How appropriate.  "GM strikes deal to sell Hummer" headlines a Marketwatch.com article.  A day after declaring bankruptcy, Hummer with all its branding and product drawings is going to China.  It seems everything about GM is iconic – including its movement of an operating auto businesses to China.

Is this bad for America, or good?  I'd rather say it's inevitable.  In a global economy, industrial production will move to the lowest cost location.  And with a low valued currency, a very lowly paid workforce, and access to very inexpensive capital that puts China at the top of the list.  Unless you want to bring back Chairman Mao and wall-in China, the population density and government programs make it inevitable that the country will be a leader in manufacturing.

But that doesn't equate to high value.

America is the world's largest agricultural nation.  But has that made America wealthy?  Not since the 1800s has it been true that land ownership for agricultural uses made Americans – and the nation – wealthy.  As the value of agriculture declined – largely due to dramatic increases in production – America's wealth shifted to industrial production.  It was by being the largest and most productive industrial nation that America prospered during the Industrial economy.

But now, industrial production has razor thin margins.  Much like agriculture.  Over-invest in capacity, and you can end up with under-utilized (or closed) plants and not much margin from other businesses to cover the cost.  Not since the 1990s has America operated anywhere near "full capacity" on its manufacturing base.  The "good" years of the last decade were unable to produce industrial jobs, or wealth for industrial companies (i.e. – GM's bankruptcy.)

In the great battle for economic leadership, the next wave is about information.  How to obtain, use and manipulate information is where value is now created.  Steel traders can make more than steel producers today.  If you want to improve your profitability, and your longevity, you have to change your thinking from "how do I make and sell more stuff" to "what do I know they don't know, and how do I turn that into value?" 

For somebody selling autos, it's becoming a lot more important to understand customer wants and preferences than to be good at making cars.  Toyota and Honda can identify opportunities first, and put products into the market faster than anyone else.  They can maximize their product development and short-run capability to reach targets fast, and gain advantages over competitors.  Don't forget, Honda made money not just on small, high mileage cars but on a full-size pick-up called the Ridgeline (and Toyota on the Tundra).  These companies are better at using scenarios to recognize early market shifts, and clearer about competitor moves so they can position products to fulfill unique customers needs.  Even if it means launching products not traditional to their "core" – like Honda's Ridgeline, it's manufacturing robotics, and its new jet airplanes.

In the industrial era, people sought scale advantages and tried to build entry barriers against competitors.  In the information economy flexibility is equally (or more) important than size.  Recognizing customer needs and competitor actions early is more important than catering to old, devoted customer groups.  Willingness to Disrupt, and do what you must do to change the market by using White Space test projects keeps you ahead of the competition – rather than trying to Defend & Extend your "core."

For the industry, having Hummer production in China could turn out to be a good thing.  It will lower product cost.  If the distribution in the USA can gain control of the market, by recognizing customer needs and directing the production, the distributors can grab all the value away from the Chinese manufacturer.  If, on the other hand, the dealers try to act like old fashioned dealers who merely keep stock and negotiate price — then they won't create value and margins will stink.  There are ways to make money in the information economy, even for traditional players, but it requires changing your Success Formula from industrial-era behaviors to the needs of an information-based economy.  You can follow GM – or you can try to be like Cisco.