5 February 2009

Pinto's Point

Perspectives on global automation

By Jim Pinto

I've been traveling for the past few months. I spent some time in Australia in September 2008, and then a couple of weeks in Europe, then South Africa, and finally India; I returned in January. I’d like to share some of my global perspectives on the automation business.

Globalization is generating a revolution in the rules of business, which will cause old dinosaurs to whiter away as new leaders emerge. Leadership traditionally came from the advanced, developed countries. There’s nothing “traditional” any more.

For several decades now, the assumption has been that the U.S. and other industrialized nations (Europe and Japan) would keep leading in knowledge intensive industries, while the “underdeveloped” countries provided unskilled labor. That has changed.

Remember how Japan changed the rules after WWII, to claim leadership in many technology arenas? In the same way, many countries around the world now compete. Competition is spreading. Through inexpensive, universal communications technology, knowledge-based work is migrating worldwide to the highest-quality, lowest-cost providers.

The next major changes will come not from incremental improvements, but new “inflection points” generated by innovation. And innovation may come from virtually anywhere, not just the advanced first-world countries. What makes you think America or Europe or Japan has the intrinsic innovation advantage?

The human factor, “asymmetric motivation,” is forcing change. In advanced regions such as North America and Europe, salaries are high and the motivation to work long hours is limited to those few who have natural drive. By contrast, in developing countries, the push for upward mobility is intense, which results in huge productivity differences.

Remember, wherever factories are built, automation equipment and services will be bought and sold. North America and Europe are stagnating simply because few new process plants and factories are being built in these regions these days. In spite of the current worldwide recession, foreign automation markets will continue to expand because that is where investments are being made. To succeed, Americans must go to where the business is. And we must have innovative and cost-competitive products that perform well against global competitors. Otherwise, we’re “toast.”

Within the next two decades, India will overtake China to become the world’s most populous country. Both countries’ middle-class populations are advancing quickly to produce and consume a vast amount of products, services, and energy. For any organization, growth plans must take into account the markets in these and other major, advancing countries.

Related links:

• Friedman – the 10 forces of Flatness:
  http://listpilot.net/c/ISA/1AbRa/w/isa.org/intechnews.cfm?id=6471
• The world is flat:
  http://listpilot.net/c/ISA/1yTIO/w/isa.org/intechnews.cfm?id=6449
• Redefining Global business leadership:
  http://r.listpilot.net/c/isa/24pqvme/1awrj
• Management of Innovation:
  http://r.listpilot.net/c/isa/2lixnos/1g8ls

Behind the byline

Jim Pinto is an industry analyst and founder of Action Instruments. You can e-mail him at jim@jimpinto.com or view his writings at www.JimPinto.com. Read the Table of Contents of his book, Pinto’s Points, at www.jimpinto.com/writings/points.html.