Wednesday 26 July 2017

Innovation is a crucial fertiliser for the process of production

LET me declare a vested interest from the outset. I am a scientist, I work for Science Foundation Ireland and I undoubtedly benefit from what is commonly referred to as Ireland's 'smart economy' policy.

Nonetheless, it worries me deeply that a growing number of senior figures, from commentators to economists to business leaders, do not seem to understand the policy.

Economist Colm McCarthy, in his recent presentation to the Richard Cantillon School in Tralee, was reported in the national media to have said that the only really viable way to re-employ the half-million or so souls who have lost their jobs in construction, retail and hospitality was to create blue-collar employment.

"It was simply fantasy to believe that they would all find a job wearing a white coat in some sort of nanotechnology business created as a result of the Government's smart economy policy," he was reported as saying.

Sean O'Driscoll, CEO of Glenn Dimplex, recently told the Lemass International Forum that "it had been a huge mis-step to shift policy away from engineering and manufacturing to 'smart economy' jobs".

He is wrong to portray the situation as manufacturing versus the 'smart economy'. Engineering and manufacturing and the 'smart economy' are not mutually exclusive and nobody is pretending that 500,000 unemployed will secure new jobs in white coats in nanotechnology.

There is nothing in the smart economy philosophy that says we should stop making things and only invent them. Quite the opposite, in fact. Firstly, the idea that all the high-skills, high-pay jobs envisaged in the smart economy strategy would be in research is incorrect.

The basis of the policy in simple terms is that we upgrade the technical capability of the country such that we can invent things and adopt inventions from elsewhere.

We then apply those inventions to everyday processes and business in Ireland, from public services to business, including manufacturing. So, today my business sells standard yogurts. Tomorrow it sells yogurts with cholesterol-lowering effects.

A small percentage of my workforce in white coats, with high-skills and high pay invented this new product, but now I need an operational workforce to manufacture, distribute and sell this product.

Because of its nature, the entire production process requires certification to high standards, meaning the workforce must be of a higher skill level, with probably higher pay than when they were making commoditised yogurts.

(They would certainly have to be higher-skilled than their Chinese counterparts making yogurts on salaries of €100 per week).

And because these new yogurts command higher prices on the market, the model is sustainable.

This is the smart economy policy.

It ranges from the white-coated scientists to the process engineer to the production-line operative to the salesperson, all of whom move up the value chain in this process. It is not all in the laboratory, it spans the entire system. It was never intended to be exclusively in the lab.

I was at the Lemass Forum and I believe that Intel VP, Jim O'Hara, Hewlett-Packard VP Lionel Alexander and Pfizer VP Paul Duffy were all firm in their view that manufacturing is central to recovery, and that they did not pitch manufacturing against the smart economy.

Indeed, it was pretty clear that they viewed the essence of the smart economy as being critical to their organisations' evolution, competitiveness and survival. In case there is any ambiguity here; that means job retention and creation, from the lab to the sales force.

Mr Alexander presented a particularly relevant example that is a case study for the smart economy that very much includes manufacturing. A number of years ago, Gillette's dominance of the shaving market was threatened by Bic's commoditising of the razor in the form of cheap, disposable razors.

Gillette did not respond by competing head-to-head with Bic. Rather, it invested heavily in R&D, developed razors that improved the 'shaving experience', for which customers were willing to pay more than 10 times the price of the disposable razor.

Only a fraction of Gillette's workforce is in R&D. But the benefits of this approach have fed through from higher-end manufacturing, all the way through to sales and aftercare; creating jobs across the spectrum.

Mr Duffy cited the case of Pfizer Ireland, where its core competence of advanced manufacturing has led to the establishment of bolt-on business units such as shared services. Again, this is the smart economy in action. It is not either-or.

The IDA is quite open about the fact that there are relatively few jobs in research but that they are essential in anchoring the larger numbers of manufacturing and other jobs here. The R&D capability provides the rest of the company's operation with the capacity to introduce new product and service lines, to innovate faster than elsewhere and thereby command higher prices for its products and services.

This might best be expressed as driving the creation of light-blue collar jobs -- the critical point being that they are lighter blue than those of the competition.

As someone who is working to enhance Ireland's research capability as an input to increased national productivity, I am concerned that the researchers in white coats will be maligned by the misrepresentation of the smart economy strategy that we have seen emerge in public discourse recently.

This is not a war between the lab and the production line. The production line needs the lab and, if it uses it properly, it can grow.

Irish Independent

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