Over the past decade, employment growth netted zero. Personal assets actually declined. For middle-income families, so did wages. (Source: “A Decade of Zeroes,” Dirk van Dijk of Zacks Investment Research, 1/4/2010.)
It appears our national economic experiment of attempting to build an economy on finance, services, and information, leaving such trivialities as manufacturing to other less enlightened nations, hasn’t panned out.
Our collective economic experience of narrowly averted economic depression got me wondering about what we do in the United States to create wealth.
The subject isn’t money. It’s what you can buy with money – the total amount of desirable stuff in the world, however it’s distributed. This definition disqualifies the products of financial innovation … derivatives, securitized debt and so on …while including (for example) services like dry cleaning and vacuuming my carpets, and things like cars, toys, food, clothing, homes, jewelry, and beer.
The Anchor Steam brewery creates wealth. Chase does not.
Here’s what’s disturbing: The private sector, for quite a long time, has been a minor contributor to the underlying drivers of wealth. Our preference for free markets notwithstanding, over the past couple of decades the federal government has done more to create the foundations of wealth than private industry, and it’s hard to find any modern foundation of wealth that hasn’t depended heavily on government-funded innovation.
The entertainment industry might be the only U.S. industry that creates wealth without government help. Except, of course, professional sports teams, which consider free facilities their due.
In our own industry, an admiral invented COBOL; microprocessor technology owes a lot to the Apollo program; and the private sector completely ignored the entire Internet until after the Web got started. The private sector contributed relational database management, transaction processing, local area networking, and not a few other core innovations.
Healthcare? New diagnostic technologies and most cures begin with the National Institutes of Health. Agribusiness depends heavily on public-sector research and development.
In consumer electronics, every device depends on the microelectronics revolution that, as already noted, owes so much to NASA; some gadgets, like GPS navigators, owe a lot more. Private sector innovation has mattered here … a lot … but other than cellular telephones relatively little has been foundational.
Then there’s energy. Nuclear power began with the Manhattan project. Those who promote fossil fuels are harvesting private sector innovations, not from the last century but from the century that preceded it. And just about everyone who is interested in “green” energy expects the innovation to come from government investments – private-sector-funded energy research and development has declined steadily since the mid-1990s.
The broad trend toward leaving wealth creation to others mirrors a long-standing business preference for investments in cost-reduction to investments in revenue-generation. And when businesses do invest in revenue, a lot of the investment goes to buying it through acquisitions instead of winning it in the marketplace.
What does this have to do with you in your role as an information-technology leader? Viewed narrowly, not much, other than giving you one more reason to look at the world and say “tsk tsk.” After all, if your internal customers don’t want to invest in revenue-generating business projects, that isn’t your concern, is it?
The answer depends on whether you accept the misbegotten notion that you have internal customers. If you do, you can leave such niceties as the business strategy to others, accepting the subservient roles of execution and blame-acceptance as your proper lot in life.
Sound like fun?
The microeconomic equivalent of wealth-creation is creating value for Real Paying Customers, one product and service at a time. This is where revenue lives. It’s also where IT’s leaders should spend most of their time and attention, because directly or indirectly, a lot of customer value comes from information technology.
Or could, if we looked at the world from a value perspective.
Ask yourself: What are the current big trends in technology? What are the trends waiting around the corner that you, in your role as the company’s IT leader, are best-positioned to recognize before anyone else? Think about how your company can:
- Build them into the next generation of its current products and services to increase value, and therefore sales and margins, or …
- Wrap them around its current products and services to increase value, sales and margins, or …
- Use them to create entirely new and unexpected products or services current customers will find intriguing.
Revenue might not cure all ills, but one thing is certain.
It’s way ahead of whatever is in second place.