Today, the New York Times reported,

A growing chorus of economists, engineers and business leaders are warning that the evisceration of the manufacturing work force over the last 30 years might not have scarred just Detroit and the Rust Belt. It might have dimmed the country's capacity to innovate and stunted the prospects for long-term growth.

"In sector after sector, we've lost our innovation edge because we don't produce goods here anymore," said Mitzi Montoya, dean of the college of technology and innovation at Arizona State University.

I wish that they had been listening to what I and some others have been saying for a very long time.  You cannot blindly separate innovation from production half way around the world physically and even further culturally, and expect to remain 'king' of the competition mountain for long.

So far the 'experts' who are finally coming to this 'astounding' revelation can only see innovation's connection to high-technology manufacturing, where the production set-up and start-up is complex, but not as yet to more routine manufacturing.  The problem is their focus, trying to directly link quantitative data to the phenomenon.  Unfortunately, it is this perceived need to tie everything to the 'numbers' today that has led not only to the wholesale shipping of jobs off-shore, but to numerous other misadventures as well, such as the over-emphasis on minimizing product cost at the expense of product design, functionality and reliability, as in designing a class of automobiles that all look the same and therefore, save manufacturing costs, but which the consumer finds boring and undesirable.

What these wizards of business and economics still fail to realize is that even in the manufacture of moderately complex products which are well into their life-cycle, the opportunity to create signifiant value-added improvements, product life extensions and yes, even cost reductions, is in most cases lost when the production leaves our shores.  Where the product visionaries, designers, developers and engineers are physically and culturally separated from the production of their products, the essential intellectual connection to the product is largely lost.

During the Industrial Revolution (circa 1750-1850), a key factor in British manufacturing's leap ahead progress can be owed to an intriguing dynamic.  At that time, scientific inquiry cut across all classes, allowing skilled craftsmen to collaborate with scholars and generate exponential outcomes.  The same holds true today, where the link between the conceivers of products and the producers is just as critical.

Among those companies that are the most innovative (and here I am not speaking of those who tout themselves as being the most innovative, but rather of those who produce the most breakthrough innovations on a recurring basis) innovation is culturally palpable across the entire organization from the executive suite to the shop floor.  This does not occur when the two are artificially separated by out-sourcing manufacturing ten thousand or more miles and many time zones apart.

There are many costs associated with our large scale export of manufacturing, one of which is the social impact, though not directly a P&L or Balance Sheet item for those companies off-shoring the jobs, but a very real concern for the nation as a whole.  However, as the bottom line costs of off-shoring begin to rise significantly in terms of increasing wage rates in developing countries, transportation and the cost of poor quality as well as the very real cost of technology theft and product pirating, the loss of internal innovativeness is yet one more growing cost that need to be seriously considered.

The underlying premise of my newest book, Minding the Giraffes: The People Side of Innovation is that the only road to future sustainability in a increasingly globally competitive world is real breakthrough innovation.  Fortunately, our business and political leaders are finally awakening from their slumber to realize that the innovation they are counting on to keep our country viable is being undermined by the export of our manufacturing.  We can only hope that the wake up call has come soon enough and that it is heeded quickly enough, that we can still turn the tide before it is too late and we find ourselves too far behind to catch up.

###