I just answered a linkedin question. I’d like to share the question and my answer below. (The original question along with all answers can be found here.)

The question…

What goals in business are truly worth pursuing? What goals – when at the end of your career and you look back at it all – are those about which you can say, “now that was worth the fight… we changed the course of some little piece of history and left a legacy.”?

My answer…

If you want something you can look back on as a satisfying legacy, I would say improving profits is necessary but not sufficient. The business leader is actually empowered to change peoples lives.

When you’ve looked back and seen how those who were in your organization grew professionally or personally as a result of your how you mentored or how you ran the place, you will feel that satisfaction.

I like to say our organization needs to consistently strive to add value for:
-shareholders
-customers
-employees
-partners
-community

I may be writing more on this theme in the near future.    I can remember in the past that here in china,  this type of thinking was considered naive in, especially in industrial leadership circles.

When I started leading in China 10 years ago, I was too stupid to know it was a naive concept.  My experiences in the past decade have made me even stupider.  I no longer believe in this concept…. I’ve grown to love it.

The SinoFactory blog has a new look and feel. Check it out.

In my last post I bitch and moan about US politicians and their bitching and moaning. But really, look at China’s pro-active stance on turning the requirement for clean energy into value-added economic activity. On Nov. 20th, the WSJ online posted an article China’s CIC to Invest in 2 Clean-Energy Firms.  Subscription is required (I’m not subscribed) but here’s the teaser:

HONG KONG—Sovereign-wealth fund China Investment Corp. aims to tap rising demand for clean energy in the country by investing as much as $1.21 billion in two companies in the renewable-energy sector, people familiar with the matter say.

The transactions are among the US$300 billion sovereign-wealth fund’s first equity investments in a domestic power producer and underscore China’s support for renewable energy.

Hong Kong-listed GCL-Poly Energy Holdings Ltd. said CIC would buy a 20% stake in the co-generation power-plant operator …

So what did the US do with the trillions it had to spend on stimulus funds? Did it invest in lots and lots of clean energy projects which would spur near immediate demands? Did it invest in encouraging and developing lean energy technologies which would add value to the economy?

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American politicians and pundits should stop complaining about successful Chinese competition for greentech and other “good”  jobs.  Rather than complain, they should get off their soapboxes and work towards incentivizing and encouraging US industry.  They should be asking following question:  ”The Chinese have their plan, what’s ours?”

This article from yesterday’s Industry Week cites a congressional panel which concludes that China’s government is aggressively encouraging the foreign investment in, and development of, key industries– this to the detriment of those industries in the US.  From that article:

China employs a variety of incentives, including subsidized land, energy and water, to foreign companies that relocate their operations there. China uses tax incentives and preferential loans, the report notes, to further reduce the cost of investing in China.

The report says China is selectively targeting industries such as auto parts, machine tools, information technology, optics, photonics and clean renewable energy. This policy, it warns, is contributing to the loss of jobs in the upstate New York area even as the state seeks to become a global leader in the renewable energy field.

The report adds that it is not just manufacturing jobs that are moving to China. “Advanced technology companies in the region that have been moving their manufacturing operations to China are now relocating their research, development and innovation operations there as well,” it finds.

The Chinese have been doing what they should do by building a platform for development by private companies, both local and foreign.  They invest in the development of the industries and they get the jobs associated with those industries.

And here’s an example of the Chinese government’s “can do” approach to clean energy from a report by Reuters posted on November 15th:

China selects 294 solar power plants for subsidy

(Reuters) – China has identified 294 solar power projects with total generating capacity of 642 megawatts (MW) in its first pilot program.

Beijing has said it will subsidies  [sic] at least half of the investment cost.

The capacity will be nearly 30 percent more than the minimum target Beijing set in July when it launched the unprecedented “golden sun” plan, which was part of China’s drive to catch up in a global race to find alternatives to fossil fuels.

One would expect that the Chinese solar panel manufacturer Suntech, or it’s Chinese competitors will get a lot of orders out of this initiative.  Speaking of Suntech,  two days before the above-mentioned article appeared, Reuters ran an article about China’s solar rooftop program:

Suntech to develop 20 pct of China’s Solar rooftop plan

Nov 13 (Reuters) – Chinese Solar panel maker Suntech Power Holdings Co Ltd (STP.N) said it expects to develop about 20 percent of the 91 megawatts of solar projects under China’s solar rooftop program.

The solar rooftop program was launched in March to increase the efficiency of buildings through photovoltaic (PV) solar systems.

Once again it seems that Chinese pols are actually doing something about encouraging clean energy and developing the industries to support it.  (Suntech, by the way, is plowing some of it’s gains into job creation in the USA– t is building a solar power panel factory in Arizona.  Everything’s connected!)

It reminds me of Taiwan in the 90’s. The government targeted computer manufacturing as key industry for development.   They created research institutes devoted to technical and market development, and helped steer local companies into the field.  They gave development loans to the 4 key players and Taiwan’s computer industry developed quite nicely.

Now I know it’s not that simple. There are trade agreements which need to be taken into account, and it might be desirable to establish job-creation metrics which would be tied to government incentives or assistance.

All of which leads me to Charles Schumer and his rant about Shenyang Power Group getting the lion’s share of the jobs associated with a huge wind power project in Texas.  Schumer’s rant fails to mention that:

• Shenyang Power got the lion’s share of the jobs, but it also invested the lion’s share of the money for the project.  (Yes, there is an application for stimulus money made by the American side, but it’s only for a pretty small minority shareholding).
• The turbines which will be made by Shenyang will all use a key component made by GE.  I’m guessing it will use other imported (maybe from the US?) components as well, but I don’t know.

So the Chinese government invested and encouraged the turbine industry, and invested in a project in the States that uses turbines.  They are putting up the money and taking risk, and stand to make money and get jobs out of it.   Also,hundreds of thousands of US homes will get cleaner electric power.  GE will get orders for their components.  See how everything’s connected?

Yes, the Chinese government have  focused on being competitive in key industries.  That’s called leadership and that’s what they should be doing. It’s what the US should have been doing as well.

Stop complaining and start competing!

Consider the source, but according to an article in today’s Global Times (a fairly new English-language paper published in the PRC) western manufacturers are increasing their outsourcing activities in China:

Foreign countries have started outsourcing to China again after a brief slowdown last year.

The first nine months of the year saw 3,287 new enterprises providing services that have been outsourced to China launched, offering 585,000 new jobs. International service contracts won by Chinese enterprises in the first nine months are valued at $12.7 billion, up 212 percent from the same period last year, according to Ministry of Commerce (MOFCOM) figures released Tuesday.

As of the end of September, there were 8,060 enterprises with 1.4 million employees operating in the outsourcing industry.

The rest of the article cites the existing and potential threats to China’s outsourcing business, namely India with it’s large English speaking population, but others as well.

For those of us operating the the Pearl River Delta, where most of this outsourcing is being performed, it might mean that the PRD is still an attractive place to set up export-oriented manufacturing.  At the very least, since we assume that the GT writes what Beijing wants written, it means that the authorities are still interested in making China an attractive destination for western export manufacturing.

According to a CNN report,  NAFTA, proximity to the U.S. market, and lower costs (largely the results of inverse currency fluctuations of the peso and yuan)  have tipped the scales in favor of Mexico (and against China) as the new manufacturing destination of choice for U.S.- bound products.

There is talk that the Beijing and and Guangdong governments are starting to play hard-to-get with foreign investors, downplaying their importance in upgrading China’s manufacturing, R&D and local market offerings.

However one report in The Japan Times indicates that Dongguan, at least, is still welcoming foreign investment.

A vice mayor of the Chinese industrial city of Dongguan urged Japanese manufacturers Friday to expand on its turf and exploit its domestic market to help the city recover from the global economic crisis and fall in exports.

“We are looking for more Japanese manufacturers to build R&D (research and development) centers in our city and create domestic brands, securing distribution routes,” Jiang Ling, vice mayor of Dongguan in Guangzhou Province, said at a news conference in a hotel in Minato Ward, Tokyo.

In many ways, what Jiang is saying is in lockstep with what the central and Guangdong governments seem to be promoting– focus on domestic consumption, R&D and high-tech manufacturing.

But what makes Jiang’s comments interesting are that he’s actively courting foreign investment, stating clearly that it essential for the area’s recovery.  Moreover, he’s speaking on behalf of Dongguan’s townships and villages, and these are the organizations which will be interpreting and implementing whatever policies flow down from Beijing and Guangzhou.

While this doesn’t mean that Dongguan is a good place to set up labor-intensive manufacturing, it does indicate that Dongguan, at least, is still Foreign Investment friendly.

This China Daily article quotes Guangdong governor Huang HuaHua and Guangdong Party Chief, Wang Yang making it very clear that the pre-downturn initiatives aimed at moving the province’s manufacturing base up the value chain will continue.

With the outline of the reform plan for the Pearl River Delta formally approved by the central government at the end of last year, the delta scheme has now been adopted as part of the nation’s overall development strategy. This will see the nine cities in southern China’s Guangdong province transformed into advanced manufacturing and modern service centers.

The article doesn’t talk about what they plan to do about the low-value exporting factories currently operating here, but Huang was quoted by People Daily in April saying:

…the province will step up efforts to achieve a change in development pattern by evolving self-innovative industry and upgrading industrial structure, while boosting the transfer of labor-intensive industries in the delta region to less developed regions and transferring labor forces from the agricultural to the manufacturing sector as well as from the rural area to the delta region.  [italics mine]

For me it raises the following questions:

• How will they encourage/force the transfer of labor-intensive industries out of the province?
• How will they define “labor intensive”?
• How fast will they move?
• How will they deal with the most local government and semi government bureaucracies who are still benefiting from those labor-intensive industries operating in their villages and industrial zones?
  

I love hearing about how LEAN strategies can do more important things than just help companies make more money.  Watch this video (or read the transcript) of Bill Moyers Journal for 9/11/09 where he interviews Dr. Jim Yong Kim, a public health expert and the new president of Dartmouth College.   Without mentioning LEAN by name, Dr. Kim  explains how LEAN thinking can improve healthcare, and how it (along with other strategies normally associated with industrial efficiency) should be implemented in U.S. Hospitals.

While there are many articles and posts out there discussing LEAN in healthcare, I just like the way this explains it.

Some quotes from the transcripts, with my comments interspersed [in italics and in square brackets].

BILL MOYERS: Why are we talking about the American health care system as a crisis? What’s wrong with our health care system?

DR. JIM YONG KIM: My own particular take on it is that I think for many, many years, we’ve been working under the fantasy that if we come up with new drugs and new treatments, we’re done.

The rest of the system will take care of itself. In my view, the rocket science in health and health care is how we deliver it. And unfortunately, there’s not a single medical school that I know of that actually teaches the delivery of health care as one of the essential sciences [sic]

[in other words, Dr. Kim is saying that high-tech innovation alone is not enough to make us excellent. The same can be said for many manufacturing facilities.]

DR. JIM YONG KIM: Well, just think about a single patient. So a patient comes into the hospital. There’s a judgment made the minute that patient walks into the emergency room about how sick that person is. And then there are relays of information from the triage nurse to the physician, from the physician to the other physician, who comes on the shift.

From them to the ward team, that takes over that patient. There’s so many just transfers of information. You know, we haven’t looked at that transfer of information the way that, for example, Southwest Airlines has. Apparently they do it better than any other company in the world.

[The same way we gain efficiencies by LEANING the flow of materials and of information in our facility.]

DR. JIM YONG KIM: It means how do you evaluate clinical outcomes? How do you understand variation in doctors’ practices, for example? And ultimately, how do you fix the problems? So the group at Dartmouth Institute does all of that. We look at variation. You know, why is a Medicare reimbursement rate, you know, almost a third in the Mayo Clinic area, as opposed to Miami?

[Measure results.  Analyze variation. Improve procedure.]

DR. JIM YONG KIM: Well, I’ve noticed over the years that when it comes to our most cherished social goals, not only do we tolerate poor execution, sometimes we celebrate poor execution. Sometimes it’s part of the culture. You know, these folks are trying to solve this terrible problem. They can’t keep their books straight.

They really don’t know what they’re getting. They don’t measure anything. But they’re on the right side, so that’s okay. I think we’re in a different time.

[Tolerating waste as a cultural problem.]

Last month I wrote a post, “Dumping your waste upstream isn’t LEAN“, giving an example of how one large American company I know (and have left unnamed) has been bullying it’s vendors into accepting the costs of wasteful stocking in order to lower it’s own costs and leadtimes, while actually raising their own costs in less obvious but more significant ways.

This month, Bill Waddell of Evolving Excellence gives another example– none other than General Motors. Anyway, for another (more skillfully written) take on a similar issue, go to his post here.