IBM is a perfect example of just what competitive intelligence can do. The technology giant had dominated its industry for decades and was the most admired and scientifically innovative company on the planet. But during the 1980s, IBM faltered, losing its lead in the personal computer hardware and software markets as it outsourced key elements to competitors like Intel and Microsoft. Those competitors soon became mega-companies, while IBM slipped. By the end of the decade, IBM was bloated, overstaffed, and overinvested in low-margin businesses; revenue had peaked in 1990 and was declining rapidly while profit margins and the stock price were plummeting.
So what did IBM do? It studied the competitive landscape and immediately learned that its expenses were much higher than other companies in its industry. Further analysis compared IBM to the strengths and weaknesses of its competitors and drew lessons from the comparison. IBM then reinvented itself by developing a strategy to leverage its advantages and cut away many of the practices, expenses, and unproductive assets that were dragging it down. The rebirth was wildly successful. Today IBM is again a master of innovation, with more patents per year than any other American company across nearly twenty consecutive years. It is focused on high-margin software and services, and it boasts greater annual revenue than Microsoft, Apple, Intel, Amazon, or Google.
If America were a corporation, it would today be the equivalent of IBM in the early 1990s -- an industry giant that's failing to keep up with the times. Once a world leader, it is now in effect facing bankruptcy, lagging behind in major market segments like health, safety, education, democracy, even equality. Around the globe, the technology of democracy has evolved, health care systems have been developed, and the world has changed greatly since World War II, yet the United States still operates with the heavy footprints of its founding fathers.
While cross-country comparisons have clearly identified areas in which the United States is faltering versus the competition, the data also show that America was not always a poor performer. In many areas of comparison, we were near the top throughout the latter part of the twentieth century. History has witnessed our leadership decline, as the competition has invested and improved while our growth has slowed down, stagnated, or receded altogether in some areas. In health, back in 1987, only seven other countries had longer life expectancies. Today, we're not even in the top twenty! In education, America once enjoyed the highest rate of college education in the world but today has a below-average performance. In democracy, we introduced the world to modern representative democracy, with landmark documents including the Declaration of Independence and the Constitution with its Bill of Rights. Today we struggle with an inefficient and archaic voting system that ignores improvements in democracy that have been developed in the past 200 years and we rank miserably in levels of voter participation. In equality, the United States has been extolled since the days soon after its founding as a land of opportunity and a destination for millions of immigrants striving for a better life, yet our social mobility is worse than in many other countries, while income inequality has been exploding since the late 1970s.
Imagine if in the early 1990s IBM had reviewed the competitive intelligence data it so carefully gathered and then decided simply to ignore everything the data made clear. No modification to its business approach, no shift in strategy, no changes at all. Had the company continued operating merrily along the same declining trajectory, IBM would now most likely be a small company struggling for survival, a subsidiary of a larger company, or out of business. As we know, of course, it did just the opposite -- paid close attention to the data and followed the lessons it learned -- and today it is once again a powerhouse.
America needs to adopt IBM's turnaround story. It needs to stop hiding itself in myths of exceptionalism and America dreams. It needs to internalize the competitive intelligence and accept the fact that it many key areas of society it is now lagging behind. It then needs to shake itself from its complacency. It needs to change the political and societal institutions, using the leading practices that have already been proven to work around the world. Lastly, America needs to battle those elements of society that are preventing us from excelling, who are squandering America's future.
If Americans fail to address the fundamental issues in American society then we risk passing a point of no return, passing a point to which our future becomes depressingly clear. We owe it to ourselves and our progeny to create a great country for generations to come.
America must make IBM's turnaround story its own national story before it loses the power to do so.
This article is based on excerpts from the recently released book The Measure of a Nation: How to Regain America's Competitive Edge and Boost Our Global Standing
A key goal in 'Measure of a Nation' is to compare the United States to other wealthy countries, with the idea being to identify which countries are performing the best in each area of interest: health, safety, democracy, education and equality. In each of those areas, the countries that are performing the best are examined to determine which best practices might be applied here in America. Leading countries were labeled Stars and lagging countries were labeled Dogs.
In order to do this analysis, we selected the subset of countries that are both wealthy (nominal GDP per capita over $20,000) and have a population greater than 10 million (upper third of national populations, no city-state countries) as a comparison group. This comparison group consists of 14 countries: Australia, Belgium, Canada, France, Germany, Greece, Italy, Japan, Portugal, The Netherlands, South Korea, Spain, the United Kingdom, and the United States.
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