Why Research and Development Is Not Keeping Pace With Globalization

Monday, 23 NOV 2015

TOPIC: 

Research and Development and Globalizstion

RELEVANCE: 

Operational Design, Strategic Planning, ROI

Over the past few years the volume of information emanating from Google and other tech companies on the topic of driverless vehicles has been a continual crescendo of promised technological transformation to one of the most prominent icons of the modern industrial era. The automobile is about to change, taking it from an individually owned piece of personal freedom and independence, to become part of an integrated vision of transportation and living. (WIRED)  

The autonomous car is just one of uncounted examples of technology transforming our lives, centered on the basic assumption that better engineering can solve every problem. (Zero Hedge) But as Google has learned, often painfully, simply presenting a ‘better’ solution does not solve the economic, cultural and social hurdles that are needed to bring ideas to market. Research, development, testing and evaluation (RDT&E) cannot be exclusive to science and technology. Rather, it must be factored in together with the influencers of economic, social and cultural inclusion that are shaping the global economy… or risk brand impact and market loss.

Globalization and digital interconnectivity are forcing a move away from the industrial age mapping of the world in terms of nation-state territories towards a more complex economic mosaic of city-states, regions, and global alliances. We are now living in a world in which the smallest localities are integrated into the global economy. And though political and social boundaries have not disappeared; they are being reconstituted around economic flows that represent local demographics, social and cultural traditions, and spatial biases from established networks. As local areas become increasingly tied directly into the global markets, the need to compete for investment with other localities and regions on a global market space further fuels a shift in local economic interests. (John Agnew) 

Compounding the issues of globalization is the decline in working-age labor pools. As we pass the zenith of abundant working-age populations in the world’s advanced economies towards a labor-resource decline, the emerging labor shortfalls will necessitate increased inclusion of low-income countries’ work forces. Simply put, "companies are running out of workers, customers or both." (WSJ) 

Simultaneously we are seeing a global rise in the aging and elderly populations. As a population ages, what people buy also changes, shifting more demand toward services such as health care and away from durable goods such as cars. The Wall Street Journal’s article “How demographics rule the global economy” provides an example:

"Consumption habits change as people age. Younger households spend more on homes, cars and their children’s education. For the typical American between 35 and 44, 8% of total consumption goes toward mortgage interest, compared with just 3.6% for someone over 65. By contrast, the typical over-65-year-old devotes 13% of total spending to health care, compared with 6% for a 35- to 44-year-old." (WSJ) 

Economic, social and cultural inclusion are thus becoming critical aspects in assessing and allocating resources to research, development, testing and evaluation (RDT&E) to innovate new products for emerging markets. The effects of globalization and labor will affect three critical aspects of RDT&E for new products and innovations:

  1. Economic inclusion: As low-income groups gain purchasing power and access to markets their historic, geographic and economic behaviors will impact and influence economic growth.
  2. Social inclusion: Emerging market needs will be increasingly exposed to local social aspects of organization, engagement, as well as religious, political and economic structures.
  3. Cultural inclusion: Values, rituals, taboos, and communication will become increasingly central to product design and distribution.

With working-age populations on the decline, aging populations on the rise, and labor migration and automation becoming an economic necessity, engineered solutions can no longer disregard economic, social and cultural influences. The modern global market is driving the need for a new way to approach RDT&E within a market space that is becoming increasingly local. 

As the Economist noted in their feature article, The Third Industrial Revolution, “The wheel is almost coming full circle, turning away from mass manufacturing and towards much more individualized production.” They continue with a discussion of traditional manufacturing versus the emerging opportunities of 3D manufacturing: 

“Ask a factory today to make you a single hammer to your own design and you will be presented with a bill for thousands of dollars. The makers would have to produce a mould, cast the head, machine it to a suitable finish, turn a wooden handle and then assemble the parts. To do that for one hammer would be prohibitively expensive. If you are producing thousands of hammers, each one of them will be much cheaper, thanks to economies of scale. For a 3D printer, though, economies of scale matter much less. Its software can be endlessly tweaked and it can make just about anything. The cost of setting up the machine is the same whether it makes one thing or as many things as can fit inside the machine; like a two-dimensional office printer that pushes out one letter or many different ones until the ink cartridge and paper need replacing, it will keep going, at about the same cost for each item.” (Economist)

As traditional industries confront the new market challenges, they are being forced to reshape their processes to maintain market growth. Ford’s recent opening of a Research and Innovation Center in Palo Alto, CA is an example, seeking to create an environment where “engineers and data scientists are bumping into each other at Starbucks or meetups.” (WSJ) 

The Johannesburg, SA startup MFS Africa has gone further. Identifying the need for migrant workers across the continent to send money home, they have pioneered the development of a payment system that does not require high-end smartphones, in a continent where no-frills feature phones are still prevalent. (WSJ) Their designed solution is cutting edge in terms of RDT&E, addressing issues such as the economic inclusion of Africans who increasingly trek across the continent and beyond for work, expanding access to digital payments using established cost-accessible mobile phone platforms, and supporting the social and cultural challenges of a diverse base of workers. 

Incorporating economic, social and cultural inclusion as part of an RDT&E process will be challenging; they are not finite sciences. Their incorporation demands a different way of thinking about and valuing the needs of the problem so that the science and engineering solutions are developed within the context of globalization. As noted in an article in Zero Hedge:

“While technological innovations could smooth the transition to a new economy and social order, the mere faith in technology is insufficient. We need new models for understanding our situation, and social innovations to match the technological innovations that are already in the works.” (Zero Hedge) 

The challenge is effectively this: as the world becomes increasingly global, our focus as consumers becomes increasingly local.  

"… there is no algorithm that can express or replicate the heartfelt warmth and the bonds that are created and strengthened when a community voluntarily reaches out to help each other… “ (Zero Hedge)