Tuesday, February 26, 2013

“Merciless self-examination”

That’s from “Secret Ingredient for Success,” by Camille Sweeney and Josh Gosfield, NY Times, 29th Jan 2013. “During the 1970s, Chris Argyris, a business theorist at Harvard Business School (and now, at 89, a professor emeritus) began to research what happens to organizations and people . . . when they find obstacles in their paths.”

Professor Argyris called the most common response single loop learning — an insular mental process in which we consider possible external or technical reasons for obstacles . . . LESS common but vastly more effective is the cognitive approach that Professor Argyris called double-loop learning. In this mode we . . . question every aspect of our approach, including our methodology, biases and deeply held assumptions. This more psychologically nuanced self-examination requires that we honestly challenge our beliefs and summon the courage to act on that information, which may lead to fresh ways of thinking about our lives and our goals.”

In interviews we did with high achievers for a book, we expected to hear that talent, persistence, dedication and luck played crucial roles in their success. Surprisingly, however, self-awareness played an equally strong role . . . The successful people we spoke with — in business, entertainment, sports and the arts — all had similar responses when faced with obstacles: they subjected themselves to fairly merciless self-examination that prompted reinvention of their goals and the methods by which they endeavored to achieve them.”

Does the foregoing bring to mind our efforts to raise our global competitiveness? For example, we're looking at “the tedious system of processing business papers from registering a new business to getting permits and clearances where the Philippines was found to have the record of taking too long a time and requiring too many signatures.” But what about Juan de la Cruz subjecting himself to fairly merciless self-examination [to] prompt reinvention of [his] goals and the methods by which [he] endeavors to achieve them”?

Understandably it is not easy for Juan de la Cruz to be self-critical. Self-criticism doesn’t mean the absence of patriotism or love of country? Or even the evil desire to see our nation fail – granted that change is disorienting? Yet we don’t have to take it as countercultural or against our beliefs or our faith? We are well-informed people and for many of us this is not the first time we’re hearing about the different modes of learning or mental processes. For example, AIM was once the region’s premier business school; and MNCs highly regarded the caliber of our managers. Unfortunately, because our business and success models remain parochial if not defined by oligopoly, we take pride in declaring: “Our focus is the Philippine market where we have the knowledge and the expertise – and it’s a big market.”

By default we’ve chosen not to develop into world-beaters. And now that ASEAN integration is upon us (2015) we're cramming and pulling all sorts of master plans and road maps to be able to compete in this bigger market – though we have seen and experienced the transition into ASEAN as early as 20 years ago. Or why our neighbors over the last few decades have pursued stepped-up infrastructure development and industrialization (and in the case of China even begging for Western money and technology) and not surprisingly became the Asian tigers. Our claim to fame can’t simply be oligopoly and political dynasties – the classic formula of why nations fail?

A Filipino investor tells me that after learning the story about my Bulgarian friends who had to unlearn their business model – that they could only sell cheap products because “we are poor Bulgarians” – that he has done a self-examination of his business philosophy. And in no time he had his “man Friday” all ears while declaring: “We have to reinvent ourselves!" [Disclosure: he had read the book, and shared it with his business partners, that I published, "Learning to Reinvent Ourselves: How to Make the Philippines a Winner in the 21st Century.]

The path of least resistance

It is human nature but we Pinoys seem to take lots of this path? When my wife and I are on our periodic homecoming, "how PHL is doing" invariably becomes part of the conversation. And while we had heard most of them before, the culture of impunity especially corruption still boggles the mind. It's too bad, so sad.

It sounds like our economic managers who have been trying their darnedest to raise revenues are getting it from all sides. ”They want to tax everything and don’t be surprised if even the air we breathe – polluted as it is – is subject to VAT.” Of course laughter is our way of life! “But the more rules there are the bigger the room for compromise; and it also explains why tax collection will hardly be honest and efficient. In a “system of compromise,” who knows what gets into government coffers? Do you know how much is lost because of “ghost deliveries” of government purchases especially consumables that can’t be counted physically in real-time? Marcos was headed in the right direction, he wanted to gut the corrupt bureaucracy – but he overdid it and created his own bureaucracy (of cronies.)”

“Beyond NAIA 3, we want to push commerce and trade and beyond air transport, we need port facilities. And in both cases we are primitive – our efforts to raise competitiveness have failed from the get-go. In the south especially and in many provinces “brown-outs” are our normal, and just like our primitive air and shipping infrastructure, power is primitive. And in these industries, the chosen few are raking it in. We don't want strong foreign interests because we don’t want the system disturbed. That is how we define patriotism – and who cares about widespread poverty? Of course, the chosen few are now talking about investing in the region because of Asean, but we always take the path of least resistant. We will never confront our reality because the chosen few (and their minions) on the one hand, and the bureaucracy on the other, are too ensconced to want change or reform.”

And so it was refreshing that a Pinoy investor was chatting about raising the competitiveness of his business interests and another, about the efforts to professionalize their organization. There may be more of them given that we have lots of SMEs. The real challenge is our various leaderships: of the economy both public and private and public service itself, for example? Every nation has its shortcomings like corruption, but when every other country has left us behind, the only conclusion to make is that their leaderships, unlike ours, have been able to create a platform and environment conducive to progress and development. That is, if indeed we mean and want “an inclusive” economy?

For instance, the Indonesian BOI leadership was recently on TV and was explaining, beyond investment, the imperatives of technology and innovation. They want to move beyond natural resources as a key industry and into creating tangible technology- and innovation-driven goods and services. Of course, they’ve recognized that they would have to step-up infrastructure development to make this a reality. And it appears foreign investors find them credible pouring more investments in Indonesia than the Philippines.

In the Philippines, we still rely on miracles just to travel through EDSA. And driving through C-5 a couple of times reminded me of being driven from a city in India to a new manufacturing zone many years ago. I asked the Indian colleague at the wheels to mind the hordes of people and vehicles – lest we be a disaster waiting to happen. The following day I sat in the meeting room and after a few minutes inquired why the meeting hadn't started, only to be told that one of the attendees was in a vehicular accident. And driving on C-5 and noticing traffic building up, it was not surprising to see an injured (thankfully not worse) person in the middle of the road.

Like any undertaking, whether a major plan or even a brand concept, setting the bar low undermines the best of intentions. C-5 is meant to be an efficient road system which is why it had to be fenced. But there are gaps after gaps that allow pedestrians to cross and even access roads to small towns or villages. It is like having our cake and eating it too? And which we proudly call "Pinoy abilidad"? It is a formula for sub-optimized outcomes – and disasters waiting to happen.

Sunday, February 17, 2013

A microcosm of an economic system

A nation's economic output or GDP is simply the aggregate of the goods and services it produces. And while the characteristics of a country are definitely more complex than that of private enterprise, the elements of how goods and services are produced are universal. The profit motive is absent in the public sector yet efficiency and sustainability remain a mandatory. It is a lesson the Greeks learned the hard way after political lords had overloaded the bureaucracy with warm bodies. [In PHL, is corruption in the bureaucracy beyond repair?] And precisely because a nation is a more complex organism, much greater focus and prioritization is demanded. In one word . . . leadership.

It is common knowledge that leadership must be forward-thinking. Whether we call it a vision or a mission, the point is there must be a North Star. And successful leaders have recognized that defining the North Star succinctly is critical if everyone is to sing from the same hymnal. And Reagan ("It's morning again in America") and Clinton ("It's the economy, stupid") come to mind, and in the private sector Warren Buffett ("I will never invest in a business I don't understand"). And not surprisingly, President Aquino has defined his presidency with “Kung walang corrupt walang mahirap.”

To be guided by the North Star means to be focused and that may be where Juan de la Cruz starts to struggle – with the discipline? Focus demands discipline. Unfortunately, we Pinoys have a bias for "inclusion"? Or have we misunderstood what it means? Given our very low GDP per capita, to define "inclusive" as simply sharing the wealth won’t work – there is not enough to go around. And that is a lesson Europeans had to learn over time – or until the fall of the Berlin wall. And in the case of PHL, "inclusive" ought to mean the opposite of rent-seeking. And that is the argument of the book, "The Price of Inequality" by Joseph Stiglitz, a Nobel laureate.

Private enterprises especially transnational companies like nations in pursuit of their North Star must give priority to infrastructure or subsidiaries like villages would be isolated – and thus marginalized. And infrastructure can be both hard and soft, but then again, focus and prioritization is demanded. For example, we've pursued tourism yet our aviation infrastructure remains an embarrassment – thus sub-optimizing results despite great potential and hope? To focus and prioritize demands discipline. And absent discipline comes inefficiency, influence peddling if not corruption?

I have been away from Eastern Europe for over a month now, but because my friends haven't ceased working on the infrastructure of the business, every morning while having coffee in Connecticut or Manila I can log in on the company’s intranet and see reported sales from over 30 countries, how they stood against targets by brand as well as the projections for the month. And if there is something out of line, a simple email would generate a response: who will do what, when, where and how. And these are ex-socialists introduced to Western business practices only 10 years ago (though I had to run the sales function for 2 years to lay out its infrastructure.) Every month regional managers post their reports and a former rocket scientist (granted his training hasn't ceased) from Ukraine continues to amaze. He is responsible for 10 former Soviet republics. The first time I met him, because he spoke no English, I could not figure out what he was like. And he had no business background. But he proudly showed several pages of impressive statistics – though I was yet to be convinced of their value, i.e., it looked like art for art's sake.

Yet his discipline accelerated his appreciation of the drivers of the business and today he delivers revenue and profit plans, even surpassing them – and why he’s been rewarded with more countries to manage. (And now speaks and makes presentations in English. His reports are the equivalent of a best practice model illustrating how to pull together what marketers call the "marketing mix" as well as the "resource mix" and the "execution mix.") But more than the business drivers, he is able to take corrective action timely whenever plans are at risk. Indeed he can think, create and execute. Those Soviets knew who their talented people were! But absent discipline even Russia – one of the BRIC nations – missed those rosy predictions.

Condescension and disrespect

The Communist propaganda that they had to live through in their previous life has made Eastern Europeans generally suspicious of authority even to the extent of preferring foreign ownership of media. And not surprising is the low expectations from and indifference to government they carry. "We don't expect government to be competent to provide our basic needs – like public services and public works, or even snow plowing." Because of their history of condescension they've in turn ceased to respect authority. Yet in the countries that have joined the EU, visible improvements are noticeable in major infrastructure, i.e., pan-European highway networks continue to be built as well as city-subway systems, for example; and in the soft elements like transparency and good governance through the introduction of the ombudsman program.

In the Philippines we didn’t have to swallow Communist propaganda, but have we picked up the art of the spin? It is expected of commentaries but has it migrated to news reporting and why alternative media like rappler.com has come about? The human condition would explain why history repeats itself. For example, greed was behind the Great Depression and also the Great Recession, almost a century later. Professed patriotism that benefited the elite class was behind the emergence of communism in Europe that then spawned the Soviet empire. Today PHL is still faced with radical elements and communist adherents yet we take it for granted? There is a price for inequality. Nor is CCT or CSR equal to the task when the root of the problem manifested in widespread poverty is something more pernicious?

And so while media may report the good and the pretty, it appears that the rule of law has been but overturned by our culture of corruption. In fairness, great efforts are being expended by countless to right the many wrongs. Yet we can’t ignore the laws of physics: to counter a vicious force we have to tee up an equal if not a greater dynamic force. But we’re a patient and a compassionate culture – and thus a happy people? Or is denial a defense mechanism as in ignorance is bliss?

In more ways than one we mirror the seeming resignation of the Eastern Europeans to their plight as a people. Yet the more progressive of them couldn't miss the miracle that is Asia – like my Eastern European friends (in only 10 years) are deep into their efforts to partake of that miracle. And because their mental and business models are not about rent-seeking but rather competitiveness and innovation, their playing field is unhampered by parochial limitations. And in the process they've helped facilitate the development of support industries in their home country that in turn equipped them to compete beyond their shores.

That is not a unique model but replicates how Western MNCs have become global behemoths. In the Philippines we like to think "livelihood programs" and thus while the "one town one product" makes sense – instead of the old "flavor of the month" where everyone was in the "bangus" or shrimp or tilapia business – still, we have to move beyond and into understanding the bigger regional if not global market. And that means investing in the ecosystem: technology, innovation, talent or skill development as well as product and market development. That would entail developing support or industry clusters for strategic priority industries, not 50 but only a handful, the key being to attain expertise and thus global competitiveness.

Take coconut-derived products, as an example, how much investment are we committing to ensure that the supply side of the basic product is highly efficient, productive and sustainable? We have Philippine products in ethnic stores in the US and some of them have the potential to become “mainstream” if we think beyond targeting only Pinoys – and in manufacturing, beyond the model of electronics component outsourcing, for instance. And that means truly understanding the consumer as opposed to taking the posture of a contract manufacturer – which reinforces Third-World mentality. We're better than that?

Tuesday, February 12, 2013

Why dynamism

“From Wikipedia, the free encyclopedia: Dynamism has several meanings. Dynamism (metaphysics), a cosmological explanation of the material world in the vein of process philosophy. Dynamism (computing), When any process in computer is using Dynamic management methods for its processing/computing/memory management/parallelism handling for being able to give more user friendly work that are more easy to interact and modify . . . The activeness of an energetic personality . . . Dynamis (Greek: δύναμις), an Ancient Greek word meaning "power" . . . Dynamicism, the application of dynamical systems theory to cognitive science.”

And from Wiktionary, the free dictionary: Dynamism. Noun. dynamism (countable and uncountable; plural dynamisms) . . . (philosophy, metaphysics) Any of several philosophical theories that attempt to explain the universe by an immanent force . . . Great energy, drive, force, or power; vigor of body, mind or personality; oomph or pizzazz . . . Dynamic reality; active energy; continuous change, progress, or activity.”

Should we even care about dynamism? Is it in our vocabulary? What about change versus status quo? Or global versus local? Instinctively we equate parochial to patriotism or nationalism? Indeed we are proud of our culture, our beliefs and our assumptions. On the other hand: "How are we to know what we should do if we do not know who we are . . . Let there be me . . ." writes Teodoro M. Locsin, "The Masks of Filipinos, June 17, 1961," Philippine Free Press.

Or are we simply at home in our comfort zone? What are the various global yardsticks in development, competitiveness, economic freedom, etc. really saying? Every nation has its own set of beliefs and assumptions but we rank poorly in many of these global yardsticks? Is Juan de la Cruz the opposite of dynamism?

After the Philippines was adjudged as one of the worst places in the world to do business in by global ratings agencies, the National Competitiveness Council (NCC) recently summoned captains of industry to help it draw up a practical plan, complete with doable programs, to make the country more competitive.” [Council to draw up plan making PHL more competitive, Business Mirror, 13th Jan 2013] A rethinking of a competitiveness plan for the Philippines was called by NCC on the heels of a report made by the International Finance Corp., the investment arm of the World Bank, that the Philippines had slid down to become one of the worst places to do business in the whole world.”

Pointed out as the country’s Achilles heel during a consultation meeting with business leaders, led by Jaime Zobel de Ayala, is the tedious system of processing business papers from registering a new business to getting permits and clearances where the Philippines was found to have the record of taking too long a time and requiring too many signatures.”

Guillermo Luz, NCC private sector co-chairman, said the strategic plan must only pick a few industries with high growth potentials chosen by the business leaders to lead the competiveness drive, like tourism, to give the plan more focus. Trade Undersecretary Adrian Cristobal Jr., however, disagreed. He pointed out that before the end of last year, up to 15 out of 50 strategic industries in the country have drafted their own road-map plans to lift the Philippines to industrialized status.”

Indeed it is counterintuitive to "start with the end in view" and to be "outcome-driven" and to internalize the Pareto principle – it is an econometric model, not an opinion or “kuro-kuro”? And we still have to be one in defining our Achilles heel? “A new industrial policy for the Philippines (part 2),” Business World, 13th Jan 2013, identified PHL’s “weaknesses” and “threats” as: “high power cost and poor infrastructure; and strong peso and global uncertainty and economic slowdown in the developed world . . .” It goes beyond the tedious system of processing business papers from registering a new business to getting permits and clearances . . .” and we have serious deficiencies that we can ignore at our peril?

Thursday, February 7, 2013

Overcoming the law of averages

As the Aquino administration marches forward it is being confronted with the law of averages. And as media reports on its play-by-play performance we see reality playing itself out. For instance, while missions to the Philippines by potential foreign investors are on the rise as well as our trade missions to other countries, pundits have asked: “Show us the money?” Indeed we must get our fair share of foreign investments and revenues. It's a New Year and we all want our favorite initiatives, yet the administration ought to focus and prioritize.

It can't overnight erase the restrictive economic provisions in our constitution nor the culture of corruption that President Aquino has waged war on. Still, there is the imperative to raise the bar – investors don’t give currency to “pwede na ‘yan”? Our energy master plan remains a work in progress because Juan de la Cruz hasn’t demanded a concrete coherent solution even after legislators revealed that vested interests have been defending the status quo. And so instead of a “dynamic PHL” we’ve remained the “status quo PHL”? And sadly while it has undermined the economy hand-in-hand with Juan de la Cruz, the industry is in celebratory mode; and to add insult to injury, key players are lionized thus perpetuating local lords? The PPP remains closer to a game plan and is yet to get into the rhythm of things. The road map for agri-business (including fisheries) is still a road map. And while it appears we now want to focus on four major industry groups in 2013 to appreciably raise economic output, the prognosis remains at the level of export targets and GDP projections that will result from numerous elements and initiatives. What is missing – or probably not reported as news? Who will do what, when, where and how?

How much investment are these industries committed to? What technologies will they acquire and where, and what innovations will they pursue? How much employment will they generate and what skill-sets will people learn? What new markets will these industries develop, what are their sizes and how much share do we realistically expect to take? How does that translate to incremental economic output over what period? The Department of Trade and Industries and the JFC (Joint Foreign Chambers) have rightly set a goal of over $100 billion, and that should bring us closer to a Thailand. But that will remain just a goal until we respond to the foregoing challenges. Our local market may be big but 100 million Pinoys after discounting our income and poverty levels don't represent the true market.

We have to seriously revisit our assumption that a big local population is sufficient to raise our economic output several times fold – and which we've euphemistically labeled “consumption economy”? That comfort zone is undermining our instincts of innovation especially when the local market has been characterized as “pwede na ‘yan.” Instead we ought to demonstrate Pinoy creativity and step up to global competition. It will take a different worldview if we are to gain that confidence but we won’t . . . if we don’t commit to investment accordingly, especially in technology and innovation.

Isn't Juan de la Cruz predisposed to investment and which is why the Chinoys have become the pillar of our economy? Our bias can't stay with rent-seeking that would characterize the handful of conglomerates that dominate our economy? Whether it is retail or housing or even services geared for the local market, our economic pie shall remain small relative to our population until we inject a new dynamic.

Of course we must feel positive that we grew at over 7%, but that was from a low base and a low GDP per capita. We don’t want to be lulled by the law of averages, we must confront it instead. Our major enterprises, successful as they are, are still driven by OFW remittances and of late by the BPO industry, enough for analysts to make bullish projections. Yet our economic pie remains small; and so we have to resort to CCT and CSR, for example. Indeed we must raise the bar. But first things first: focus and prioritize.  

Friday, February 1, 2013

Getting in the way of competitiveness and development

No pain no gain” is not as powerful as “pwede na ‘yan”? Unfortunately we seem to get discombobulated whenever we hear opposing views or the equivalent of rocking-the-boat? And “where we are coming from” would explain the temperament of Juan de la Cruz? Does it start with parochialism and respect for hierarchy – and which is why competitiveness and development seem to elude us? As Tim Cook of Apple explains, at Apple, they are not expected to be other than who they are as individuals – they are about meritocracy. Is it any wonder they are extremely competitive and have built Apple into the largest enterprise?

Apple is an MNC and we even patronize their products, yet in the Philippines we’ve had a love-hate relationship with MNCs. Is one reason because we carry absolutism in our value system and thus we generalize instead of discriminate – e.g., foreign is bad and local is good? Or in corporate Philippines hierarchy has absolute rule? Consequently one of the givens amongst success models, that of “buy-in,” is something we take for granted? In our heart of hearts leadership means to dictate – and Marcos knew that well? One of the traits of Steve Jobs that Cook talks about was the former’s ability to change his mind no matter how aggressive and overwhelming his style was.

Jobs was not exactly unique in that sense, progressive MNCs culturally are egalitarian. And I remember that the CEO of my old MNC employer, perhaps knowing I was oriental, was the first visitor to my new office after I had moved to headquarters. With a grin on his face, he tapped the nameplate on my door – no mister but my nickname preceding my family name. “In the Philippines you call me mister, here you call me Reuben; and everyone will call you by your nickname. When you call my extension I will answer unless I am not available. Bill does the same. He may be a “big” guy (he meant a big 6-footer who happened to be the president) but that shouldn’t bother you.” And the culture was tested and passed with flying colors when I had to disagree with them. And so when teams from HQ traveled the world, doing our homework first was a given if we were to get "buy-in" – even corporate leadership that we represented wasn't absolute.

My Bulgarian friend has his own style: he would express a thought but then walks around and replays it to as many that should hear and challenge him, and in the process from a seed of an idea would blossom a great initiative, including the caveats that have formed. And so the execution plan would incorporate the dos and don’ts of the undertaking. [“Execution” can’t be dissociated from "the idea" – ideas are only as good as they are executed. There is a world of difference between “pwede na ‘yan” which is characterized by sub-optimized results and "expertise" which yields optimized outcomes. And expertise comes from moving beyond skills that have become instinctive and going deeper into figuring out the “downsides” like in the practice of medicine. Examples would be the downsides we’ve paid for dearly from our power crisis, NAIA 3 and the absence of a strategic industry base in PHL?]

Out of deference, Juan de la Cruz doesn’t really give himself the chance to form his best thinking and falls back on “pwede na ‘yan”? And yet especially with competitiveness and development where dynamism is central, we need our best thinking. And the best thinking does not necessarily reside at the top of the house. But what about speed, does it suffer in an egalitarian environment? One of the challenges that a group of MNCs commissioned the Conference Board (the New York-based think tank that does the ongoing consumer confidence index) to study was precisely about speed. And while these progressive MNCs were geared for speed they still wanted very badly to step up speed – “pwede na ‘yan” never figured in their calculus. [And as my Bulgarian friends have realized, putting discipline in the way business is done, including product development and innovation, enhances speed.]

We may take pride in respecting elders (or hierarchy) but then again, to be absolute is something we have to revisit in light of the imperative to be discriminating – for the common good? Otherwise “pwede na ‘yan” will continue to undermine our best thinking?