Apple, Bosch and Zara
think: act CONTENT
Where do jobs have future?
In a globalized economy where wage disparities have seen jobs relocate from Berlin to Bangalore, many have lost faith in the future of employment in developed economies. Employers are constantly trying to internationalize to optimize their value chain and generate growth. But must this necessarily come at the expense of domestic employees? International market leaders like Apple, Nintendo and Bosch would disagree. For years they have invested in employment at their headquarters, and relocated only select jobs abroad. Their goal: Maximizing comparative advantage by keeping key jobs at home. Are they isolated examples? How do these companies design their value chains to avoid the downside of globalization? How do they protect themselves at home and stay ahead the global competition?
The system head approach
To answer this question, we examined the value chains of companies in Germany, the world's number one exporter. With the Federation of German Industry (BDI), we surveyed thousands of companies to identify the business functions they are keeping and developing at home to create more jobs. In a second step, we transferred our findings to the international stage, only to find that the same rules applied on a larger playing field.
As the global analysis shows, know-how in developed industrial countries is less mobile than most people think. It's precisely the high-value, knowledge-intensive tasks and functions which leading companies worldwide keep close to home. Around 43% of the staff at the companies we surveyed work in knowledge-intensive areas – R&D, production and sales management, marketing, branding and in high-value production. The future lies in these demanding functions: They are instrumental in controlling global production activities, maintaining the unique value of products and services (which guarantee higher prices) and safeguarding jobs at home.
These key knowledge-based functions give companies the edge. They are what we call "system head" functions: based on unique, intangible resources – know-how, competencies, fine-tuned processes and partnerships – competitors cannot imitate or replace them, at least not in the short term.
System head companies invest disproportionately in research and development: 70% of all system head companies are active in these areas, compared to only 57% of non-system head firms. In system heads, 23% of all staff work in R&D, design and construction. It comes as no surprise that one euro out of four is earned with unique products, whereas comparable businesses generate just 18% of their sales with unique products.
As a result, these businesses have a vested interest in hiring and training people locally for these key competitive areas and promoting them within the company.
System heads: The path toward growth and jobs
Many of the world's leading companies operate as system heads, resisting pressure to cut jobs or outsource key areas completely. System head companies don't only invest in sustainable jobs at home, they excel in other areas as well: Their international expansion is carefully planned to maximize comparative advantage. They build strong national and international networks (with research institutions and partner companies) and know what their customers want. This calibrated strategy promises greater success than simply outsourcing costs to low-wage countries. They have realized that they need to develop and maintain those activities that are vital to their products' USPs at home.