Sunday, December 29, 2013

Just the tip of the iceberg

This is about the increase in Meralco's charges. But I would establish the premise through my favorite third party if only to bring the emotions on the subject a few notches down . . . The one reality with my Eastern European friends that has endured – and where I have a ringside view – is constantly seeing the tip of the iceberg . . . and reminding ourselves that underneath the obvious is something more horrific. To paraphrase Einstein, “I have no special talent, I just stay with a problem longer” – and which we translated to organizing classroom sessions so that indeed we would stay with a problem longer.

But so that the culture in the company doesn’t retract to the command-and-control disease of the formal structure where everyone abdicates because authority has all the answers, a big chunk of a brainstorming session is carried on by the players closest to “where the action is.” And so, for example, I would stand up and leave. In the meantime, we would flash on the screen a PowerPoint template of three engaged gears – with the gears representing the units that, in synergy, must deliver the desired outcome. Yet there are challenges that would unsettle them: “are you not joining us?” “No I am not,” would be my standard reply. And I would add: “do you think my daughter would have taken it kindly if I was there every time she was with friends?” And then almost in a flash the group would get a great sense of relief and confidence as one would intone: “Keep it simple! We must stay with the discipline of the fundamentals.”

We were in a resort in Phoenix, looking out to the desert-golf course from the balcony (my wife wanting to show a visiting brother around and get away from the wintry weather in New York and, of course, to get in at least a round of golf), when I read about the protests against the increase in Meralco's charges. I had been going through my in-box and was still wearing a grin after reading the monthly reports of my Eastern European friends; and despite the turmoil in Ukraine, the business in the region continued to be robust, with a very pronounced upward trend. But the one from Hong Kong gave me the biggest thrill, being the baby in our portfolio. “The discipline and investment in the fundamentals are paying off. We had the highest share of voice (local TV commercials) in the category during the campaign period, and the cost per unit was thus drastically reduced. That is on top of our print advertising, aggressive sampling program and in-store activity. We're also working with Hong Kong University students to evaluate our efforts. In the meantime, the velocity of the business is in an accelerated pace.” [The examples of two different parts of the world say a mouthful: competitiveness is not a function of exchange rates and tariffs and even distances and friends or foes. They matter but are manageable, i.e., great products override barriers. In PHL, competitiveness is still a function of monopolies and oligopoly that thrive in political patronage – and we wonder why we’re in the pits?]

What do they have to do with the increase in Meralco's charges? There are tactical or short-term problems and there are strategic and long-term problems. PHL has been reduced to a reactive being consumed by “retail politics” – some, and they ought to be hanged, even making “pa-pogi” points while people suffered in Tacloban – instead of nation building? We have been conditioned to seek populist solutions and are well down the road in pursuit of “the lowest common denominator” – thus in a race to the bottom, if we’re not there yet – with no sense of the pursuit of excellence, as in the common good! And not surprisingly, a legislator proudly suggested for the government to forego the VAT on the increased Meralco charges. It smacks of our reality: a dole-out culture given our cacique, hierarchical system and structure where paternalism is the yardstick even at the supposed august body that is the Senate? Where is leadership going to come from? Isn't legislation meant to put us on the right course, to attain the common good?

Why do we have an energy crisis – because we’d rather stick our head in the sand? This crisis was a crisis at the time of President Ramos; and every economist interested in the Philippines as well as the international institutions and foreign banks, and analysts and investors, etc., etc. have raised the challenge time and time again. The fallout: we are the least able to attract FDIs! If PHL were a prisoner, we would be in death row – for being recidivists?

I talk about my Eastern European friends because their mindset wasn’t that much different just eleven years ago. When they were first introduced to the discipline of the fundamentals, they thought it was purely a Fortune 500 lingo. Yet from a business model that said “we could only sell products at 50 euro cents because we're poor Bulgarians,” they have evolved to: “only great products will do; we must ‘own the store’; and there will be no compromises.” In today’s fast-changing world, business models must succinctly and sharply communicate the enterprise’s reason for being. It must give the organization and its people the confidence to do what they do for a living. Contrast that to the days of strategic planning when an enterprise would have several 3-inch binders – or bibles – that spelled out their business plans, and where only a select few had the authority to discern their chapters and verses. Unfortunately, the public sector still reflects that model; and, not surprisingly, inefficiency is commonplace thus conducive to compromises – and at its worst, corruption and a culture of impunity?

In fact early on the business model of my friends was simply: “margins, margins, margins.” Because when I arrived they shared their dilemma: we are able to sell our products but aren't profitable – thus the sustainability of the enterprise is suspect. “This is a simple business; we shall make things and sell things. But we shall make not things per se but competitive things that will find markets beyond your shores. We shall learn why Edison said, “I want to see a phonograph in every American home,” or why Gates wanted “a computer in every home,” or how Jobs figured that an “Apple responds to the 21st century lifestyle.”

Unfortunately, in the Philippines, hierarchy rules; and we play by their rules and the outcomes are represented by Meralco's increased charges. And which is just the tip of the iceberg. And so we run around like a headless chicken, clueless that we live in a rigged system.

The evidence: the restrictive economic provisions of the Constitution, the neglect of basic infrastructure, starting with energy and beyond, bypassing industrialization, failure to support the JFC's seven industry winners, among others – while a handful of billionaires prosper in a sea of poverty . . . It brings to mind how dreadful the world viewed oligarchy in countries like former Soviet satellite states, including Putin's Russia – and thus have bailed out from what was once a BRIC economy . . . Can PHL rightly claim moral superiority or the hubris exuded by our elite class? Are we beyond redemption?

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