Partnering for Competitiveness

Executives in developed and emerging economy nations alike are currently facing tremendous challenges when it comes to the manufacturing workforce. Almost universally, the executives interviewed expressed concern about identifying, attracting, training and retaining the most qualified talent. They described challenges with locating the next team of skilled engineers, top-tier supervisors, technologically savvy production workers and outstanding innovators. They also emphasized the need for greater collaboration between the public and private sectors and between universities, national labs and other non-profits to create environments that breed talent and innovation. 

Link between Innovation, Talent and Competitiveness

This concern for finding and developing the next generation of high-performing talent is critical, as chief executives consistently viewed talent-driven innovation as the key catalyst for competitiveness and prosperity. Indeed, there is an intrinsic link between talent and innovation, and the success of any manufacturing economy depends ultimately on the quality of its innovation and innovators. Companies and nations have been found to flourish most when manufacturing innovation ecosystems are developed and fostered, a closed-loop product development life cycle exists, and research centres and manufacturing operations are co-located – creating an intimate connection where continuous product and process innovations thrive. These ecosystems foster an innovation pipeline in which breakthrough discoveries are developed and matured from basic to applied research, transitioned to pilot phases, and then fully ramped up to commercial applications. The key foundational element throughout the entire innovation ecosystems and pipelines is high-performing talent at all steps of the process. 

The quality of this top talent starts with how their inherent human capital is nurtured throughout the lifespan of their education and careers: from fundamental primary and secondary development to post-secondary and professional skills enhancement. Certainly, basic training – with an emphasis on science, technology, engineering and mathematics (STEM) education, professional development in training and processes, etc. – is important for the future of manufacturing. However, as innovation is the by-product of imagination, all levels of training should also inspire imagination and new, integrated ways of critical thinking, problem-solving, entrepreneurial drive and leadership skills.

Policy-Maker Role in Talent-Driven Innovation

Countries traditionally have three major avenues to develop their skilled workforces: improve education at all levels, support retraining and skills advancement within the existing workforce, and attract and retain high-quality talent from across the world.

Improving education at all levels

To establish a foundation to build the necessary skills for the future, national education systems require a policy environment that focuses on STEM disciplines in particular. Countries have developed specific programmes to promote STEM education and have designated significant government funding to promote training in this area.

Moreover, some executives indicated that countries successful in making skills aspirational and glorifying careers in research, engineering and other areas of science, technology and mathematics will be better equipped to recruit top talent. Governments that employ focused, creative and impactful marketing targeted to youth, parents and schools of today and tomorrow will help to ensure their talent pool views manufacturing as an attractive industry and viable career path.¹

However, while STEM education is important, it is not sufficient. Executives also consistently said that multidisciplinary thinkers with excellent problem-solving, communication, creativity and critical thinking skills are equally valuable for improving competitiveness. Furthermore, the increasingly globalized market requires an internationally minded workforce, and many executives said an understanding of and exposure to foreign markets is important to becoming a more effective manufacturing workforce of the future.

Supporting retraining

Executives also said that retraining the existing workforce is another pathway to developing talent-driven innovation. Some executives noted specifically that retraining and advancing skills often enable employees to face new challenges in the rapidly changing manufacturing environment, which also results in other benefits such as worker productivity and morale. 

Furthermore, high unemployment is a consistent problem plaguing many countries despite companies looking to fill vacancies of highly skilled roles. To mitigate this situation, some governments are concentrating on supporting recruitment and providing sufficient training to fill these gaps. The Workforce Investment Fund, supported by the Department of Labor in the US, is a good example.² Another case in point is China, which has taken strong steps in recruitment development with the Employment Promotion Law that has been enforced since 2008.³

Emerging economy nations are particularly focused on skills advancement through the expansion of vocational and industrial training. For example, India has taken steps towards promoting skills development by increasing funds for its National Skill Development Fund (NSDF), launching the credit guarantee fund and exempting vocational training institutes from paying service tax in India.⁴ China has embarked on the National Medium and Long Term Talent Development Plan for 2010-2020, which emphasizes vocational training and employment promotion.⁵ In 2011, the Brazilian government launched the National Program for Access to Technical Education and Employment (Pronatec), which will create 8 million new vocational training opportunities by 2014.⁶

Attracting and retaining high-quality talent from around the world

The third area of improvement is to attract high-quality talent from around the globe. Countries are realizing that in order to stay competitive in manufacturing, they have to attract both domestic and foreign talent. China, through its “1,000 Top Talent Program”, plans to recruit 1,000 top professionals from across the world to hold senior positions primarily in government, business, science and education.⁷ Brazil is making changes to its immigration policy to attract qualified young professionals while restricting the inflow of unskilled workers.⁸

Among the developed countries, Japan is implementing a policy to accept overseas professionals through a point-based system, while Germany passed the Assessment and Recognition of Foreign Professional Qualifications Act as recently as April 2012, which will help to attract skilled immigrants. In contrast, some countries, like the US, appear to have relatively limited immigration policies that promote attracting top foreign talent. For the United States in particular, the absence of such policies may have an unintended consequence of curbing retention of top-performing students who are educated in the US and then subsequently sent back to their native countries.⁹

The Shared Responsibility of Talent-Driven Innovation

To improve their manufacturing competitiveness, governments of many nations are partnering with industry and academia in efforts to attract and retain top talent. Working with the Project Consultative Group and panellists at the symposium on Talent-Driven Innovation (November 2012), the Manufacturing for Growth project team identified dozens of organizations demonstrating best practices in the area of talent and human capital development or in science, technology and innovation. These public-private partnership organizations represent a broad range of geographies, sectors and missions, but all have impacted the competitiveness of manufacturing companies and countries.

Defining Best Practices in Public-Private Collaboration

The term public-private partnership (PPP) typically refers to a contractual relationship between the public and the private sector for the delivery of a specific product or service, such as the construction of a highway, bridge or hospital. For the purposes of this report, the PPP concept is broadened to include organizations that perform a service for the public good. These organizations are “partnerships” in that both public authorities and the private sector are stakeholders. While in most cases both public and private stakeholders provide some level of funding, the extent of financial contribution is not necessarily equal. In some cases, a stakeholder offers intellectual or physical capital in lieu of financial contribution. Some PPP organizations focus on applied or basic research while others emphasize training. Some focus on a single technology or service while others pursue a more diversified portfolio.

Some PPP institutions – such as Canada’s National Research Council (NRC) and Singapore’s A*STAR – have strong structural links with their respective governments. Others – such as the Irish Centre for Manufacturing Research – are more organizationally aligned with industry. The Fraunhofer Institute, Germany’s leading PPP organization, focuses on applied and basic research, while India’s National Skills Development Corporation (NSDC) provides manufacturing skills training. The collection of PPP organization case studies reflects a broad swath of geography, organizational mission, focus and structure. Each organization is marked by a unique combination of distinguishing characteristics across several key dimensions:

• Sector focus
• Funding source
• Tenure
• Focus of mission
• Geographic reach

Sector Focus

In the search for best practices, the project team found highly successful PPP organizations that were dedicated to a single sector and others that diffuse their efforts across sectors. For example, Sweden’s Automotive Research and Innovation (FFI) and the EU’s European Green Car Initiative both focus on vehicle-related research. In contrast, the NRC and the Fraunhofer Institute assume a broad-based, multi-sector approach.

To some degree, the extent to which a PPP institution focuses on one sector is a function of the organization’s funding sources: FFI is formed by a partnership between the Swedish government and the automotive industry. On the other hand, the largely public funding of the NRC drives a wider array of stakeholder interests and a more diverse set of activities. It is important to note that a PPP organization’s close alignment with a particular sector does not necessarily say anything about its focus on a particular technology. FFI is dedicated exclusively to the automotive sector, but its research programme is technologically broad, including automotive fuel, safety systems, vehicle electronics and software, among other areas.

Source of Operating Budget

Another leading characteristic of the collection of PPP cases that was reviewed is source of operating budget. The funding for these organizations ranges from no overt governmental financial support to essentially full public funding. Some of the PPP organizations – such as the NRC, A*STAR and Enterprise Ireland – are themselves extensions of government and thus receive nearly all of their operational funding from public sources. Others – such as South Korea’s Research Institute of Science and Technology – are private organizations with no apparent public operational funding. A third group relies on partial public operational funding. Fraunhofer relies on government sources for 30% of its operating budget. FFI and the NSDC reflect a nearly 50-50 public/private funding arrangement.

Certainly, the relative share of operational funding burden helps to inform the priorities of the partnership. PPP organizations that are entirely or even mostly self-financed by private sector member organizations have the greatest latitude in shaping their research and service agendas. Still, even organizations that rely overwhelmingly on public funding – often by legislative budgetary authority – involve and rely on industry to varying extents for licensing fees, consulting engagements, technology transfer, etc.

For example, the NRC – an agency of the Canadian government – is operationally funded by the budgetary authority that the Canadian Parliament provides. In 2011-2012, approximately C$ 700 million total authority was used. However, the institution also derived about C$ 60 million from research services on behalf of industry and academic clients in 2011-2012. As part of its organizational strategy, the NRC states that it is “looking to further increase external revenue in future years”.

A more fundamental rationale explains the public-private integration for the research agendas of even mostly publicly funded institutions. The prime mission of those PPP institutions that are largely publicly funded – especially those that practice applied research – is to promote technologies and services that have widespread commercial viability. Government, alone, cannot know what the marketplace demands nearly as well as private sector players. For this reason, a close relationship is warranted even in the absence of substantial financial support from the private sector. In addition, the private sector is home to a deep reservoir of technical expertise that may not always be available elsewhere in the public sector.

Tenure

The project team looked at both nascent and well-established PPP organizations to collect best practices. Organizations such as Fraunhofer, NRC, and Embrapa are decades old. Others – such as FFI and the NSDC – are just a few years old. To some extent, an entity’s longevity is a tribute to its success – particularly if the entity derives most of its operational budget from private sources. It is no surprise that more established PPP organizations tend to be more evolved than younger ones, with greater project differentiation. On the other hand, because newer PPP institutions – such as FFI and the NSDC – are often formed in response to current need, they may make up for in “industry relevance” what they lack in track record.

Focus of Mission

In general, most PPP organizations can be grouped into two categories: those that engage primarily in applied and/or basic research and those that engage mostly in talent and skills development. Leading examples of applied/basic research institutions include Fraunhofer, NRC and A*STAR. To a large extent these organizations are focused on applied/basic research to develop technologies and products that have commercial viability. Institutions such as the NSDC, the Manufacturing Skills Certification programme, Project Lead the Way, and WorldSkills International are examples of skills, training and education-based organizations.

Many institutions participate in both spaces, which is not surprising given the role of a talented workforce in driving innovation. For example, Fraunhofer operates the Fraunhofer Academy, a learning environment that offers its students – mostly from industry – a grounding in the latest findings from Fraunhofer’s applied research organized by subject area. 

Geographic Reach

Some PPP institutions are decidedly local in their reach. Others are truly global. To a meaningful extent, the geographic reach of a PPP institution is informed by the very nature of its mission. PPP institutions that engage in applied research, for example, aim to introduce products into the streams of commerce that transcend national borders. Fraunhofer is one such institution. On the other hand, PPP institutions that engage in skills training typically focus on a single nation. For example, in articulating its mission, the NSDC refers to the growing need in India for skilled manpower across sectors and the existing gap between the demand and supply of skills.