Some extraordinary statistics in the March issue of Harvard Business Review, in an article by Gallup executives on what’s happening in China:

% of urban Chinese workers who strongly agree:

– I know what is expected of me at work….34%

– At work I have the opportunity to do what I do best every day…26%

– My supervisor, or someone at work, seems to care about me as a person….26%

– Someone at work encourages my development…23%

– This last year, I have had opportunities at work to learn and grow…23%

– At work, my opinions seem to count….20%

– In the last six months, someone at work has talked to me about my progress….19%

The human resource practices these statistics imply hardly bode well for the development of the Chinese economy. On the other hand, my assistant Myfanwy, who was a temp for several years, says she isn’t surprised by these figures at all, and that you may see similar responses by large segments of the Western workforce. Certainly it is enormously sad, and a great lost opportunity, whenever people feel this way.

If you happening to be flying Qantas anywhere in the world in the month of January, you can listen to an interview with me on the Qantas radio business channel, hosted by Peter Switzer. The interview was on the general theme of the future of the global economy and followed quite a few different tangents, but probably the most interesting part was about how we should feel about work being outsourced to China, India, and elsewhere around the planet. Work is becoming increasingly specialized, and technology allows business processes to be unbundled into small elements that can be easily integrated. Unless you are truly world-class at what you do, you can’t expect to do well in the long-term. The real value is often in coordinating how the pieces come together to create something new and valuable.

For example, many leading Indian technology services companies, such as Infosys, Tata Consultancy Services, and Satyam, have won contracts to run Chinese software development centers. These companies clearly have the expertise to do this. They weren’t chosen because Indian programmers are cheap, but because these companies know how to manage offshore software development centers. Yet why shouldn’t Australian, or Brazilian, or Singaporean companies do this? It is not an issue of cost, it is about effective project management and client liaison. Those organizations that have excellent capabilities at this level can create far more value than is possible by providing large numbers of inexpensive software developers. The problem is one of mentality. For example, there are any number of great software products developed in Australia and other mid-sized developed economies that are successful internationally. However I see very few initiatives being put together that deliberately draw on global best-of-breed suppliers, and create distinctive and high-value services and products from those inputs. This is where the smaller developed economies need to be playing. It is not about competing where you can’t compete, but about recognizing that value creation will cross boundaries, and positioning yourself effectively in that space.

[Update]: Just found out this is actually airing in February.

Last week The Bulletin, Australia’s premier newsweekly magazine, ran an interesting article on the role of technology in the future of Australia, drawing heavily on an interview with me. The broad topic of how Australia – and all other countries – can be successful in the swiftly evolving global economy is taking much of my attention, and I anticipate spending increasing time on this theme. In an intensely connected and interdependent world, it is impossible to stand alone. The idea of creating products, services, and ideas at home and then taking them to a global market is increasingly dated. All aspects of the innovation and commercialization process need to access global best-of-breed talent from the outset. Australia certainly doesn’t suffer from a lack of talent. Australians are well ensconsed in the most sophisticated business, technology, and academic circles around the planet. An interesting statistic is that 6% of open source coders hail from Australia, making it the most heavily-represented country in this domain relative to its population. However, with some notable exceptions, Australian technology innovation isn’t positioned to capture global markets. Part of the issue lies in the size of the economy. With 20 million people – not to mention the reality of geographical isolation – there is a mentality of economic self-sufficiency. Countries such as Singapore, with 3 million people, and Finland, with 5 million people, have no illusion of self-sufficiency and so seek more actively to integrate themselves into the global economy. A key theme that is brought out from my quotes in the article is that of specialization. As scientific and technological progress drives deeper specialization, we must as individuals, organizations, and indeed countries, very carefully select the domains in which we specialize, where we can have a reasonable possibility of being world leaders, and then who we will collaborate with to create value from our expertise. Very likely those collaborators will not be in the same country as us. We must form ties with whoever in the world provides the best complement to our skills. Building and leveraging the supporting networks is a critical skill that Australians – and others – must develop. We live in an increasingly location-independent economy. If you have deep specialist expertise, and connect and collaborate well, you can create massive value, wherever you reside.

John Hagel and I gave the two keynotes at the Silicon Valley KM Cluster last week. Hagel is a true thought leader in the intersection of technology and business strategy, with landmark books including Net Worth, that in 1999 described the currently still-emerging phenomenon of “infomediaries”, and Out of the Box, on how web services are transforming business. His new book, The Only Sustainable Edge, co-written with John Seely Brown, describes how value creation and innovation are increasingly happening at the edges of organizations, economies, and markets. At the event Hagel talked about “modular process networks”, in which business processes and activities become increasingly modular, and are brought together dynamically from throughout the network. In an excellent overview article (and in the book) the authors describe how the motorcycle industry in Chongqing, China, can now make a quality motorcycle for less than $200 by implementing standardized, modular design across an ecosystem of manufacturers and suppliers. China currently produces around 50% of motorcycles worldwide. While John and I use different language and frameworks, the messages in my book Living Networks and that I am currently preaching on modularization, integration, and global innovation networks are based on very similar premises. Executives should pay careful attention to Hagel’s vision of the future of business.

The excellent Knowledge@Wharton site of Wharton Business School has just published an in-depth special edition on What’s Driving India’s Rise as an R&D Hub? (registration required). Motorola, Microsoft and many others are launching R&D programs in India. The real issue is that these are not isolated projects, but integrated elements of global research. The new term for this is Research Process Outsourcing. To do this effectively absolutely requires knowledge-based outsourcing, and harks back to the issues raised by the Harvard Business Review case study I discussed last month. There is no question that the increasing sophistication of the best of the Indian technology companies enables not just participation in global R&D efforts, but also the coordination of international efforts. However despite all the excitement about the potential of the Indian economy, the depth of its lag in education, infrastructure, and health will prove a massive drain on the ambitions of the leading edge of the nation.