General Electric’s energy-management business is redoubling its focus on Germany, it seems, according to an interview Stephan Reimelt, CEO of the company’s Energy Germany division, had with Bloomberg. The company is on a mission to take market share from Siemens AG and to do so it plans to acquire whatever expertise and intellectual property it can in the country.
“We will invest, we will make acquisitions and we will want to place our entire product portfolio here in Germany,” Reimelt said. “There are several interesting, profitable and innovative mid-sized companies that could fit.”
Germany has surely been in the news lately, although not necessarily in ways the country might prefer as it pushes, by hook or crook, its fellow EU nations into some kind of fiscal order.
Less noticed has been its ever growing level of business innovation. GE pointed to it in a newly released Global Innovation Barometer, a survey of nearly 3,000 U.S. and foreign business executives on innovation. Germany is close to the top, perhaps disconcerting close to the US, which is still a leader in this category but showing distinct signs of losing ground.
US is Still At the Top
The GE Innovation Survey ranked the United States in first or second place as a leading innovation champion—indeed even respondents from both China and Japan overwhelmingly considered the U.S. to be the gold standard for innovation, the report said. Only Germany came close to matching this reputation.
The chief areas of concern are the continued deterioration of education, federal cutbacks in R&D funding and the ongoing loss of high-tech manufacturing jobs to nations with lower cost structures, it said. “The U.S. still sets the pace of global innovation, but its position is not as secure as it once was,” the report’s profile on the US concluded.
A Lot to Admire
Certainly the strengths that have driven U.S. innovation remain. The report cites, for example, the strong university-industry collaboration. Many leading companies, Google among them, have been direct offshoots of universities. Also, the U.S. is home to the largest venture capital pools in the world, even when VC is adjusted relative to GDP. The country also remains the single greatest generator of patents on a global scale.
Here and there, though, in the U.S.’s innovation profile, cracks emerge.
The U.S. was once the leading manufacturer of high-tech exports in all categories—and it is still in the top tier, remaining the world’s leading exporter of high technology by total value. However, the increasing shift of manufacturing, especially for sophisticated high-tech items, to locations such as Mexico, China and Thailand, continues to erode the U.S. lead, the report says—which, incidentally, the National Science Board also reported in a separate finding this week.
Worse, the U.S. falls just slightly into the third quartile in global rankings for science, technology, engineering and math education, the report found—which is not far behind the U.K. and Germany, but still represents a dramatic departure for a country once seen as the world’s education leader.
Yes, the U.S. has plenty of lost ground to recover and I haven’t even touched our broken corporate tax code is not as supportive of R&D as it should be and the current crop of kindergarten-like Congress people running the show.
Then There’s Everything Else
However, innovation, while clearly important, is not the only factor in economic survival of the fittest in the global arena.
Go back, if you will, to the subject of high-tech manufacturing overseas. There are so many different variables that go into this decision beyond innovation. Last year, natural disasters and their impact on the supply chain was an ongoing theme. The floods in Thailand, for example, had a significant impact on the U.S. PC industry. That disaster alone is going to hurt the industry for the next six to nine months, Richard Gordon, Research VP with Gartner Group’s Global Forecasting unit in London, tells me.
As a result, “there has been increasing concern how some of these manufacturing hubs are at risk from natural disasters and we are seeing some companies looking to diversify their supply chains and manufacturing operations.” Companies will make their site selection decisions based on the usual suspects, he says—government and local incentives, quality of labor force and infrastructure.
Innovation, though, does not necessarily have to play a high level role. At least that is what one can conclude from the recent wave of foreign direct investment in Indonesia by some of the world’s top manufacturers—a country that is completely absent from GE’s list of profiled countries.
In recent months, Suzuki Motor, Toyota Motor and Caterpillar have all announced plans to build manufacturing operations there for various reasons, none of which have much to do with innovation.
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