How ideas in leveraging technology possibilities for getting jobs done better are being formed and shaped in a competitive market into eocnomic value or waste, causing the rise and fall of products, firms, and economies, is the primary focus of Modern Day Engineering Economics and Management.
Sources of Wealth– ideas play a vital role
However, the further progression of ideas such as electric vehicles, renewable energy, and cloud-based IT service automation have been destroying such markets. Hence, ideas are at the core of creating wealth and shaping the market of other factors. Therefore, the development pathway should focus on getting into the orbit of creating wealth from ideas.
But despite the strength of ideas in driving wealth creation, there is no natural correlation between idea density like patent filling and wealth creation. For example, more than 75% of innovative products retire without producing profitable revenue. Similarly, as high as 94% of patents are never used in improving products or processes. Furthermore, incumbent ideas producing profitable revenue run the risk of losing the market due to the rise of the next wave of ideas. For example, the LED light bulb has taken over the incandescent light bulb market, invented by Edison. Hence, one of the core challenges of Engineering Economics and Management is to make decisions and manage programs to understand wealth creation dynamics out if ideas as reoccurring patterns.
Natural resources (N), labor (L), knowledge(K), and ideas (A) are our tools for creating wealth through getting our jobs done. But is there a natural, scalable correlation between wealth and these input factors? Unfortunately, the answer is no. The wealth creation capacity of natural resources, labor, and ideas depends on ideas. Ideas create and destroy their wealth creation capacity. For example, the idea of internal combustion engine-based automobiles has created the market for liquid fuel. Similarly, the idea of automating knowledge and skill, leaving only innate abilities to humans, has made low-skill labor of Bangladesh eligible for manufacturing jobs. Besides, the idea of remote service delivery over a communication network has created a market for IT services market. Hence, how to leverage the non-linear relation of ideas with economic value creation is an issue, as shown in Fig. 1.
Science, Technology, Engineering, and Mathematics (STEM)–why are we after it?
As explained in the previous section, ideas are at the core of creating economic value. Does it mean that Engineering Economics and Management suggest encouraging more idea creation? For this reason, should the focus be on STEM indicators like the number and quality of graduates, publications, and patents? It appears that conventional wisdom suggests it. For example, in assessing innovation and competitiveness capability, such indicators play a pivotal role in the Global Innovation Index (prepared by INSEAD, WIPO, and Cornel) and the Global Competitiveness Report (prepared by WEF).
As less developed countries are at the bottom of such indicator-based ranking, there has been advice for these countries to improve these indicators by accelerating investment, often through borrowing from foreign sources.
Unfortunately, there has not been a natural linear correlation between STEM indicators and economic prosperity. Often, less-developed countries suffer from declining returns on their STEM indicator advancement. But in some cases, mostly in advanced economies, there has been an exponentially growing relationship. Hence, Engineering Economics and Management face the challenge of establishing a positive, scalable correlation between STEM indicators and economic growth. Unfortunately, most less developed countries have been increasing STEM investment without paying much attention to this vital issue (as shown in Fig. 2) of driving prosperity out of it.
Genesis of Modern Day Engineering Economics and Management
Economics deals with the science of the optimum allocation of scarce resources—for maximizing welfare.
And innovation is the heroic art of Genius—a magical act. It is about getting jobs done better out of ideas, generating a highly scaleable, profitable revenue stream, and accumulating monopolistic market power.
Science is about identifying variables and establishing quantitative (or at least logically very strong) relations among them to interpret and scale up art. Technology is about the intentional manipulation of those variables to invent or advance means for getting jobs done better.
Innovation success —the heroic act of magical personalities in making an enormous amount of money (wealth) out of ideas, often causing destruction to incumbent products and firms and monopolizing a new wave of wealth creation.
Engineering is the use of scientific principles to design and build machines through the optimum allocation of resources–cost-effective technology solution to an economic problem (how to make the best use of limited or scarce resources).
Economics is the branch of knowledge concerned with producing, consuming, and transferring wealth.
Scarcity as an economic concept “… refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good. ”
Urgence: to replace the allocation of scarce goods among competing demands and the heroic art of innovation with the science of infinite wealth creation out of scarce resources—so that we keep producing more with less.
Engineering Economics and Management focuses on interpreting technology-led wealth creation dynamics as reoccurring patterns for scaling up invention & innovation art of economic value creation out of ideas with science, engineering, and management practices—for endlessly expanding reservoir of wealth from scarce resources.
Key Topics of Engineering Economics and Management
- 1. Purpose of Science, Technology, and Engineering–Electrical and Computer Engineering
- 2. Basics of Wealth Creation through Getting Jobs Done
- 3. Economics of Value Creation by Leveraging Technology
- 4. Engineering (H) and Rational Decision (D) Making in Taking Ideas (A) to Market
- 5. Basics of Economics within the Context of Creating Wealth from Science, Technology, and Engineering
- 6. Technology Progression and Transformation of Human Role (future of work)
- 7. Technology Lifecycle, Diffusion Patterns and Principles of Innovation
- 8. Managing Technology Uncertainties and Portfolio in Creating Economic Value
- 9. Economics of Reinvention, Redesign, and Design for Manufacturing
- 10. Attaining Market Power and Creating an Imperfect Market by Exploiting Technology Possibilities
- 11. Managing Communication, Coalition, Programs, and Projects and Financing the Journey
- 12. National Strategies and Policies and Programs for Leveraging STEM in Driving Economic Growth