Friday, December 19, 2014

Creating an open, transparent and diverse society

Two recent articles influenced this blog posting. “A Mckinsey article, ‘Redefining Capitalism’ (Beinhocker and Hanauer, 2014), argues for revisiting the role of capitalism. The authors claim that the essential role of capitalism is creation. The world today is a better place because there are life-saving inventions and many technical and social innovations. Capitalism creates the incentives and reward for solving human problems and makes those solutions available. It is solutions to human problems that define prosperity.” [Rolando T. Dy, The need for creativity and problem solvers, Business World, 9th Dec 2014]

“Problem solvers are scarce commodities in this country. And we need tremendous creativity to find solutions to the society’s problems. Natural resources -- land and sea -- are under-utilized. Surplus workers are mostly under-employed. And markets -- domestic and foreign -- are untapped.”

“As Filipinos, what lessons can we learn from these? Strategic Lesson No. 1: ‘Prosperity is the accumulation of solutions to human problems. Businesses contribute to society by creating and making available products and services that improve people’s lives.’ Strategic Lesson No. 2: ‘Democracy is the best mechanism for navigating the trade-offs and weaknesses inherent in capitalism.’ ”

“To quote Atifete Jahjaga, former president of Kosovo: ‘Democracy must be built through open societies that share information. When there is information, there is enlightenment. When there is debate, there are solutions. When there is no sharing of power, no rule of law, no accountability, there is abuse, corruption, subjugation and indignation.’ ”

In other words, if PHL is to develop a problem-solving culture and also of creativity, we need to revisit the imperatives of an egalitarian society: openness, transparency and diversity.

“Filipino intellectuals are detached from the hustle of ordinary Filipino lives . . . They cloak themselves with robes of erudition and pedantry. Intellectualism and knowledge production are ends in themselves…. Unless the intellectuals of this country immerse themselves in the nation’s problems and join in the great debate of Filipino-hood, they’ll remain useless erudites and pedants, or better yet books in libraries that gather nothing but dust.” [Cielito F. Habito, Public intellectuals in default (?), No free lunch, Philippine Daily Inquirer, 9th Dec 2014]

Is that a surprise given our hierarchical system and structure – against the backdrop of parochialism?

“Benedict Anderson, described as one of the most prominent Southeast Asian scholars of the 20th century . . . deplored what he saw to be ‘the long-term decline of the traditional public intellectual.’ This was against the backdrop of what he described as a ‘decade (that) started with an admirable outburst of reformist politics, but has ended depressingly with the entrenchment of oligarchies in Indonesia, the Philippines, Thailand and Malaysia. In all these places, the level of economic inequality has rapidly increased, human rights have been constantly abused, and state control of the mass media has become more formidable.’ ” [ibid.]

This blog as some would recall was inspired by my Eastern European friends who were unequivocal in their need for help to traverse the path to free enterprise. First of all, even when I saw them as creative – from the appearance of the products they showed on my first visit – they still needed to learn both the art and science of creativity and problem-solving. And I was encouraged because they recognized and accepted the necessity of examining their “thinking” – which came from them matter-of-factly.

They were ex-socialists and so we had to start from square-one: “You are unprofitable because your margins are unacceptable. The first thing we must do is focus on driving margins, and in this business, they must ideally be 50 margin points, if you are to compete against Western behemoths. The object of an enterprise is to attain sustainable growth. Show me the money! And you can be a contributing member of society. And that presupposes putting the requisite building blocks in place.”

“We will define the businesses you are in and, conversely, the businesses you must not be in – to be focused – and attain competitive advantage. [This is one business principle that oligarchic economies ignore given the culture of impunity that is perpetuated via dominance of the local market with the regional, if not global, market an afterthought, and accounts for PHL’s poor competitiveness ranking, among others.] The portfolio must in its aggregate generate healthy margins and that means moving beyond cheap and economy brands. We will go to school and learn product-architecture modelling which is driven by value-addition, thus the value chain. It is synonymous to Maslow’s hierarch of needs. And the higher the value-addition the bigger the geography we can cover, beyond your small country which you claim is poor. Product development is more than being artistic. And a product is of value if it addresses a human need or problem. This is a simple business, we make things and sell things of value.”

To cut a long story short, 11 years later, our time is heavily spent on problem-solving and product development, both demanding lateral thinking – or connecting the dots as Steve Jobs would define creativity. And this is after we’ve put the requisite building blocks in place. For example, I found out that under communist rule, they didn’t learn accrual accounting and financial statements were historical in character, not meant or utilized as management tools. And they were celebrating topline or sales numbers even without knowing the bottom line.

The factory was dated and inefficient and had no chance of generating ideal margins, compounded by the focus on cheap brands. In short, we were changing tires while the car was running. “We need to look ahead and do a 3-year plan. We will need financing from banks but must be able to present a business plan that is credible. That means we will tell a straightforward simple story: This is where we are, this is where we want to be and this is how we will get there.”

And ever since, during budget and quarterly business reviews, the core of the organization, the business unit, comprised of R&D and Marketing and Manufacturing, will examine the business – brand by brand, SKU by SKU, channel by channel, major customer by major customer, country by country, among others – with the people on the ground, comprised of sales and local marketing. It is a model of openness, transparency and diversity.

Throughout the year, the business units are developing new products in order to keep the consumers engaged and gain their trust – i.e., that the enterprise is committed to respond to their needs. As Maslow postulated, human needs are progressive. And marketers cannot be stuck in the past – which explains why competitiveness matters.

If an economy is the aggregate of a nation’s products and services, it follows that it is made up of the countless enterprises in the country. And if enterprises by and large are schooled in creativity and problem-solving, then the nation will be competitive. Admittedly, private enterprise is more efficient than the public sector.

And that is why progressive public servants would look to the private sector and adopt their best practices. But that presupposes the public sector is committed to openness, transparency and diversity. Because they are the imperatives of critical thinking, creativity and innovation. But then again, they demand leadership of the visionary kind. Not our parochial and hierarchical system and structure that breeds political patronage, crony capitalism and an oligarchic economy.

While the education community will have to embrace the pragmatism of free enterprise because bread is what people put on the table? And that was the sob story I heard when I first arrived in Bulgaria. “There was a riot because our Communist masters simply failed to supply our daily rations of bread and vegetables.”

Problem-solving and creativity is not learned in the classroom and demands the right environment. It is like our manicured lawns, they are properly tended by our gardeners. “Filipino intellectuals are detached from the hustle of ordinary Filipino lives . . . They cloak themselves with robes of erudition and pedantry. Intellectualism and knowledge production are ends in themselves….” [ibid.]

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