Giving up the high ground
The Economist, the only magazine you really need to read, has the answer in the latest edition. In the December 17th edition there is a special report on Japanese businesses entitled Competing through Innovation. The article suggests that the Japanese economy, after 10 years in the doldrums, is starting to wake up and shed the deflation and lack of confidence it has been under for quite some time. The Japanese recognize that they need to innovate to differentiate. The article goes on to state that the Japanese will improve it's innovation capability - primarily by improving the way it commercializes new technologies and funds entrepreneurial firms. OK, so the Japanese will innovate if we won't.
Oh, and the other article that might be of interest in the same edition of The Economist (December 17th) recognizes that India is placing large bets on moving beyond simple IT outsourcing to outsourcing business functions like accounting and even legal tasks. Microsoft has just opened several new R&D centers in India. So, if the innovations the Japanese come up with won't work for us, hopefully the ones from India will.
Of course, China and other major trading partners aren't sitting around watching all this happen without taking action themselves. The Chinese government is backing a program to launch 1000 Chinese businesses which create innovative products and services. Note that's not 1000 jobs but 1000 companies.
I've argued before that we in the States have outsourced and downsized to the point where our businesses are lean and mean. We understand how to cut costs, reduce cycle times and improve operating ratios. Now, these businesses need to grow. To grow they either have to go after new markets with existing products, or win new customers with old products, or create new products for existing customers and new customers. Innovation is key to all three of these market requirements.
Now, removing my tongue from my cheek - we've got to get busy. We need to keep the innovation high ground and keep innovating. Otherwise we've got few competitive options left.