We’re management . . .

. . . And answerable to you, being the shareholders!

The setting in a 5-star hotel mirrored the typical shareholders’ meeting of a Fortune 500 company. The business leaders were in awe: “Is this my country, really?” The new Bulgarian prime minister was reporting to the business community the progress of his first 100 days.

“We inherited a debt-ridden enterprise but I’m happy to report to you that in October we already registered a surplus. Efforts to raise revenues and reduce spending have begun to bear fruit. We have a mountain to climb but we’re scaling it with great resolve.

Foreign direct investment in 2009 is down 50% to Euro 3 billion, but excise tax collections from the grey economy are substantially up – with the linking of the databases of the Revenue agency and the Customs agency. Imports are down as exports. But efficient government administration is well underway; we are moving beyond the 15% reduction in government personnel – following the findings of a private auditing firm we retained and the vetting process we developed.” (This is what love of country is about – the greater good takes precedence? Or is it anathema to our culture of compassion and inclusion?)

More than half of the ministers are unknown to me – they were hired on the strength of their credentials, whether from the World Bank or private business. And they have a common understanding of how their engagements can end. And that is, even one euro of unexplained income will get them out the door.”

We’re running the administration like an efficient business enterprise. We came across 1000 proposals for renewable energy projects that were not even touched by the previous administration. In a matter of weeks we had contacted all the proponents and advised half of them that we would proceed with their projects, and prioritized them accordingly. Our goal is 16% green energy by 2020. And to accelerate and ensure execution, we’re delegating authority to the local government. We hired the Environment minister precisely because beyond her technical expertise, she’s a very efficient manager. She would make the local government play by the rules.”

You want to hear about corruption: We agreed with the EU that over 200 road projects were ridden with corruption and must stop. We’re losing the EU counterpart funding but that is the price of corruption. We have prosecuted the guilty parties and you know where they are today – the newspaper hosting this forum has been reporting on this.”

We are continuing to attract foreign investments because they see that we have the political will to fix the country. We are stepping up efforts to make doing business with us a pleasant experience and registering businesses like a breeze. We are also reducing payroll taxes. We’re working with Parliament to streamline the privatization of government assets; our best brains are deeply engaged with them.”

What you can do for your country? Pay your taxes and tell the rest of the business community to do as well. Our foreign exchange reserves are healthy and our currency is stable. Whatever else you need from us, you can expect a professional response delivered urgently. We’re in this together!”

Over the Q&A the business leaders were simply blown away. As they left the forum, the air of optimism was palpable. These are ex-socialists, new to democracy and capitalism, doing problem-solving not spinning wheels!

An explosion at 30,000 feet:

Revisiting the discipline of science

Not long after the jumbo jet reached cruising altitude (after taking off from Narita) the passengers were jolted by a loud explosion, including the writer. It happened many years ago and is among the many travel tales that surface during social gatherings.

The explosion was followed by an eerie silence – like a pin dropping moment. The pilot’s reassuring voice calmed people’s nerves: “. . . one of the engines conked out; but this baby is a fail-safe equipment and can fly with just one engine . . .” – it had two more to spare! However, the remaining engines would be working extra and hence wouldn’t reach JFK (typically a 13-hour leg) and land at O’Hare instead. The flight attendants assured the passengers that connecting flights to New York were being organized, and lo and behold, at O’Hare the writer was directed to his plane to JFK in no time.

The couple of tech folks traveling with the writer came over to explain what the pilot meant. And given the many hours they’re to stay on the plane the group, as with others, turned into a small social gathering – partaking of cocktails offered by the crew.

The British colleague was most eloquent and gave an impromptu discourse on physics and science in general, beyond the technical innovations built into the 747: “Higher education taught us about hypotheses, e.g., Galileo overturned the earlier hypothesis that the earth was the center of the universe!

Europeans are credited for bringing higher education to America and at its core is the discipline of science and experimentation, e.g., employing scientific method in the investigation of hypotheses. Thus, it is not surprising that in the West they constantly stretch their capacity to renew themselves.”

The thought came back while reading the latest bad news about poverty in the Philippines: our economic model needs renewal?

One recent evening the writer and his wife attended the town’s (in a New York suburb) high school presentation of “Fiddler on the roof”. The opening scene made the writer reminisce about the Philippines: “Tradition . . . tradition . . . tradition . . . “

The stage-filling cast (culled from hundreds by a famed Broadway director) made the writer whisper to his wife that the diversity of the kids was a microcosm of America. One of the lead players, as the second daughter of the poor Russian Jewish farmer, was Filipino. But practically every nationality was represented.

Despite all its faults America remains the model of diversity – of culture and tradition. And in the process they attract the best and the brightest. These high school kids could give regular Broadway stars a run for their money! Over the years the writer has seen how kids he thought (his hypothesis) were rowdy (given his Filipino upbringing) turned into responsible citizens and generous to the less fortunate – their Protestant work ethic intact – beyond simply being well-off! Their hypothesis: “kids ought to be kids”.

Manna from heaven:

It’s what we’re hoping for?

A family friend strongly feels that what we need is manna from heaven. But what options do we really have to overcome our economic woes? Unfortunately, we seem to have truly narrowed our playing field. Beyond our focus on our OFWs, what is our paradigm?

Our industry has geared their plans to meet the needs of the OFWs and their families: from shopping malls to low- to medium-cost housing and everything in-between. And to maximize their share of this income source, they have engaged in M&A Philippine style, with a strong emphasis on infrastructure development – a critical gap in our productivity efforts. The government is pushing infrastructure development as well but is constrained by our ballooning external debt. And infrastructure projects have become a breeding ground of corruption.

We are encouraging more SMEs (small and medium enterprises), country-side development, CSR (Corporate Social Responsibility), and have drawn an R&D and investment plan. Yet they’re mostly platitudes – they don’t spell out the incremental GDP they will generate. And presidential wannabes are on the bandwagon. But letting them to be wishy-washy will confine us to la-la land!

What do we hope to achieve? Get GDP growing by 7%? Can we sustain that for 30-50 years? That’s how deep a hole we’re in; yet our economic model is akin to that of a developed country (individual entrepreneurship) where a 3% to 4% growth translates to a big lift for the country and for the people given their high income levels. Entrepreneurship is coming out of our ears – Pinoy homegrown businesses are plentiful! Our inability to be competitive and thus industrialize is the issue – there’s no escaping it!

We’re not alone in our dilemma: underdeveloped countries generally struggle to revisit their assumptions, which the writer saw at close range in Africa and Latin America; while the developed world has a greater capacity to renew itself. A management guru called it tough-mindedness. Or simply, reality!

Unfortunately, our industry is uncompetitive regionally and globally. Our ability to put up 21st century infrastructure is limited. The types of foreign investment we are getting are meant to partake of the OFW-remittance bonanza. Why? Because we don’t have a coherent (joint public-private) plan to focus and prioritize economic activity; and that means prioritizing those that will generate the biggest returns. Global investors have a vast array of options – our economic model must be competitive, thus attractive if we are to draw major foreign investments.

Our challenge is development, not simply growth. And that means focusing on expanding our economic pie or GDP. It means pursuing coherent (a la FDR) planning; and as an intermediate goal, to double domestic output (unlikely!) or raise GDP by $ 100 billion (by raising our competitiveness) to address poverty – as the dynamics of Thailand’s economy demonstrate, i.e., we need that much more GDP to meet the needs of our large population. It will not happen overnight but we have to think big.

We need confidence to think big, and it starts with going back to the drawing board – if we are to renew ourselves. And that’s what the presidential candidates owe the country – what’s on their drawing board?

And we owe it to ourselves to put them through the wringer!

Running for office . . .

Is love of country . . . ?

That is according to the gospel of Estrada and Arroyo? If it is simply ego they can be forgiven – leaders have huge egos; it takes a humongous ego to run and govern. But politics stinks (or sucks?) in our country. And the only way they can rise above is to spell out their intentions and what they will do for the country. But it will take generations to fix our mess; so what’s their point?

What are our options? Noynoy or Villar? Villar, unfortunately, is declared clean in part but not wholly? Noynoy is assumed to be – given the genes of the mother. But as we now know Bush 43 is not Bush 41! Our country needs help, big time. And it will not come from this pool of candidates? They’re more of the same?

Best-practice benchmarking is not inherent in governing as it is in private business. And given our focus on personality politics, we are letting our politicians get away with murder. The writer made a similar point to a conservative New York Times columnist before and during the tenure of Bush.

Bush was a product of American politics especially the conservative element – he had the right name, family tree and connections. But it did not make him the ideal candidate for US president. And it was easy to stick it to the columnist: “I told you so!” (Unfortunately, Obama isn’t keeping to the 80-20 rule – and his inability to deliver quick hits is glaring; the jury is still out if he can do the big bangs.)

The UK civil service system has been perceived as best practice in public administration. Many years ago though in private business, it was one of many the writer checked out specific to how they hired people. And he tracked down a principal consultant in Dublin. The exercise confirmed critical elements that must not be overlooked in recruiting. For instance: What trying conditions does the job demand? What conditions has the aspirant encountered in previous jobs? How do they match? How specifically did the aspirant respond to these conditions? How did he or she demonstrate upholding the integrity of job, say, presidency if that was the job? Did he or she pass the Caesar’s wife test? How did he or she demonstrate bold thinking and astute planning on a large scale; did he or she successfully execute? How did he or she demonstrate incremental thinking? How did he or she distinguish between the two? Net, it’s not enough to tout one’s leadership and success; we must dig deep into their critical elements to peel off the veneer.

If for competitive purposes private business would seek the best practice – wherever – in selecting its people, shouldn’t we given our sorry plight as a country, seek the best way to asses our candidates?

It can be the start of developing transparency in governing if we as a people put these candidates to a test? Media needs to be more aggressive and assertive? Private business and academia should join hands to develop the yardstick by which we must measure these candidates? And the media and the Church should focus the nation in scrutinizing them? And the Church and civic organizations should educate the vulnerable how not to sell their votes? Of course, politicians can also turn around and point a finger at industry, the media, the Church and all of us – it takes a nation as a whole to perform as badly as we have?

We can’t continue to feel good that we’re minding our own business, and thus be complacent about the plight of the country? We’re a disaster (if we assume for a moment that we won’t accept being the basket case of the region) and yet we’re behaving like we’re taking a walk in the park? Then we don’t have the right to scream how bad and corrupt our politicians are? In a democracy, we get the leaders that we deserve!

Resiliency, hierarchy and aristocracy:

“Virtues” that hold us hostage?

The writer hears the supposed virtue of . . . resiliency . . . in both developed and developing countries; but is it unwittingly a justification for inaction? And it’s masked in various ways; and to raise a contrary view is deemed sacrilegious, i.e., lack, if not absence, of love of country or of patriotism?

Juxtaposed with resiliency is the virtue we see in . . . hierarchy . . . which we describe as “respect for elders”. But is our definition of elders generously expansive? Thus what we really are respecting and calling a virtue is . . . “aristocracy” . . . as opposed to meritocracy? Behind all the faults the Brits see in the American system, they overwhelmingly point to meritocracy as the “competitive advantage” of the US over the UK, if not Europe. (The US, public and private, spends a bigger share of GDP in R&D and beats Europe in speed to commercialization. However, the US is producing more MBAs – thus the focus on financial engineering – than engineers. And California’s bankruptcy is starving the university system that has been a major source of innovation. Ergo, the US’s slip is showing!)

Thus, it is not surprising that in global companies, whether US- or European-based, meritocracy, not aristocracy rules: it’s not who you are but what you are. And one’s rank (where vice-presidents and graduate degrees are “a dime-a-dozen”) doesn’t influence performance assessments.

The writer was hosted to a going away dinner recently by an Eastern European businessman – who was born under and lived though communist rule. He was comparing two country managers: one would simply say yes to him and the other would present an opposite view but with solid arguments. His conclusion: he couldn’t leave the first one alone but the other would keep him sound asleep at night.

He is now into developing a 4th business unit, each with a number of categories. Bankers and proponents come to him to present acquisition opportunities – because they see a winner amid the global financial crisis. But like a disciplined student, his standard response is: my business model is grounded in competitiveness (meritocracy), not monopoly (aristocracy). Thus he sticks to their core competency such that while the business units are different, they are similar in thought process: from consumer insight discipline, product development, R&D, manufacturing, marketing and to sales and distribution. And it gives them the ability – i.e., increasing and accumulating knowledge and confidence critical to building competitive advantage – to reach across the region and beyond.

In the process, he keeps his thinking fresh and his ideas innovative. He laughs recalling that his thinking has evolved, as opposed to frozen, over the years – which is now into its 4th generation. And then quickly adds, “If Windows is into its 7th generation, I am falling behind! At evening’s end he quips: “I learned a great lesson over dinner: product portfolio – we must constantly rationalize our product offerings across the region and by country and that means generating a healthy product pipeline, to ensure we’re marketing compelling and high-margin products and thus sustain our competitiveness”.

Are we surprised why we are where we are? Why we are the economic basket case of the region? Why we are falling behind our neighbors in every global development measure?

A family friend sums it up: “what we really need is manna from heaven, to save us from ourselves”? But what about doing something about it – open our minds to fresh thinking and unlock the world of innovation, the key to progress and development?

Change is never easy

(Or why Pareto’s 80-20 rule is alive)

Do we belong to the 80% that account for only 20% of the world’s wealth? With a third of our population (67-33) in poverty, we have more than proved the reality of Pareto’s.

This is not only true of countries but organizations and families too. A third of the supposed excellent companies in Tom Peter’s 1982 best-selling business book are now extinct. The same has happened with scores of Fortune 500 companies. Why? Countries, organizations and people have their blind spots.

We know about Peter Principle and companies mirror it all the time – only 20% move up the hierarchy. The writer has witnessed this reality over decades in many parts of the world yet has also felt the immense reward of seeing organizations and people develop their potentials.

The writer’s family traveled to China and Eastern Europe after they opened their borders. And realized how blessed Filipinos were. And when USAID/IESC tapped the writer to do development work in Eastern Europe, he knew that he had to dig into his reservoir of development experience to make a dent. And his core message would be: “you don’t have to be victims of circumstances; create your own circumstances, your own future instead”.

If businesses can be fixed and if people can be developed, there is the chance for companies and hopefully countries to develop as well? Friends – Filipinos and foreigners – have told the writer that the Philippines has already been cursed by Pareto’s rule. Hopefully like the good thief, we would overcome our blind spot?

Change is always uncomfortable. People get disoriented with change. The status quo is our comfort zone and we have a slew of justifications why we can’t change: tradition, culture, religion . . . and for the non-poor, “poverty is for them, but not for us; our way of life (our “senorito-muchacho culture”?) beats the rest of the world”.

This point was made (but did not register then) to the writer many years ago by a foreigner (who cared for Filipinos especially his Filipino daughter-in-law and loved to visit until his passing) who was amazed that the writer’s car had access to all the gated communities (including a military camp) from Alabang to Makati thus exempt from Metro Manila’s traffic jam: “A country cannot change if those who can influence change beat the system instead and get rewarded . . . and (the writer is now paraphrasing) everyone seems to have an answer for why things are, matter-of-factly defending the status quo – that acceptance equates to the virtue of resiliency”?

In the history of nations regimes changed either because people wanted change (e.g., our People Power, France, and Russia) or the regime wanted the change (to modernize, for example) and the opposition resisted the change because they had their own model and the people went with the latter (e.g., England).
We don’t have the chance to be like the good thief? Because it must be we, the people, that should want the change? It appears that despite all the global measures of development going against us, personified by 30 million hungry Filipinos, we remain conveniently stuck with the status quo, in one guise or another – i.e., we can’t go against our grain?

But as FDR said at the height of the Great Depression: “Nations like people make mistakes, but we must be big enough to change”.

Cause and effect . . .

Man (woman) is the true measure of himself (herself)

We’re victims of circumstances – we’re a small, poor country and had been pushed around by foreigners. But we can make do. We’re resilient! We’re victims of circumstances – we’re born in paradise, had everything and should’ve everything. We couldn’t resist partaking of the forbidden fruit! Either way man (woman) finds someone to blame except himself (herself)?

Yet Adam and Eve proved that man (woman) was the true measure of himself (herself). From total disbelief that they lost paradise to showing those that came after that man and woman were endowed with God-given gifts . . . to create their own future!

No one subsidized their “cost-of-living”; no one was tasked or expected to protect them. They had to survive and succeed on their own. And they did . . . and mankind thrived!

Everything we’ve said about our plight has been caused by something – and like Adam and Eve in Eden, we only have ourselves to blame? What we must not fail to do then is to live up to our God-given gifts?

Do we want to behave that we’re victims of circumstances . . . and thus not let our minds seek and create our own future? What we can think we can create; what we can’t think we can’t create? Like our CNN’s Hero of the Year demonstrated! (If the West created a multi-trillion dollar economic hole, and are throwing a multi-trillion dollar solution; shouldn’t we be throwing a hundred billion dollar solution to our hundred billion dollar economic hole?)

Do we want to behave like adolescents, not share our “candies and toys” (to protect our patrimony?) with others? Do we not foresee that others could have better “candies and toys” than we do?

Do we suspect the intentions of every foreign investor, every foreign seat of knowledge, every foreign idea, and every foreign product? Do we believe that our faith is meant for us to be holier than thou – that we’re the chosen few and they’re not, that we must protect our children from them?

Economists have compiled a body of knowledge that low-trust level is more common among underdeveloped countries; conversely, the honor system is more common in the developed world! Low-trust translates into looking over one’s shoulder, bureaucracy and inefficiency, among others. Yet a hierarchical society puts misplaced trust in authority (leader dependence – e.g., we’re putting our future in the hands of Noynoy or whoever when it will take more than a generation to fix our economic woes?) that translates into abuse? The bottom line: underdeveloped countries have unwittingly created a perfect storm: from low-trust level to inefficiency to corruption and thus decline!

On the other hand, the rest of the world are successfully leveraging their shared investments, their shared knowledge and ideas, turning them into much sought after products . . . and are growing wealthy in the process? Where have our assumptions brought us – shut out, confined to our outdated “candies and toys”, and outdated ideas? And we’re among the most corrupt – what happened to our holier than thou?

Do we continue to kick and scream and blame the rest of the world for our plight? Who brought this upon us in the first place? But we still have our God-given gifts – if we focus on using them, not on blaming others?

Business has a noble purpose . . .

Aggressively pursuing the profit motive is the way?

The writer did a back of the envelope comparison of two local companies in the consumer-goods business based on their respective press reports.

One has estimated sales for 2009 of $ 160+ million; the other of $ 65+ million, with profits at less than 5% and less than 10%, respectively. The conclusion is these businesses need to be more competitive if they are to succeed as regional or global players – i.e., raise profitability to industry levels, to double digits. Thus the second one is moving in the right direction; and the first is probably not gearing up to be a regional player? Applauding growing sales and profits is encouraging but the acid test is the competitiveness of profit levels – if we’re to attract the Warren Buffets of the world, i.e., simplicity and clarity best describe their investment philosophy.

Double digit profitability (derived from healthy margins) means that the business is sustainable – the company can invest in R&D and market compelling products, among others, and can pay a living wage. A major reason why growth doesn’t always lift the poor is because narrow margins and low profitability don’t allow companies to: (a) invest in R&D, (b) market compelling products and (c) pay a living wage – critical elements to optimize the multiplier effect of investment.

Even in the US sweatshops hire illegal immigrants because their business model is not geared to be competitive. Or they’ve lost competitive advantage because they’d failed to move up the value-chain; and thus have to compete with emerging countries with their lower cost structure. Japan is experiencing another form of competition. Despite their technology advances they are losing to South Korea and Taiwan – because in the 21st century knowledge is accessible to everyone including us (we don’t have to be a standalone R&D center, i.e., partner with world-class universities and entrepreneurial labs to override learning curve). And in the case of pharmaceutical companies once their patents (i.e., they spend a ton of money on R&D which they recoup via healthy margins during life of patent) expire they have to compete with generic producers. The moral of the story: businesses cannot afford to standstill; and must continue to invest in R&D and product development.

Quoting financial performance of local industry in dollar terms is one way to instinctively look beyond our borders; and facilitate benchmarking against best-practice entities. Until the global business currency is changed (e.g., oil is quoted and traded in dollars) we have to do the same.

The bottom line: it is not enough to encourage entrepreneurship. It is imperative that we gear industry to be sustainable and competitive – and that means designing businesses to meet global investment standards in R&D, product development, marketing and supply chain . . . in order to generate healthy margins and profits and thus pay a living wage; and attract foreign investments as well! We can think cheap pricing locally, but to succeed globally we need a good handle on market dynamics: i.e., it’s not one-dimensional as pricing per se.

This is especially true for our major industries – if they design their businesses to be sustainable and competitive, smaller businesses that support them can fortify themselves as well. What is the converse? Aiming for quick profits that are good to investors over the short-term but with no clear long-term perspective to ensure sustainability and competitiveness – i.e., stock market investors can pull out their investment anytime.

For the Philippine economy to be competitive we need industry to be competitive – there’s no two ways about it! And for that to happen, we, as a people, have to grow beyond our parochial instincts – it is our perspective as a people that is shared by industry and by our leaders, fortunately or unfortunately.

If we stay parochial we’ll live out our image as isolated Pacific Islanders, not world-beaters . . . and in decline?

Our “materiales fuertes culture”

First we assume we are creating something that has longevity if not permanence; and then conclude it’s a “no-maintenance proposition”; and once we realize that fallacious assumption we turn and claim: “it’s good enough”? Materiales fuertes?

Good enough’s never good enough in today’s highly competitive global arena! For instance, our jeepneys are still around: they make us proud of our creativity and for creating a source of livelihood? But even great inventions become dated, e.g., the Model T lost its appeal when GM came out with sleek models?

The need to create employment is precisely why we need to step up development efforts – look and move forward. And so the writer is restating a thought: “An idea (or product) can always be topped – marketers leave their egos behind; keep the mind liberated; and constantly seek better ideas . . .” The writer challenged his young Eastern European protégés to top his own business model – that they shouldn’t be paralyzed that it has borne a competitive regional entity in less than 7 years. Innovation never sleeps! And gave iPods (icons of innovation) to the two with the best models; but challenged them still to integrate their ideas into a more formidable model – so they own it, be proud of it, win in the West and wherever else as well. And then let the “next generation” to top it likewise – because Narcissus is the poster boy of underdevelopment!

When should we be driven by tradition? When should we not? Tradition stops where the people’s well-being begins – a lesson the Pharisees had to learn? Even strongly tradition-oriented Europe who had fought one another has turned itself over; and taken on a gigantic challenge: to come together as one EU and be a bigger economy than the U.S. They’re a work in process but they are looking to the future not to the past, and don’t see it as unpatriotic!

Not to be outdone, the Russian president (he must have heard of Dutch disease?) on November 12th announced: "Instead of a primitive economy based on raw materials, we shall create a smart economy, producing unique knowledge, new goods and technologies, goods and technologies useful for people – e.g., information technology, telecommunications and space." We can replace “raw materials” with OFWs and it will be a good model for us?

Corporate America entertained self-doubt when it faced the emergence of Japan Inc. and their great products; but took a great lesson from the Japanese. And that is, “continuous improvement” – the quality of Japanese products evolved from being the laughing stock . . . to the envy of the world. And eventually Corporate America righted itself by driving competitiveness, essentially by stepping up productivity via the digital revolution – computing and communicating technology.

As the world now knows, Wall Street (taking advantage of pandering politicians, i.e., subprime loans) took the country down and the rest of the world with it. But given their problem-solving culture, the West is again pursuing course correction. Not surprisingly, those foreign to problem-solving cultures are betting against them, if they have not written their obituary yet. That is not meant to applaud the West: it is to give us pause – how can we be more prone to problem-solving? New initiatives silent on equivalent GDP impact are platitudes not problem-solving!

Today we know we are uncompetitive and could rightly be the laughing stock of the world? There are lessons we can take from the experiences of other nations: (a) look to the future; (b) continuous improvement and (c) problem-solving? But we must first learn to unfreeze and turn things on their head?

The writer had talked about unfreezing, lateral thinking and force field analysis – he did not learn them in the West, he learned and practiced them in the Philippines . . . and has brought them wherever he traveled. From the West he learned to simplify and execute – the test of the pudding is in the eating. We may want to dismiss the West but our economic model of individual entrepreneurship is more like Bush’s than FDR’s, i.e., when coherent planning is called for, capitalism is sufficiently flexible! Copy if we must but pragmatic we must be!

Who will do what . . .

. . . when, where and how?

If news articles must satisfy the above criteria, should we apply the same yardstick in quizzing our presidential wannabes?

Whether it is Noynoy or whoever: what will he do, and who specifically will do what, when, where and how? For instance, can any candidate provide shelter to 30 million marginalized Filipinos? Or is it la-la land-speak?

It’s time the media put these folks into some acid tests? Remember the simple question “when” from Ted Koppel – ever the journalist – that got Marcos flustered . . . and the snap election followed?

It’s time we focus on the vital few? The bigger the enterprise and the bigger the challenge – as the world’s largest and most successful entities have experienced – the more the 80-20 rule applies, i.e., clarity of purpose! The axiom: simple enables execution; complex engenders disaster!

Our task goes beyond growth, it is development. Do we blur the two and end up with initiatives that are at cross purposes, don’t deliver the goods or are too little too late? We have a humongous, monumental task and thus must respond with equal force.

For instance, country-side development is well and good. But we need to prioritize and keep the 80-20 rule in mind? A big chunk of our GDP comes from small enterprises – yet we need to ask: is it sustainable and will it deliver the bang for the buck? The object must be equal to the task – how much do we need to raise GDP to attain developed-nation status? Our mindset must move away from pursuing a zillion projects . . . to building a “21st century Philippines” – a coherently designed economic structure, where the object is proved equal to the task! JFK sounded like he was shooting for the moon?

The task is development: where do we get the bang for the buck? Without doing much, we know we will grow given OFW remittances – and thus are fixated? But we know as well, or are in denial, that they are insufficient to move us closer to development? That even growing at 7% a year will take us a generation to attain developed country status – on a theoretical basis thus reality is even more dismal?

$ 100 Billon – the intermediate object – is a scary number but our vision must be crystal clear, if we are to match Thailand, for example. And it is still way off the ultimate goal of being a developed country! We need that much more GDP if we are to break the bondage of poverty. We will not get there in 5 or 10 years but we must lay down the groundwork and the foundation to be able to build up to that vision – a “21st century Philippines”. And that means focusing on generating, from wherever, the critical building blocks of a developed country: capital, market, technology and expertise for industries that will give us competitive advantage. And it’s not rocket science, developed markets are such because they are able to pull together capital, market, technology and expertise to be globally competitive and thus generate first-world GDP per person. Unfortunately, developing countries, in many parts of the world, tend to bask in sophistication when pragmatism is what they sorely need – in competitive lingo it’s called blocking & tackling!

The question to the presidential wannabes then should be: who will do what, when, where and how?

About winning . . .

. . . Turning losers into winners

We need to hear from our development experts (e.g., from PMAP) to learn and understand more about “unfreezing”. They can likewise edify us on lateral thinking and force field analysis – to chart a new course?

Is it Filipino stubbornness (or “tigas ng ulo”) that has confined us to the cellar? How can we start to think like winners? First, we have to unfreeze – long-held, frozen beliefs won’t allow room for new ideas!

Individually we’re entrepreneurial enough to succeed in the market – but our real test as a nation is to compete successfully beyond our borders. Because winning globally is what lifts economies and nations. In fairness, thinking outside the box is unnatural because it does not provide an anchor for safety and stability. Can we just be parochial, socialists or in la-la land instead? Or has the world moved on – and we’re playing catch up?

The writer was fortunate to understand competitiveness from the fortified headquarters of a Fortune 500 company. And so to get into the competitive arena representing a poor and small ex-communist enterprise was a great challenge – that pumped the adrenalin!

Fast-forward 6+ years, this once backward entity-wannabe has already inflicted damage on two global behemoths – David is reality! But they had to get a fix on R&D, marketing, financing, infrastructure, logistics, border restrictions, tariffs, etc. – name it, and they had to hurdle them all! (We should hear more from Jollibee & Splash!)

We’ve already justified our failings for the nth time; it’s time to ask ourselves: How do we develop the heart and the gut of a winner? Beyond putting Pacquiao on a pedestal, we can learn from him!

To get his Eastern European friends to unfreeze, the writer asked them from the get-go to toss whatever “can’t-do” attitude they carried from their socialist past: we’re a poor country, our infrastructure is crumbling, our suppliers are unreliable – the cartons they supply for our packs are inferior, their printing is unprofessional, etc. (Filipino socialist-wannabes ought to be careful what they wish for? Western European socialists have the benefit of their first-world economies; third-world economies produce third-world socialists!)

That they had clarity of purpose – and were starting on the right foot – was why the writer took on the challenge: the owner wanted to win against the world’s largest entity in the industry. And so the writer said, “Terrific!” And added: “You must drive this business like crazy that not even a bullet can stop you!”

“So, we put in the hopper only items meant to win: only businesses where we have a competitive advantage; only equipment that gives us efficiency and healthy margins; only brands with the potential to deliver 50-gross margin points, and then some; only compelling products that travel across borders; only communication campaigns that are intrusive; only logistics that are cost-effective; only people that think like winners – we’ll relocate to the heart of the city so that banks and talents see us up close and personal. Question: What while we’re not there yet? We’ll work our butt off until we get there! Next question: What about the Ukrainian tariffs? That’s why we want 50-gross margin points, if that means buying a local company and then driving margins still! Next: But can we afford expensive equipment? That’s why only compelling products that travel across borders – banks line up to invest with winners! Next question – none?” Carry on – Philippines! (That’s an exercise in force field analysis.)

The writer covered Asia Pacific for a decade and saw firsthand why investors favored our neighbors over us. More excuses won’t help us; neither invoking emotions. Tangible problems demand tangible solutions: we should be aggressively soliciting capital, market, technology and expertise for industries that will give us competitive advantage – to focus infrastructure development and minimize white elephants like bridges to nowhere. Behave like one and an adolescent economy we shall endure! Behave like winners and winners we shall be!

We’re not clueless . . .

. . . Are we doing it by design then?

Pangilinan represents Indonesian money; ergo, we have to stop him? Didn’t Cojuangco champion the coco industry while invoking nationalism? So we can’t let Indonesian money own Meralco? Thus, Cojuangco/SMC taps SM? And the press and we, the people, are riveted by the excitement?

During Marcos’s time, a crony won a construction contract in the Middle East. And that became the genesis of our OFW-centric economy. We could get Filipinos working in the Middle East for better pay than working in the Philippines.

But it was short-sighted (and we had to strike out brain drain from our lexicon?) driven by a lack of confidence to be a developed country or a realization that being capital-challenged we would not have the chance? (But still we didn’t want an open economy – to protect our patrimony – thus unwittingly rewarding the few, and ensuring our decline?) Or was it crony-capitalism invoking patriotism? Or was it an insult to Filipino intelligence? But now many years later we still see it as a real positive – being an OFW-dependent economy, with the shadow of Marcos no longer lurking? And kids born post-Marcos haven’t heard of brain drain? Net, we’re the economic basket-case of Asia? How do we right our economic ship?

But first back to the Pangilinan-Cojuangco/SM fight for Meralco: It’s a replay of an old song – we don’t have the confidence to be a developed country and so we’ll just have local entrepreneurs (more precisely, the few) own our industry. Thus we miss the requisite value-adding question: are they geared to be regionally or globally competitive?

We may not need foreign capital in Meralco’s case. But the bigger issue is: how do we move towards development? Beyond local capital, we should gear up to be globally competitive – because our local capital and economy generate only third-world economic output and thus an alarming poverty rate. But we have yet to come to grips with this glaring economic reality? In the meantime we find ourselves clutching at straws!

International institutions have been encouraging us – that we need to develop our infrastructure. And source capital, market, technology and talent, wherever! No matter, for now we have a ringside view of titans fighting, and are applauding them like Americans applaud Donald Trump or Warren Buffet. But America generates first-world economic output with its multi-trillion $ economy. And we’re not American copycats – of the unbridled brand of capitalism?

Foreign or Indonesian money must be geared to make us regionally or globally competitive – which was how China designed their investment/economic model. Is Indonesian money thus geared or more to be a monopolist-conglomerate? Have they successfully marketed Philippine-produced products and services regionally or globally? How much of their Philippine operations’ income comes from overseas? That is the gut of a regionally or globally competitive economy: i.e., industry, whether local or foreign capital, is a successful regional or global player!

Simply changing ownership does not generate incremental economic value! We need to re-design our economic model – to serve the many not just the few? Re-design? Developing countries are fixated by cheap pricing. But the mind plays tricks. In the developed markets they “turn things on their head”. Instead of being paralyzed by cheap pricing, they think value. Value opens the mind – to optimize its dynamic with pricing, and much more!

Our local businesses are locally but not globally competitive because their premise is cheap pricing, not value. Cheap pricing doesn’t generate the means to do creative product development, R&D, regional/global marketing and logistics. Thus they need a two-track strategy in order to be competitive both ways and make a dent on GDP.

(The writer will be in Manila in the January to March timeframe and is offering his time to anyone who wants to discuss value-pricing and product development – and gear up for regional/global competitiveness.)

Are the WB and ADB ganging up on us?

(It’s not surprising if some of us think so!)

But it appears the WB is telling us that we can cut the 175 years the ADB said that it would take for us to attain developed-country status. Instead of 5-6 generations, we can do it in one generation if we’re able to sustain growth of 7% over the next 33 years. But that is assuming today’s prices, exchange rates and if the rest of the world stood still?

Then the WB is probably motivating us? The writer, an indifferent student, recalls that his high school senior class, in jest, voted him least likely to succeed. He can’t help but feel the same way reading the prognoses of these international institutions. The writer knows what it’s like to have a chip on his shoulder. Do we have a chip on our shoulder?

But then the writer remembers that he had to develop a competitive and can-do attitude. And he shares this learning experience with his protégés, including a couple of PhD candidates – because in business failure is not an option.

A bunch of kids, younger than the writer’s daughter, begged the writer to take a break while they were doing store checks in the center of Skopje in Macedonia. It was past noon, it was summer and hot and humid. And the one who was with the writer in Sofia, Bucharest and Kiev told the group that the writer’s age had been frozen at 17! And so he had to explain that at this level of competition – going head-to-head with global behemoths – they had to be two-steps ahead in every facet of the business. And thereafter they created what is now known within the organization as “The rule of 2”.

(Athletes know this and why the writer had talked about the competitive spirit of Ateneo and La Salle and thus their games are always SROs! We also read it often, Tatang Sy, wheelchair and all, with daughter Tessie, is still doing merchandising after hours.)

Here is a group of people whose perspective of life is unlike that in the West – because of their country’s history, words like future, much less, bright future or positive outcomes are taken as unreal. Their country is less confident than they themselves are, although their GDP per person is already 4 X ours. And the writer keeps talking to them about their bright future.

Comparing the world the writer saw despite his humble beginnings in an inner-city district in Manila, and the world these people grew up in, there is no doubt we have more to be thankful for. But surprisingly, as a nation, we have allowed ourselves to keep sliding down – because we have a chip on our shoulder? Competitiveness is a philosophy and comes from within, not from without like satisfying a global checklist!

More exotic countries are leaving us in the dust. And it has nothing to do with ideology or history like we always slip in when making our arguments – to justify our failings? Ideology is a cop-out – which this group of ex-socialists folks has learned. What they are creating instead is their own future – not blaming their 500+ years of Ottoman rule and 45+ years of Soviet domination. Why are we blaming everyone and his uncle? That’s not what we learned from the Sacrament of Penance?

We have to snap out of all the irrelevant clutter in our psyche? Whose image and likeliness do we have? Why do we keep underselling ourselves – invoking “Pinoy kasi”? Who are we – Christian or Filipino first? It is immoral and unpatriotic if those of us blessed with more than we need close our eyes to 30 million hungry Filipinos – perpetuating an economic model that serves us but not them, content with throwing crumbs? But the Titanic was a great equalizer!

A “nation-building” czar

The label we like to use – global nation – focuses us on the OFWs. What about nation-building instead?

We don’t dispute the following: (a) we’re sinking in the global competitiveness ranking and (b) likewise in the human development index, and (c) it will take 175 years for us to attain developed-country status?

Competitiveness needs to be driven by our major industries but their DNA does not spell c-o-m-p-e-t-i-t-i-v-e. But we create conglomerates and develop SMEs (small and medium-scale enterprises); and the latter, in fairness, support the larger companies. But the kind of ship we’ve built does not make us a global nation? Our ship, like it or not, is meant for a small pond?

The same logic applies to country-side development. Until the object is designed for competitiveness, the outcome will be uncompetitive and thus unsustainable. Ex-communists countries learned the lesson the hard way – that pricing couldn’t be set in la-la land; it’s dynamic with value was a given and must generate margins to make the venture sustainable. Bread was rationed and cheap in la-la land hence it disappeared from store shelves that people had to die fighting for crumbs. In our case, Magsaysay knew that the law of supply and demand couldn’t be repealed even by a compassionate, nationalistic and patriotic Congress!

But Japan and South Korea have zillions of SMEs supporting their larger companies! But these larger companies have their DNAs spell c-o-m-p-e-t-i-t-i-v-e – g-l-o-b-a-l-l-y. How do we pursue nation-building then?

Enter the SMEs; but not the current generation – they have to move closer and faster towards the latest, globally competitive generation of SMEs like they have in China.

Beyond a rehab czar, we need a czar to get us into our next generation of SMEs – a “nation-building” czar? (And Tommy Alcantara comes to mind – if only to start a short-list?)

And that means starting with a roadmap: Generate the requisite infrastructure – capital, market, technology and talent – but first identify strategic industries where we can develop global competitive advantage. The recently announced R&D and investment program is a good stepping stone to build on, e.g., higher value-added electronics beyond semi-conductors; agribusiness but all the way to branded products; BPOs, but including software development and higher value-added services, etc.

The next steps can play out as follows: (a) define the use of the capital (sourced globally, ergo, we better pay our debts – no defaulter will have a prayer sourcing capital); (b) that means to produce products (and product architecture modeling is a practical tool to employ) that have a compelling concept – a clarity of purpose, that will have a leg and a message to stand on, and travel the global market and ; (c) that we can tap the requisite technology (sourced globally, as well) to produce these products and (d) develop and tap the talents (not limited to ourselves!) to keep the technology updated and the capital coming . . . because the global market sings halleluiah!

Nation-building can be done in small steps but the object has to be equal to the task – not limited to stop-gap measures that have become our DNA?

Firefighting has become our normal

. . . Because we can’t seem to stay above water?

After Ondoy we now have another fire to fight: rehabilitation. And overarching them is Noynoy and the other presidential wannabes. And of course, given our state of affairs, the next president will tell us that he or she would have to fight another fire.

Staying above water reminds the writer of “Smokey Mountain”. What could he and his company do to help these people stay above water? A priest came with a practical idea: “How about appointing a group (e.g., a cooperative) to distribute your products in the community?” And the venture got started – a livelihood project.

Today many “Smokey Mountain”-like communities have mushroomed – but the model remains. It’s a stop-gap measure . . . that is not equal to the task! Who then is equal to the task among the presidential wannabes? Four years from now who can say “we’re better off today than 4 years ago”?

We have teed-up the initiative to rehabilitate post Ondoy, which is great. But we have a far larger destruction to address: we need to come to terms with how far down the economic abyss we are. By any contemporary global yardsticks we are doing poorly or why close to 30 million Filipinos are hungry.

If we’re content with stop-gap measures, it’s conceivable that our economy would come unglued. Why? We don’t have the infrastructure (capital, market, technology, talent) to create a robust, sustainable and developed economy – we’re already witnessing our downward spiral? Infrastructure starts in the mind, goes beyond the physical . . . and just like in computing, the software is as important. (But this seems too far removed from our consciousness – because we have been busy fire-fighting over the last 60-odd years and have become so jaded? “Pinoy kasi” won’t cut it!)

To push the computing analogy, Windows/Office and integrated, enterprise-wide systems have become the lifeblood of IT. Our effort to rehabilitate following Ondoy is akin to downloading “Excel” but not the rest of Office. We should be rehabilitating our economic infrastructure in the first place.

We’ve become an OFW-centric economy and thus developed a penchant for thinking small – or what they call Dutch Disease in the West. Now that we’ve realized the economy’s inadequacies, we’ve resorted to slicing the salami, e.g., that this initiative or that industry would keep us above water? But benchmarking ideas must be against best practice, e.g., when has Argentina been best practice in generating capital, something we sorely need? Will their model or one bright industry cut the 175 years to achieve developed-country status? We have been reduced to clutching at straws? A structural challenge demands more than spinning wheels and ideology – or why the world has left us behind! Unfortunately, countries and governments are averse to restructuring – and so deeper into the abyss we sink?

In an earlier article the writer talked about clarity of purpose – it’s not an American invention, but some would explain as inherent in their Protestant work ethic. The Americans are a Bible-reading lot. And just like us they read that Christ has set the example via His Two Great Commandments. KISS – was what He wanted to say? In any case, He chided the Pharisees not to focus on the form, i.e., the 300 tenets they had to live by, but on the substance of their faith.

Are we likewise, beyond our “kuro-kuro”, bogged down by so much irrelevance given our focus on personality-politics, and form-religion? Our focus should be on the people’s well-being – the 27 or 30 million hungry Filipinos? How do we “lift all boats”, our economy?

“Don’t expect logic from us . . .

. . . We’re Italians!”

Italians thrive in pulling the wool over another’s eyes: “Why did you block my car?” “Of course, I’m Italian!” The next line is left unsaid: “Don’t expect logic from me!” – and the world simply loves them!

Why did the Nobel Prize Committee give Obama the Nobel Peace Prize? “Of course, we’re Europeans!” And unsaid is: “We’re kinder and gentler!” – a not so subtle rebuke to the predecessor?

What do the following have in common: (a) “The pursuit of life, liberty and happiness”, (b) “It’s the economy, stupid” and (c) “Just do it”? Europeans find Americans too forthright and candid – because their mindset tends to be confident, focused and precise? On the other hand, the Brits struggle to define themselves vis-a-vis the EU, for instance?

When the writer first came to Eastern Europe he immediately sensed their tentativeness. Instead of saying “yes” they say “maybe”. They are not very different from Filipinos. And when asked “how they are”, the typical response is “so-so”.

Americans instinctively express clarity of purpose while Easterners and even Europeans formulate more dimensions? And in the case of the Filipinos, is it because compassion and inclusion are imbedded in our subconscious?

We imported the latest Western “widgets” and so managers from neighboring countries trained in our institutions to learn problem-solving and decision-making. We know that fundamental to problem-solving is problem-definition. But is it instinctive to us? For example: What do we need to be a developed country? Infrastructure: capital, market, technology, talent – to make strategic industries competitive globally? Why are we exporting talents then? (None of the presidential wannabes has a compelling vision but more of the same? We have ourselves to blame because we don’t go to the gut of our problem and quiz them?)

Is it because our mindset is so inclusive that we end up with no clear problem-definition and thus fail to attain clarity of purpose? That we are so scared to omit anyone from our “guest list”?

With the Eastern Europeans the writer incessantly talked principles (e.g., 80-20 was JC’s before Pareto’s) and related them to the real world; but still it took them time to internalize what clarity of purpose meant.

The first exercise (competitive advantage) the writer did was to have them define who they were: What business they’re in and conversely what business they ought not to be in. (Filipinos argue against this given monopolist tendencies and parochial blinders – that limit market to the Philippines and cement our uncompetitiveness?) He had to walk them through the dynamic of pricing and value thus margins. With their communist past and poverty, their instinct was a hostage – to cheap pricing. And so because of inertia (or sentimentalism?) they did not have the heart to kill a business until they realized the red ink could drown them.

They had “to be schooled” to unlearn their practice re product development – that competitiveness demands more than artful and cheap products. That it’s about clarity of purpose: that every product must have a compelling concept – a message to stand on to travel beyond local boundaries, which was their wish. Now they’re well on their way and confident!

We have so much to unlearn if we’re going to break loose from our parochial shackles . . . and solve our problems? But we’re too proud or sentimental? Quezon should’ve been careful what he’d wished for?

It’s not growth . . .

. . . It’s re-building that is our challenge!

We will always grow so long as we have OFW remittances, e.g., $18 billion – it’s not rocket science; it’s all gravy! But we have not disputed the ADB’s prognosis that it would take 175 years for us to attain developed country status!

Then it would be sad if we sat on our laurels growing between 4% and 5% or even 7% to 9%. They are a drop in the bucket given the mountain we have to scale, if not irrelevant – and so ADB said it rather coyly?

For many years on his 7:09 AM commuter train from Stamford to Grand Central in Manhattan the writer would read that inflation was trailing the 3% US GDP growth – that there was real growth in the multi-trillion $ economy. That would be a good yardstick for their US business, substantial by itself. But then he would scan foreign currency exchange rates because the business overseas was even bigger. A strong US dollar was good for the US business but bad for the overseas business because the consolidated numbers were in US dollars. But in the finally analysis: (a) in the developed markets growth was key, (b) in the developing and emerging markets expansion was the driver given their greater growth rates, but (c) if a market was uncompetitive, it was imperative to redefine and focus the business to achieve competitive advantage and to rapidly upgrade and/or create the requisite infrastructure . . . and Execute, with a capital E – no “paki” or “puede na ‘yan”. (It’s not one size fits all!)

A global business is on its toes intervening in markets as demanded by their respective challenges, i.e., (a) fortify systemic and industrial infrastructure to leverage developed markets’ growth; (b) build up infrastructure in developing and emerging markets to exploit potential to the hilt and (c) restructure uncompetitive businesses. No punch is pulled!

Countries can be asleep at the wheels – they don’t disappear in a sea of red ink like badly managed businesses. But they yield massive poverty. And (bad) country management doesn’t explain to the poor . . . before they’re fired! (No role for Donald Trump here?)

The question we should be asking ourselves is: how do we re-build our economy? We need to upgrade or create the requisite systemic and industrial infrastructure and get strategic industries globally competitive in order to raise GDP significantly. To keep our OFWs as the foundation of that infrastructure while industry goes on their merry ways – uncompetitive regionally or globally – is a disaster waiting to happen, if it has not happened yet! It’s the modern-day version of Juan Tamad – elsewhere it’s a Dutch disease?

The 21st century world while interconnected is tough and unforgiving that we must draw strength from “our image and likeness” – which was why Adam and Eve were driven out of paradise? To tell the succeeding generations what the real world would be like; and what we must be like – tough, nothing less?

We want to be socialists instead? Even kinder and gentler Europe didn’t elect socialists in recent elections! And the writer’s 25-year old Bulgarian assistant would have a fit! As his sister, parents and the organization the writer consults with. They started in the middle of nowhere 100 kilometers from the Black Sea trying to be marketers in a country of 8 million. But 6 years later has the infrastructure marketing to 220 million in 17 ex-socialist states, and making beachhead in a couple of Western markets.

We’re sophisticated and educated but we can’t have the world – big and small countries – wait for us; if the train has not left us yet? (Competitiveness is still at our “kuro-kuro” level; others are at their “Windows 7”!)

“No country, however rich, can afford . . .

. . . the waste of its human resources”

That is a quote, as most of us know, from FDR during the Great Depression.

He demonstrated strong leadership and was able to turn the tide against both extremes: those who had declared the demise of capitalism and the privileged few who wittingly or unwittingly were perpetuating an economy of haves and have-nots. Because of our failed economy, we are seeing similar extremes in the Philippines? (We have a structural challenge that has overwhelmed our psyche – so we keep thinking small?)

But the core of FDR’s philosophy was rather simple: problem-solving, not ideology – he rejected wealth redistribution. Born to privilege, he knew how those with access to wealth could create a financial bubble and undermine the economy especially the well-being of the less-privileged. And so he took unto himself the task of re-charting the course of the nation: imposed limits on the influence of wealth; prioritized industries accordingly – to receive government support or stimulus – and forged partnerships between them and labor and consumers. Not surprisingly, he was a traitor to his class and labeled a socialist especially because of his “make-work” schemes and social security. But he was able to preserve capitalism and leverage its strong points – although Bernanke, a student of the era, concluded that a more aggressive stimulus could have ended the Great Depression sooner, and why he is not hurrying to raise interest rates in today’s America.

What can we learn? “No country, however rich, can afford the waste of its human resources.” And it goes without saying that neither can a country afford the waste of its capital. Unfortunately, that is precisely what we have done and continued to do. And not surprisingly, we are the most uncompetitive in the region and close to 30 million hungry Filipinos are paying the price. (The ideal president is one who can say and deliver as follows: “I have a concrete plan to raise our GDP by $ 100 billion – that is the only way out of our poverty!)

We have wasted so much human resources with the millions of OFWs – who should have been provided the opportunity to produce higher value-added products and services instead. And have wasted so much wealth by applauding our industry while sub-optimizing capital via our monopolist heritage and isolation. If we could peer beyond our parochial boundaries we would be red-faced and do something – and enough of the excuses? But we could not even build a new airport terminal on schedule – a microcosm of what ails us?

How did FDR do it? He cobbled together, not a flawless, but an integrated plan and led its execution with passion. He kept media informed right from the Oval Office, and the public too with his fireside chats. When the World Bank challenged NEDA to pursue integrated planning, did they get a cold shoulder instead?

Recent news reports say that we are currently preparing an R&D and investment program. It does not have to be flawless, but how integrated is it? For instance: Have we identified the industries that will give us true competitive advantage that should be the raison d’être of this initiative and raise GDP by $ 100 billon? Is partnership with industry incorporated? What about global players – e.g., if we’re talking drug manufacturing, is a global player like Pfizer invited? If we see agribusiness as one of those industries, who locally and globally from the industry are invited? Same question with BPOs if that is another industry we believe we should pursue? Who will lead execution efforts with passion? How will media and the public be kept in the loop?

That is how we should quiz presidential wannabes not incessantly focusing on personalities. We should be focused like a laser on our socio-economic cancer cells – above and beyond injecting our “kuro-kuro”?

When one can’t figure it out . . .

. . . It doesn’t mean the others are wrong

That is what we can learn from the Bush-Cheney debacle? Media described the Bush-Cheney team’s view of the world as “bunker-mentality”. And not surprisingly they fell into a leadership trap that is best described as: “when all you have is a hammer, everything looks like a nail”.

More precisely, leadership to them meant flexing muscles as opposed to flexing the mind. That is why teachers live by the mantra: if the student hasn’t learned the teacher hasn’t taught. Likewise, every teacher will say that they learn from students all the time. The same is true of leadership: if the enterprise hasn’t executed the leader hasn’t led. And every leader will say that they learn from their team all the time.

When Bush-Cheney could not get the American public to follow their lead they resorted to twisting the truth and sowed fear. And to add insult to injury they simply flexed the US’s muscles. Ergo: they went down in flames. They could not generate new ideas because of their bunker mentality – and so they concluded that everyone else was wrong and they were right.

If we continue down the road we’re in, we would find ourselves digging deeper and deeper into a sinking hole? Yet we seem to see the speck in others’ eyes – and have become experts in dissecting their flaws but not emulating their successes? We have become like the goat in class giving teachers excuses for our performance or under-performance? Failure is complex; success is simple – it speaks for itself?

We have to emerge from our own bunker and get some fresh air – a fresh view of the world?

The first time the writer came to Eastern Europe – still relatively new to the free market system – he talked to his clients about the requisite mindset to succeed in a competitive environment. They had a couple of beliefs that had to be nipped in the bud: (a) driving turnover is exhilarating; (b) low prices get their brands accepted; and (c) keeping the factory low-tech makes for low overhead.

“Driving turnover if you can go to the bank at the end of the day to dump money is exhilarating, but I don’t see how you can with your margin numbers, you have to kill a couple of brands – you cannot fall in love with a dated idea. Low prices are not a competitive advantage in the absence of healthy margins. You want to be a marketer of brands – and in control of your destiny, not a hostage to commodity pricing and a victim. And low-tech manufacturing will not allow you to expand at an accelerated pace to reduce overhead.”

Filipino business people would laugh at these scenes – or do they in fact espouse the same uncompetitive beliefs? But fast-forward 6 years, these same people are: (a) driving turnover while optimizing its dynamic with margins; (b) pricing based on value of product promise while optimizing its dynamic with volume and (c) operating 3 different state-of-the-art manufacturing facilities while continuing to drive overhead down.

(That’s the gut of competitiveness – not to get passing marks against the global competitiveness checklist?)

The bottom line: Their mindset is totally changed and the people are indeed exhilarated. And the writer has learned quite a bit from folks who knew next to nothing about capitalism; and ready to leave them alone because they are now equipped to take on all-comers including giant MNCs, and making beachhead in the West. They sought liberation . . . and are in hot pursuit – making global competitiveness indeed an imperative for us?

Our “señorito-muchacho culture”

. . . We think one BIG . . . and the other small?

OFWs labor long and hard in foreign lands while away from family – and so we could not thank them enough. On the other hand, we applaud monopolists. Both are fundamental givens in our life and the lifeblood of our economy – but we pigeon-hole them accordingly, BIG and small?

And so we take it for granted that OFWs are not happy campers? Who cares if millions of OFWs are the ones toiling to keep our economy afloat – and our system in some sense (or senseless?) of equilibrium that benefits industry and the rest of us? (It does not bother us if our maids work 24/7 or close to that? “Of course we give them time-offs!” It’s always interesting to listen to our señoras make “tsismis” about their favorite “mayordoma” and driver.)

We need industry to become global competitors to expand our economy and lift ourselves up – especially the 27-30 million hungry Filipinos. But global competition is risky and isolation becomes the prudent option – which unfortunately is anathema to economic expansion and development because it does not develop our competitiveness as a nation. (And its fury can be greater than “Ondoy’s”?)

But since we’re signatories to international agreements we had to allow foreigners to participate in our economy. Unfortunately, we don’t seem to think through how we could turn their presence to our advantage? For instance, China, from the first day they allowed foreign investors in, made it clear that any investment initiatives in their country must be geared to make them a global player, not simply a market for the investor’s products or services.

From the very beginning, we did not think big because we always thought we were small and that foreigners were big? We believe that global competition is risky because we are small? And we did not believe we could think BIG? (The MAP should be applauded for its efforts on corporate social responsibility. But if the writer could offer his two-cents, he would encourage MAP to think even bigger by looking beyond the Philippines and challenge their respective business models – so their income stream is not largely OFW-dependent. The biggest help to alleviate poverty will come from efforts to step up economic development: Think as a global player. Invest in product development, R&D and marketing. And generate far greater economic benefit. The Philippines is still a low-cost location like Eastern Europe, where his client is based. They developed a simple day-to-day product, sharply differentiated versus competition, which retails for 40 euro cents in the East but 90 cents in the West. The price differential generates incremental margin, funding bigger R&D, marketing and logistics and, of course, profit.)

The biblical lesson of David does not seem to have traction in our psyche? We have to start to be like David and more fundamentally, start to think BIG?

But we have to start at home and not pigeon-hole anyone as either BIG or small – or we carry that bias beyond, at our peril? And more directly, we have to stop thinking OFWs as small and expect them to toil for us? And the more we do the more we ourselves think small when confronted by forces extraneous to us, like foreign or global competition?

That’s the long and the short of: (a) our hierarchical culture; (b) what one educator calls our split-level Christianity and (c) the gut of our economic malaise?

Rethinking RP economic development

How to turnaround a failed economy

Where we are

We are in a crisis – for decades; but we’re still in denial?

We need to move from incremental to radical/crisis-mode thinking

Recognize pragmatic parameters – the playing field we are in

Developed countries’ GDP per person is over $30,000 against our $3,300, i.e., 27-30 million hungry Filipinos

As a starting point, to match a neighbor, Thailand, we need to raise our GDP per person by 2.5 X; and to get to developed country status we need to do 9.5 X

We have been driving cottage industries for decades, stuck in survival mode – see below China’s SME model as reported by The Economist, Sept 12th 2009

We thought OFWs would be our savior – competing for lower valued-added labor ignores emphasis on/requisite higher valued-added products and services

The Chinese are driving exports via small entrepreneurs but they account for 66% of patent applications, more than 80% of new products and a whopping 60% of GDP

Higher value-added products is a requisite that we must satisfy – but even our biggest industries don’t have a healthy, competitive patent portfolio

Our biggest industries have been richly rewarded by keeping their noses to our borders

They have not developed competence to compete overseas, e.g., San Miguel and Ayala

Where we want to be

Capital and labor are the pillars of an economy

They are critical resources that must be optimized, not marginalized

Industry must thus develop competence to compete beyond our shores – to optimize resources

Until we get our mindset right & committed to the above keystone, we won’t have the resolve to pursue these requisite building blocks, i.e.

Government must provide the environment to encourage industry to compete overseas – via incentives and enabling laws and regulations (for us to become globally competitive)

Government and industry must open the country for foreign investors to partner via capital & technology and provide access to bigger markets (for us to fill competitive gaps in these areas)

And given the Church has moral suasion, it should be a party to the partnership – to be able to buy-in and support economic development and address poverty, beyond the pulpit

How do we get there?

“Keep it simple” must be the guiding principle

The key to success is execution: complex cannot be executed – the world’s largest enterprises stay with fundamentals but are hard-nosed executors

We have to unlearn hierarchy – monopolists don’t develop competitiveness

The structure we fought against (& be free from) is what we precisely created with a nation of haves and have-nots – we applaud and celebrate monopoly

We have to learn to be competitive

Our culture of compassion and inclusion inhibits competitive spirits?

An idea or product can always be topped – marketers leave their egos behind; keep the mind liberated; and constantly seek better ideas; it is fundamental to product-architecture modeling or why Steve Jobs and MediaTek of Taiwan are successful – electronics can be thriving but it requires constant idea generation, as with other industries

We have to develop a problem-solving culture (beyond spinning wheels)

It distinguishes a developed from a developing country’s “kuro-kuro” culture

But it is again a cultural issue – problem-solving can mean stepping on toes

The barriers we face

We don’t have the experience to drive and sustain economic growth

We don’t have the experience to compete globally

We don’t have a track record in problem-solving

Those in leadership and industry grew up in a hierarchical culture; staying with it maintains the status quo that suits them – talk about humanness!

In the meantime we keep stepping up borrowings and accumulating debt; yet our infrastructure remains woeful – a classic double whammy!

The bottom line . . .

We are in a downward spiral unless we as a people change . . .

Do we have a saving-grace?

We are one of the least developed countries but with a long history in democracy & trade plus a steady foreign exchange source, i.e., OFW remittances

We will attract: (a) incremental (not massive) global investment, e.g., extraction, energy-related industries; (b) liquid assets that can be transient c/o financial services firms, e.g., CalPERS and © foreign companies who want to partake of the OFW bonanza (we need to ensure they make us a regional player not simply a market for them)

Unfortunately we would still yield sub-optimized outcomes (poverty remains daunting) until we change our fundamental thinking and structure – to be globally competitive

Footnotes

Optimizing resources like capital and human resources goes beyond Finance or Economics 101 – especially when creating higher value-added products

It is what is behind the success of global brands like Coke – it is valued at $69 billion; the world’s top 10 brands have an estimated value of $423 billion

But developing countries don’t appreciate this phenomenon

Turkey has developed its manufacturing sector but has not achieved what Taiwan has

Both countries benefited from Western support to establish a manufacturing base which Taiwan leveraged via the creation of brands that are now global

Optimizing capital and human resources is why global brands are able to price ordinary, but higher value-added, day-to-day products competitively

And generate healthy margins to support brand-building

Other than Taiwan, e.g., HTC & Acer, South Korea has also learned the lesson & are getting enormous economic benefit, e.g., LG and Samsung

Until Philippine industry moves away from monopolist/isolationist to global competitor, we will miss out on this economic phenomenon

The reality of our (un)competitiveness . . .

. . . Filipinos would likely laugh about visiting these countries . . .

Tunisia, Jordan, Azerbaijan, Montenegro, Romania, Kazakhstan, Morocco, Namibia, Vietnam, Bulgaria, Sri Lanka, Ukraine, Macedonia . . . plus a handful more . . . alas, have something in common: these countries are more competitive than we are.

The writer has traveled to a few of them, especially Eastern Europe. He finds it intriguing that people who for decades lived under police states could turn on a dime and live out Maslow’s insight, shopping for $200 jeans and $300 iPhones – talk about humanness! On the more serious side, a group of young marketers the writer mentors has developed a simple one-page “marketing for dummies” model. And to the horror of MNCs, these kids are taking regional market shares from them, if not beating them hands down. The largest of the MNCs reported lower sales & profit YTD; while they had their best ever P&L/balance sheet, despite the global financial crisis, thus poised to inflict more damage on the big guys. And so a Western marketing guru had acknowledged them as “best practice” example in a recent speaking engagement.

These people knew next to nothing about capitalism, investment, global trade, etc. But they have been stuffing their portfolio of 3 different but related businesses with higher value-added products (and registering them globally) and generating the capacity to: (a) price competitively with healthy margins and (b) aggressively compete. Beyond marketing, they demonstrate skills in economics, strategy, finance as well as R&D and supply chain. They understand markets and economies and the vulnerabilities of MNCs (cost structure, agility, etc.) and treat them as preys . . . not ghosts to run away from – like we do? And they have a one-page roadmap they call a GPS: they know where they are and where they are going, and as importantly, how to get there.

It would be 18 months since the writer started to engage columnists and editors about our state-of-affairs. And over this period, it is apparent that our way of life has very little propensity for change: (a) we are truly accommodating, hospitable people; (b) the tropics is paradise; (c) our Christian upbringing tells us that every day is a blessing; (c) we are among the happiest people in this world; (d) and we are not about problem-solving or competition or development or progress – we’re about family and destiny.

We would be happy to strike the least common denominator, not the highest per capita GDP. In the meantime we would continue to support our favorite charities and doing so is a feel-good sense. Too bad for the close to 30 million Filipinos who may or may not benefit from the kindness of the rest of us.

On the other hand, we are again pinning our hopes on the next leadership. Leadership is critical . . . like FDR demonstrated. But we will always get the leadership that we deserve – because we vote for those that reflect our instincts? And until we recognize that as a people we need to change, we will perpetuate the leadership profile that we’ve had for decades: politicians pander to popular demands because they win votes – dangling candies and favors.

Popular demands are not synonymous to change. We need to see ourselves beyond a collection of exotic Pacific islands, e.g., scarce resources like human and capital ought to be optimized via ideas designed to travel beyond our shores – in order to leverage economies of scale and the interdependence of nations.

The bottom line: we must first change as a people. But we keep rationalizing our failings? Throwing supposed new widgets to our crisis? But our crisis is decades-old; we don’t need new widgets because we are the problem?

We keep barking at the wrong tree . . .

. . . Our competitiveness dilemma – rooted in denial?

As we continue to debate where we stand economically as a nation, it is not surprising that there are those who are unwittingly prescribing a cure that unfortunately had brought us where we are today: and that is, with the supposed failure of the global economy, we ought to become an island unto ourselves.

On the other hand, the Japanese have finally learned that it is a two-way street: they cannot be open when they are driving exports yet closed for most everything else, e.g., they could use more migrants to mitigate their ageing population. And so they booted out the ruling party that had preserved the status quo for decades – they had to make someone account for their plummeting living standard.

Those who advocate being an island unto ourselves apparently have seen what it’s like outside the country. And they don’t like the quality of life in the developed world – señoritos are the exceptions? Seriously, they believe that every time our leaders had pursued reforms like opening our market, we had to pay a heavy price. But that is a truly narrow view of the world and is reflective of a parochial mindset – the list of countries more competitive and more open than we are is rather long?

The reality is – even in this day and age – we have industries that are crying to be protected: This is the 21st century and we still have industries that cannot stand on their own two feet? Or why in global competitiveness we are ranked below the median!

Of course there are farmers in the West – the US and Western Europe – that still cannot stand on their own two feet, and are protected by politicians opting to pander than to lead. Big guys and bullies will always be big guys and bullies. Life is not fair – as Adam and Eve must have thought. But despite its unfairness, countries that played it smart were able to overcome the imperfections of the global community. And we don’t have to go very far: Asian tigers have demonstrated that irrespective of the challenge – including the 1997 Asian financial crisis and the 2008 global financial meltdown – these neighbors displayed agility and robust economies.

We cannot argue simply and point to the imperfections of the world. We have to grow up and accept the reality that where we failed . . . others succeeded, warts and all – if we want a meaningful and productive self-examination? Nor can a silver bullet come from outside – because we have to dig deep into ourselves to find it?

On the other hand, we seem embarrassed by our ranking in global competitiveness – that we are treating the measures like a punch list of must-dos? In the spirit of nation-building, Ateneo or La Salle or Jollibee or Splash could share how they nurture competitiveness? We need to internalize two complementing imperatives: (a) we cannot continue to sub-optimize and marginalize our human resources by exporting maids and seamen, instead of exporting higher value-added products and services; and (b) industry must, in the first place, optimize capital by generating higher value-added product ideas and/or services targeted to the bigger market or, say, region of 600 million people like Malaysia does, beyond the 90 million Filipinos? The business section of our dailies should have a regular column on these imperatives rather than applauding monopolist tendencies!

These pillars of our economy (capital and human resources) are the critical building blocks where it is imperative that we inject competitiveness? Our failing marks against the competitiveness yardsticks are merely symptoms of what really ails us?

In the meantime hunger to 27-30 million Filipinos is real. The writer has used Fortune 500 as an example (early on) because in that environment problems are fixed or they pay dearly.

Competitiveness is a state-of-mind . . .

. . . e.g., The Parable of the talents

The global economic crisis has resuscitated the old debate: Capitalism is bad. And greed is the flashpoint.

But is greed really about our humanness, e.g., Adam and Eve? What about the tsars? Were they capitalists or virtual monopolists? Those visiting the Palace of Catherine the Great or Peter the Great or the State Diamond Fund museum in the Kremlin or the State Hermitage Museum would sense the reality of: our humanness, power and greed? But the tsars lasted less than 200 years, shorter than successful global businesses, i.e., ideas and knowledge – not power – make for sustainability. (The same values espoused by Andrew Grove, the man behind Intel, whose family had to escape from the Nazis. And at New York’s City College he learned to reject hierarchy.)

The Soviets then saw that socialism did not work either: investment and production are not immune from the law of nature – resources must be replenished! Ignoring resource-replenishment via giveaway pricing guarantees failure – their inability to ration bread to their satellites; despite the wheat farms in Ukraine being as extensive and breathtaking as those in Washington State. Is it why the Vatican and the Archbishop of New York are savvy financial managers? (Much closer to home, our failure in reforestation – replenishing resources – has guaranteed devastating floods; and we are doing hoot?)

The good news is the world has learned from the Great Depression and has collectively intervened to rebalance the outcome or excesses of human greed. And once again the Asian tigers, given strong economic fundamentals to begin with, have led the world with a robust rebound. They were not debt-ridden and thus were able to aggressively pump-prime and create domestic demand. Australia and Norway are resilient as well.

In the Philippines, hopefully we don’t fall into the trap of justifying our failings – by invoking ideologies and treatises more apt for academic discourse. Even Bernanke has realized that what seemed sound within the confines of Ivy walls (e.g., central banks could override and extend boom periods via aggressive monetary intervention) would not necessarily match the realities of the global economic crisis – i.e., unfortunately, it could engender greed and create a humongous bubble.

Ex-communist countries likewise have learned their lesson and have become outward-looking and unsurprisingly, are now more competitive than we are. They: (a) have not become economic liberals, (b) don’t claim any form of ideology and (c) are merely seeking a better life. And in the process have realized that they need to be competitive. That competitiveness is a state-of-mind and that true competitiveness does not stop at the nation’s doorstep. It must be carried beyond to achieve its real potential: They have experienced: (a) the reality of economies of scale and (b) the interdependence of nations, e.g., they need oil and gas which they don’t produce – two fundamental realities that we don’t seem to delve on, i.e., we have yet to experience global competition? To these ex-communist countries globalization is about pragmatism and competitiveness or “blocking and tackling” – and not about sophistication or intellectualization.

Do we instinctively fear competition because we are small? Is it because being sheltered is safer? Is it because we have not tested our ideas beyond our shores? Or is it because we want to preserve the status quo – unwittingly perpetuating a nation of haves and have-nots?

Fortunately, companies like Jollibee and Splash have not taken an inward-looking bias. They should be our 21st century model; their mindset is that of a competitor – not a monopolist, from a bygone age.