A Formula For Economic Growth

By: Verne Harnish “Growth Guy”

Dec 31, 2012 1:00:00 PM ET

Everyone agrees that an excellent education system, cutting-edge research and development efforts, a thriving export market, and global competitiveness are critical ingredients for any thriving economy. And while some countries are winning in these areas, the U.S. is falling behind dramatically in all four. What we’ve been trying hasn’t worked for decades. It’s time to learn from those around the planet-and in our own back yard-and figure out how to get more bang for the bucks we’re investing in revitalizing our economy. Here’s my prescription for a robust turnaround.


Levin invested nine months in recruiting the right board members-experts who can help her strengthen the company in key areas. Her six-member board now includes an entrepreneur who sold a $55 million company who has helped with project management, and the former head of one of the government agencies her firm works with, who has sparked business development. “He’s been instrumental in making introductions for me and leading me to millions of dollars in work,” she said.


In the old days, rich nations were the innovators. We came up with great products and services and sold them to poorer ones. That’s changed, now that developing economies in places like India and China are in high gear. One key trend is “reverse innovation”-a phrase coined by Vijay Govindarajan, a professor at Dartmouth’s Tuck School of Business who is author of Reverse Innovation, which I consider required reading for every executive. That’s a process where industrialized nations like the U.S. import great ideas from less developed economies. For instance, there are Indian cardiac facilities that achieve better outcomes for surgeries for which they charge $2,000 than American facilities do when billing $50,000 for similar procedures. We should be looking to overseas entrepreneurs to achieve similar magnitudes of savings in our own healthcare industry-and many other fields.

At the same time, let’s take a page from Dr. Peter Diamandis and his California-based X Prize Foundation and start crowdsourcing innovation. The foundation offers prizes to brilliant visionaries who can solve challenges that advance humanity, in sectors from education to energy. For instance, it’s offering $30 million to the first privately funded team to send a robot to the moon. That may sound like a lot of money-and it is-but it’s a fraction of what the R&D would typically cost for a project like this. You only have to pay the winners, not fund all the losers. We need more initiatives like this to draw great ideas from everyone in our economy, not just those who are entrenched in existing institutions. 


The new board has required Nurse Next Door’s team to stay on top of key information-from financial metrics to risk factors-on a constant basis. “Every single month, I and my entire team have to do formal reporting to the board,” says De Hart. “It’s made us so much more disciplined in our actions and thought.”

The board has the power to hire and fire the CEO “which is me,” De Hart notes. That accountability has made him a better CEO. “I literally get challenged at every board meeting,” he says.


Despite our massive efforts to reform our public education system, it’s a mess. It’s time we learn from nations like the Netherlands to trust parents to choose the best schools for their children. The Dutch adopted their government-funded school voucher program, which lets students attend their parents’ choice of public or independent schools, in 1917. Today, the Netherlands consistently ranks among the nations with the best-scoring students, while the U.S. is merely average. The only way to get back on top educationally is through a voucher system, where all parents have access to schools that can help their children learn, regardless of their family income.


Despite President Obama’s goal of doubling exports by the end of 2014, we’re nowhere near where we should be. In 2011, Germany’s per capita exports were $18,863, compared to $4,859 in the U.S. As Woody Allen has said, 80% of success is showing, and we need U.S. executives to fan out around the globe to establish overseas outposts. Right now, they’re missing in action. What’s holding them back is the expat tax. The U.S. is one of a tiny handful of countries-and the only industrialized nation-that forces its expats to pay U.S. income taxes on top of the taxes they pay in European and other nations. We’ve got to lift this heavy burden if we want to free them to get in on the action.


The U.S. has been sinking in global competitiveness for several years. Just take a look at the index prepared by the World Economic Forum. The U.S. has slipped from fifth place in 2011-2012 to seventh place-after claiming first place until 2008. Why has our ranking declined? The WEO cites reasons such as the business community’s lack of faith in public institutions and lack of trust in politicians, concerns about wasteful government spending and economic instability. Not exactly a bastion of conservatism, the WEO doesn’t have an axe to grind here-and it’s worth paying attention to its findings.

We’ve got to get our competitive chops back as a nation, and the only way to do that is dropping our corporate tax rate so it’s on par with thriving countries such as Singapore, where it’s 17%, and Canada, which lowered it last year from 16.5% to 15%. Right now, we have the highest-taxed corporations in the world, and that’s holding back growth. We’ve got to lift this heavy burden from our economic engines so they can start firing again!