Clayton Christensen has revolutionized our understanding of innovation - and in fact business - by providing a theoretical framework around sustaining and disruptive innovation[1].
A couple of days Christensen published an article in the New York Times, showing how different types of innovation either created, destroyed or just maintained jobs in the overall economy. And without new jobs, the US will not emerge from recession.
Empowering Innovation (what he has called new market disruptive innovation in the past) creates jobs, whereas efficiency innovation (what he has called low-cost disruptive innovation) destroys jobs. Sustaining innovation doesn't create jobs, but does manage to preserve reduced job numbers in an industry that might otherwise fade away. Very interesting analysis. It takes his thinking about innovation at the level of an individual company to a thoughtful analysis of how innovation affects a whole nation.
He goes on to discuss the perniciousness of some of our financial metrics for measuring company success. Let me take one he mentions, RONA, or return on net assets. You can improve this ratio, like any other ratio, by increasing the numerator (return or profitability) or reducing the denominator (net assets). Too many companies have focused on the denominator, clearing net assets off their balance sheets. Outsourcing manufacturing activities to another party gets those big expensive factories (assets) off your balance sheet, improving RONA but outsourcing jobs and reducing your own control of your destiny in business. And it certainly doesn't grow jobs in your own country.
I highly recommend reading this article. It'll get you thinking.
[1] Disruptive innovation is a term of art coined by Christensen. It's means something quite different from what you'd read in a dictionary by looking up disruption. Read The Innovator's Dilemma to get the whole picture, or my post here to get a quick summary.
Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts
Tuesday, November 6, 2012
Thursday, July 5, 2012
Another Take on Birth Rates
Recently, I wrote a post about Hans Rosling's latest TED talk, discussing the relationship between birth rates* and religion. He shows data that debunks the idea that religion is a factor in birth rates. Rather, the factors that affect birth rates are economic well being, health (in particular infant mortality), and the education of women. Rosling focuses on these factors with respect to the poorer countries in the world. He analyzes the data to show that birth rates decline with bettering social and economic conditions, and better social and economic conditions drive the birth rate even lower, creating a virtuous circle.
But what happens when the birth rate drops below 2.11, replacement level that keeps population from declining? Then you have a different problem: there are too few young working people contributing to the economy relative to the number of older people who create significant burdens on pension plans and health care services. The problem is extreme in Japan, where the birth rate is 1.39 and immigration is almost nil: the population will decline from its peak of 128M in 2008 to 87M in 2060, with more than 40% of the population over 65. Concern about this onrushing demographic disaster is said to be spurring Japan's interest in anthropomorphic robots, which they envision looking after the elderly when there aren't enough young people around to do it. (Apparently the xenophobic Japanese would rather have a robot look after them than an immigrant!)
In general, Europe had experienced recovering birth rates for the decade up to 2008. But since 2008 birth rates have plunged. A recent Economist article examined this drop.
You can see a number of countries where the birth rate has fallen below 2.11. You'll also remark that the drop started just after the economic crisis of 2008. The Economist's conjecture is that this is not a coincidence: because of the economic situation, young adults are postponing marriage and having kids, while immigrants, who in general had higher birth rates, have left now that the employment market has dried up. They show a graph of the inverse correlation between youth unemployment and partnership formation. (They look at partnership formation as a common precursor to having children, and thus one that foreshadows a drop in the birth rate, which of course has a built-in 9-month lag).
Rosling certainly piqued my interest in birth rates as such an important factor in global development. It was equally interesting to see The Economist's take on the subject, through the lens of the developing countries.
*By birth rate here, we mean the number of children born per woman.
But what happens when the birth rate drops below 2.11, replacement level that keeps population from declining? Then you have a different problem: there are too few young working people contributing to the economy relative to the number of older people who create significant burdens on pension plans and health care services. The problem is extreme in Japan, where the birth rate is 1.39 and immigration is almost nil: the population will decline from its peak of 128M in 2008 to 87M in 2060, with more than 40% of the population over 65. Concern about this onrushing demographic disaster is said to be spurring Japan's interest in anthropomorphic robots, which they envision looking after the elderly when there aren't enough young people around to do it. (Apparently the xenophobic Japanese would rather have a robot look after them than an immigrant!)
In general, Europe had experienced recovering birth rates for the decade up to 2008. But since 2008 birth rates have plunged. A recent Economist article examined this drop.
You can see a number of countries where the birth rate has fallen below 2.11. You'll also remark that the drop started just after the economic crisis of 2008. The Economist's conjecture is that this is not a coincidence: because of the economic situation, young adults are postponing marriage and having kids, while immigrants, who in general had higher birth rates, have left now that the employment market has dried up. They show a graph of the inverse correlation between youth unemployment and partnership formation. (They look at partnership formation as a common precursor to having children, and thus one that foreshadows a drop in the birth rate, which of course has a built-in 9-month lag).
Rosling certainly piqued my interest in birth rates as such an important factor in global development. It was equally interesting to see The Economist's take on the subject, through the lens of the developing countries.
*By birth rate here, we mean the number of children born per woman.
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