Speaking at The Economist’s Buttonwood Gathering in New York City today, former IBM
CEO Samuel Palmisano shared what he sees as the three keys for anyone –
be it cities, countries or companies – to compete in an integrated
global economy. In a period of growing interconnectivity, it becomes
increasingly important for entities to distinguish themselves in order
to find growth.
“The developing world has reached the end of the easy path to rising
GDP. Simply put, growth markets have plucked the low-hanging fruit of
global integration Act I,” said Palmisano. “Just as all emerging markets
are being hit at once by the middle income trap, so the developed world
finds itself needing to address huge structural overhangs with urgency.
Postponement is not a serious option.”
Sam Palmisano
So how can you compete? For Palmisano, it boils down to three major points. From his speech today:
1. Have some unique value. You have to do something better than others.
That’s how free trade and comparative advantage work. Cities and
countries have to address this basic question: ‘What is your
differentiating value proposition?’ Economies that succeed will have
clarity on that point – beyond natural resources. In a truly
globally-integrated economy, investment, work and people flow like never
before. What will cause them to flow to you?
2. Simultaneously invest in the future and improve your competitive muscle tone.
You can’t cost cut your way to competitiveness. You can’t transform a
multinational like IBM if you are focused only on cost cutting…You have
to have greater flexibility in how you operate. You have to have smarter
labor, smarter trade regulations. All these systems need to be revamped
if you’re going to be competitive, either as a city, country or
company, in this integrated economic world.
3. Remember that there’s an ‘and’ in ‘R and D.’
When we talk about R&D, we sometimes conflate the two. They’re
different. The history of my industry, information technology, has been
driven by truly breakthrough ideas. They came from deep research – Bell
Labs, Xerox Park, IBM Research, Stanford, M.I.T., institutions like Lawrence
Livermore, just to name a few – the great modern age of industrial
scientific research was built by institutions that pushed the boundaries
of knowledge and stuck to it in good times and bad. It takes
institutional patience to pursue fundamental research.
Its payoff doesn’t usually
come in a quarter or a year or an election cycle. It comes sometimes in
decades if it ever comes at all. And sometimes the benefits are from
derivative works different from the core work you started with at the
beginning. IBM and many universities are convinced that fundamental
research will become more important than ever.
When you hear people claim
that all the basic science has been done and that IP has become a
commodity, don’t believe them. They’re looking at the past. It’s just
the opposite. We’re seeing innovation more out of the back office, more
new gadgets and games than we have in the past. It’s the interaction of
all of these things that are going to change our planet and our
industries and how our society is actually run.
By: Chris Barth
