Friday, February 26, 2010

The genius of the Great Commandments

It is amazing how much we have dissected our challenges: economic, political and poverty, among others – yet we haven’t moved forward! Problem-solving, unfortunately, is not dissertation-writing.

Leaders who move their country forward are clear-thinking decision-makers – not trapped by analysis-paralysis! Beyond staying on message, they stay with time-tested principles – they have internalized the genius of the Great Commandments! FDR was elected three times – he stayed with his New Deal message and as importantly, focused on the vital few initiatives that defined his agenda. Clinton overshadowed the perspective of Bush 41 during the campaign and carried his mantra – “it’s the economy, stupid! – through two terms that saw one of the longest economic expansions in America. Perfection is not what moves a country forward!

But do we stop short when confronted with a challenge – and dance around it instead? And euphemistically call it “Filipino abilidad”? Unable to pursue industrialization, we pride ourselves instead for fielding millions of OFWs globally? Haven’t we learned that bolos couldn’t win against the cal. 45? And given industry is high up in our hierarchy, we keep pressing poor Juan de la Cruz to take the slack of a failed economy? Do we want to upgrade nursing education to generate more OFWs? Is that “Filipino abilidad” or abdication – “to whom much is given, much is expected”? (What about countryside development? It has a caveat, i.e., sustainability. The commune system did not break poverty in China. Industrialization drastically reduced it – they tapped the requisite elements of competitiveness: capital (foreign), market (global/economies of scale), technology (foreign) and expertise (foreign). They leveraged globalization to attain competiveness – the Holy Grail!)

Our industry is inward-looking; but meets the needs of the few (e.g., monopolies and conglomerates) and thus the rewards to them are a windfall. And given our hierarchical culture, we make them larger than life – that they can’t do wrong? What is reality – we’re not an industrial, first-world country because we don’t have a big industrial base as Gokongwei pointed out, for example?

What we have is a glaring crisis to confront: every contemporary global yardstick that measures a nation’s progress – especially development, competitiveness, corruption and economic freedom – has failed to galvanize us! A columnist discusses the efforts of the UP community to spell out the challenges for the next president. And he laments that the outcome largely calls for political will – and thus falls short? Or was it an exercise in dissertation-writing, an attempt to cross all the t’s and dot all the i’s and thus missed the knock-out punch? Perfection is not what moves a country forward!

What is there to dissect but for the national leadership to work with the private sector to pursue industrialization? 98 million Filipinos with a GDP per person of $3,300 (PPP) can’t drive the economy like the US does – with a-$46,400 GDP per person – that is, skewed to consumption! The reality is: the US is a multi-trillion dollar economy with a humongous export industry albeit the US consumer had demanded more cheap foreign goods. The US is more than a consumption-driven economy – it’s a fully industrialized, export powerhouse (e.g., GE, Boeing, Microsoft, etc.) on top of their capacity for capital formation and product-idea generation. Of course, they have their Achilles heel – their bigger than Texas-sized deficit and a dysfunctional Washington – but that’s another topic altogether. We better focus on our crisis – our own crisis!

Our penchant for “kuro-kuro” (or circular arguments that don’t get closure thus equate to muddled thinking?) and “kwentong kutsero” (or assertions that are suspect?) create failed efforts like the Terminal 3 of the (NA) international airport? It is a critical infrastructure element for stepped-up economic activity with the outside world – if we missed its import? Of course there are legal issues! Getting ourselves in a no-win situation is something we need like a hole in the head?

Tuesday, February 23, 2010

Pursuing strategic industries

New export road map to be drafted”, says a news article. And it drew the writer’s attention, and led him to the EDC’s (Export Development Council) website. So far we have 3 groups in government pursuing strategic industries to boost the country’s competitiveness?

The EDC had earlier spelled out (for 2005-2007) what they called interventions to support specific industry clusters. And the writer perused two in particular: electronics and food. Clearly the West can share a thing or two about competitiveness: for instance, their R&D mantra is “start with the end in view”. It simply means that instead of figuring out the first step of an initiative, we must first ascertain what the end looks like. And the preceding steps (i.e., the vital few!) must be geared to the attainment of that end goal. How does that work in developing our electronics and food initiatives?

If we go to a supermarket we won’t miss the strong presence of Nestlé products, for example. And if we visit their website we will even get a sense of their business: “Nestlé is the world's leading Nutrition, Health and Wellness company. We are committed to increasing the nutritional value of our products while improving the taste. We achieve this through our brands and with initiatives like the Nutritional Compass and 60/40+.”

The key is to understand how global companies view the industry and their businesses. For instance, in our own food initiative we can adopt an approach similar to Nestlé’s in creating high value-added products: (a) deliver the specific benefits (for example) of nutrition, health and wellness, and (b) win the consumer’s trust via well-developed branded products. To that end, our industry needs a major break from tradition: raise their investment especially in R&D and product development, quality assurance and marketing, including consumer insights. Nestlé spends over 2% of revenues (twice the industry norm) in R&D; while we as a nation spend less than the industry. Clearly we’re not geared to be competitive. The writer opened an impressive, export-quality looking Philippine branded nuts, vacuumed sealed and all, but the quality of the nuts inside was not worth the expensive packaging; and foreigners have complained about this before – and in some cases the can is rusted by the time it gets to a store shelf overseas! This is a waste of investment meant to establish trusted branded products, which we can’t afford!

To truly understand the industry, we can invite representatives from major global companies to share their insights. And if we do, the interaction can open our eyes (and theirs!) to partnership opportunities: from agriculture to manufacturing to marketing to sales and distribution, locally and beyond.

We can go through a similar exercise with electronics or ICT (Information & Communication Technology) or BPO: in order to develop a truly globally competitive industry initiative we ought to pick the brains of major industry players who set the tone for and define the industry. For instance, have we considered inviting Bill Gates or some respected personality in ICT to edify us on the product architecture of the BPO industry? High value-added products and services come to light when we “start with the end in view” – it pulls us from being stuck to the past!

We can move up the value chain of our strategic industries, beyond dried mangoes and semi-conductors, for example – but we don’t have to do it by ourselves: we should make globalization work for us!

The bottom line, always: the revenues we need to generate across these strategic industries must cover our GDP shortfall – to the extent of 80% over a 5-year period of our incremental GDP target of $100B, for example.

Thursday, February 18, 2010

Raising the bar

If we are to be competitive in the global market, we need to start raising the bar at home – and reinforce meritocracy. Well traveled as we are, we have a sense of our comparative efficiency standing? Are we unwittingly tolerating inefficiency because of our “compassionate heart”? At its worst, are we unknowingly reinforcing a culture of corruption – given that: (a) we can’t say no to a relative, a friend or an “elder”, and (b) we value, believe or bet that hierarchy and aristocracy is what can move us forward or simply get things done? Not surprisingly, seeking public office or buying influence (“being a kingmaker”) is not uncommon?

Are we scared to be labeled a snob (“suplado”) if we don’t demonstrate an accommodating persona? We’re not alone: in Eastern Europe they openly exhibit a high social need. One story that sticks to an Eastern European friend who spent a school year in Georgia (USA) is the strangeness of making an appointment to visit with a friend. Because like in the Philippines, they could simply drop by for an impromptu get together.

When the writer first came to Eastern Europe, the first exercise he did (with his clients) was anathema to their “impromptu culture”: to review the businesses they were in. Their revenues (after 8 years of learning the ropes) were growing yet they were unprofitable: they employed aggressive pricing to fight the big guys from the West, very similar to the way we do it in the Philippines. “How do we take the business to the next level”, was their question to the writer.

And thus began the mantra of focus and discipline. “We will be in these businesses, but not in these – because we will be only in businesses where we are competitive. That means we will exit these businesses but we will aggressively grow this category! And given your vision and desire to be a major regional player, we will define new businesses we will enter yet satisfy our competitive yardstick.” (The imperative of a vision and desire to be a major regional or global player and be competitive must not be lost to the Philippines. And our concern if we can be competitive in manufacturing is misplaced – because capital, market, technology and expertise can be gained via global partnership if not procured and acquired. Globalization is concrete, not abstract or esoteric!)

“Why are we in this business? If you truly believe in this business, you must demonstrate that we can develop the next-generation product that consumers will perceive as truly of higher value than the competition.” This rigor and discipline (which included endless classroom and field work; and being shown how to sell cross-border in the information and communication age, as opposed to traditional or relationship selling) paved the expansion of their market across the region in less than 7 years. And so from “critic” (“suplado”), the writer is today their biggest cheerleader. And banks and proponents would present new investment and acquisition options – yet they would always recite who they are: focused and disciplined . . . in consumer products manufacturing and marketing, with 3 developed business units and moving into the fourth.

But does this approach work for countries? The writer quotes John Gokongwei anew: “In the last 54 years, Korea worked hard to rebuild itself after a world war and a civil war destroyed it. From an agricultural economy in 1945, it shifted to light industry, consumer products, and heavy industry in the ’80s. At the turn of the 21st century, the Korean government focused on making Korea the world’s leading IT nation. It did this by grabbing market share in key sectors like semiconductors, robotics, and biotechnology.

“When Singapore was asked to leave the Malaysian Federation of States in 1965, Lee Kuan Yew developed strategies that he executed with single-mindedness despite their being unpopular. He and his cabinet started to build a nation by establishing the basics: building infrastructure, establishing an army, weeding out corruption, providing mass housing, building a financial center.”

Problem-solving is not dissertation-writing – it is internalizing the genius of the Great Commandments!

Sunday, February 14, 2010

Gokongwei defines entrepreneurship

The writer thanks a friend who referred him to John Gokongwei’s speech to the AD Congress a couple of years ago: “. . . To be a truly great nation, we must also excel as entrepreneurs before the world. We must create Filipino brands for the global market place.”

Entrepreneurship as we know it is wide spread: from fruit vendors and prepaid SIM card outlets to giant malls – making our typical neighborhood an overwhelming hodgepodge of activity, a potential environmental challenge, if we’re not there yet? But the more practical issue is: This model, after several decades, can’t double an already relatively large (vs. our neighbors) local economy, roughly at $100B – which is what we must attain to break the bondage of poverty given our population size? What we direly need is (high value-added) major investment and globally competitive industry because of their greater multiplier effect and market reach? And this is the crisis our presidential candidates must address: force the right debate and agenda, and raise the bar – for the Filipino people and themselves and thus be true leaders and models?

Gokongwei puts entrepreneurship in perspective: “. . . Why serve 86 million when you can sell to four billion Asians? And that’s just to start you off. Because there is still the world beyond Asia . . . As a boy, I sold peanuts from my backyard. Today, I sell snacks to the world . . . We just made sure we came prepared with great products and great strategies. We ended up changing the rules of the game instead” . . . [recognizing that] “the Philippines has no big industrial base, and Filipinos do not create world-class products.”

Not surprisingly, beyond his own experience, Gokongwei highlights the Koreans’ focus and Lee Kuan Yew’s single-mindedness in driving economic development. Should we revisit Lee Kuan Yew’s exhortation about discipline – because it just may apply despite our being “Pinoy kasi”? That we’re capable of discipline – to drive our own development initiatives?

Focus and single-mindedness can be in our psyche especially when we’re pursuing a noble purpose? (For instance, Al Gore thought he won the election but the country had to be focused and single-minded in order to move forward . . . despite the magnitude of the stake – not just for Gore and America but for the world.) Whenever we are unwilling to compromise for the common good, we may want to test the magnitude of our stakes – or our egos?

NEDA is currently updating our economic development plans. It is admirable that they are pulling together what they call 21st century industries to boost the country’s competitiveness. The success of this endeavor can be measured against Gokongwei’s self-imposed yardstick: “We just made sure we came prepared with great products and great strategies. We ended up changing the rules of the game instead” . . . [recognizing that] “the Philippines has no big industrial base, and Filipinos do not create world-class products.”

Talents and skills and good intentions can’t guarantee success for NEDA . . . and the country – it is imperative that we are focused and single-minded. And that means within government and between the public and private sectors there must be commitment and support – and likewise from every sector of society, including education and the Church. And our planners must be able to spell out and articulate how each one must play their part – to boost the country’s competitiveness. For example, should the Church be preaching more about “helping ourselves” – e.g., the writer’s sister, a nun, worked with farmers as a green advocate while another group in the chapel prayed 24/7. But there is a more efficient, productive and high value-added agribusiness program that the country should pursue?

Development requires national leadership! We can’t afford national leadership “to get away with murder”. Neither should we tolerate empty (poverty-fighting) rhetoric – it’s an insult to Filipino intelligence, and fools the vulnerable, a double whammy. Instead we should hold the candidates’ feet to the fire – to spell out their economic programs and how they would execute them?

Thursday, February 11, 2010

NEDA’s 21st century industries

Finally we’re talking about the 21st century! It’s likewise encouraging that our economic managers are looking at setting more dynamic economic goals; and that we are developing the next-generation jeepney or Philippine-branded vehicle in partnership with a Japanese entity. (Partnership is what we must offer to be able to aggressively pursue capital, market, technology and expertise globally!) Given the credibility of government, NEDA and our economic managers better start fleshing up these press releases.

To push into this apparent new direction requires tough-mindedness in order to develop discipline and focus. Discipline and focus? Is it second nature to us? Many of our local businesses can’t drive margins and thus resort to tweaking to generate decent profits – and hence are not globally competitive. Margins are a function of great product ideas – the end to which we must discipline and focus Pinoy creativity, not to adapting to circumstances, which we mistake for resiliency? The Senate’s efforts to define our strategic industries and NEDA’s list of 21st century industries are laudable. But as NEDA pointed out, our fiscal position limits our ability to pursue priority initiatives – that it behooves government to pull their efforts together.

It’s the wrong foot to start if we say that we can’t be competitive in manufacturing – it can rob our resolve to move up the value chain, the key to overcoming barriers. Steve Jobs demonstrated it against BIG Blue and IBM was almost sunk by the PC and thus shifted to services! (But even services have their product architecture. Our BPO industry has to move up the value chain! A recent article from the industry was silent on this – if we sit idly we will be victims of circumstances, again?) Nor was Apple first with the MP3 or the smartphone. IDEAS are the key to win global partners as we seek capital, market, technology and expertise.

Understanding Maslow’s hierarchy of human needs in order to generate the corresponding product ideas to satisfy them is the starting point of competitiveness. Caveat: not every principle or theory applies to problem-solving – or why doctors don’t order antibiotics indiscriminately! Neither should we be bogged down debating and defining 21st century: competitiveness – which reinforces sustainability – is the Holy Grail!

Government may not be in a (fiscal) position to pursue priority initiatives now but it has the brains to develop its game plan, NOW – and tee it up for successful execution? Says the Manila Bulletin about NEDA’s initiative: “Among the 21st century industries cited were high-value agribusiness and aquaculture, renewable energy, shipbuilding, tourism, business process outsourcing (BPO), information and communications technology (ICT), and mining.” What then are the ideal next steps?

The writer is restating an earlier point: “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?”

Initiatives are only as good as they are designed to succeed – they must cascade from a “must-achieve” revenue or GDP goal of $270 billion in 5 years, for example? Being disciplined and focused is imperative. We can’t be everything to everybody – tough-mindedness means saying NO whenever we are being led astray, off our game plan!

Sunday, February 7, 2010

Finding our place in the sun

This blog is a year old. But the impetus came earlier during a Holy Week break: friends and relatives kept asking, “How do you view, what is your sense of what’s happening to the country?” Regrettably, his first news this year is even bleaker: corruption and poverty have turned for the worst.

“You would not believe it but Filipinos are speculating about what’s in store for these politicians in the afterlife. Filipino values and our Christian upbringing are out the window. And fairly or unfairly the mothers of these despised individuals are being blamed for their “recidivism”. We’re indeed a banana republic – the new normal is to keep one’s office via military/police protection; and of course politics is “addition”. Marcos is suspected to have started it, but it has been elevated to an art form. Filipino “hiya” is so yesterday. Anyone who can’t take the new reality is naïve. Forget about Rizal and the Filipino ideals. Your country has gone to the dogs.” The writer, his wife and daughter just sat dumbstruck hearing people pour their hearts out.

On January 20th the Manila Bulletin had a two-page spread detailing the economic achievements of the current administration. In fairness, they deserve a “Bravo” going by the comparisons presented versus the three predecessors. Unfortunately, it fails to present reality – where we stand as a country. A 4.9% GDP growth would take us 175 years to attain developed country status according to the World Bank. And our GDP per person of $3,300 (PPP) puts us right where we belong: underdeveloped – left in the dust by our neighbors and confirmed by the latest Economic Freedom report. Ergo: our economy is not to crow about; and we better do something!

It likewise fails to present another reality: we are an OFW-, not an investment- and industry-driven economy. Our industry does not generate the requisite number of quality jobs; we have to turn overseas to lift our families. And the more of us become OFWs, the more our politicians can crow about our economic achievements – adding insult to injury!

And industry can keep mum though pursue CSR (Corporate Social Responsibility), like we’re committed to the Sunday collection? In a small globally uncompetitive economy, local capital is King. Unfortunately, our industry is reminiscent of days when new cars needed to be broken-in. And industry took the need for granted given the absence of global competition. Were we thus short-sighted or didn’t believe in ourselves, or both? What is the reality? The US, Japan, Germany and the other big players are being beaten in their own game. We can think small, we can think the past, we can think status quo . . . and the 21st century will indeed leave us in the dust!

The bottom line: Has the 21st century rendered our basic beliefs and assumptions outdated? The new century has made the world smaller and countries and people more interconnected and interdependent? And in this global environment, we have to find our place in the sun lest we occupy the bottom rung? Are we there yet? The option is to pull up our bootstraps and be an active participant of the new world order – drive our revenues/GDP like they do in the private sector and dynamic economies? But will the powerful and the haves have it? Or it is better to be a big fish in a small pond than a small fish in a big pond?

After a year of engaging on the subject, the writer remains hopeful as a Filipino. But objectively, benchmarking against our neighbors, the mountain we have to scale is ever higher. Problem-solving of such magnitude as nation-building demands the discipline and focus of great athletes (or why Keynes at the height of the Great Depression railed against muddled thinking?), not the romanticism (and bias for inclusion) that is our comfort zone? National, not false, pride is what we need to give us the resolve to step up to the plate. We can’t be lumped, dumped with other third world countries that are objects of charity . . . instead of models of dynamism like our neighbors?

Wednesday, February 3, 2010

The natural beauty of the Philippines

The writer’s family always looks forward to bask in the beauty of the country – one of the many motivations for their periodic trips and why they keep and call it home.

The daughter (typically) travels ahead, as self-appointed scout, and picks dream destinations with cousins and plans out-of-town trips for the family. She emails the parents, waxing poetic while still in a (new, secluded cove) resort in Boracay: “this is as good as it gets, bar none”.

She then arranges a stay at an island resort – a short plane hop from Manila plus a 40-minute drive and a little boat ride – to help parents with their jetlag. It’s Shangri-La, if not nirvana! But the daughter is yet to get over the thrill of the Boracay experience: “It’s top of the top, the service is impeccable and the food is to die for. You have to see it.”

The island resort – with access to natural spring water and offers spa facilities as well as a 9-hole golf course – is idyllic yet world-class. It is being developed by foreigners, but managed by a Filipino company, the family is told. Service is great. They’re a year old and have yet to complete the facility; and acknowledge that capital is vital. And so is their ability to sharpen their marketing efforts: spell out, articulate and communicate their competitive advantage via a well thought out, targeted campaign. Clearly golfers – Filipino and from the region – and/or wellness enthusiasts are ideal guests especially if the resort can arrange in-bound flights. They appear to have resort technology and expertise down pat; and seem to overcome typical teething problems that come with new ventures. The family wishes them well – that they have the requisite resources to carry them through their infancy.

Tourism is an inherent industry given the natural beauty of the country like it is in the Caribbean, for example. Yet, competitiveness – capital, market, technology, and expertise – is overriding if we are to optimize this gift.

While at the island resort the writer’s email inbox has the usual offers from international resort/hotel chains and, of course, Amazon – books, electronics, whatever. On a tiny island in the Philippines, Amazon is effectively competing incessantly. Competitiveness is 24/7 and global, recession or not. And the writer learns that even under the sun’s glare the Kindle (eBook reader) is ever readable. Best of all, it eliminates the need to tote books while traveling.

On the plane to Manila the writer is reading (again) about Hyundai. Last summer he wrote about his positive experience – a pleasant surprise – after picking up a Hyundai rental car at the San Francisco airport. Fortune magazine reports that they are recording explosive growth while the rest of the industry is reeling from sales decline. Competitiveness is 24/7 and global, recession or not. And for Hyundai, it means: (a) shifting from a volume- to a quality and luxury-driven (higher value-added) strategy yet price-competitive, and (b) benchmarking versus Lexus, i.e., stripping it down to match it part by part and bit by bit. Benchmarking demands a forward-looking and an objective mindset – which we must hold when we view our neighbors given their dynamism.

And so Hyundai is moving into the rarified field of top-dollar automobiles – i.e., healthy margins and profits and thus greater investment-multiplier effect! Very soon it will not be shocking to read about China and India getting into the fray! And by then we would not want to be driving our economy on the backs of millions of OFWs. We can’t continue to take for granted the reality that our GDP is miniscule – given 92 million Filipinos we don’t have enough notwithstanding our compassion. Our focus must be to expand our GDP and not simply tweak its many parts. A jeepney is a jeepney despite incessant tweaking. Ours is a structural crisis! We can ignore our economic fundamentals and accelerate our downward spiral?

The natural beauty of the Philippines