Innovation Models For Government

In reading the current version of Fortune magazine (January 18, 2010), I came across two examples where innovative thinking is changing the fortunes of two entities, one a business and one a local government. In both cases, people are thinking through the whole problem, understanding interrelationships between the parts of the systems, understanding the financials of the entire process, and acting creatively to solve their problems and create value. I thought of them as modes for the operations of the Federal government which seems to do none of the above things:

• the political class seems to never understand interrelationships, with many of the laws they pass having unintended negative impacts on other areas of the economy or the country.
• the political class never seems to consider the financial costs and impacts, continually running up huge spending deficits.
• when was the last time you ever stood back and thought: "What a creative and innovative government solution!", it never happens.

The first article, by Gregg Segal, was about Hyundai Motors of South Korea. Hyundai entered the U.S. market in 1986 with a single model, the Excel. It was one of the very lowest priced cars in the market and was also one of the most quality deficient in the market also. According to the article, when Hyundai repossessed cars from its lower income delinquent owners, their quality was so bad that they were usually worth less than the outstanding loan balances. However, since then, Hyundai has made quite a turnaround. In the past year or so when all major car companies saw their sales drop significantly, Hyundai actually saw a steady growth in its sales. Hyundai is now the fourth largest car company in the world, surpassing Ford in 2009. Hyundai now has a full line of vehicles for sale at its dealerships and has steadily moved up the charts in J.D. Powers quality ratings, becoming the best quality mass market car brand in 2009.

How did Hyundai move from a terrible single product line up to a full line, high quality performer? The article points out a number of contributing factors:

• Hyundai maintains a Global Command and Control Center in Seoul that minute by minute tracks every aspect of its operations including the shipping and tracking of parts to ensure adequate, but not unnecessary, availability of parts, cameras continually monitor every assembly line around the world, the center watches over all R&D activities around the world, and monitors the massive Hyundai test facility in California. This constant monitoring and adjusting allows Hyundai to anticipate and react to all problems before or just after they crop up. When was the last time the political class was so proactive as to avoid a disaster before it happened?
• Hyundai constantly shortens and improves its delivery process to introduce new autos to the market. Thinking about the agonizing slow process of the health care reform bill, when was the last time the political class ever shortened and improved its delivery process of worthwhile laws and government services?
• While Hyundai has improved its sales volumes substantially over the past few years, its corporate philosophy is now focused on quality, not volume, which is quite a difference from the Excel days when sales, not quality, was the mantra. When was the last time the political class focused on quality?
• Hyundai has built a cross functional quality culture where all parts of the company work together to ensure that quality exists from the design team to the sales floor. When was the last time the political class had a quality process to ensure that the laws it passes actually are enforced in the manner they were designed to be enforced and address the issues they were designed to address?
• According to John Krafcik, president and CEO of Hyundai's American operations, "Hyundai is an ambitious company that looks for boldness and leadership." When was the last time that the words "boldness" and "leadership" were apt descriptions of the American political class?

The second example was also in the Fortune issue. In an article written by David Whitford, the possibility of reinventing Detroit is reviewed. In previous posts we have reviewed the sad state of Detroit today. It has gone from being the fourth largest city in the country with a population around two million people to a shell of its former self with less than one million residents. Its unemployment rate is approaching 30% and its housing market has collapsed. There are vast swaths of inner city property that have been abandoned and the buildings have been knocked down or burned down. This has made the city very difficult to run and manage. Tax revenue is down and police, fire, ambulance, and other services have become very inefficient since they must serve a large geographic area with low population density.

The question becomes one of what would help rejuvenate Detroit. Becoming a regional financial center would be tough because Chicago and Minneapolis fulfill that role in the Midwest already. Boston and San Diego are years ahead as far as being biotech centers. Some have suggested that Detroit might become a center for TV and movie production but Hollywood does not seem interested. Anyway, none of these ideas would make good use of the acres and acres of empty and blighted land.

Mr. Whitford's article, "Can Farming Save Detroit," reviews an incredibly unique way of approaching and solving Detroit's problems. Rather than try to rebuild Detroit's historical industrial base, some people are dreaming of turning the city's many vacant lots into high tech farming centers. Their thought is if they can convert the vacant land into a productive farming industry, it will generate jobs and hopefully consolidate the remaining residents closer in to a core city center, making fire, police and rescue more efficient and less costly. The outer parts of the city limits would evolve into farming centers, the city core would evolve into a more manageable city.

And we are not talking about a typical farm and just tilling some soil and planting some seeds. The people dreaming up this transformation are looking at the latest in farm technology, indoors and outdoors, that would utilize such technologies as compost heated greenhouses, hydroponic growing (water only, no soil), aeroponic farming (air only), etc. Crops would grow year round despite the cold Detroit winters and the farming centers would be a tourist destination for both locals and visitors.

Is this a viable solution for Detroit? I do not know but at least those addressing the city's many maladies seem to have done their homework. They understand the problem, i.e. they have a lot of unused assets (vacant land) with little chance of using that asset they way it had been used historically (car and other industrial production). They understand the bad economics of a lot of vacant land with not a corresponding population density that needed to be served by fire, police, and other city services, i.e. they understood the root cause of the problem. They are thinking creatively to find unique solutions to dire problems.

Like the Hyundai example, the Detroit farming solution stands in stark contrast to the government and the ruling political class who rarely, if ever, display the characteristics of 1) understanding the root cause of a problem, 2) understanding the relationship between all components of the problem, 3) understood the financials of the problem, and 4) acted boldly, quickly, and creatively to solve it.

Many steps in "Love My Country, Loathe My Government" would help bring the positive characteristics of Hyundai's rise and the Detroit farming idea to the ruling class. Term limits would remove politicians from office after a reasonable time, infusing new people with new ideas into the ruling process on a regular basis. Doing a comprehensive zero-based review of all Federal government functions and programs would weed out unnecessary functions, meld together related and redundant functions, and would help bring creativity out in solving problems. Holding politicians accountable based on their performance on Congressional committees would also move members of the ruling class out of committee positions for not thinking uniquely and creatively in solving problems.

Hyundai and Detroit farming are just two examples of innovative approaches to problem solving. Some how we need to get that same energy into the political process before we waste another trillion dollars or so on government processes and functions that just do not work.

Visit our website at www.loathemygovernment.com to order an autographed copy of the book, "Love My Country, Loathe My Government -Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class" and to sign up for the cause. The book is also available online at Amazon and Barnes And Noble.