How Can the U.S. Stay Competitive? Professor Jan Rivkin and Others at HBS Explore Problems and Potential Solutions
Professor Jan Rivkin, chair of the Strategy Unit at Harvard Business School, was interviewed by The Harbus regarding the U.S. Competitiveness Project, an HBS initiative involving Dean Nitin Nohria, Rivkin, Professor Michael Porter, and a host of other faculty members and researchers at HBS. Rivkin discussed the genesis of the project, the key competitive challenges facing the United States, and the role HBS students can play in advancing the initiative.
What’s the driving force behind the U.S. Competitiveness Project?
Dean Nitin Nohria had grown very concerned as he went around the world and asked alumni and other business leaders, “What are your greatest concerns? What should Harvard Business School be doing?”
He kept hearing a concern about the ability of firms in the US to succeed globally and to support living standards for the average American. Different people, I’m sure, presented the concerns in different ways, but many were looking for America to provide some leadership in terms of demand, innovation and the international trading system. The consistency of that message led him to speak with faculty, many of whom had reached the same kinds of concerns independently.
Things came together from there. The Dean has given us a very clear mandate that we should be active in society’s most pressing problems that pertain to business, and this presented a natural opportunity. I think [co-chair of the US Competitiveness Project] Mike Porter, the Dean and myself all feel that there are certain things that Harvard Business School can do uniquely well. There are certain things we can do if we act as a faculty rather than individually – this seemed to be one of them.
Is the challenge confronting the United States principally a result of the recession, or are there broader issues at work?
The United States economy faces a dual challenge. The first is we’re still recovering from an unusually long and deep recession. The second is that we have underlying structural problems whose roots predate the recession. The danger is that we only address the recovery and don’t address the underlying concerns. What happens then? We basically revive an economy whose long-term prospects are weak.
Basically what we see is that somewhere in the 1980s, there were changes in technology and geopolitics that opened the world for business. The ability to do business from anywhere really increased dramatically. At the same time there were changes in governance which tended to make both business leaders and government leaders more short-term focused. This is a recipe for businesses to offshore and to go to wherever offers the best deal today.
Tremendous benefits of globalization ensued, but there were also some downsides. The big downside is the commons that we rely upon in business starts to deteriorate. And the pressures are particularly large on the middle class of society whose jobs tend to be more prone to being offshored.
Now, how does a society respond to its middle class coming under increasing pressure? One response would be we double down on making the middle class particularly productive, through skills building, through education, through innovation – and we’ve done a little of that, but it hasn’t been the dominant response. The dominant response, frankly, was to make a series of unsustainable promises to the middle class.
What promises were those?
“Here’s credit, go out and consume – particularly housing stock,” or, “Don’t worry so much about your retirement, we’ll cover your healthcare benefits more than we said we would in the past,” or, “We the government will employ you directly” – in fact, in the period 1990-2005, the government was one of the sectors that increased employment faster than any sector in the economy.
These are all very appealing promises, but the problem is they’re not sustainable. So you take those promises and you combine them with two wars, a bunch of tax cuts, and a nasty recession, and suddenly you have a government that lacks the resources to invest in the underpinnings of increased productivity: education, basic R&D, infrastructure.
At the same time, you’ve got footloose companies that don’t see the need to invest, and suddenly you’ve got dramatically increasing inequality, productive growth which has slowed, all in the face of other economies that are getting their act together.
Another really vexing matter is that those same forces of globalization imply that individuals with unique talent that can be applied globally suddenly saw their prospects dramatically increased, and you know, that leads you to the Occupy Movement.
If you look at the stats, the Occupy Movement has it wrong. It’s not the 99% vs. the 1%, the real concentration of wealth is in the top half of 1% – but I guess we are the 99.5% is not the same motto!
What has the process been to this point?
Beginning about a year ago we gathered roughly a dozen faculty together from HBS plus some experts from outside in areas where we felt we didn’t have expertise. We identified pieces of the puzzle, each faculty or faculty pair grabbed a piece of that puzzle and started doing research and writing to try to understand what was going on and what recommendations they might make.
We knew we needed some new data, so we also tapped into our alumni base and surveyed what became 10,000 of our alumni on their perspectives and experiences. We also tapped into business leaders. In November , we gathered together a summit of business leaders as well as leaders from labor, the sciences and government, to vet the ideas. They came together for a little over a day, the faculty presented their papers, the gathered experts ripped the papers apart (laughs), we then put the papers back together, better than ever, and that’s what led to the March issue of Harvard Business Review.
We are now in the stage of taking the ideas on the road. Our definition of victory here is not simply that we publish another issue of HBR. We want to make a positive difference. That requires getting the ideas into the hands and minds of decision makers and we’re figuring out how to do that right now.
How do you define success for this program?
Personally, I define success in terms of our impact on US competitiveness. If we tangibly move the needle on competitiveness as we define it, then we’ve had success.
For me and I think for many of my colleagues, it’s also defined particularly on how we move business. Much of the public discourse on US competitiveness focuses on what should the government do. That’s appropriate – there’s a lot that the government should do.
Ultimately though, competitiveness is reflected in the decisions that business leaders make – where do they build that factory? Do they invest in the US workforce? Who do they train? Do they support local competitiveness initiatives? Are they bolstering their local suppliers? These are actions I believe that are not only in society’s interests, but in the longer-term interests of the companies themselves. If we get more companies to see that and act on it, we’ve made a huge difference.
Will you present to government leaders as well?
We will definitely reach out to policy makers, we’ve already begun doing so in fact. We’ve been getting real traction at the regional and local level; Washington is a more difficult place in many ways and the fact is, for us, that’s not our expertise.
But I don’t think of that as too much of a constraint. The bad news is it’s unlikely the solutions to our challenges will issue forth from Washington in spite all the good intentions there. The good news is, they don’t have to. There’s a lot that can be done at local levels.
Many countries and economies are under duress today, so why is the faculty focusing on the United States? Is there an aspect of US favoritism in this initiative?
It’s a great question and it’s one the faculty has struggled with. To me there are three parts to it.
The first part is the US really does play a special role in the world economy today. It is hard to imagine a healthy world economy in which the US is struggling. That’s particularly true given the situation in Europe.
The second part is, a lot of what we’re learning is not just about America, it can certainly be applied to Europe, it can be applied to many emerging economies – so I think we’re actually learning things here that apply beyond our borders, and the US can be thought of as the grand case study.
The third thing is, just as we would expect a company to contribute disproportionately to the communities in which it resides, the same is true of Harvard Business School. We benefit from the competitiveness of the United States, and for us not to give back to that in some fashion would be hypocritical.
How much of a departure is this project for HBS as an institution?
I think in many ways it’s a great departure. Nothing at HBS is unprecedented – over the past 104 years we’ve probably tried everything out once. But, I guess there are a few distinctive elements.
One is working on a cross-disciplinary basis as a faculty team, which is something we do only on occasion.
Committing ourselves to having a direct impact on reality as opposed to studying reality is also a bit different. We’re always committed to impact but in this case our impact is particularly close up.
The way in which we are trying to engage our alumni base is unusual. We ask a lot of our alumni but it often isn’t about their expertise. But here we really are trying to tap their perspective and their experience and their insight.
What is the one message you would hope an audience member would take away from a session with your team?
That’s a tough one. If I had to choose one, it probably would be this: that business leaders have a positive role to play in boosting the competitiveness of the United States.
I’d want people to understand what we mean by competitiveness, I’d want people to understand that we’ve got a problem and where it comes from, and that the sky hasn’t fallen, there are still great strengths in the United States.
I think it was Bill Clinton who said that “there’s nothing wrong with America that can’t be fixed by what’s right with America” – I actually buy that. But business leaders can’t stand on the sidelines. I think we’re at this crossroads where business leaders will either step out or they’ll step up. I think the future is a lot brighter in the step up scenario.
How can students get involved?
We don’t have a formal program on this; interested students should email me directly and we can talk about areas that might be interesting for them. Involvement will vary between the RCs and ECs.
For the RCs, what I can envision is pairing them up with faculty members to engage in independent projects during their EC year that have educational value for which they get credit and they contribute to the work.
For the ECs, they’re going to be spread out all over the country, and as we make the rounds of different cities, we’re going to need people to carry the work forward in those cities, and I can very easily imagine some of the ECs being deeply involved in that.