Strategic industries:

The devil is in the details

It is noteworthy that the Senate is focusing on strategic industries – to support them aggressively via targeted fiscal policies.

One way to be truly strategic is to draw a simple roadmap:

What incremental GDP output do we expect from these strategic industries? Instead of abstract goals, like a 7%-10% GDP growth, we can set absolute targets like $100 billion, i.e., benchmarking against Thailand’s GDP, and reduce poverty to 10%, for example. We can then break it down as a 5-year plan, and set the incremental GDP output at $17 billion or 10% growth for year-one. (For decades we’ve been focused on the domestic economy yet haven’t articulated a clear-cut target as such; and so we talk about how much our economy has grown instead of how much it must grow! Faith alone won’t save us; it must come with repentance – and thus be prepared to be pruned for the mistakes we’ve made and re-grow ourselves?)

Assuming coconut/agri-business, jewelry, semi-conductors, garments and BPOs are our strategic industries; will they deliver 80% of the $17 billion or $14 billion incremental revenues? If not then we need to revisit the composition of our strategic industries. (The 80-20 rule – a lesson from the Two Great Commandments, and developed into an econometric model by Pareto – is not an academic exercise: it is the foundation of successful major endeavors (from the West and the East) and business models like Wal-Mart’s or dominant consumer goods companies’, i.e., they zero-in on the vital few that will deliver the desired outcome.)

What products will we produce: low-end, high-end, or mainstream? Does the industry have a good handle on the product architecture – that is, it spells out “multi-generation”, higher value-added benefits desired by consumers, so that they can invest for the future to sustain the business? Which countries are the target markets? Does the industry have the requisite consumer insights to win in these target countries? What is the size of the market and what volumes can we sell? Which countries are we competing against? Can our products win versus these countries – from a quality- and customer service-standpoint? How does our cost structure compare? Is our infrastructure and logistics competitive against them? Will our market share and revenues be sufficient to yield ideal margins – to fund aggressive marketing efforts – and profits to be sustainable?

The above sample parameters will help us figure out which of our industries are truly strategic – and facilitate the development of fiscal policies we ought to pursue via legislation, and enhance our competitiveness.

Industry groups must work with government so that together they can craft a plan that has more than an even chance to succeed – we may not be at 100% in the first go-around but would have gained from the experience and do better next time. The key is learning experience – which we don’t gain by merely repeating current practice and expecting a different outcome; which is how quality gurus define insanity.

The more transparent we define what makes an industry strategic the greater leverage media will have to monitor our efforts – and weed out crony industries that can’t present and meet the requisite parameters. As importantly, the sharper we articulate our roadmap, the more we can attract foreign capital – it’s no manna from heaven; we have to compete for capital!

Reincarnation of Rudolf Von Havenstein –

How will history and future generations judge us?

We talk how badly we are ranked in economic development and poverty, in competitiveness, in corruption, among others. Yet are we unwittingly justifying the status quo, our economic model – reminiscent of Rudolf Von Havenstein of 1920’s Germany, i.e., the road to disaster is laced with good intentions?

GDPs are driven by the products and services that a country produces – we must focus on innovation to become competitive and thus aggressively drive GDP!

The ADB has finally said it: “We’re suffering from Dutch Disease”! Our psyche needs to be soothed; and “feel-good”, positive words of encouragement are important. We need the spirit to deal with our economic challenges yet we must step up to the plate . . . of reality!

Despite generating record levels of foreign exchange reserves from OFW remittances and thus a stable peso, what do the dynamics of our economy yield? We remain underdeveloped and thus the number of hungry Filipinos keeps growing! Do we want to turn defeatist and be accepting of an economy that marginalizes a third of our population? Do we want an economy that rewards the few at the expense – or on the backs – of millions of OFWs? Do we want to be an elitist nation – no different from banana republics? And with such a big chunk of us being objects of charity?

Should we instead pursue an honest-to-goodness agenda focused on “nation-building” – where “honesty is the best policy” and “the honor system” is the rule?

There’s blame to go around in spades. We need every sector of society: government, industry, education and the Church to come together . . . and get the country to reset its course. “Que sera sera” will not get us where we ought to be – reality will?

1. We have to stop thinking in terms of incremental GDP growth; we can’t sustain the ideal rate – it’s failure predicted!
2. We have to think of expanding our economic pie or GDP to levels that meet needs of 92 million Filipinos – we’re “building a cathedral, we’re not just bricklayers”!
3. We can’t manage “300-odd doctrines” or prescriptions to achieve economic prosperity – let’s not even try to list them – economic development plans must be geared for successful execution!
4. We can manage and execute a very short list (focused on nation-building) or the industries and mechanisms that will give us the biggest bang to substantially expand our economic pie – the lesson of the Two Great Commandments!
5. Government and industry must knock their heads together to draw this short list, not a laundry list – this is where we need to direct our brainpower, not on justifying what we have. An OFW-driven economy is a dud – laizzez-faire is not absolute as demonstrated by the Asian tigers!
6. And education and the Church ought to support economic development efforts – in the history of nations, those who knew how to focus on nation-building became developed countries!

Our biggest obstacle: we haven’t done any of these before; we’re like adolescents groping how to develop and grow up – but we know that what we have does not work . . . and that’s reality staring us in the eye!

Capital, market, technology and expertise:

The fundamental elements to develop competitiveness

Is the debate over an export-led growth relevant for our purposes – we need to expand our economic pie, first and foremost? Is it also relevant to the US – given its unsustainable balance of trade issue – and for its premier enterprises like General Electric, which seeks to revive its old glory, growth? What about Germany, Japan, South Korea or Taiwan, etc.?

The bottom line: everyone seeks competitiveness – because competitive products will always find a market. Yet competitiveness doesn’t have to be rocket science. Day-to-day, ordinary products can be the foundation of competiveness – so long as they deliver value that the consumer desires on an ongoing, sustained basis. Ergo: the first requisite is dynamic as opposed to static thinking, e.g., how many “New Tide” have we seen in the market over the recent past? Unfortunately, competitiveness may be abstract given our lack of experience?

We need to revisit our mindset – in a similar manner that Old Europe had to learn to be New Europe?

The fundamentals of competitiveness – capital, market, technology and expertise – won’t give us the edge until we embrace change. For example, foreign capital gravitates to countries that can spell out their competitive advantage – and articulate their priority industries – supported by the requisite infrastructure, not “bridges to nowhere”.

Capital: Competitive sourcing of capital is imperative. That means revisiting our brand of nationalism – learning from China and the Asian tigers before them. Our bias for monopoly has rendered our major industries globally uncompetitive – jack of all trades, master of none, beyond low lying fruit? The GE model (circa: America’s then infant industry) is the exception – as Siemens learned and thus restructured. It’s not a 21st century model. And despite its success, GE is constantly rethinking its business portfolio: they abandon businesses which aren’t market leaders as their share price takes a beating; and hope that their biggest profit generator, global finance, recovers. Even Japan, whose economic miracle was driven by its conglomerates, has realized that competitiveness demands that they merge, and share and upgrade technology incessantly. An option for our conglomerates is to partner specific businesses with global industry leaders in the local market in exchange for partnership in the region if not globally – so that the business unit concerned develops a global competitive mindset and eventually capability.

Market: Not every product idea is a market winner. Competitiveness must be built into the DNA of our industry. That means understanding the target market of the product and thus its market and financial viability. And we must toss our parochial blinders and view the region if not the world as our market. That means investing in market research, R&D and marketing at world-class levels – for which we lack the commitment and resolve? We need government leadership especially to attain world-class R&D capability, but industry doesn’t have to wait for government to invest in world-class market research and marketing, for example.

Technology: Technology is the core of product winners or competitive products. We have a lot of catching up to do. We cannot build every product or R&D idea from the ground up. We have to partner with R&D entities that have a track record of innovation. These can be world-class universities or entrepreneurial laboratories or R&D centers wherever they are.

Expertise: It is something that is developed overtime and continuously updated. Again, given the catching up we need to do we must wear the partnership hat and seek those with the expertise and a track record of success for our top priority businesses. We have to do our homework and figure out what economic activity or priority industries will give us the biggest bang for the buck – and thus attract foreign capital. And we must constantly seek and pursue expertise well beyond our borders. Good enough is never good enough!

Harnessing innovation:

As consumers we are a source of innovations

What do the: (a) universal remote, (b) iPod and (c) Kindle have in common? They all serve the needs desired by consumers! As consumers, given the manner we use products around us and the habits we develop in the process, we acquire a new need – how these products can become more user-friendly. Marketers are dying to hear from us because of such contemporary needs – to help them develop the next-generation products. (Efforts of the Bureau of Export Trade Promotion are laudable, but merely peddling Philippine products without the manufacturers ensuring market competitiveness will fall short. The export market is tough, very tough; and absent competitiveness, it’s a non-starter – the Divisoria model is not it!)

Let’s set aside unfettered consumerism or American greed for a moment. And think of Maslow’s hierarchy of human needs instead. The three-product examples are all reflective of Maslow’s. This may be boring to marketers but it’s important to understand why in the 21st century, we still have, for example, the jeepneys – they are the antithesis of Maslow’s?

Human needs move from the basic or physiological to security to social to self-actualization or ego satisfaction – or what marketers may define as our lifestyle needs. Whenever we talk of the excesses of the West our knee-jerk is “they’re spoiled consumers or greedy bankers”. They probably are! But to be human is not all bad – the lesson of the manger or Eden? Or why the West ought to know we don’t live in trees!

How do we then move from: (a) simply being entrepreneurs and conglomerates to (b) globally competitive entrepreneurs and conglomerates? We need to move up from our basic, security and social needs to self-actualization or ego satisfaction? Given that we’re not regionally or globally competitive, we need to draw on our egos to make us desire to be regionally or globally competitive – a noble purpose to lift a third of our people out of poverty; but more directly, meet their basic, physiological needs?

We may not be ready to be competitive – up against the universal remote or the iPod or the Kindle. But we need to move up from the jeepney, from mainstream garment exports, from semi-conductors, from low value-added BPOs, etc. – to higher value-added and thus globally competitive industries!

And as consumers we know what we desire – beyond riding a jeepney, beyond working for garment exporters or call centers. That’s why marketers talk and seek to understand consumers – and gain consumer insights!

It is the same model that the Asian tigers, China and more recently Eastern Europeans had to learn – to become regionally and/or globally competitive. They had to overcome issues of confidence and defeatism! What about us? Our GDP or revenue shortfall, of say, $100 billion, is miniscule, a drop in the bucket – given the size of the global economy! The debate over export-led growth doesn’t apply to Juan de la Cruz: we must come down to earth, be focused like a laser and dogged in expanding our economic pie!

We are more far-advanced in our knowledge of marketing and of most disciplines – but we need a mindset that “takes no prisoners”, doesn’t inhibit us from being inquisitive and innovative and thus competitive?

“Quentas claras”:

Does it go against our grain?

As we move into the New Year and deeper into the 21st century, we need to get a better handle on competitiveness. (The way the cross-section of our society talks about our economy, one can draw that we continue to box ourselves within a very narrow playing field? What about thinking outside the box?)

Competitiveness demands innovation and excellence; not simply innovation but excellence in innovation – from idea generation to execution to winning in the marketplace, regional and global. And innovation starts with an inquisitive, challenging and forward-looking mind!

Are our values (e.g., tradition and hierarchy, among others) inhibiting us to be more inquisitive? Still wet behind the ears, the short 10- or 15-minute the writer had with a Filipino entrepreneur (may he rest in peace; a son is today amongst Forbes wealthiest Filipinos) was like a revelation: “you’re a young – and I hope . . . promising – manager, you have to develop inquisitiveness”!

Does our dependence on OFW remittances undermine any inclination to compete regionally or globally – to pursue excellence in innovation? To simply adapt to our circumstances fails the test of inquisitiveness espoused by the Filipino entrepreneur, thus be alien to innovation and excellence? (The writer is delighted to read that Rota Philippines is successfully exporting world-class alloy wheels. He met Romy Rojas, the man behind, through his wife who was a colleague, 39 years ago; but have not crossed path since. We need more Rota, Jollibee and Splash!)

Part of inquisitiveness as practised by global companies is succession planning. Every manager must be able to answer: “God forbid, if you’re hit by a truck, who is your successor? You must have 4 potential successors and we as an organization must be committed to developing them”!

After arriving from Eastern Europe a few weeks ago, the writer was in a supermarket outside New York and was delighted that the company he retired from had the most eye-grabbing product on the shelf amid the countless competing products. It confirmed the webcast presentation from the CEO a couple of months earlier that the company’s new-product pipeline was indeed healthy.

A case of déjà vu? Many years prior the then CEO reacted to a brand that was killed by a young marketing manager in a subsidiary by intoning: “I’m very proud of you, for developing a better product than I did when I was in the subsidiary”!

While back in the States, the writer is going over the 2010 budget of his Eastern European client; he has a big smile looking at the new-product portfolio: (a) a senior R&D person is hired from a major western global company, (b) the R&D manager confirms that the new formulations for the biggest brands will deliver the benefits desired by consumers, (c) thus be compelling products, (d) yet yield greater margins and generate a robust fund for stepped up, aggressive marketing across the region and (e) go toe-to-toe with global behemoths from the West – innovation does not have to be rocket science!

For decades we have been consumed by OFW remittances. Yet for decades our economy has not taken off – from underdeveloped status: “que sera sera”? And so the ADB is talking about us suffering from Dutch Disease – we’ve had it for decades? Still we have a saving grace: Jesus’ ancestors weren’t perfect either!

Innovation and excellence can’t be skin deep – they must be a way of life . . . We must espouse “quentas claras” if we expect our grandchildren and great-grandchildren to live our dream – born to a better life?

We produced a Rizal:

Greatness is in our blood!

When the US Congress was debating the issue of Philippine independence, the day was won by a Representative who invoked Rizal: a nation that can produce a Jose Rizal surely deserves to run its own country. The thought comes back whenever the writer and his wife are on summer break by the Black Sea, and Rizal’s Mi Ultimo Adios is literally all over the resort – etched in tall (over 5-foot) cylindrical planters – operated by a Spanish hotel chain.

Our instinct to excel ought not to be subsumed by an attitude of que sera sera – keeping our head in the sand?

Rizal fought hierarchy tooth and nail. We have an excellent model in questioning what some may view as the inevitable – e.g., our social structure or underdeveloped status.

Government, industry, education and the Church are all critical if we are to mirror Rizal’s model.

We need a new People Power to simply tell politicians that enough is enough? If Rizal was able to offer his own life . . . what could they offer? Whatever happened to public service? What about the honor system – is it alien to us?

Industry is unwittingly reinforcing hierarchy (aristocracy?) by simply pushing financial goals, i.e., only a few would benefit from their enterprise? The ability to run an enterprise is God-given – it’s a privilege and an honor, and thus must benefit beyond one’s self, i.e., nation-building? We now know that focusing on the local market will not provide the economic benefits badly needed by our large population. We need to expand our economic pie by being competitive – regionally and/or globally. This demands a new paradigm and greater risk-taking – inherent in doing business beyond our borders. But we can dig into our instinct of excellence to overcome the risk?

We talk about reforming our educational system. But like most things that require change, it starts in the mind . . . before it comes down to the heart and eventually to the gut – i.e., instinct! Invoking nationalism at the core of education has not worked for us – it has isolated us from the rest of the world. The search for knowledge ought to be expansive and thus universal, not parochial. What about character-building? How do we turn out true public servants? The writer’s Bulgarian assistant recalled his graduation oath when the writer had stressed as an acquisition condition (in another ex-socialist state) that the books must first be cleaned and brought up to GAAP standards: “we put our hands on our hearts and swore that we’d use our knowledge only to drive progress and improvement; to always be honest and careful in what we’re doing and never use knowledge for bad.”

The Church was not spared by Rizal. We ought not to be subservient to the Church either. The Church ought to be lauded for making the Church more human, as Christ demonstrated. Spirituality and humanness can come together from within not necessarily from without like institutions or religion? For example, honesty is the best policy?

How do we pull them all together – bearing in mind that there’s no institution or system that can be everything to everybody? Not even Eden welcomed free board and lodging! Net, we need to fix our economy if we truly want to be compassionate . . . to over 30 million hungry Filipinos – and bid our split-level Christianity goodbye?

“Lechon at Christmas dinner”:

Race and culture mix in a family get-together

Joyous Filipino Christmas celebrations are plentiful in the Northeast; but in a typical or extended family, Christmas dinner is more intimate.

Family in the US where mixed marriages are not uncommon is defined more broadly than in the Philippines. It has become family tradition that Christmas dinner for the writer’s family is at his daughter’s in-laws – who were born and raised in the Northeast, and represent what America is: a nation of immigrants.

At the dinner table are three Filipinos, and among the extended family are Jewish, Italians and Germans. After the pleasantries and compliments to the host for the excellent cooking, the writer’s son-in-law asked if he had been to the new-find Filipino restaurant in Flushing, Queens, New York: they serve great lechons! Then the rest chimed in bragging about their favorite restaurants serving “roast pig” in the New York Metro area.

Race and culture mix in family get-togethers – and one hears about the best and the worst of America. Mass cards are universal, recipients irrespective of faith are grateful to receive them.

The writer’s son-in-law is talking about his recent trip (with friends from college) to New Orleans to watch a college football game; and how racism is still alive in America. And then the chorus: remember we have a close family friend from Mississippi who grew up in a Ku Klux Klan community; and everyone takes it under advisement. America takes the good with the bad.

The son-in-law is astounded that there’s a clear divide between black and white at the bar where they went after the game: it’s like segregation is still the norm. Before flying back to New York they went around the city; their verdict: New Orleans is far from rehabilitated if it’d ever be rebuilt, notwithstanding Obama. There is a sense of resignation in the air: former residents have not returned and investors haven’t jumped in either. Aside from the decreased population, people are aware that the city sits below sea level and hence not conducive to rebuilding and redevelopment.

The moral of the story: even the most powerful man in the world can’t fix his own backyard – no country or system or institution can be everything to everybody – especially given their economic woes!

They have to bank on their Protestant work ethic once again? They would turn the economy around? And given their humanness, they would succumb to excesses yet again? Or why the recent recession is part of the cycle of boom and bust: the world has seen it 5 times over the last 4 decades, though 2007/2008 brought the fears of 1929 to the fore!

What lesson can we learn? Our task of pursuing development remains – we haven’t been there nor done that; nor could we afford the excesses of the West. The US is not the model for us: classic fiscal and monetary tools won’t suffice! Our model ought to be poor countries that succeeded to become developed countries like our neighbors: characterized by (a) strong and strategically-directed public-private collaboration reminiscent of Singapore, Inc. or Japan, Inc., (b) aggressive GDP goals to meet needs of 92 million Filipinos and (c) driven by big-bang or priority industries that are globally competitive!

Bleak Christmas in the Northeast (US)

Poverty is not our monopoly

The past two Sundays’ collections in the writer’s parish (in a New York suburb) reminded him of the upsurge of “spirituality” in the period from 1980 (a period of global economic slowdown) through the Ninoy assassination and People Power – when we saw a great many becoming Born-Again Christians.

The parish weekly bulletin reports the collections and they were $10,500 and $12,500, respectively. There are 1,322 registered parishioners and the $10,500 equates to the parish meeting its annual operating budget of $550,000. And the $12,500 is clearly over the top. For years the average weekly collection was $8,500, despite a third of the parishioners having their contributions directly debited from their bank accounts. And to cover the shortfall the parish has been holding a summer fair that has become a (town) tradition: it nets the parish beyond its operating needs and the surplus is accumulated to cover capital expenditures. There are a number of “2nd collections” throughout the year to cover the Bishop’s Appeal (which goes to Rome plus supports the diocesan’s seminarians) and charity programs that the parish sponsors. (The writer and his wife were once trustees in a Manhattan church and understand the challenges of church funding.)

What is going on? As reported in the news, unemployment in America is at 10% and if underemployment is factored in, 17% are going to have a bleak Christmas.

Reality hit home when the writer’s wife invited over the community developer’s “key people” – i.e., the ones she deals with – and was surprised that the Sales Manager who sold them the property had been laid off. But she came over still and so the conversation had to touch, albeit briefly, the bleak Christmas people were facing. The maintenance person was most positive, and said he never had government in his mind and that he has always fended for himself. He’s such an engaging person that the writer’s wife would typically call him to do chores, and make extra bucks in the process. (The family had moved to an energy-efficient – natural-gas fueled, multi-zone thermostat controlled heating and cooling and contemporary insulation system – to meet their lifestyle – i.e., frequent travelers – while supporting Copenhagen.)

The story goes on: the cleaning lady who comes with a team of 4 (between visits husband and wife team does the chores from vacuuming and steaming to doing the laundry and most everything in-between; it’s what the doctors ordered) and had a thriving maid-service business, lost the investment apartment she bought at the height of the housing boom. And is about to lose her own home. Her option is to rent.

Even high profile folks are facing the same bleak Christmas: in a family friend’s neighborhood by the Long Island Sound, three Wall Streeters lost their jobs. And the writer’s daughter adds that a broker friend, a successful Manhattan realtor, is experiencing the worst of the New York property market.

It is not surprising that Americans are again turning to the Church; the local church gets filled on Sundays and the weekly collections are on an uptick. Americans, like Filipinos, know how to turn to the Lord.

The writer sends his and his family’s best wishes – “Maligayang Pasko . . . and a blessed New Year!”