Leadership Spotlight

"No Partial Credit in the Fleet"

Doing things right in business "has gotten a lot of press in recent years," Mittelstaedt writes in this book. "We seem to have finally discovered that just having ideas is not enough. Results are what really matter, and results come from both ideas and execution, but the biggest enemy of great execution is mistakes."

While serving as an office in U.S. Navy nuclear submarines in the late 1960s, Mittelstaedt says he learned one thing right from the beginning: "There is no partial credit in the fleet. You win or lose in battle. There is no in-between—something that is especially true in the unforgiving environment hundreds of feet below the surface of the ocean." In many ways, he writes, "these are the most challenging times for business in a generation. We have all been awakened to the need to look beyond the comfort of our day-to-day existence, to the need to synthesize the implications of external events, including heightened competition. That, in turn, leads to the need to focus not just on execution but on flawless execution. There is no partial credit in the Fleet"—something to keep in mind when someone asks the question, Will Your Next Mistake Be Fatal?

Reprinted from Knowledge@Wharton

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China: The Next Japan... or the Next U.S.?
The Chinese Century, by Oded Shenkar

Barely thirteen years ago, Michael Crichton chose Japan's growing economic power as the subject of his thriller Rising Sun. What, besides Japan, could scare Americans as much as the raging dinosaurs of Crichton's previous book, Jurassic Park? But the sun failed to rise. Today, when Americans look East, it's China they're usually worrying about.

Will China ultimately become the next Japan, hobbled by internal weaknesses? Not likely, argues Oded Shenkar, author of Wharton School Publishing's latest book, The Chinese Century. Rather, China will leverage its growing advantages to redraw long-standing economic, political, and security arrangements—potentially to the West's great discomfiture.

China's size gives it crucial advantages over other emerging economies, writes Shenkar. Its enormous worker supply lets it keep moving up the technology scale without raising costs. Its huge markets allow it to drive hard bargains on technology transfer. It benefits from regional leadership, and a vibrant and entrepreneurial overseas community.

Local firms like TCL, Haier, and Lenovo—which just purchased IBM's PC business—are beginning to build solid global brands. Meanwhile, America's shift to Wal-Mart style discount retailing has been a perfect match for China's low cost structure and massive production capacity. Even China's physical and regulatory infrastructures are progressing, though China still hasn't cracked down on the massive intellectual property theft that's often substituted for innovation.

In short, when it comes to long-term global impact, Shenkar believes the best analogy isn't Japan (or India or Singapore): it's the U.S.'s emergence as a world economic power a century ago.

There's little encouragement here for American manufacturers. Some will survive by exploring product lines requiring specialized capabilities, or those where labor constitutes a small percentage of cost, or by moving upmarket. But the Chinese are automating and moving upmarket, too. Services may remain an option. In certain product categories, so does customization. But many companies will find themselves outsourcing everything—or simply exiting markets.

What are the broader economic implications of China's ascendancy? Shenkar outlines three conventional scenarios, finding flaws in each. He seems especially skeptical of the hopeful "soft landing" scenario, which posits a gradual decline in trade imbalances as China's costs rise and U.S. productivity accelerates.

While China is now the U.S.'s fastest growing export market, shrinking the trade deficit will require exports to keep rising 25% annually while import growth plummets below 10%. A soft landing assumes China will gradually change exchange rates, open markets, eliminate subsidies, and make a genuine effort to "buy American"—doubtful propositions, in Shenkar's view. It also assumes the U.S. will quickly climb to higher-end production, but "the US will not be the only nation trying to move up the ladder as a way of escaping vicious competition at the bottom... life at the top will get pretty crowded."

The Chinese Century is sobering, especially if you believe that economic power drives geopolitical and military power, too. But if you're determined to base your decisions on reality, it's a must-read.

–Bill Camarda