Where American Industry Went Wrong : MADE IN AMERICA,Regaining the Productive Edge<i> by Michael Dertouzos, Richard K. Lester, Robert M. Solow, and the MIT Commission on Industrial Productivity (MIT Press: $17.95; 340 pp.) </i>

There is an old Zen saying: First enlightenment, then the laundry. Measured by both the number of books sold and the quality of the recommendations therein, the ‘80s must qualify as a decade of enlightenment for American management. Even so, “Made in America” contributes its share. Written by an all-star lineup of MIT faculty, the book illuminates our No. 1 economic problem: the seriously declining rate of manufacturing productivity.

In the long run, the American standard of living depends on productivity, on the amount of goods and services we produce with the available work force. As the Brookings Institute recently pointed out, our living standards would be 25% to 50% higher today if our productivity growth hadn’t slowed over the past 20 years. “Made in America” (the slogan has a poignant ring today) addresses this problem head on. It is a seminal study of the structural and institutional reasons for this decline.

The results of the study aren’t new. The list of weaknesses is the usual one:

* Outdated Strategies

* Short Time Horizons

* Technological Weaknesses in Development and Production

* Neglect of Human Resources

* Failures of Cooperation

* Government and Industry at Cross-Purposes

Nor were the Commission’s recommendations startling, although they are so thorough and detailed that they alone would make the book worth buying. Basically, they are to provide better education and more on-the-job training, treat workers as a resource rather than a cost factor, encourage cooperation instead of competition both within and among firms, learn to live in a global economy, replace the myopic, quarterly mind set with a long-range one, flatten hierarchies, and stay close to the customer.

One fresh and exciting recommendation--perhaps the most significant one--is to produce superior goods, not just invent them. According to senior author Dertouzos, “two-thirds of U.S. research and development budgets are committed to investing and only one-third to finding the best way to make a new product. In Japan, it’s the reverse.”

What makes this book remarkable, though, is its thick description and analysis of eight industrial sectors, two that it considered internationally competitive--chemicals and commercial aircraft--and six others that have suffered for the past decade or two: steel, machine tools, automobiles, consumer electronics, semiconductors and computers, and textiles. I know of no other study that stands on such a hefty empirical base or is as solidly grounded in the sweaty complexity of real organizational life as this one is.

The authors took a “bottom-up” approach. Without neglecting macroeconomic or political/legal issues, the Commission helps us to understand what has been happening to American productivity “on the shop floor, in the laboratory, in the boardroom, and in the classroom.” Members of the Commission visited more than 200 companies in the United States, Europe and Japan and interviewed almost 550 knowledgeable practitioners and analysts in industry, government, organized labor and universities. (Once the study was launched, a ninth team was formed to look into education and vocational training in various countries and to examine the way “companies cultivate and exploit their human resources.”)

But before you run to your neighborhood bookstore, let’s talk about doing the laundry--that is, implementing the study’s specific recommendations for what American industry needs to regain its prominence in a global economy. The authors are certainly aware of the monumental set of changes this entails. They note that “wrenching changes at all levels of the organization” will have to be made if we are to keep pace with our foreign competitors. And they’re wise enough to know that serious change means serious resistance.

Nevertheless, it is precisely at the level of change that the study lets us down. For example, we are told that well-run companies reduce the number of layers of management and base their reward system on performance. Those are two sensible suggestions. They’ve been espoused for years--airport bookstores are filled with pop management books offering the same advice. But what does it take for organizations to get from here to there? How do we get engineering schools to lengthen the typical four-year engineering program (as the report suggests) to make it more like law or medicine or any other professional school? When MIT president Paul Gray, who commissioned the study, was asked this question, he replied that it would not happen quickly and would take place only when major engineering schools all agreed to do it at the same time.

Don’t hold your breath. I was once president of a university, and I’d rather try to move a cemetery than get one faculty committee to agree on change.

Or take another wise suggestion from the study: move the planning focus from the short-term to the long-term. Talk to Nicholas Brady about that one. When he was asked last year what his top goal as Secretary of the Treasury would be, he didn’t recite the litany of urgent national crises such as savings and loans failures, the budget deficit, or Third World debts. He said that the most important task was to influence United States industry to look at the long run. One of his first acts was to appoint a team to devise strategies to shift the orientation of investors and managers. Has anybody noticed any changes?

The point the study misses is that leadership is needed, at the national level and the organizational level, or the laundry isn’t going to get done. As Machiavelli pointed out, “Change has no constituency.” It’s the leader’s job to create one. The flaw in this book is that it does not address the need for leadership to influence organizational culture, to reconstruct the scaffolding that shapes our values and behavior.

Newspapers and magazines celebrate the nation’s most respected corporations, invariably the same set of firms who seem to have mastered the art of managing in a turbulent world. Johnson & Johnson, Merck, Disney, Nordstroms, WalMart, Chapparal Steel, Nucor, Ford Motors, Herman Miller, Motorola, Apple Computers, Compaq, Pepsico, and W.L. Gore are among a handful of corporations who are said to thrive on chaos. What distinguishes such companies--the real bottom line--is a single, elusive trait: leadership. Great companies have great leaders. And great leaders do the laundry.