Of bricklayers and a cathedral

When friends and relations asked the writer to share his thoughts about why we’re economic laggards (basket case was their descriptor) he had to revisit how his worldview had evolved – which they knew and why they asked in the first place. How he netted: our thought process and culture are two fundamental givens that we take for granted?

In a business organization, leadership can shape a culture. For example, at Apple: “. . . Culture informs success, not the other way around. Leadership drives a culture . . . Culture drives numbers: Culture drives innovation and whatever else you are trying to accomplish within a company—innovation, execution, whatever it's going to be. And that then drives results”, reports Businessweek, June 14^th. A country is more complex than a business, but if President-elect Aquino is to succeed, he has to educate us and drive a ‘success culture’?

Every country or region of the world takes their thought process and culture for granted – that’s what people are? And when the topic comes up, national pride only reinforces the instinct. The writer’s Balkan friends (that’s how they label themselves when the topic is discussed) profess to want to be members of the EU – given the advantages they’ve seen, e.g., infrastructure projects and foreign investments. And while they are critical of the inefficiency and corruption that they acknowledge are part of the system that must be addressed, still national pride allows them to tolerate a growing frustration – even coming back home because they find the outside world truly alien; though embarrassed of their state of affairs when talking to foreigners.

But given the global economic slowdown many quarters are having a field day dissecting the plights of countries – i.e., their problems are in fact to be expected? A polite way of saying: ‘deservedly so’? When we talk about the Portuguese or Italians or Greeks of Spaniards, we could see where they messed up? Of course the US and UK messed up big time – and are today seeing a drastic change in their way of life!

Whether they call themselves southerners or Mediterranean countries, the perception of others seems consistent? For example, poor Angela Merkel, the Germans are giving her grief for helping the Greeks – why are we supporting these people when they’re less hard-working than we are? Their image of Greeks: sun-loving southerners with ouzo in hand? Yet Europeans can’t imagine themselves taking as little holidays as the Americans!

The bottom line: the Philippines’ inability to generate foreign direct investment can be attributed to the general perception of foreign investors that instinctively we have a bias for local investors – e.g., crony capitalism? And when we realized that globally we’re uncompetitive our impulse was to analyze the yardsticks that rated us so? Yet staring us in bold numbers are the investment figures being posted by Vietnam, for example. In short, while global competiveness is our challenge, we are looking at internal variables? Of course red tape in processing business-venture applications is a problem, but is that the root of the problem? For instance, what enabling legislations must Aquino champion – and that we must strongly support – to make us truly attractive to foreign investments?

Do we instinctively look at ourselves as ‘bricklayers’ – instead of looking at ourselves as building a cathedral? And thus our thought process and culture are at the root – we think local/parochial and we want to preserve the patrimony? But if we turn the challenge on its head, and see ourselves as building a cathedral – i.e., a developed economy – we would be summoning the requisite plans and elements of a cathedral, i.e., enormous foreign investments and technologies from advanced economies?

Would we have generations of bricklayers or cathedral builders? We know what we want but we also recognize that our dilemma just won’t go away? No different from the writer’s Balkan friends – or north v. south Europeans?

Keeping it simple!

President-elect Aquino continues to be thrown fast and curve balls, and even cheap shots – are we expecting him to hit them all out of the ballpark? What is reality?

An economy producing $3,300 GDP (PPP) per person cannot address all the problems he faces, not to mention our budget deficits and rising debts. Yet while he campaigned on an anti-corruption platform he still must ask for the laundry list of problems – unemployment/poverty among them. So Clinton had an easier time – it’s the economy, stupid! But not even Obama can give jobs; so we should not expect Aquino to wave a magic wand and presto, unemployed Filipinos find themselves at work on July 2^nd?

If indeed his focus is to fight corruption and poverty, he can still be innovative? But we too have a role to play: the premise we must keep as a people is he can only do a ‘couple of things’ – the rest will fall among the ‘trivial many’ as opposed to the ‘vital few’? Our culture of inclusion and compassion must take the backseat . . . lest we continue to squander whatever little resources we have – and that is our dilemma?

Innovation by definition is dynamic – thus a challenge, beyond Aquino? For example, while the Americans supported Japan to recover from WWII, America found itself falling behind in innovation and manufacturing. Yet it was a team of Americans who showed the Japanese the requisite thought processes and techniques. And thus clueless Corporate America trekked to Japan liked it was the Mecca of innovation and manufacturing.

Today Japan has lost its grip on electronics to Steve Jobs (and Taiwan and even South Korea). Because as the Americans struggled to regain lost grounds, they were rapidly developing computing and communications (or C&C and later ICT). (It’s a common sight in many parts of the world, in gatherings big and small, people are showing off their latest iPhone downloads; and how amazed they are at their relevance and uniqueness.)

But even in ICT technology continues to evolve. For instance, computing power can generate warehouses of data – and so innovation has to figure out how to pick and choose the vital few from the trivial many! For example, in driving revenues and margins models are now accessible to rapidly find the dynamic that will yield the optimum output.

When the writer first arrived in Eastern Europe, they proudly showed him the websites of the countries and their mountains of economic data. He cautioned them though not to traverse the path of analysis paralysis. (In our case we’re looking at Q1 GDP growth of 7% and celebrating; when we should be driving investment and exports to the hilt, and then we can celebrate?) And to their amazement the writer picked only three economic variables from each country; and one from the company – and developed a one-page chart showing the business potential of the region. And updating the document each year tracks how the business is progressing against a simple master plan – thus highlighting the imperatives of growth, organic and/or acquisition.

(Of course inside the company they had to learn competitive advantage – i.e., every business element must be competitive, from investments to product development to prioritizing target markets to prioritizing and developing trade channels to focusing on priority products and optimizing the dynamic between revenues and margins. In the case of the Philippines, the Joint Foreign Chambers (JFC) teed up 7 strategic industries – that would generate competitive investments thus technology and competitive products?)

The thought process in driving an economy is no different? Or why Lee Kuan Yew talked to us about discipline? For example: $18 B OFW remittances, > $100 B local economy, < $50 B exports, <>the imperatives of growth are staring us in the face, if we’ll only benchmark against our neighbors? But comparisons are unpleasant to us – thus another dilemma?

The vital few

Many elements in our culture are making it difficult for us to internalize the meaning and power of the vital few?

Beyond the 10 Commandments we have to memorize the Commandments of the Church and the Sacraments; and we have to learn the Catechism. Next we have to keep abreast of the encyclicals; and read the Bible and join study groups, and use the Concordance. And then in the community we share our reflections from our readings. Bible-reading Americans are no different . . . but they could go beyond being believers, and become ideologues – some unfortunately become extremists and take the law into their own hands. What about the Jews? The writer had lived in a Jewish neighborhood and learned that while there are those who could go to extremes, many of them were non-ideologues, like his Jewish friends.

Given we are well-informed people, in our secular life we indulge in ‘kuro-kuro’ believing that we have the perfect ideas on our favorite topics – from religion to politics to world affairs. The net of it is: we can’t get closure or resolution on things that matter? For example, two very enviable groups, the Couples for Christ and GK, had to part ways. We have many examples of groups falling out. How can we agree on how to move the country forward – or on the strategic industries to pursue – when each of us believe that we have the perfect idea, putting Moses to shame? And why as a nation we’ve been stuck in neutral – while our neighbors have zoomed ahead?

It must have been such a chaotic society that Christ saw that he had to come down with the Great Commandments? And yet the world seems as chaotic as ever – because history simply repeats itself?

They thought they had the perfect idea . . . and so the writer’s Eastern European friends were excited to present how they would proceed to develop the new business that was in the process of acquisition. They showed him actual competitive products: locally, regionally and globally; and photos of even more products. And then very proudly, explained the meaning of the logo of the new brand that was being created. When he gave a smile and an encouraging nod, they proceeded to talk about another brand that would be part of the portfolio; and then their price points. That’s when the writer said, ‘Stop, let’s not get ahead of ourselves’!

‘Don’t you want to explain what we’re building . . . what business are we in? If this will be our biggest business unit, you will be creating a major structure – how are you going to lead the organization and ensure the success of the business? What is that ‘animal’ in the first place?’ (In the Philippines, our enterprises would be confident to compete globally if they’d first articulate their business models before assessing their viability? Coke is in a very simple business yet is a global leader – it is not about perfection, it is about keeping it simple!) The next time they started differently: “We are in this business . . . These are the two legs . . . This is how each leg breaks down . . . This is how the competing products are arrayed across pricing and benefits . . . These are the two segments where we will compete and why . . . This is the target market and size at year-one, year-two and year-three . . . These will be our market shares, turnover and margins.”

‘What else? How will you raise the probability that your two entries will win in the market place and take those shares? You are not selling a product; you are selling an idea – what is the idea or the concept? How will you communicate these ideas? How competitive and compelling are these concepts? How does each product reflect them? Figure them out like we’ve done in the classroom; then you will be the confident winner and market leader!’ Then they all smiled . . . they remembered the vital few.

To successfully drive the business they better clarify and simplify – in crystal-clear fashion – its object within the organization . . . and in the market place? Because clarity enhances leadership and communication; and simplicity facilitates execution? (And it’s no different from transparency – but is it anathema to the Filipino hierarchical culture, e.g., a boss may want everything in his head; the organization is left to discern and guess?)

Dynamism can’t exist inside a bunker

Dick Cheney never understood why despite an unpopular president he rated even worse!

Cheney was a smart upstart and labeled a whiz kid when he got to Washington the first time. And thus he was ushered into the corridors of power. Unfortunately, as we had heard often during the waning days of Marcos, ‘power corrupts and absolute power corrupts absolutely’. It didn’t help Cheney any that he was an ideologue, and had no qualms getting inside a bunker – and inside a bunker he went and unsurprisingly found it to his liking?

Dick Cheney came to mind when the writer was reading about Boracay. He was not surprised that San Miguel who’d be developing the airport . . . was offered (to own?) the next island to preempt competition – so that no one could build another airport! Translation: there goes innovation out the window – or why we’re stuck with the jeepney? But innovation is not on our radar screen? (It probably doesn’t make financial sense to put up another airport, but that’s not the point – let the investor beware!)

Did our subjugation over centuries give us a distorted vision of winning? And it is best described as crony capitalism or monopoly – the absence or lack of competition? In the 21^st century it doesn’t work? For instance, the US has realized that being the sole superpower does not guarantee winning. Winning is earned by continuous renewal; and competition provides the hurdle vital to innovation and progress, i.e., the ‘natural order’. Or why Eden had to be shut down? (Einstein was so taken by the natural order . . . and thus concluded that there’s a Maker!)

We unwittingly accept this vision – because it is the model we ourselves aspire for? Probably not to the extent of oligarchy but at least we could: build a house in a gated community, send our children to exclusive schools, join a country club, and buy a condo in Tagaytay (Baguio is so yesterday)? And send our kids to holiday at Disney if not in Anaheim or Orlando at least in Hong Kong? And when they’re a little older they’d want to go shopping in Rome or Paris or London, but finally we would put our foot down, ‘no, Singapore is good enough, and we’re going with you’?

And who cares if the infrastructure from out homes to the airport and the airport itself are third-world? When they get to Hong Kong they’re like Cinderella, transported in 21^st century – or dreamlike – fashion. And so the ‘escape’ relegates the need to upgrade our infrastructure to the bottom of our consciousness? And as adults we become: (a) resigned – because we see no way out or (b) callous to our being economic laggards – because of our access to developed economies, that puts us head and shoulders above Juan de la Cruz in the hierarchy that we cherish in the first place or (c) nonchalant or (d) all of the above?

In the meantime, it’s fun to be working in a monopoly, directly or indirectly – or when there’s no major competition to deal with – because our future is assured. Or we hope so – that no 21^st century technology comes around to make the business passé? And that’s precisely why monopoly is a false sense of security?

So we don’t really like foreign investors to disturb the apple cart – and, regrettably, see no need to seek technology to elevate the nation to developed-country status? But if a Filipino who understands our game runs the show for their foreign owner, that’s fine – because they will not disturb the ‘Filipino law of natural order’?

And so we can count with our fingers those who run and control the economy – i.e., we unwittingly condone the elimination of competition? For instance, it was reported that San Miguel shareholders approved their expansion plan; but they should be talking likewise about investing in technology for the future? Nestlé, for example, spends twice the industry norm in R&D – over 2% of revenues – to fortify their future. Should our major firms adopt the same forward-looking strategy to raise their competitiveness and thus respect the natural order?

If we want the succeeding generations to lead a dynamic and modern economy, we better tell them not to thrive inside a bunker?

What a welcome sight!

Delightfully, our biggest export generator, electronics, is stepping up to the plate. Reports the Manila Bulletin (June 2^nd): “Electronics investments may hit $1-billion this year, but the industry needs between $5-billion to $10-billion to move the industry to the next level of technology products and become globally competitive.

And the report continues, “Arthur J. Young Jr., chairman SEIPI, said that if Vietnam could generate $10 billion electronics investments, there is no stopping the Philippines from achieving the same rate of inflows given all the right government support and investment climate.

“SEIPI is completing an six-year industry roadmap for presentation to the new government in August. It will be a detailed growth plan and industry direction to push the industry forward by aggressively courting big multinational companies to invest here.”

Hopefully the BPO industry and agri-business sector (that reaches the countryside) would develop similar roadmaps – because they are among the major industries identified as strategic. For example, the JFC or Joint Foreign Chambers are focusing on 7 major industries that could generate as much as $75 B in investments. And they include: creative industries, infrastructure and logistics, mining, and tourism.

We’re playing catch-up in a major way that we truly need to focus on the vital few – or why the genius of the Great Commandments is a great lesson for the humankind, beyond the Pharisees and Scribes. Traditionally our investment priorities were meant to be inclusive, a terminology we seem to like – because it fits to a t our culture of inclusion and compassion? But in investment and global competition, that is like opting for a big number of ‘bolos’ against cal 45s? And our forefathers learned how the dynamic worked against them . . . and why in the 21^st century Filipinos are still crying for water and electricity!

Another welcome news quoting a former government official is: we are now recognizing that compassion is not what will address the problem of unemployment and poverty. An industry that is competitively capitalized and invested and developing and marketing competitive and compelling products will generate the requisite economic activity that will provide employment. And it must be employment derived locally not employment focused on the promotion of OFWs.

We better start using the terminology brain drain again – so that there’s no confusion that economic initiatives that can take our focus away from (strategic) investment and industrialization can’t be the bedrock of our economy, i.e., they are a sub-optimized choice that is uncompetitive in a globalized economy? For example: (a) we can’t be gun shy with industrialization – i.e., we don’t want to share what we have in abundance with foreign investors and so they don’t want to share what they have in abundance too?; and (b) then make do with OFWs? Making-do at the expense of brain drain is not an equitable exchange?

The bottom line: a consumption-driven economy with a weak infrastructure/industrial base – thus uncompetitive – does not generate sufficient output to overcome such weakness! The dynamic does not compute: $18 B OFW remittances, >$100 B local economy; <$50 B exports, 14.3% gross investment . . . net a GDP (PPP) per person of only $3,300, or one-tenth that of developed economies, thus we’re underdeveloped!

Foreign investment is a competitive advantage as a relatively new market-economy entrant, Vietnam, has experienced (and the Asian tigers before them) – i.e., they’re developing faster than we are driven largely by greater foreign investments that are 2 X ours; their exports are at 1.5 X, while our poverty is 2.6 X theirs!

A swallow doesn’t make a summer . . . but the writer is keeping his fingers crossed that we would follow-up – and in a big, bold way – on the lead of the SEIPI!

How the mind plays tricks

Some months back the writer spoke to students at two Eastern European universities, both English speaking, both with Western professors in the faculty. George Soros is a major supporter of one and the other, Bill Gates. (Hopefully we’re likewise tapping committed supporters and keeping our universities competitive? Aren’t we wondering, for example, that the Asian Institute of Management does not rank among the best in the region? We’ve allowed many elements of development and competitiveness to slip through our fingers? Why – because of our inward-looking bias?)

It felt like standing in a modern Western university lecture hall; and the students were similarly confident and energetic. The writer was accompanied by two young marketing managers, alumni of the universities. (And he thought: no wonder his Eastern European friends have established relationships with these institutions.)

Forward to spring, 2010: The writer is reviewing the business of the young marketing manager who was with him at the university. She speaks better English with no accent, and is very smart. She’s managing a successful brand that has evolved into an umbrella brand with competitive market shares – by primarily counter-punching smartly; thus there’s a missing piece and its absence could mean trouble down the road. (We do see troubles in our economy, and ought to do something – we’ve been counter-punching for decades with OFW remittances, missing the imperative of economic development and leadership?)

And so the writer says, ‘I’ll be away for a week, and what I like you to do is visit a few places – forget about your work . . . or what you are doing . . . and even what you know about it . . . and when I’m back talk to me about leadership’.

“You want me to talk to you about brand leadership?” ‘No, I just want you to talk about leadership. And so visit as many leading entities you can find: the leading hotel, the leading auto showroom, the leading restaurant, the leading bar, the leading salon, the leading department store, the leading hospital, the leading dental office, the leading pharmacy – and whatever else, including your university, since it’s a leading school!’

Obviously the writer wanted her to talk about the imperative of brand leadership. But defining the challenge narrowly would equally narrow her perspective – undercut her dynamism, inquisitiveness, and forward-looking mind! As importantly, she had to experience and feel the attributes of leadership – and develop these same attributes into the characteristics of her business (or economy, to economic managers?).

“Oh my God, leadership is so pronounced – and strong and confident and pervasive. It is universal – it comes out so powerfully in the places I visited; they must have some guiding light and beliefs; and so the organizations reflect them; their leadership is so compelling that even an outsider like me felt it!” ‘We will have a pre-review before the next business review; and you will start it off with a discussion on leadership. And then you will present your business . . . as a model of leadership – and template for the rest.’

Economic challenges are bigger – but our biggest challenge is we don’t have a history of economic success in a globalized economy, thus have not experienced and felt what it’s like unlike the Asian tigers. Adults learn via experiential learning (andragogy) while children do via teaching (pedagogy). The familiar feels safer than the unfamiliar – thus until we develop a radically different thought process, our efforts would mirror the familiar and yield familiar outcomes as before? And the familiar (our parochial instinct) will hold us hostage ever stronger? Which explains why our economy is a hard nut crack?

Competitive instinct

Instinctively we know what winning teams look like and what losing teams do. But when it comes to economic development is our thought process fuzzy – because of our parochial instinct? Thus are unwittingly creating oligarchy? And then seek refuge . . . in our supposed protectors (e.g., Marcos, Estrada and Arroyo) like a vicious circle – because history is only repeated but never learned? (And why Gorbachev is critical of Russia?)

And so we don’t talk of the imperative of pursuing a competitive edge in economic development? For example, in a globalized economy, competition starts with competitive capital generation. We can’t simply generate capital – we must be competitive size-wise? For instance, to raise our gross investments to 25% and start to compete with our neighbors, we need $20 B; while the JFC or Joint Foreign Chambers are looking at $75 B – clearly a competitive edge, like fighting with a WMD in our arsenal?

Global competition demands competitive products. How many export-promotion initiatives have we pursued over decades – and our exports still lag those of our neighbors? We can’t simply market indigenous products – we must market competitive and compelling indigenous products? Global competition demands world-class product development practices. We simply don’t have a product-development heritage – and thus must acquire the skill-set in order to elevate our export revenues?

Global competition demands world-class marketing. Our industry can’t simply be focused on the local market lest it be a self-fulfilling prophecy – they must invest in developing world-class marketing? Global competition demands world-class efficiency and productivity – to enhance margins for reinvestment and growth, and to develop competitive-building skill-sets. But our infrastructure at the macro and micro levels are inadequate? And corruption multiplies this competitive disadvantage – because it breeds a culture of inefficiency? And we can’t simply give ourselves false hopes by comparing our liabilities with others instead of our net worth?

Global competition demands world-class technology and expertise to attain and sustain competitive advantage. And global players – MNCs and expatriates – are the source of technology and expertise. But we’ve had a conflicted relationship with them – still, we can’t simply carry a chip on our shoulder?

The writer’s Eastern European friends have learned many of the nuances and dynamics of the above elements but seven plus years weren’t enough to make them second-nature. (Indeed we have a lofty mountain to scale?) Yet they’ve learned, for example, that while local resources were easy to tap – i.e., equipment could be fabricated, e.g., the jeepney? – they may not be globally competitive. It took beyond number-crunching before they realized the mantra: it is not costs; it is margins, i.e., technology and efficiency more than offset cost. And they acquired a state-of-the-art technology from the West. The outcome: they’re dominant in this piece of business generating far greater margins – thus the funds and compelling products to compete in the West; where before they were fixated on low-pricing as a strategy! And adding a feather to their cap, Western financial institutions have become fans – thus encouraging them to pursue growth and acquisition.

All the above are commonsensical – none is rocket science – but our parochial instinct has screened us from reality: the simple formula our neighbors have adopted, i.e., to partner with foreign investors and global players? That we do it in fits and starts as transactional and tactical initiatives – like the growing (neighborhood cottage) industries established by foreigners turned residents, among others – is in fact counterproductive: (a) SMEs are good but they must be geared for global competition; and (b) we’ve lost focus on the big bang like what the JFC or Joint Foreign Chambers were proposing? Or we seem to forget the 80-20 rule or the genius of the Great Commandments?

It is not about destiny; it is about the choices we make? And it is the same life-lesson that we teach our children? That they ought not to be like kids in a candy store – they should share what they have in abundance so that others would share what they have in abundance too? And that’s the gut of a global competitive edge? Sounds like the multiplication of the loaves and fishes?

What innovation is not?

In the West it is endearing to be critical of new products especially if doing so makes one a contrarian. We should do the same in the Philippines; but where we need to focus our efforts . . . is in understanding innovation.

There’s no perfection in this world – thus trying to give the presumptive president the perfect agenda is an exercise in futility? In innovation, the mantra is: ‘perfection is anathema to excellence’. Or why marketers are periodically out with new variants of old products – not in pursuit of perfection . . . but excellence . . . and creative destruction . . . or the next generation of products. Thus they are guided by the 80-20 rule: don’t shoot for 100%, only 20% that gives 80% of the desired outcome! And that demands a lot of discipline in thought process – especially for our culture where ‘kuro-kuro’ is a national pastime or why we can’t get off our carousel?

Down by the corner of the street where the writer lives is a pair of massive pillars meant to be the archway to a publishing giant and American icon – and the titles of their popular periodicals are still etched. The physical facility has moved to another state and in its old place is a boutique hotel. The business is audaciously dealing with the modern phenomenon called the internet: at least a dozen of their once popular magazines are now extinct – yet they keep developing new products and maintaining a healthy portfolio.

Everyone with an internet connection can access whatever periodicals one desires. Of course, there are computer viruses to deal with, phishing or spam mails, etc. When the Ford Model T came out people protested because they predicted a rise in road mishaps. And in Eastern Europe, this has indeed become reality. The once walled off region is now home to an exponentially growing motorists. And the same is happening in Vietnam and Cambodia; and obviously, China and India. (The cure: they have to develop safety consciousness; which the writer shared with his Indian friends many years ago when he saw the chaos on the road between his hotel and the company facility. And unsurprisingly, that is exactly what the EU has mandated for its new member countries.)

We can’t afford not to focus on understanding and pursuing innovation, or we shall be stuck in neutral – and unfortunately, we’re on an uphill climb so gravity will pull us down?

The writer has raised the issue of hierarchy, especially our hierarchical culture – he is a critic of hierarchy when transparency is taken for granted. The sun, as they say, is the best disinfectant. And transparency invites critical thinking. Ideas are generated when the mind is encouraged and nurtured to be dynamic, inquisitive and forward-looking. And in the 21^st century where competitiveness is underpinned by ideas, we need a truly mind-nurturing environment. (And here is where education reform can come in?)

As Catholics we don’t question the Trinity and Papal Infallibility; but there are things around us that we must question, for example: why haven’t we developed something after the jeepney; why are we economic laggards; why is politics the way to wealth when it’s meant to be a public service. Or why is there sex abuse in the church? (Disclosure: In the writer’s archdiocese, the Archbishop demonstrated how to handle this problem: ‘Bishop Lori signaled a welcomed change to his predecessor's handling of clergy sexual abuse of minors and acknowledged that abuse took place, apologized, offered counseling and offered to meet with other victims. Bishop Lori dealt with these claims in a candid and open manner which helped us in going forward with the mediation process,’ said the lawyer of the victims.)

Until we develop a dynamic, inquisitive and forward-looking mindset we will witness our continuing decline and thus our inability to provide justice to a third of us that are hungry? And to tolerate such enormous poverty is to tolerate injustice?