman on the floor of the AT&T store.  In fact, many workers –  are less than fully engaged in their organizations. Having workers feel bound  to the successes of their companies is even more vital these days. Millions continue working from home long after traditional 9 am – 5pm shifts are over, and millions more work remotely, without supervisors or colleagues nearby.  Employees are shouldering greater responsibility  as  customers demand more responsive service and customization based on their unprecedented knowledge of the competitive landscape  And despite their greater autonomy and status, knowledge workers aren’t  fully invested in the companies they work for – they feel like modern-day steelworkers, who could be replaced at any time by cheaper substitute workers far away. Or even machines.   

We need updated answers to the Scanlon Challenge for enterprises in this century:

  1. How much of what each employee can contribute are they contributing?  How  can employees make a difference?
  1. Is the environment set up to help them make a difference – for example, by working together on testing their ideas?
  1. How can they be recognized and compensated  appropriately for their contributions?

Fortunately, I’m seeing several impressive Scanlon-like projects, ranging from  a huge Chinese manufacturing company to American start-ups, and including innovative non-profits. More on those in future blogs.

China Today

China Today: Beautiful, Stressed, and Optimistic

August 20, 2010

I am returning from three weeks in Chinese cities, with a sense of optimism about this thriving country—strained by its rapid economic growth, urbanization, and environmental challenges. China stands a good chance of creating a vibrant future for itself and contributing to the world.

My family and I were impressed by the kindness of Qingdao, the rage of Nanjing’s and Hangzhou’s future leaders at its corruption, and the indefatigable commitment we saw in Shanghai to preserve the past while pursuing the unique opportunity China faces today.

The Beautiful

Qingdao, a city of eight million, is a village, even though it is the size of New York. Visitors and strangers are welcomed with a warmth reminiscent of America’s small towns. So many people took care of us. For example, we had arranged to rent bikes for a week; when we arrived in our hotel lobby to pick up them up, we learned that each bike rental would cost 160 RMB a day, or $24. The bell captain told me that we could buy bikes for $75 each, so we decided to rent for only a day.

The next morning when we came down at 5:45 a.m. to go to our daily Tai Chi class, a bellman raced over to us and said,  “I came in early so you could use my bike,” as he gave the handlebars to my  teenage daughter. He was not angling for a tip; they are prohibited by law. He was taking care of us. He said, “If you want to use it tonight, I will walk home.  It is important that you enjoy your visit to Qingdao.”  That afternoon, we returned the bike to him.   The next morning, he was waiting for us again at 5:45.

Another example: I was waiting in a park as my daughter was busy working with the Tai Chi master.  An elderly woman was stretching nearby in Music Square, a large paved area on the shore.  She saw me watching and came over to invite me to stretch with her.  She spoke no English.   Over the next few days, I stretched with her every morning.  On our last morning, I said goodbye and she said, in English, “Keep stretching—important.”  She had found someone to teach her that phrase so that she could take care of me.

Yet another example: We were taking Mandarin lessons for a week. I was quoted a price and asked if I would pay in cash. I calculated the amount in RMB and brought it with me the next morning.  The third day, our instructor told me that his price had been in RMB, not dollars; I had overpaid by a factor of six. He gave me a cash refund and urged me to put it away.  After class, he escorted us to a taxi and paid the driver.

These acts of kindness happened many times every day. The people of this city, act like villagers.  It is a beautiful village. The kindness so many people showed toward us, and their comfort and confidence with helping us as Americans made me hopeful that China could one day be our country’s partner, rather than our rival.

The Stressed

As we sense from the U.S. media, China is not universally rosy. The rapid change that has so benefited the economy has also put traditional morality to the test, and in some instances it has failed. Corruption is now rampant. In both Nanjing and Hangzhou, I had opportunities to sit down with 24- to 30-year-olds, China’s future leaders, and ask about their lives. They were all proud to be Chinese and clearly excited to be part of a growing country.  Yet they spoke angrily about corruption  and the threat it poses to China’s survival.   One doctoral student decried the corruption in the academic world, the one place she had hoped would be corruption-fee.  She explained that except for professors over age 70, the faculty sold grades: on every exam, in every class. They wanted money.

A computer engineer who worked a second job as an on-line instructor, described with tears in his eyes the day he took his father to the hospital with pneumonia. He said that, had he not brought a wad of cash every day to pay the hospital staff, his father would have died.    He described with show the doctors who refused to treat other patients because they did not have that extra cash.

One articulate 27-year-old explained to me, “It is a balancing act.  Our job as citizens is to collectively push the government to do the right thing.” He added, “ In your country, the government regulates the corruption in the population.   Here, the population regulates the corruption in the government.”  He gave me an example. To get government support for hemophiliacs, citizens published reports comparing China to Taiwan in the treatment of hemophiliacs. The reports embarrassed the government, and they rapidly corrected the problem in the biggest, most visible cities. He continued, “We cannot push too hard, on too many places, or as individuals.  ”

These future leaders expressed the fear that the corruption may encourage young talent to flee.  Each one described friends who do not live in China because of the corruption, and will not return.   They all said that it is not clear that China can rid itself of corruption in critical sectors such as education and healthcare.  I heard that many government employees have sent their children to other countries or obtained for them alternative citizenship, so if corruption destroys China, they will have an escape route.

The Optimistic

Despite the dark clouds, China retains a rich heritage and fundamental values that may well carry it through.  The message was clear when I visited several companies, then wandered through the Chinese Pavilion at the World Expo. The message: China’s past and future are in harmony.   Its economic gains since it began opening itself to the world are its greatest pride.  The exhibit begins with a short video on the last 30 years—the shifts in living conditions, sizes of homes, and people’s optimism about their lives and those of their children.  It then moves to a hall of historic art. A wall 100 yards long displays a screen that looks like the Marauder’s Map from the Harry Potter films.

It is an image of an ancient scroll displaying village life on the day of the Qingming festival, which honors ancestors; but here, the characters and animals are moving. The images are projected from behind the wall, using state-of-the-art technology.   Other exhibits of Chinese treasures, also strove to integrate ancient values with current technology.  I continued to “The Land of Hope,” which emphasized homes, families, and communities. One film showed an apartment building with a basketball bouncing from home to home.  I saw hundreds of children’s drawings of their hopes; extensive material on creative education; a dialogue on urban planning—architecture, transportation, landscaping, and more. The last hall displays a vision of China’s future. It is loaded with inventions and ideas for a sustainable future: a fully functioning car that runs on photosynthesis; urban plans for streets beneath streets, with no stop lights; sustainable living with plants on the outsides of buildings, geo-thermal heating and cooling, rainwater collection on the roof and so on.  At the exit is an artwork that defines   “harmony,” like a symphony with, many instruments playing a common melody.  In harmony – socialism and capitalistic enterprises have resulted in one of the most sustained expansions in history.

One cannot leave China without optimism.   It is now the world’s second largest economy, having passed Japan while I was blissfully doing Tai Chi in Qingdao.   China leads the world in exports, having outstripped Germany this year, and has a military operation that is second to the United States in size. It is easy for Americans to fear China as an up-and-coming competitor. Yet I departed feeling optimistic that China will continue to be a great neighbor and friend, as well as a leading force in creating our common future.  The best thing we can do is help the individuals collectively challenge corruption while encouraging China’s harmony.

Creating America’s Future Economy

I will begin by saying what everybody would like to ignore or forget but which must nevertheless be stated, namely that our economic engine is absolutely broken. The discussion of how to help our economy is riddled with prescriptions for on undoing “mistakes,” freeing up capital for individual small businesses, bailing out troubled homeowners, and re-building infrastructure.

All that is piecemeal. It is wasteful and wrong. We cannot fix a broken economic engine by standing still, going backwards, or incrementalizing ourselves forward. The rest of the world is no longer there.

We need to move boldly to create the future. U.S. preeminence for at least half a century has rested on superior capabilities in computer science. Many of our most profound private sector innovations (such as microwave ovens, optical fiber, and video) were built off-of defense-related research and it is no coincidence that corporate innovators developed commercial applications.

When I spoke with Kimberly Clark’s head of R&D, he explained to me why they chose to move from Wisconsin to Seoul. “We are close to infotechnology, nanotechnology, and biomedical research.” He added, “We are close to Singapore, Hong Kong, and Tokyo. And access to those communities will drive our future.”

We need to put our energy into identifying the engines of economic growth where we can be global leaders—whether stem cells, nanotechnology, infology, or energy. The American future is not in automotive manufacturing. That is our past. We need to invest in building the capabilities, communities, and connectivity to become preeminent in key disciplines. And we need to do this together – right and left; private and public sector. Without collaboration, we will fail.

Success will happen like it happened in Silicon Valley when the public sector, the academic world, the private sector and the venture capitalist work together on creating a community of capabilities that draws in other capabilities and supports one another. It is more than being an incubator for start-ups — it is creating a community and spirit that work together and grow in capabilities with common underpinnings. The public sector needs to be the standard-bearer and economic encouragement that crosses company bound and academic bounds.

The key issue is not which economic faction gets the tax cuts. The political squabbling does nothing to advance the effort to find the platform from which we can be a leader in the global economy. That’s what keeps me up at night. We are asking the wrong questions. Our goal is not to recover but create–not to regain our past strength but to build the strengths we’ll need to create the future. Let us begin by defining those.


By Elizabeth Edersheim 
When the Leader to Leader Institute asked me to blog about my book, The Definitive Drucker, which was published three years ago, I thought, what would Peter Drucker have asked me about what I learned? I realized he’d have asked, what happened that was unexpected? And what did you learn?
The first unexpected result: The nature of the U.S. response to the book. I received numerous e-mails from readers in the United States, saying that the book changed their perspectives and practices. These came from doctors, lawyers, small-business owners, and executives with no business training, who happened to pick-up the book. The gratitude these letters expressed was overwhelming. One business owner wrote, “I run a wedding dress shop and never thought a management book could help me. I started reading it in a bookstore, and couldn’t put it down. Your book has changed how I make decisions and serve customers.” Many of the notes emphasized the universality of Peter Drucker, asserting that everyone can use his insights and thoughts.

The second unexpected result: I saw for myself that business frameworks, practices, and language are a great equalizer in a world divided into diverse religions, cultures, nations, political views, and peoples—and that Drucker’s thinking applies across the globe. The book has been translated into 32 languages and has taken me on an eye-opening global journey. I’ve visited seven countries in the last 12 months and corresponded with editors and readers in nine others. In Saudi Arabia, where women are forbidden to drive, a female business owner wrote to me with her thoughts on Drucker. In Japan, entrepreneurs are fascinated with Drucker, and a society has formed to study and promote his philosophies and practices. In China, one of the most respected CEOs, Zhang Ruimin, quotes Drucker religiously at Haier’s Saturday morning management meetings. The winners of Drucker innovation awards in Korea are global leaders and enduring benchmarks. What’s the strong attraction to Drucker in Vietnam, China, Korea, and Japan? Possibly the emphasis on people in Drucker’s philosophy, which mirrors the local cultures in some respects.

The third unexpected result is Drucker’s ability to stand the test of time. Though my book is admittedly only three years old, it draws on work, writing, and relationships from throughout Drucker’s career. Every company, Drucker complimented has done well. Every controversy and caveat Drucker raised has visibly elevated its ugly head. And the book’s observations about companies have held up despite the fundamental shifts we’ve seen in the past three years:

For example:

  • Medtronic continues to be innovative despite all the healthcare debates and their impact on private companies in that sector.
  • P&G is the success story of the decade, with Lafley named CEO of the year by Fortune, Forbes, Business Week, and Leader-to-Leader. Of course, P&G has faced day-to-day challenges in the current recession. For example, they had to decided to compete with private label products, introducing Tide Basic without bells and whistles. It is a dangerous strategy but one that might be the right response to the new realities. The recession changed the market, and management listened to their customers. They didn’t insist that every Tide customer needed to pay 30 percent more for Tide’s high-quality features.
  • JetBlue, which we highlighted as a star player, hit a bump in the road. Their performance fell off during winter storms. They had grown beyond their system’s capabilities. They stepped back and fixed the system, and are doing well again.
  • Peter Drucker had predicted that GE’s Finance group would get in trouble, and said they should sell NBC. He praised Immelt for jumping into green energy before anyone else.
  • The Myelin Repair Foundation is in the process of commercializing new drugs ahead of schedule and is moving ahead to address new challenges with new collaborations. It continues to be an amazing story.

Looking back and re-reading the book, there are many other companies built on Drucker that can be written about, such as Haier, Yuhan, Kimberly-Clark, Park Electronics, and FirstService.

Knowing Peter Drucker and writing about his ideas changed the way I listen and think. I’m hearing more and asking more, with a new appreciation for helping others think. I am very grateful for the time I have spent with Peter Drucker, his family, and his disciples. It was and continues to be a great opportunity.


by Elizabeth Haas Edersheim  September 2009

As the school year gets going and I have a chance to gather my thoughts from a trip to Asia, I wanted to share with you the incredible effort I saw in India around education reform focused on bringing post high-school graduates into the 21st century knowledge economy. It is quite a contrast to Bob Herbert’s comments on the status of the United States’ education reform, “In educating its citizens, we are now moving decidedly in the wrong direction”

Like the U.S., India faces a daunting education challenge—they need to make enormous improvements, immediately, in educating and training a very large and diverse population, with many of its people economically disadvantaged or living at a subsistence level. India has stepped up to the task, setting up a National Skill Council (NSC) to work with the Confederation of Indian Industry. They are rapidly innovating the entire concept of vocational and, in some sense management school, and revamping the country’s institutions, curriculum, and faculty.

India’s National Skill Council and the Confederation of Indian Industry believe that Polytechs—post-secondary vocational schools—are critical to the country’s future. By 2022, the government wants to train 500 million people to master a variety of skill—some entirely new—for the industries of tomorrow. Many of those people have only high school educations today.

They highlighted two primary challenges: (1) revamp a severely outdated curriculum and align it with the needs of industry, and (2) upgrade the faculty, ensuring that they have the knowledge to teach the skills of tomorrow and motivating them to continuously innovate.

Against these challenges, India is putting together two initiatives, both of them examples of the new Public-Private Partnerships.

Partnership 1 – The Indian government is moving the management of Polytechs to the private sector. Its rationale: industry knows exactly what they need, and knows how to manage a large institution. A radical change in governance is necessary to move forward.

The preliminary plan is that the private enterprise that takes charge of the contract will have no financial obligations but will need to make a number of commitments, including:

  • Involve senior management directly in the curriculum and teaching; every member of the senior team must commit 1-1/2 to 2 hours a month to lecture in the classroom
  • Modify curriculums to better support their own needs of tomorrow
  • Offer their own employees the opportunity to become students during 2% of their working hours every year
  • Create tighter links between faculty and industry – e.g., offer faculty training opportunities inside the company

This private sector engagement and commitment is expected to fundamentally shift the dynamics of Polytech education to the needs of tomorrow.

Partnership 2 –The government also announced a program for setting up new Polytechs—not in rural areas but in industrial centers. The government will provide land and set up residence halls so students can be brought to the industrial center from the countryside to go to school. Multiple companies located in the area will be engaged in the Polytech—setting the curriculum, training their current and future employees, and building state-of-the-art facilities.

Will these two initiatives meet all the educational needs of every citizen of India? Of course not.  But they are bold efforts that will carry substantial educational and economic benefit to many, with the further benefit of fueling India’s burgeoning knowledge industries and boosting its international competitiveness. And they are going forward NOW.

We can all take a lesson from India. Washington and our local districts recognize the challenge. But are we just doing more of the same and not stepping back and asking what we need to do for tomorrow? Finding the solutions will require creativity and involvement of more than government. Our challenge—to be focused on what 21st century students and their future employers really need, and more cognizant of every person’s need for lifelong learning.

©Elizabeth Edersheim




By Elizabeth Haas Edersheim
June 24, 2009


In 1964, Peter Drucker wrote,
“The first indicator of the need for major innovation is one with which economists have been familiar for well over a century: Declining productivity.”


We constantly assume that the private sector is the engine of innovation. But we need to rethink even that. Many of the requirements of innovation — the patience to wait for results, the willingness to take significant risks — are difficult for companies to meet. Companies systematically under-invest in R&D, especially for exploratory research and technology development. Start-ups systematically focus on very narrow segments.


2008 global productivity growth was the worst it has been for 20 years, and 2009 does not look much better. Despite large investments in innovation during the past decade, this effort has failed to deliver beyond a few high profile internet areas — Google, Facebook. This failure may be contributing to our economic difficulties.


Innovation, as defined by Drucker, is new wealth-producing capacity. With that definition, gene therapy, alternative energy, biotech, micromachines, etc., have not yet delivered.


It is an opportune time for public-private partnerships. They can make a difference in the speed and scale of innovation and the patience of startups.


The public sector — governments and not-for-profits — needs to help support long-term investment by large and small companies alike. Then it needs to accelerate adoption of innovations. When public-private partnerships are disciplined, they can create a new community of businesses and institutions, and foster many wealth-producing innovations.


For purposes of conversation, let’s focus on the most productive of government roles in fostering wealth-producing innovations via public-private partnerships.
Role 1: Assumption Busting. The first step in any meaningful innovation is to abandon assumptions. The government’s regulatory power enables it to radically alter conventionally held assumptions about the nature of competition in an industry.


Some cite government regulation as the most important factor in America’s success in information technology. The trustbusters made AT&T lease its lines to others and eventually broke up the giant. Later they forced IBM to separate its hardware and software businesses. In both industries, these actions challenged assumptions about the level of investment and integration required to compete. It also fostered innovation by replacing stodgy monoliths with smaller, specialized companies that joined forces with other, similar companies with complementary capabilities. The result — tremendous innovation and the emergence of new standards to support the collaborations.


Governments can also protect outdated assumptions, often with disastrous results. As Drucker said, the worst thing a government can do is hinder the movement of capital and people to new products, technological solutions, and modes of competition. A stark example of this is the U.S. government’s role in the terminal illness of the U.S. automobile industry with its support of mediocre mileage standards, work-arounds, and low gas prices.


Similarly, in Japan, the government’s failure to force new assumptions and passive acceptance of the status quo may have contributed to the country’s lost decade.


Role 2: Spotlighting An Opportunity. Governments can greatly increase the likelihood of an innovation’s success through strong public policy signals. And they can coax results with money. For example, NASA in the U.S. created decades of innovations, not only through funding but by sustained attention to the aerospace industry and its innovations.


China now is trying to shine a light on the electric car, as the Chinese market gears up. The Economist predicts that, in 40 years, China will have as many cars as the whole world does now. The government’s vision is for the Chinese auto market to bypass internal combustion engines for new buyers and go directly to the electric car as soon as possible.


China’s Ministry of Industry and Information Technology and the government of Wuhan are working with Nissan in Shanghai on a pilot electric-vehicle program.  Nissan is expected to provide free electric vehicles to Wuhan and to help develop a network of vehicle-charging stations. The ministry is also working on new facilities for their electric vehicles, joining forces with Beijing and BYD, the battery company that acquired a car company from the state. Beyond the auto companies, the ministry is working with a myriad other companies including grid intelligence companies, fueling, and network companies.


Role 3: Facilitating the Growth of Cutting-Edge Capabilities To Support InnovationsThis role focuses on underlying capabilities needed for innovation vs. directly on the innovation. As an example, let’s look at the state of Maine’s boat building industry.


In April 2007, a delegation of boat builders from Maine headed to Shanghai for the China International Boat Show, where they were treated by the national government as honored guests. Maine’s success in international boat building was made possible largely by public-sector efforts to build the state’s competency through a series of deliberate steps. It is an example of how government can fund collaborations across institutions to build competencies not achievable by any one company.


Maine’s boat building industry was flat from 1980 to 1994 with the closure of a local naval base and declining productivity threatening to kill it entirely. Recognizing that the future of the state’s boatbuilding industry rested on its ability to harness innovation capabilities in composites and nanotechnology to compete globally, several different types of institutions formed an alliance to create an advanced engineered-wood composite center — a university, workforce training centers, private companies, trade associations, economic development agencies, and investment organizations.


Government investments made participation in the center possible for many of these institutions — and paid for the trip to China. As a result of this coalition, Maine’s boatbuilding industry has more than doubled in the last 10 years and is at the cutting edge of innovation — taking a 400-year coastal heritage of skilled craftsmanship to a new level.
Role 4: Supporting Entrepreneurs And New Businesses To Build Innovation Communities. Government regulations, tax policy, and economic incentives are all tools that can be employed to help form innovation communities often dominated by the small businesses that create the most jobs and get the most patents per capita.


In my visit to Korea, a newspaper reported that young Koreans do not want to take the risks involved in starting businesses, or even work for small businesses. When I spoke with some entrepeneurs, they indicated that it was virtually impossible to hire talented people unless they were brought from the U.S.. People are afraid of small companies and are used to the security, as well as the health insurance and pension benefits, associated with the larger companies.


Government action can reverse such a trend, helping communities embrace start-ups with bankruptcy laws and small business loans, and creating community awards and recognition for businesses that contribute substantially to innovation communities.


The United States’ Small Business Administration (SBA) understands the importance of entrepreneurs and a continuing pipeline of new businesses. Its goals align with this critical need:


–         Continue to get loans out to small businesses
–         Revitalizing the agency itself, which was reduced and lost its focus over the last eight years
–         Making the SBA the strongest possible voice for small business in the U.S.


Certainly other public sector and non-profit entities can also play these four roles very successfully, with similar impact on the speed and scale of innovation. For example,The William J. Clinton Foundation supports a number of public-private partnerships. One worth following is the Clinton Climate Initiative, dedicated to environmental innovation. The Climate Initiative was launched in May 2006, when the former president’s advisor, Ira Magaziner, met with Ken Livingstone, then-mayor of London. Ken knew that the Clinton Foundation had joined forces with 60 different African countries to get a low-cost drug for HIV/AIDS brought to market, which none of them could have done independently. Ken suggested that the foundation undertake a similar project with large cities — which are huge contributors to greenhouse gas emissions — to advance some innovative-driven climate initiatives.


One such initiative is Clinton Climate Initiative’s C-40 project, which brings 40 cities together creating new economies-of-scale in demand for energy-efficient technologies — from the 367 million people that live in those cities — and linking demand with sources of supply. The C-40 project is a catalyst in accelerating market development for such innovations as clean-technology vehicles, energy-efficient lighting, chillers, solar control window films, and “cool” roofing that will help to lower the costs of building retrofits. These beneficial technologies all face a fundamental barrier to adoption: No customer is big enough to justify investing in cost-efficient scale production, and no company is ready to bet that future demand will approach that scale.


The Climate Initiative works with vendors to determine the volume necessary to fundamentally change their economics, using economic and life-cycle modeling to understand and think creatively about when and how a new technology can become attractive. The foundation then works with the C-40 cities and gains commitments to deliver that volume. They have broken through barriers that only a public-private partnership could. Hybrid buses, which first appeared in a few cities with big public subsidies, have been updated with newer technology and purchased for use in locations that manufacturers would not have approached for years. Already, many cities in India and Brazil are the world’s largest users of hybrid buses.


When I asked Magaziner to describe his biggest barrier, he responded that he is pushing everyone’s comfort zones. People can’t sit around waiting for the usual lag time from the usual circumstances – excessively long government time lines when it comes to ordering equipment from private suppliers, the hesitancy of entrepreneurs to push the envelope farther than they ever have, and so on. He’s right. Usual just doesn’t cut it under unusual situations like today’s productivity performance. Public-private partnerships can be significantly more agile than the usual contracts between state agencies and corporations. They are the right vehicle to speed the delivery and elevate the scale of innovations in the face of our critical needs.



Elizabeth Edersheim


THE AUTO INDUSTRY TODAY: An Opportunity Inside a Responsibility, Wrapped In a Disaster

While the collapse of the U.S. auto industry is a disaster of global proportions, it is a great opportunity for companies and countries.

It is an opportunity to redefine the rules and make them global, reset the boundaries and work with energy and alternative transportation companies, and redesign the ground transportation system, rethinking everything from the fuel stations on the street corner to the size of parking spaces at the train station.

There exist today the cost-effective technology and widespread public concern to make it possible to develop cars that are low-cost, energy-efficient, and practical for everyday use—to make real progress on environmental issues while contributing to global prosperity rather than dampening it.

The automobile makers and governments around the world have a unique chance to create an effective model for trans-national-industrial partnerships.This type of collaboration is uncharted. Rather than operating on their own, Toyota, Honda, Tata, Tesla, Geely, Ford, and General Motors could find common ground with Exxon, CSX, Aichi Kokuki, Indianrail, and academics to design a standard for energy-efficient and environmentally sound transportation. Imagine the global automotive industry embracing this standard rapidly without putting consumers through years of confusion and skepticism—will it be hydrogen, solar, hybrid? Will I be able to refuel on the highway? It would be like skipping over eight-track tape music players, cassettes, and CDs, and going right to MP3 players.

Imagine governments collaborating to fund global development of that new transportation standard while individually investing in the local infrastructure—for example, modified fueling stations in a format common around the world. At the same time governments can create financial incentives for consumers to replace conventional vehicles with the new green cars. Imagine 400 million of the world’s 800 million vehicles being replaced with green cars by 2025. It is possible, if we respond to the decline of GM and its American counterparts as the very real opportunity it is.

Handling the current crisis means rethinking the way industry operates and becoming collaborative, innovative, and strategic—thinking big with a long time horizon. Autoworkers and taxpayers would agree that we haven’t gotten very far in the past two decades by being insular, conventional, and tactical.

Auto manufacturers are expected to sell 9 million vehicles in the U.S. this year, down 50 percent from 2007. The Big Three have about 44 percent of that market, an all-time low. Yes, GM has updated many of its plants and made them more flexible, but it has a long way to go to match Hyundai’s Alabama plant. Yes, Ford’s cars were recently ranked third in reliability by Consumer Reports, the first time in over 5 years that a U.S. company made the top three, but their website section on quality doesn’t even discuss the reliability of the engine.

GM is now asking for help one nation at a time. Toyota views itself as a Japanese company and is seeking support solely from Japan’s government. Consumers are also insular. In Korea, 95 percent of the cars purchased are domestic. In America, where the auto industry drives about 1 in 10 jobs in the U.S., consumers view this as a “Detroit problem.”

As GM goes, so goes Chrysler, and possibly Ford. By the playbook of traditional strategy, the day GM declares bankruptcy, Toyota, Honda, and the others will unload the docks and cut prices on their vehicles by $3,000 to $8,000, offering unprecedented discounts. They may have more than 1 million vehicles on docks already—enough to boost their combined market share more than 10 percent, sending U.S. companies’ share to a new low that may make the Big Three unsustainable no matter what kind of bailout Washington offers.

Even if global competitors step up and do what is right—give The Big Three some breathing room so that they can recover—will the American companies and unions learn from this disaster and re-engineer the entire business? They better. If not, they will die a slow and painful death that all of us will feel.

Institutional courage, bold thought, respectful collaboration, and a collective belief in tomorrow are required.