Roger Martin, dean of the Business school at U. of Toronto argues in this BusinessWeek column (subscription required) that there is a "romantic notion in North American business that its future lies in design and innovation , while India and China ...churn out the products and services the US comes up with." He provides examples of how Detroit ignored the Japanese, companies like Solectron underestimated the Taiwanese and how each moved up the value chain. He ends with "... (we) need to reject the notion of an apparent trade-off between low cost on one hand and design and innovation on the other".
Many Western tech vendors continue to believe they are immune. As I wrote in The Discipline of Market Leaders being operationally efficient (compared to new global benchmarks) is increasingly the price of entry. On top of that you can expect a reasonable premium for product innovation or customer intimacy. 75%+ margins are only an invitation for customers to encourage the Indians and Chinese to accelerate their move up the tech value chain.
