Category: Business Strategy

The nice folks at McGraw-Hill sent me a freshly minted copy of Ro Khanna’s new book Entrepreneurial Nation : Why Manufacturing is Still Key to America’s Future.  As someone who would like to help the CEOs and board of directors transform the sales and marketing of America’s manufacturers to make them into international growth companies, I was excited to see this title as I hope it will bring focus to an important and related issue – where and how corporation resources and employees are allocated for utilization.

In Entrepreneurial Nation, Ro Khanna presents a highly valid yet contrarian book about the potential for USA manufacturing resurgence. Ro advocates reversing certain strategy consulting dogma of the late twentieth century to create this reality. People would be wise to listen to and act on Ro’s message.

The book is a highly unique combination of personal memoir, business and government stories. If the book were to go mainstream, I would  think that the world might discover that his core concept has applications in other areas. Ro was kind enough to answer some questions:

In Chapter 1 you state, “The best American manufacturers consider the intellectual contributions of all of their employees.” Critical and divergent thinkers are critical, but the majority of companies are not yet replacing their leadership ranks with these types of transformational leaders.  What has to change for this to occur at more companies more quickly?

Ro Khanna: We cannot compete with China in a race to the bottom or lower wages.  So, we have to outcompete them by offering more innovative products, finding efficiencies in production, or customizing products to meet consumer’s unique needs.  The best manufacturers recognize this fact, and their leadership creates the culture for employees to make meaningful contributions to a product’s design and the production process.  The result is gain in productivity and also better products.
My hope is the manufacturers that I profile can serve as a model to many of American companies.  They show that empowering employees makes business sense.  A bottom-up culture is perhaps the only way American companies can compete with low-wage labor.  We can’t compete on price. We need to compete by being more creative.

You had the privilege and honor of meeting with one of the most brilliant business people ever, Andy Grove, former CEO of Intel. He argues strongly against outsourcing manufacturing ? Yet it occurs. so who exactly are people listening to for this advice that is contrary to Andy Grove’s great wisdom?

Ro Khanna: Yes, Andy Grove is one of the most brilliant and passionate people I’ve met.  I wish more policy-makers were listening to him about the importance of keeping a manufacturing base for the purpose of innovation.  Some neo-classical economists have argued that we should be indifferent about whether we have a manufacturing base or not.  That may be nice in theory, but what Grove shows is that it cannot work in practice.  Losing manufacturing would mean losing millions of good paying jobs.  It would also hamper our ability to innovate because as Grove shows design and production cannot be separated.  I am disappointed that Grove’s ideas on the importance of manufacturing have not captured more of the attention of the Beltway.  It’s partly why I wrote the book, and Grove arguably is the protagonist of the story.  Washington should listen to people like Andy Grove who have actually implemented successful manufacturing processes and created thousands of jobs here.

I found your research finding that a number of companies were starting to “recognize that machines don’t always improve productivity” to be fascinating as it validates much of my research about white collar management, business strategy and marketing operations. Please discuss how you discovered these fascinating bits of information …

Ro Khanna:  When I would ask manufacturers about why all their jobs could not be automated, they would laugh at the naivete of such a thought.  One of the senior managers at GE explained that individuals were actually more efficient and accurate at tasks such as packaging compared to robots because they were more portable.  Keith Busse of Steel Dynamics also went into considerable detail about the types of jobs in steel manufacturing that he could not see automated any time in the near future.  In general, it’s a gross oversimplification to say that automation will render human workers unnecessary.  A better question is to figure out what types of workers are needed with increasing automation, and what skills they need to develop.

You discussed a manufacturing skills gap in Chapter 7. Recruiting expert Libby Sartain is famous for saying “Hire for attitude, train for skills.” Jeffrey J. Fox asserts companies do not spend enough on training employees. Is there really a skills gap or is there a management problem combined with a lack of vision around how to hire talent that could be trained to do these jobs in a short period of time?

Ro Khanna:  Great question.  You are absolutely correct that companies should invest in training workers.  But, we need to provide them with the incentives to do so.  If we expect companies to take a financial risk and invest in training workers for specific skills —skills that these workers presumably did not acquire through public schooling, college, or vocational education –then companies should receive some tax incentive to do so. We have to make the economics of investing in worker training attractive for a company’s bottom line.  Yes, visionary corporate leaders may get the importance of doing so, and understand that you hire talent not resumes.  But, having incentives can help them justify such  long-term investment decisions to their Board and shareholders. Companies can also partner with trade unions to invest to help cultivate the best workforce.

How did the lecturing gig at Stanford come about?

Ro Khanna: I was speaking at Stanford about how historically there has been a bipartisan vision of supporting American manufacturing.  I talked about Hamilton’s Report on Manufacturing, about Coolidge’s investment in our aviation industry, about Reagan’s investments in our semiconductor industry.  Many of the students had no idea about this aspect of American economic history, and said that they often did not get that perspective in their classes.  Their economics classes were like math classes. So, I thought it would be fun to discuss with students the practical aspects of American economic policy-making, and how that may not easily fit into classical economics or Keynesianism.

What did you personally learn about manufacturing as a result of writing this book?

Ro Khanna: I was inspired about the resilience of American manufacturers I met, and how they went about just doing their work with determination.  I write in the book that, in a deeper sense, the American manufacturers I met speak to who we are as a people. Those talking heads who predict America’s decline need to travel this country and see the hundreds of innovative businesses that are thriving.  There is a reason that the skeptics were wrong when they wrote us off during the early years of the Cold War.  There is a reason they were wrong again when they predicted in the 1980s that Japan and Germany would be the dominant post Cold War economies.  These skeptics always miss the entrepreneurial culture, the hard work, and the sense of optimism that defines America.  After meeting dozens of manufacturers, I am very confident about the future of American manufacturing.  We just need to get the policies right to make their lives easier, and encourage our manufacturers to adapt to the global economy.  That’s why the work you are doing is so important.

Was there anything you learned after the book went to press  that you’d like to share?

Ro Khanna:  Almost every person who has read the book says what they find most interesting is the stories.  I spent a lot of time worrying about taking on the economists such as Jagdish Bhagwati who argues that manufacturing no longer matters.  I spent time arguing for the right policies our nation needs to support manufacturing.  But what seems to touch readers is the concrete stories of Americans who are succeeding in making things.  If the book accomplishes one thing, I hope it shines a spotlight on those Americans who are figuring out how to compete successfully, despite the difficult odds.