Change – the only thing constant

Are we predisposed to change? Do we tend to look to the future – because change is the only thing constant?

The writer and his wife just finished lunch in a promenade restaurant by the harbor in a small town in southern Norway. And the wife commented: ‘do you notice that the adjacent restaurant is empty while ours is full’? And as they walked away the writer took a picture of both restaurants side-by-side . . . and a picture says a thousand words!

Clearly the empty restaurant appeared bland in the picture while the busy restaurant exuded more life and color . . . even after the customers had left. And so the writer explained to the wife that one of the techniques marketing and sales people would use to figure out how they are measuring against competition is to take pictures of competitive presentations (in stores, for example) and to compare them against their own. And without much prodding they would sense their shortcomings! But do they necessarily take it upon themselves to change for the better?

The writer was pleasantly surprised that the AA (Alcohol Anonymous) ‘change model’ was influenced by a Jesuit – that St. Ignatius was a ‘results-oriented mystic’ and would respond positively when presented with new facts. This reminded the writer of the most tough-minded senior executive he met in corporate America. Translation: people could be truly scared when he shared his mind. But his ability to change his position when presented with new facts was legendary – because he had very good listening skills. (And thus many young people learned that tough-mindedness didn’t equate to a closed-mind.) The tough-mindedness instead drove his ability to focus and execute – which he attributed to his days as a collegiate athlete.

We’ve taken ‘snapshots upon snapshots’ of our economic profile – and compared them against Singapore, Thailand, Malaysia, China, Taiwan, Indonesia and even Vietnam. But while a picture says a thousand words, the reflection would remain just that – a reflection – until we take action?

The writer had worked with these Asian neighbors for a decade and witnessed firsthand how they pushed economic-development efforts. For instance, in the beginning he would see a handful of business-hotel guests at breakfast time, but as time went on these same hotels buzzed with activity. And the increasing traffic of foreigners translated into greater and greater foreign direct investments. It was clear from the nationals that their countries adopted a proactive, welcoming policy to attract foreign investment.

There is no question that we Filipinos can produce great plans that satisfy academic rigor. But in economic development the test of the pudding is in the eating. For example, our neighbors focused on attracting foreign investments! It is encouraging that the new NEDA director general is looking at 25%-28% investment against the current 14% of GDP. (Now we need to focus like a laser to attain this ambitious goal?)

Are we predisposed to change – and to look to the future?

Where the rubber hits the road

The Aquino Administration appears committed to fundamental or must-do initiatives, zero-based budgeting and efficiency in public administration, for example – and wants to eliminate incentives to industries that have not become competitive as well as agencies that are unsustainable?

Are these efforts meant to make the public sector truly effective – and by definition eliminate patronage politics, one of the many faces of corruption? Is the Administration signaling their readiness for . . . where the rubber hits the road – and to confront vested interests head on? What about opening the economy up so that we attract greater foreign direct investments? Indeed we need both: (a) efficiency in public administration and (b) investments if we are to move the country forward and truly address poverty?

Change is never easy – and focusing on a handful of must-dos raises the probability of successfully pursuing change? It is understandable that our instinct of inclusion makes us uncomfortable if initiatives don’t appear to be holistic – i.e., we have yet to internalize Pareto’s principle or the 80-20 rule? And is at the heart of the unease our compassionate heart? For example, doing zero-based budgeting and eliminating unsustainable government agencies would mean unemployment for those affected? Practitioners recognize that the key to successfully pursuing major- or large-scale change is to articulate ‘the end point’ – it facilitates identifying the elements critical to execution, i.e., a plan is only as good as it is executed, and lends itself to continuous improvement. And it also explains why the US has a better record in commercializing ideas than Europe, for example – their R&D mantra is to ‘start with the end in view’. Of course, it demands practice, practice and more practice, as his Eastern European friends are learning firsthand.

Is our compassionate heart behind our inability to create strong economic fundamentals – for example, our failure to focus on something very basic as power makes us uncompetitive in manufacturing and our broader economy weak? And the price is poverty? An economic activity that is unsustainable has to give – and the Greeks learned it the hard way, i.e., their recent financial crisis could be traced to a bloated bureaucracy, among others. A German couple tells the writer and his wife that while the average German is predisposed to assist countries like Greece, they don’t take it lightly that governments could be inefficient.

President Ramos had talked about crab mentality – and there are many facets to it? When we give a wink and a nod to inefficiency in government we are in fact mirroring a crab mentality, i.e., the country suffers like we’ve suffered for decades given lack of such basics as power, water and rice or a world-class airport or harbor or transport system?

Another facet is our bias against foreign investments, i.e., the country has suffered for decades given lack of investments and thus our inability to be competitive? To be competitive demands a strong foundation: (a) basic infrastructure, e.g., power, water and rice and a world-class airport or harbor or transport system; and (b) as importantly, strategic industries that can drive our GDP per person.

Giving a wink and a nod to a few . . . where the rubber hits the road . . . pulls the whole country down – or why we remain economic laggards reduced to talking about our first-world neighbors? That they ought to be our models, but models are inanimate and don’t bring prosperity – change does . . . because it comes from the mind and driven by the heart?

Moving forward

It appears we want to move forward as a nation – but are we carrying too much baggage to be able to do so? To welcome change is to grow? To paraphrase a contemporary Jesuit author, Jim Martin (whose latest book is the wife and the writer’s shared reading while on a summer break in the Baltic – keen to visit St. Petersburg again because of its wonders, and as importantly, to get a better sense of its market potential for his Eastern European friends).

Development, economic or human, is about growing up? Or until a nation recognizes that the assumptions that dictate their way of life haven’t truly moved them forward, they would unwittingly keep the nation at a standstill? And as many countries have experienced national pride, respect for the culture and belief in themselves – while healthy for a nation’s self-esteem – could conspire and undermine their capacity to excel, e.g., Old Europe? (The writer still remembers the self-doubt expressed many years ago by Europeans including his Belgian friends.) Conversely, countries that update their assumptions are able to progress rapidly – China embracing capitalism, for example; and in fairness, New Europe?

Yet none can claim perfection in their efforts to push progress – because contemporary knowledge is as ‘constant as change’ or why the search for knowledge is evergreen? For example, who best to teach Harvard MBA students about Wall Street white collar crimes than a white collar criminal behind bars? Or tapping an FBI official who did the ‘after-action report’ following 9/11 to teach about ‘connecting-the-dots’? Or why Europeans constantly challenge themselves to be as dynamic as the Americans – i.e., they continue to carry a chip on their shoulder? (While Europeans would say Americans likewise carry a chip on their shoulder – e.g., some may unwittingly seek the perception of power, beyond deeds, and view diplomacy as undermining American power – and thus get the country entangled in wars of choice, with the world paying a heavy price?)

The writer’s Eastern European friends are another example. They are a group of people who had a set of assumptions that dictated their way of life. And when they found themselves in a radically different world they were overwhelmed – yet hopeful that EU membership would bring positive change, but were unsure how!

For instance, how do they sustain positive economic activity given their experience with the Soviet system? (While they highly regard Russian art and culture, they still resent the communist leaders, their mentality and ideology!) Thus they struggled as some of the new ways they were learning simply went against their grain. For example, the concept of higher value-added products in order to generate healthy margins is hard to internalize because their instinct says it equates to higher pricing . . . and they’re a poor country! (What about us Filipinos? Do we need to move beyond the intellectual level too – so the world won’t leave us behind?)

Also, given that their instinct is to develop products more as an art form, they had to learn a bit of science – i.e., product architecture modeling – before they would develop the bias for higher value-added products. Again, a struggle! But they’re a smaller entity than a country that despite the difficulty inherent in change, they are able to internalize the need to question their assumptions and abandon them, if not all together, at least to an appreciable extent.

Bottom line: It will not be easy for us Filipinos to embrace change? But until we do, we would keep throwing the same set of assumptions into the hopper of development. And the outcome would be the same no matter how much we may will it to be different? For instance, to sustain an economic activity and reap its benefits like providing such basics as power, water and rice or a world-class airport or harbor or transport system, our mantra must be the efficient use of scarce resources – i.e., sentiments or ideology or a bias for inclusion won’t work if they’re unsustainable? ‘Growing up’, as parents would say, is a great dose of reality – beyond our mental model and emotional makeup – and thus to ‘charge it to experience’? And ‘to welcome change is to grow’?

So far so good . . .

It appears the new Aquino Administration is keen to be coherent, focused and transparent? Could they be pulling together an economic program – with a bias for aggressive sourcing and targeted investments – that will be clear, simple and execution-biased? Could the new communications team be part of the efforts such that the different agencies seem to be singing from the same hymnal when speaking to the media? And thus the private sector – represented by the PCCI – seems predisposed to support the Administration’s direction?

It is not surprising that reactions from the broader media and the public are mixed – because the SONA was not a presentation of a fleshed-up agenda, and thus underwhelming? Could Aquino be under-promising and then work to over-deliver? And to respond to people’s impatience they’re talking of delivering a few quick hits and wins? Are both elements straight out of a ‘managing-change playbook’?

If indeed the above would characterize the new Administration, they deserve a BRAVO? It is not about perfection but the pursuit of success? And success can be narrowly defined (not by some growth rate but) as substantially raising our GDP such that the net GDP per person would appreciably rise – and conversely reduce poverty?

Absent perfection mistakes are bound to happen? And that’s reality – or why mortals could be saints? For instance, poverty will not be eradicated as the experience of the US demonstrated? But substantially raising investment levels like Thailand and Vietnam have done yielded lower poverty? And down the road more targeted efforts could be initiated for the purpose – i.e., continuous improvement or why marketers come up with new products all the time, for example! In short, dynamism is key; it must not cease! Which brings the point raised by the private sector to the DTI secretary: what about manufacturing?

Clearly we have yet to demonstrate competitive advantage in manufacturing but it is foolhardy to picture an industrialized nation without a manufacturing capability, given its many facets and greater impact on economic output? The US is pointed as a model – we’re not the US and can’t duplicate the extent of their advances in technology and in the service sector, e.g., financial services? And the US exports a trillion dollars annually – from nuts and bolts to aerospace products and lots more between them. So any inference that the US is not a manufacturing powerhouse is a fallacy? Of course, low-value, low-priced consumer goods have moved to China and other low-cost manufacturing locations; but they don’t equate to a US weakness in manufacturing, but rather the reality of a global economy – water seeks its own level? Net, the US has to keep developing higher valued-added products? But they’re big boys and girls and can fend for themselves?

It is encouraging that electronics still appears to be in the industry-mix of the Aquino Administration. The linear argument against it is we don’t have a competitive advantage in electronics; and semiconductors don’t generate sufficient multiplier effect to generate major employment. But that is because our electronics industry is at the bottom rung – i.e., assembly – of the value chain! And to move up the ladder we must consciously and doggedly work and partner with global players? We can’t build it from the ground up, not in the foreseeable future? For example, the writer’s Eastern European friends were able to move across 3 new business units by tapping state-of-the-art manufacturing technologies from the West; and setting up an R&D unit patterned after, and run by a talent from, the West – i.e., focused on commercialization, higher value-added thus competitive products. Lateral problem-solving says: grab what the global economy has to offer and not be helpless victims?

The bottom line: The Aquino Administration appears to be on the right track . . . and should keep on trucking! And that means once plans are ready they are presented to Juan de la Cruz; and then transparency becomes the mantra – who is doing what, when, where and how – so that Juan de la Cruz is kept updated. He is the boss as President Aquino said?

Leaders v Managers

The focus of a manager is to control – because he/she is at the top of the hierarchy; the focus of a leader is to inspire – because he/she has established a road map: where they are and where they want to be, how they will get there, and who will do what, when, where and how! And a leader-manager focuses like a laser at moving forward – exuding strength, character and confidence that rub off on the team.

It appears the new Aquino Administration is on the right track; but there will always be bigger challenges to face. Fortunately, or the reality is, the bigger the challenge the bigger the opportunity – so long as they’re focused . . . committed to their goal . . . and able to inspire . . . the team and Juan de la Cruz . . . and as importantly, keep the faith?

Planning, organizing and controlling are straightforward, but what about leadership, she asked – one of the smartest businesspersons the writer knows! It dawned on him that just like in the Philippines in Eastern Europe they’d talk about their managers.

The young Eastern European (born under communist rule in a small, poor country) who asked the question does business (not simply exporting but competing) on the ground in over 20 countries – a feat achieved in 7 years . . . while we’re on our endless debates about the value of the global market! She’s the age of writer’s daughter, speaks better English than him, spent a year of high school in Atlanta (USA) and earned a PhD in Economics attending a UK university. She has become a family friend. She was preparing for her team’s planning session and wanted to ensure and confirmation from the writer that she covered leadership.

In 7 years she evolved from individual contributor to leader (and the anointed deputy of the writer’s Eastern European friend) but admits her leadership is still a work in progress – given her very high standards. Clearly she can direct her people. But the writer has to illustrate that directing an activity piecemeal is not leadership especially when goals, timelines, resources and measures of success are not clear – and not bought into by the team. The key is to inspire them, but to be mindful of inefficiencies – which she recently realized. Thus she has been vigorously working on her leadership.

She very recently sent out an email: ‘2010 is so far a very good year for the SBU with turnover up X% for the first 6 months vs. last year. Furthermore, the SBU is delivering the most or Y% of total company profits. Yet we are using only a fraction of the consumer marketing budget. This is quite low by industry standards and also lower than the other SBUs’. We may be MISSING the opportunity to grow our strategic brands and markets in the long run. So, for SELECTED brands in SELECTED countries it might be wiser to invest more than currently planned for a better second half but also to invest for a more profitable future . . . I would like to ask you to support the SBU’s efforts in this direction. Even if we together decide that we will not spend more than we have currently planned for we will at least make sure that there are no opportunities we are missing.’

What a great leadership piece from one who’s working on her leadership – but has internalized the power of investment! She can inspire, focus her team and the bigger organization to beat competition, including global behemoths – and why some of them are now working for her!

Competitive Advantage is being dogged to meet very high self-imposed standards . . . instead of blaming the world for her shortcomings? She isn’t perfect – but is focused on the vital few and on moving forward. She is dynamic . . . and it puts her on the higher plane of ‘continuous improvement’!

‘Problem-solving is lateral’

It is not linear, it is lateral thinking. In the early 70’s Anaclecto del Rosario (May he rest in peace!) brought over Edward de Bono to present the latter’s Lateral Thinking model to his friends and clients. Anacleto was a pioneer in Marketing consulting and also introduced Philippine industry to Louis Allen’s fundamentals and principles of management. He thought that Filipino managers ought to keep abreast with emerging and best practices; and move beyond the typical linear approach to problem-solving.

For example, marketers want to win in the marketplace but must recognize that winning is not driven by one single factor like price alone, but by the dynamic of several factors: product, pricing, placement or presentation and promotion or communication. Thus figuring out how the dynamic works is a great exercise in lateral thinking (and Force Field Analysis is a good tool). Or why product development geared for healthy margins is fundamental to global competiveness – and it is predicated on investment, contemporary technology, systems and processes. (Unfortunately, the financial sector undermined the benefit of growing margins – i.e., they raise the multiplier effect of investment – by marketing copycat products that didn’t add value and that they didn’t understand, and dug a deeper hole by ignoring risk management. It was sham marketing at best; or pure, unadulterated greed at its worst – with a lot of help from politicians and consumers; and the world is yet to recover from the folly!)

One of Brazil’s largest miners explains to Charlie Rose (a respected American journalist) how their push for big-scale, high-tech mining and oil exploration elevated efficiency and margins, and thus competitive advantage. On the other hand, Cambodian and Vietnamese acquaintances tell the writer about one of Pol Pot’s claims to infamy: a failed small-scale farming mandate. And not surprising the Vietnamese are moving from small-scale to high-tech and bio-tech farming. Do we want small-scale mining (or farming) or in fact sustainable and high-value adding mining, for example? The commune system is not why China became an economic power – they opened their economy up and the great rush ensued! We have yet to internalize the positive impact of economies of scale – or do we associate it with our monopoly-cacique culture? And we have yet to embrace globalization – or do we associate it with foreign domination? Are we neither here nor there – and why the 21^st century finds us marginalized? To be small doesn’t mean remaining small and being a laggard – as demonstrated by Singapore or Hong Kong or Taiwan? Is our hierarchical instinct confining us to ‘smallness’?

Lateral thinking applies to governments as well? ‘Our tax revenues are limited but we have to support every sector of society, so let’s spread them around.’ Unfortunately, as we have seen, the outcome in the Philippines has been dismal – we can’t provide such basics as power, water, and rice, and a world-class airport or harbor?

Our tax revenues may be limited but sources of investment aren’t? With limited revenues we are confronted with unsustainable spending – which, unfortunately, is throwing good money after bad. Thus it is imperative to prioritize in order to generate the biggest bang . . . that will feed into and reinforce a virtuous circle. It is encouraging that there appears a growing consensus that the Aquino Administration can’t be everything to everybody; and urging them to exercise leadership: create a vision and establish a clear set of priorities!

The Administration hopefully would recognize the lateral sources of investments, revenues, technologies and markets – because if we don’t pursue the avenues that generate economies of scale and competitive advantage, we will be left with a very small, narrow, inefficient and uncompetitive playing field? Smallness Is not what will lift the third of us that are hungry?

What’s so magical about 100 days?

Is the honeymoon with President Aquino winding down? It appears there are efforts to offer him specific agendas from various quarters, and that he must deliver or put in motion within 100 days a la FDR?

Is that reflective of our frustrations? We’ve been a developing country for decades – and suddenly we want to impose a yardstick of 100 days, because we’re tossing mañana, finally? FDR had to find a way around Washington gridlock; and given the Great Depression he knew people were desperate for solutions. Thus he played strongman. And he sensed they were on his side – and true to his calculations, voted him three times, against the term-limit (but death would overtake him). Of more recent vintage is Bloomberg – New Yorkers voted him for another term, again beyond the term limit that had to be amended, because they thought he had solutions for their problems! The operative word is solutions – or one who can solve problems is what people want when a nation or a city needs to fix itself? And is that why Aquino is talking about solutions?

We’ve had our problems for decades – do we now expect an agenda that would give us a sense of their solutions in 100 days? If we do, are we prepared to support the vital few . . . as opposed to seek perfection? How do we define perfection? Do we equate perfection to addressing all the causes of every concerned group – sounds like the scribes or the Pharisees? Net, our problem goes beyond Aquino . . . and into our resolve as a people?

We can’t expect tangible solutions to our laundry list of problems – we need to recognize that even a president could only do a ‘couple of things’? So which things? While FDR overreached and pursued initiatives that fell outside his core program, he set out to drive what he thought were the vital few industries that were needed to turnaround the economy – winning friends and enemies in the process!

The PCCI (Philippine Chamber of Commerce and Industry) is pushing to make us an attractive investment destination. This is a welcome development if indeed local enterprises are opening their arms to foreign investments, 21^st century technologies and systems – because we badly need them to attain competitive advantage and accelerate economic development? But which industries are strategic – how much investment ($75 B?) are we targeting to ensure that we raise our GDP substantially, like the JFC (Joint Foreign Chambers) model? It is encouraging that the new DTI secretary is exploring greater international trade and has teed up 6 priority industries – and hopefully would flesh them up and set more specific goals! A columnist talks about 8 sunrise industries aimed at global competitiveness! And a UAP economist is urging the review of foreign ownership rules! And a UPSE professor wants the Administration to focus on economic growth, not labor policies! Indeed we’re smart people and should be able to feed the hungry – if we keep the faith!

We’re also talking of a water czar; and everyone agrees we need to reduce the cost of power, become self-sufficient in rice, and upgrade our airport. Indeed our credibility as a nation has been greatly eroded given our inability to deliver them – thus our failure to attract foreign investments in a big way? The Administration will demonstrate leadership if it comes out with an industrialization plan that is clear, simple and execution-biased – for example, make those two sets of priorities (strategic industries and basic infrastructure) subject to the 100-day test?

Separately the Administration talked about raising the direct subsidies to the poor that would raise our deficits for the fiscal year. But at some point something has to give – and so we’re back to the imperative of aggressively driving our revenues.

The bottom line: It is not about perfection but the pursuit of success – characterized by clarity in our initiatives as well as simplicity, with a bias for execution? That our individual preferences give way to what’s good for the country? That Juan de la Cruz grows up fast – keeping the faith and tossing the ego?

Competitive Advantage

We can call upon our faith (instead of our sentiments?) if indeed we want to move the nation forward – because we don’t want the world to leave us behind? We’re competing against the rest of the world and we want to get our act together . . . fast?

What’s the rest of the world up to? For example, the US, not just Lloyd Blankfein of Goldman Sachs (following their SEC case that was finally settled), is doing “rigorous self-examination” given the country’s eroding competitiveness. And the writer recently witnessed how this is translated in their daily lives.

It was a weekend and he needed medical attention, and went to the emergency room of their neighborhood hospital – an extension of a New York university hospital, ranked among the country’s best. But his experience from several years ago was not to crow about – the first thing they wanted to know was his medical insurance. This time the registration was a breeze: providing only his name, birth date and chief complaint. The insurance bit (and it was a breeze as well and patient-friendly) came only after he had been seen by the physician. Forget about the state-of-the-art medical equipment and devices; and the doctor standing in front of a computer keying-in the writer’s responses; and the Filipino nurse who took his vital signs and later came out with the prescription and information to edify him about his complaint, both printouts from the doctor’s computer, and then she helped the writer to his first dose of medicines. A couple of days later he received a questionnaire to rate his experience – from promptness to courtesy to his overall impression of the emergency room staff!

The writer recently did jury duty in a criminal case, and again he received a questionnaire to rate the performance and behavior of the judge! During the jury selection he thought that the court was efficiently run, able to assure him that all it would take were 4 days of hearings; after alerting the judge that he was scheduled to travel overseas. Justice delayed is justice denied?

These things they do in the private sector given their bias for efficiency, but not in the health care and the justice systems? They do give a peek into how the US is consciously raising performance as a way of life? That competitive advantage is not a ‘bumper sticker’ – it is part of the way people do their day-to-day and thus ingrained?

But that’s the US? The writer and his wife just traveled from North America to Eastern Europe, flying on an Eastern European airline and going through two of their airports. The planes were new (and the service would put US airlines to shame!) and the airports were modern and efficient. That was the wife’s reaction; and so the writer told her about the Mother Teresa airport, more modest but still modern and efficient, in (Tirana) Albania, among the poorest countries in Europe! Are we then surprised why the EU downgraded our airport?

How do we react? Recognize that we can’t do our thing in isolation – because we’re competing against the rest of the world? That we truly need to get our act together . . . fast, and step up efforts to move the country forward?

We have to toss ‘que sera sera’ – that we can’t fix government, we can’t fix corruption, and we can’t fix complacency? If ex-socialists can pursue market economy, how radical is our challenge? (The writer is having morning coffee in a café in Sofia; Western music is playing and parked outside are Western cars – he no longer sees much of the Ladas! He had just reviewed the product development plans of his Eastern European friends for 2011, which they proudly emailed him because it’s only 2010 – he has been pushing them to extend their planning horizon and to keep driving margins; and words like vision didn’t ring a bell before!)

We need to summon our collective character as a nation to attain competitive advantage – and overcome our dire economic straits?