X-raying the globalization of an icon

You probably recall, maybe still use, the old Sonicare electric toothbrush. It fought plaque at 32 KHz, was used by most dentists, guaranteed your money back if improvements were not obvious after 30 days of use, was bulky and all American. Chances are that even your dental hygienist would praise your toothbrushing style. At that time, Optiva, the maker of Sonicare, had a workforce of just 600 and sales of $175 million, in an all-American affair.

Fast forward to now. Five years after Optiva was acquired by Philips, Elite, scion of the old Sonicare, is becoming a global status icon. Elite is just one of the oral-care products a team of 4,500 workers of two dozen nationalities, at 12 locations and in five time zones, manufactures - this is indeed a global team. From Der Spiegel, here's the first half of the global journey of the Elite toothbrush, from spare parts to the assembly line:

The toothbrush is essentially comprised of 38 components. The parts for the energy cell, a rechargeable nickel-cadmium battery, are supplied by Japan, France and China. The circuit board, its electronic heart, comes pre-etched from Zhuhai in the Pearl River delta of southeastern China. The copper coils originate from the Chinese industrial city of Shenzhen, not far from Zhuhai. They are wound by armies of women with bandaged fingers. Globalization is largely a female phenomenon.

The 49 components on the board - transistors and resistors the size of match heads - hail from Malaysia. They are soldered and tested in Manila. Then they are flown to Snoqualmie on the West Coast of the U.S., the site of the parent plant. Meanwhile, back in Europe, the more complicated plastic parts are trucked from Klagenfurt in Austria to Bremerhaven in Germany. Klagenfurt also supplies blades made of special steel produced in Sandviken, Sweden. A freighter from Bremerhaven takes the half-finished brushes across the Atlantic to Port Elizabeth, New Jersey. From there they cross the continental United States by train. And in Snoqualmie, a 40 minute drive from Seattle, the final product is assembled and packaged.

By this time the components have traveled a full 27,880 kilometers, two thirds of the Earth's circumference.

And here's one of the current driving forces:

A worker in the US assembly team earns between $9 and $14 an hour, depending upon her position on the assembly line. A Chinese worker brings home about 1,000 renminbi a month - i.e. $120, or roughly $0.75 an hour. Just over 5 percent.

Conclusions:

1. Such redistribution of labor could explain the low inflation in the US - by keeping wages in check;
   
2. The US workforce will likely find more redress from education than from labor unions;
3. And... Today's future is in transportation.

Excuse for offshoring or call to action?

Following, there is an excerpt from a letter Craig R. Barrett, Intel's Chairman, sent to Business Week, in which he is addressing the need for corporate involvement in what, and how, the US educational system turns out specialists:

Science Grads, Where Are You?
[...] But their achievements do not tell the whole story about the American education system. The Intel STS finalists are the exception, not the rule. In fact, American K-12 students are consistently outperformed by their foreign counterparts on international math and science assessments.

ERODING RESOURCE. We also have a graduation gap: While the number of jobs requiring technical skills is increasing, fewer American students are entering -- and graduating from -- degree programs in science, math, and engineering.

Why does this matter? Science and technology are the engines of economic growth and national security in the U.S., and we are no longer producing enough qualified graduates to keep up with the demand. These graduates -- like the Intel STS students -- represent a resource vital to American competitiveness that is eroding at home while being produced more rapidly and efficiently abroad.

For the past three decades, about one-third of U.S. bachelor's degrees have been granted in science and engineering. Asian nations far outstrip that figure, with China at 59% in 2001, South Korea at 46% in 2000, and Japan at 66% in 2001.

LOSING GROUND. Of those degrees, the number awarded in engineering also varied greatly: In China engineering accounted for 65% of all science and engineering degrees; in South Korea for 58%; and in Japan for 29%. In the U.S. that figure is less than 5%.

How did we get here? A report released earlier this year by Achieve, a nonprofit organization that helps states raise academic standards, contends that we have institutionalized low performance through low expectations. Our high schools expect only a small number of students to take the advanced math and science courses such as algebra and geometry.

Another Achieve study showed that much of the math content on state high school exit exams is basic at best -- similar to material covered by foreign students in the eighth grade.

GET INVOLVED. America's economic future lies with its next generation of workers and their ability to develop new technologies and products. This means we must strengthen math and science education in the U.S.

We must increase the number of students who can compete on a global level by, for example, adopting the goal of doubling the number of engineering graduates each year from some 50,000 to 100,000 or more. This requires the support of elected officials, but changes of this scale cannot occur without action from the business community. [...]

Despite similar calls coming from other leaders in the industry, not much has happened to show greater corporate involvement into tuning up the educational system to the industry needs. To date, only IBM has announced a program whereby its elder employees, with advanced degrees in science, could opt in for early retirement on the condition they go and serve as high-school teachers. Are these initiatives enough to bring about change? Are they meant to persuade lawmakers, students and parents, or directly effect the desired change? How realistic is it to expect a solution and how that solution may look like? N.B. Industry leaders are aware of the amount of time it would take to turn things 180^o in education if we started doing things right today (~20 years).

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On shareholder democracy

If aproved, the newly proposed SEC rules regarding the disclosure of executive pay will make for interesting analyses about the not so direct connection between corporate incentives and results. The Corporate Library Blog, the blog associated with The Corporate Library, brings into attention a piece by NYT's Gretchen Morgenson about shareholder democracy. The idea is that "shareholder elections are procedurally much more akin to the elections held by the Communist Party of North Korea than those held in Western democracies."

In our day and age, we almost instinctively associate (more) democracy with the idea of better in most organizations. Corporations, organizations meant to maximize profit, seem to make no exception.

One can rationalize endlessly about the level of democracy a corporation can and needs to take in. In fact there is a continuum: on the one hand we have the military (pure hierarchy and no democracy), on the other we have the individual. Such continuum makes it difficult, especially for the lawmaker, to rule on the optimum level of corporate democracy. Not to say that, in general, democracies are about legitimacy, not rational decision making...