27 August 2008

No infrastructure, no competitive advantage

Infrastructure performance is an essential contributor to a nation's economic development and competitive advantage. Those individuals responsible for infrastructure upkeep have a heavy burden: economic advantage in today's world is defined by agility and responsiveness and if the infrastructure underpinning the delivery of goods and services is not up to the task then economic advantage is squandered. For example, not only is the aging electrical grid in the US threatening the economy and the livelihood of individuals and community through the increased threat of blackouts, but a NYTimes piece illustrates beautifully how it is also thwarting innovation through bottlenecking the profitable development of renewable energy. A similar issue is playing out in telecommunications infrastructure where telcos are throttling (aka "traffic shaping") growing Internet usage so that they do not have to invest in new infrastructure. But here's the rub: no infrastructure, no competitive advantage.

The challenge is that we take infrastructure for granted. Anything taken for granted is likely suffering from disrepair or abuse. In times of recession investment in basic services is likely to be curtailed, resulting in even greater future challenges. The spend in the US is $400B but its largely used to prop up an existing infrastructure model, as is outlined in a global study by the Urban Land Institute and Ernst and Young. This study paints a dismal picture of a truly under-appreciated yet critical element of a nation's economy that is in desperate need of innovation. World Changing has an inspired piece on new ways to think about infrastructure, what infrastructure requirements may look like in the future and rightly calls for a much more substantive debate on this matter. Whether nations can move from archaic systems based on physical distribution routes dating from the 19th century and earlier, to innovative systems that actually evolve and grow to meet and anticipate demand, will determine which nations retain economic advantage and which do not in this increasingly competitive global economy.