Prof Cautions Against Carrier-Like 'Spot Fixes'

Posted: Updated:
Tatikonda is a professor of operations management at IU Kelley. Tatikonda is a professor of operations management at IU Kelley.

A professor of operations management at Indiana University's Kelley School of Business says he's glad Carrier Corp. will remain a "fixture" in Indianapolis, but says he "sincerely hopes" the deal that will keep about 1,000 jobs from moving to Mexico does not become a model for the future. Mohan Tatikonda says if companies focus more on cutting manufacturing costs than sparking innovation, it could become a "race to the bottom." He says American businesses can make up the difference in international manufacturing costs by developing more "diversified and differentiating" product lines.

Tatikonda says, when he first heard about Carrier's planned cuts in February, he was surprised because of the company's long history in the city. However, as he began to research the decision, he says he found it was actually "somewhat remarkable" that Carrier had stayed as long as it had, in the face of many similar companies already shifting to international production.

He argues a "spot fix" like the Carrier deal is great news for the employees and their families, but doesn't address the core problem, which is companies chasing lower manufacturing costs instead of higher innovation. In all, Tatikonda says it is a short-term fix that could create a longer-term problem.

The agreement, detailed Thursday by United Technologies Corp. (NYSE: UTX) leaders as well as President-elect Donald Trump and Vice President-elect Governor Mike Pence include a 10-year, $7 million incentive package from the Indiana Economic Development Corp. UTC says it plans to invest $16 million to turn the operation into what it calls a Center of Excellence for gas furnace production.

Tatikonda says, instead of a constant focus on costs, companies should work on creating a product line that " is differentiated" in the market, saying the larger profit margins generated by innovation can outweigh higher manufacturing expenses. In addition, he says policies promoting more worker ownership will give employees a greater voice in the company.

Tatikonda says an employee focus can help companies drive innovation.
  • Perspectives

    • Why Blogging Without Rules Produces the Best Content

      I spend a lot of time talking with people about what makes writing good. Depending on who you ask, good writing might be exciting and illustrative. It might be simple and efficient. If you ask someone who works in marketing, good writing translates to whatever helps a marketing strategy generate more leads, or more sales, or more of whatever a business is looking to gain. Though I fully respect and agree with this results-oriented perspective on content, in practice it can be...



  • Most Popular Stories

    • The Honda Greensburg plant opened in 2008.

      Honda to Invest $4M, Add Jobs at Greensburg Plant

      The American Honda Motor Co. continues to invest in its Greensburg, Indiana plant as it has announced the factory will be producing the company’s first electrified sport utility vehicle in the U.S. The company says it will invest more than $4 million and add 34 new jobs in the plant to support production of the CR-V Hybrid.  

    • (photo courtesy of The Times of Northwest Indiana)

      Valpo Mansion May Fall to Wrecking Ball

      A one-time mansion that once hosted dignitaries and politicians while they visited Valparaiso appears to be facing demolition, following years of decline and disrepair.  The stately mansion, known locally as the Brown home, maybe knocked down and replaced with condominiums, according to our partners at The Times of Northwest Indiana. 

    • Socio received the Top-Rated Overall Culture award. (Provided Photo/Socio)

      Inaugural Tech Culture Award Winners Unveiled

      Indianapolis-based Powderkeg has unveiled the winners of the inaugural Indiana Breakout Tech Culture Awards. Eleven Hoosier tech companies received the honors based on survey rankings from the 2019 Tech Census, which focused specifically on tech cultures. Nearly 270 tech companies were nominated and the winners were selected from a group of 50 finalists. More than 1,300 individuals responded to the survey, which allowed employees to rate their companies and employers on...

    • Photo courtesy of Purdue University

      Purdue Offers 'Stranger Things' Replica Tee

      Purdue University has partnered with trademark licensing agent CLC to produce a special-edition replica Purdue shirt that appeared on an episode of Netflix’s “Stranger Things 3.”  The university also teamed up with Venley to accurately replicate the shirt, which will be available at retailers on the West Lafayette campus and online later this month.

    • Mearns was named Ball State's president in 2017.

      Ball State President Bullish on Growth Potential

      The president of Ball State University says he is optimistic about the growth trajectory for the school and the Muncie community at large. Ball State recently set a new record for total enrollment with more than 22,000 students, including its largest-ever freshman class. The university is also continuing with several major capital projects, including the more than $87 million Foundational Sciences building, which broke ground earlier this month. In an interview in Studio (i) with...