U.S. Competitiveness: What American Business Can and Should Do (In Its Own Interests)

U.S. competitiveness is mostly about the private sector--how well companies are doing selling goods and services domestically and internationally, and how much of that success is being passed on to Americans through more and better jobs, higher wages, lower prices, and improved living standards. But, strangely, most of the debate over competitiveness is focused not on what companies should be doing, but rather on what governments should be doing.

The Harvard Business School’s U.S. Competitiveness Project, which held the first of a series of meetings with HBS alumni in New York on March 5, is trying to correct that imbalance. And in doing so, it is directly challenging beliefs that have become deeply ingrained among many U.S. business leaders as the global economy has expanded and growth has accelerated in emerging markets. The mantra goes something like this: “American companies are no longer American; they are global companies that happen to be headquartered in the United States. Our responsibility is to our shareholders, not the nation, and we will pursue profitable opportunities wherever they exist in the world.”

Michael Porter of HBS argued forcefully that this view is simply wrong, and not for reasons of patriotism or broader civic commitment. Instead, business should be working to improve what he called the “commons”--the collective resources that make the United States a better place to do business--because it is critical for the long-run success of these companies.

What does that mean? The best example is workforce skills development. As the U.S. economy recovers, many companies are complaining that they can’t find the skilled workers they need to expand. As I discussed last week, one of the big reasons for this shortfall is that companies have allowed apprentice and training programs to whither, and have too often failed to partner with colleges or universities to help develop the workforce they need. Skills training is both a government and a corporate responsibility, and the companies are the primary beneficiaries.

Or take the issue of supplier networks. Large companies can and should be doing far more to help nurture local networks of companies to supply goods and services. In 2010, IBM launched an initiative that brought together more than a dozen large companies to establish a common platform that allows small companies to use a single application to qualify as potential suppliers to all 14 companies, which together purchase about $150 billion annually in goods and services. The benefits to the small companies are obvious, but by increasing efficiency and making it easier for new suppliers to qualify, the big multinationals are likely to reap cost savings as well.

Even with examples like this, however, persuading business leaders that strengthening U.S. competitive capacity is also in their corporate interest is likely to be a hard sell. Harvard Business School is trying to take the lead by asking for commitments from its alumni in managerial positions to undertake concrete steps “that are beneficial to the company but also raise the long-run productivity of doing business in its communities.” The suggested actions fall into six categories:

• Improving skills, including creating or expanding apprentice and training programs.
• Upgrading supporting industries, by expanding sourcing from local suppliers and helping them improve their capabilities.
• Bolstering regional strength by moving business activities back to the United States and participating in broader regional competitiveness initiatives.
• Adopting management practices that strengthen U.S. operations.
• Supporting innovation and entrepreneurship, through research collaboration or investing in promising domestic start-ups.
• Shifting the business-government relationship by lobbying for “business-wide improvements” rather than lobbying for special interests.

Will corporate leaders rise to this challenge? I am skeptical, but would love to be proved wrong. For all the focus on government, there is only so much that governments can do to address this country’s competitive challenges. Business, in its own self-interest, needs to play a far more active role.