Innovation Blog

How that last link in  the chain can murder great innovation

by Shlomo Maital

Life isn’t fair.

Take Apple.  This company has come back from the dead, and its market capitalization now exceeds that of Microsoft!  It has leveraged great innovation in the iPhone, iPod, and now, iPad.

But its business model is threatened.

The iPad is manufactured by Foxconn, a Taiwanese company that runs enormous plants in China.  We visited one, with a group of Israeli managers, and were stunned by the scale!  There were 20,000 workers at the plant, and it was one of Foxconn’s smallest!

The media reports a wave of suicides at a Foxconn plant.   Why?

“I do the same thing every day,” one worker says, quoted by Bloomberg Business Week (June 7-13, 2010, p. 35).

Foxconn has reportedly raised salaries by 20 per cent.

It’s that old déjà vu all over again.  In the early days of Henry Ford’s Industrial Revolution, when he invented the mass production assembly line,  his system was threatened with early death because workers quit just when their skills become sharp and productive, because they could not stand the boredom.  Ford solved the problem. A notorious scrooge, he doubled wages, from $2.50/hr. to $5.00.   For that workers were willing to stand the boredom.

Foxconn has done the same, to some degree.   But the insight remains — great innovation requires, in the end, that efficient dedicated workers produce high-quality products without defects, at enormous scale and speed.  If you fail to share the fruits of your innovation with those workers, they will despair and some will kill themselves.   In your innovative business model, highly customer-centric, make sure your business design is also worker-centric.  If you don’t,  you will face crises like that of Henry Ford (1909) and Foxconn (2009-10).