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New trends in global enterprise are transforming how the world does business. In fewer than 50 years, the rapidly developing economies of Brazil, Russia, China, and India are projected to overtake those of today’s richest nations. Sustained U.S. innovation depends, in part, on universities like Pitt—and the stakes are high.

Market Moves

Jennifer Bails

John Camillus and Bopaya Bidanda (Ric Evans photo)

An electrical engineering student peers warily into the bathroom of a ramshackle house in the slums of Campinas, one of the largest cities in Brazil, with a burgeoning metro population of 3.2 million.

Unlike most of his American-born classmates, Andy Gu, a Pitt senior, isn’t alarmed by the squalor of the favela, a poor neighborhood with seeping sewage and makeshift homes. Gu grew up in China exposed to poverty in some of its cruelest guises. Instead, what leaves him flabbergasted are the naked wires snaking dangerously from the bathroom wall into the showerhead. That is a really bad idea, thinks Gu, gaping in surprise at the stripped copper braids of the mangled electric-shower hookup.

Of course, it doesn’t take an advanced degree in engineering to know that mixing water and electricity is a risky proposition. Yet because of the prohibitively high price of natural gas, Brazilians install their own electric showers in more than 70 percent of the nation’s households—and, consequently, most wear rubber sandals while bathing to protect against shock, which happens all too often.

Gu traveled to Brazil for eight days last March during his spring break as part of the University’s new Product Realization for Global Opportunities class in which students from Pitt and the University of Campinas collaborate to design products for sustainable development. Now in its second year, the joint business and engineering program is funded in part by grants from the National Collegiate Inventors & Innovators Alliance.

“The course makes our students much more globally aware in terms of developing new products,” says Michael Lovell, professor and associate dean for research in Pitt’s Swanson School of Engineering. “Hopefully, it also gives them a feel for some of the challenges they will face in understanding different cultures, which is something we think is very important as the world gets smaller and smaller.”

Standing inside the meager Campinas home—and looking into the faces of the children who lived there—Gu knew right away what his team would try to do. Upon returning to Pittsburgh, he worked with marketing student Jamie Ennis (CBA ’07) to research the electric shower industry and draft a business plan. Next, they created an affordable, snap-fit connector that encloses the copper parts of the ground and hot wires in these shower heads and secures them in place so there is no chance they can touch each other, or worse, a person.

“It is definitely a good feeling and a real source of motivation to come up with an idea that will improve consumer safety,” says Gu, who is now applying for seed funding to launch the Gu-Ennis wire connector prototype in the Brazilian market.

Indeed, Brazil is catching the eye of investors worldwide. In 2003, an influential report issued by global investment bank Goldman Sachs forecast that the rapidly developing economy of Brazil—together with emergent markets in Russia, India, and China—would overtake today’s richest nations by the middle of this century. The acronym BRIC is increasingly used in the media to indicate the rising financial clout of these four nations.

With their large, young populations and insatiable hunger for financial growth and development, the BRIC countries are shifting the center of economic power, says John C. Camillus, the Donald R. Beall Professor of Strategic Management and associate executive dean of Pitt’s Joseph M. Katz Graduate School of Business.

Dressed impeccably in a dark power suit, Camillus sits at his desk in Mervis Hall beneath framed photos of the skyline panoramas of Prague, Pittsburgh, and Sao Paolo—the three sites of Pitt’s top-ranked Executive MBA Worldwide program, which he oversees. He begins to rattle off a bevy of mind-boggling statistics about India, his birthplace and the BRIC nation he tracks most closely. This year, for instance, India’s GDP crossed the trillion dollar mark, and the economy continues to expand at unprecedented rates of nearly 10 percent. On the basis of purchasing power, it is the third-largest economy in the world, says Camillus. Thirty years ago, the country had just 2.5 million telephones for a population that was 700 million. Today, India is the world’s fastest-growing telecom market, with more than 6 million mobile phone subscriptions sold each month. And with 500 million citizens under the age of 25, India has the youngest population in the world. Experts believe if these highly motivated masses can be educated and leveraged as a skilled workforce, it would create a powerful engine to drive even more rapid economic growth.

In many ways, India today no longer resembles the tightly regulated, inward-focused country Camillus once knew. Seismic changes are under way, largely because of sweeping economic reforms and growing numbers of middle-class people who make no secret of aspiring to a better life. “It is incomprehensible what is happening there,” says Camillus. “Most people outside India think it is unsustainable, but they just don’t understand that the game has changed.”

Corporate America already is capitalizing on this transformation, sending manufacturing, telemarketing, and call-center jobs overseas to India and other low-wage countries to cut labor costs. Yet the global ubiquity of the fast, affordable Internet means computer programming, product research and development, and back-office jobs such as accounting and billing are migrating abroad, too. Essentially, any work that can be sent across a network is up for grabs, including many skilled and knowledge-based jobs.

Take, for example, Pittsburgh-based Acusis, which provides outsourced medical transcription services to more than 72 hospitals, clinics, and physician practices nationwide. Launched in 2001, the company generates $19 million a year through advanced technology that enables a sprawling network of 800 telecommuters across India to process dictation tapes from doctors in America.

Acusis CEO and President David Iwinski Jr. (LAW ’88) says his company opted to locate the bulk of its operations in India for cost savings and to gain access to the country’s vast pool of well-educated, English-speaking workers. He says medical transcription is a highly technical, often stressful career that is falling out of favor in America, making it difficult to fill open positions here in the $10 billion-a-year industry.

The transfer of jobs overseas—a politically charged issue known as offshore outsourcing—is just beginning, and it is a revolution that cannot be stopped, according to Iwinski. “What we are experiencing right now is just a little trickle or stream compared to the tidal wave of globalization that is coming in the next 15 years,” he says.

Camillus agrees. But while the loss of jobs is an immediate and troubling issue, he says, what worries him most about the future of the U.S. economy is the loss of knowledge—the driver of all innovation—that is a byproduct of this momentous trend.

Camillus was born in 1945 in the coastal metropolis of Chennai in South India. His father was the manager of The Hindu, the country’s leading English-language newspaper, and his mother taught high school geography. Camillus would have become a professor of English literature, but other pressures obliged him to choose instead between medicine and engineering. Unable to withstand the sight of blood, Camillus picked the slide rule over the scalpel. After finishing his degree in mechanical engineering at one of India’s top technology schools, he went on to complete his MBA at the Indian Institute of Management, Ahmedabad, the premier management program in Asia, and then earned his doctorate in business administration at Harvard Business School.

Raised in a Catholic family with a strong sense of social obligation, Camillus went home to India in 1971 to give back to his country by teaching at his alma mater in Ahmedabad, becoming the first alumnus in the institute’s history to join its faculty. After working in India for several years, an authoritarian crackdown by then-Prime Minister Indira Ghandi prompted Camillus to return to the United States in early 1977.

He soon accepted a faculty position at Pitt, where he has spent the past three decades teaching in the University’s MBA and doctoral programs. In that time, Camillus has been a consultant to Fortune 500 companies and top government agencies. He serves as a trustee of the Carnegie Museums of Pittsburgh and is on several other nonprofit boards in the region. His dedication to his students and service to the community have been honored with the Chancellor’s Distinguished Teaching and Public Service awards.

For most of his career, Camillus has conducted extensive research in strategic planning and management control, publishing four books and dozens of journal articles in these fields. More recently, though, he has turned his scholarly attention to how the landscape of international business and strategy is being reshaped by the ascendancy of India and the other BRIC nations.

In 1990, Harvard Business School economist Michael Porter first described what he called the “cluster” effect in his seminal book The Competitive Advantage of Nations. Business clusters, according to Porter, are geographic concentrations of companies, specialized suppliers, and associated institutions that achieve a competitive advantage by sharing knowledge and infrastructure; some well-known examples are the Hollywood and Bollywood film industries (based in Los Angeles and Mumbai, respectively) and automotive clusters in Detroit and Sweden.

This classic cluster paradigm is now evolving into the more dynamic notion of innovation ecosystems, Camillus says. These complex pockets of enterprise consist of a combination of large corporations, small businesses, start-up companies, universities, nongovernmental organizations, government agencies, and venture capital, all working together to seed invention and discovery. When these ecosystems sprout around the globe, they each become the source of potent innovation needed to fuel sustainable economic growth. “What you have is something much like the Amazon jungle—an ecosystem that is very much alive, dynamic, and growing,” Camillus says.

Ecosystems in one industry are powerful fonts of new ideas and technologies. But experts agree that by building bridges between ecosystems across diverse industries, it is possible to trigger even larger explosions of innovation that are the lifeblood of any country seeking to compete in the global economy. For example, cars today are equipped with more computers than the Apollo lunar spacecraft had—evidence of innovation stemming from ties between the automotive and IT industries.

Economic indicators show the United States still sets the bar for the rest of the world when it comes to innovation. But in this era of globalization, Camillus says it is not enough to connect ecosystems across industries here in America alone.

An unanticipated side effect of the outsourcing boom is that foreign workers end up developing operational savvy and technical know-how about their trades. As knowledge moves overseas, it generates new innovations that kickstart economic growth. “Politicians are worrying about cost-driven outsourcing and the loss of jobs, but the long-run implications are even worse than they think,” Camillus says. “What they forget about is the loss of knowledge—that’s where real power comes from these days.”

Moreover, the vast, and vastly different, consumer markets in the BRIC countries are spawning highly promising innovations such as the increasing use of sophisticated remote diagnostic technology to enable physicians in India’s cities to “see” and treat patients in distant villages that lack access to adequate medical care. Nokia develops many of its ultra-low-cost mobile phones in India, hoping to target the country’s rural masses, while Citibank first experimented there with a special bank machine that recognizes thumbprints to help illiterate users who struggle with access codes like personal identification numbers or PINS, which are fundamental to automated banking.

“Markets are opening to us in places where we could never exercise our creativity, and millions and millions of people around the world who never had a reason to buy our products are moving to the middle class,” Acusis CEO Iwinski says. “If we can be clever enough to create products and services that meet their changing needs, we will benefit. But if we sit around and cry in our beer, that gap will be filled by someone else.”

Reaching this next stage of innovation will mean tapping into the wellspring of knowledge arising in countries like India and Brazil. To do that, “we need to start connecting ecosystems across national boundaries,” Camillus says. “And no one can do that better than a major American research university like Pitt.”

These connections are made when undergraduate students such as Andy Gu and Jamie Ennis travel to Brazil to do market research and bring knowledge back to the United States to feed venture capital or start-ups. Or when Pitt MBA students and engineering majors hold internships at Acusis in Bangalore and at other companies overseas. Or when the University conducts high-level policy forums and symposia with government and business leaders, sends faculty abroad on sabbaticals, or develops multicultural graduate programs in connection with foreign universities.

Camillus has been working with Bopaya Bidanda, chair of Pitt’s Department of Industrial Engineering, to establish a Center for Global Value and Information Networks, which would provide a Universitywide clearinghouse for these efforts in disciplines as diverse as law, public health, and information sciences. The government-funded center would support undergraduate travel, develop new degree and certificate programs, host policy forums, advise businesses, and create new opportunities for faculty research. By doing so, they say, it would help to establish Pitt and the surrounding region as a key driver of innovation and creator of jobs—something that will be essential in a business environment dominated by global commerce.

The time for this undertaking is now, according to Bidanda, the Ernest E. Roth Professor of Industrial Engineering. “We stand at a crossroads where we can either embrace the globalization trend and become leaders in this new world, or we can shy away,” he says. “Those of us who embrace this challenge wholeheartedly will end up being corporate leaders down the road.”

When Gu graduates this year, he hopes to find a job in the United States rather than return to China to work. He is certain that the experience he gleaned in Brazil working across disciplines and cultures will attract the interest of potential employers even if he never sells a single electric shower wire connector.

To Camillus, America’s greatest hope resides in students such as Gu who possess the skills necessary to be successful innovators in a global marketplace. Our world is shrinking fast, he says, but there is a clear path toward ensuring our continued growth and prosperity: Think globally to find and create new opportunities for success at home.

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