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Sunday, January 16, 2011

Corporate Strategy Revolution and Michael Porter

I caught an interview with Michael Porter on Squawk Box (CNBC) in December. Porter is a leading authority on company strategy. He is also a professor at Harvard Business School. He made the following points regarding America’s ability to compete (primarily with Asia) in the global economy. The short term stimulus that the U.S. government is fixated on is not the solution. Retail and real estate will not grow our economy, which are the sectors that are being targeted by the stimulus. The current path will lead to a slow and disappointing reduction in unemployment. The real challenge is giving manufacturing companies the ability to invest profitably in the U.S. Holding these companies back are: expensive health care, high corporate taxes, inadequate employee skills, and most importantly burdensome government regulations.
Regulatory simplification is the key to growing the U.S. economy. As Porter points out, this doesn’t necessarily require reducing our standards, it means that we have to make the process more efficient. We need to encourage manufacturing companies to invest in America because, after all, this is where we live. Trade deals are great but they won’t help if we can’t export at a competitive price.
We met with a company last week that makes electrical cords. (Sounds pretty simple; it isn’t.) This company can compete if the runs are smaller and more customized. They’ll lose every time to China on larger production runs. Productivity overcomes wage differentials. If we can create a productivity revolution in America by reducing burdensome regulation and the high cost of doing business, perhaps our manufacturer of electrical cords can compete on the larger runs…..which results in more employment right here where we live.
Michael Porter led the strategy revolution for American corporations; he appears well positioned to lead the productivity revolution for America.

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