Friday, May 29, 2015

Outstanding achievement versus wasted potential

“I have always been deeply moved by outstanding achievement and saddened by wasted potential.” [Carol Dweck, PhD; one of the world’s leading researchers in the field of motivation; the Lewis and Virginia Eaton Professor of Psychology at Stanford University]. “Her research has focused on why people succeed and how to foster success.” That’s from her website:

Dr. Dweck came to mind after coming across these news reports re APEC: “PH proposes ‘Boracay Action Plan’ for APEC,” Chino Leyco, Manila Bulletin, 24th May 2015; “Making ASEAN economic integration a reality,” Manila Bulletin, 23rd May 2015; and “APEC backs ‘Boracay Agenda’ to globalize small enterprises,” Business World, 24th May 2015.

I happened to be covering North America at my old MNC company when NAFTA came into being. And was invited to Bulgaria 12 years ago when Bulgaria and Romania were working on their accessions into the EU. The Canada of today appears to me more confident [and I am doing business there again through my Bulgarian client] while the Canada I knew then was more like the poorer of the two cousins, the other being the US. And Puerto Rico today is reported to be akin to Greece. While Bulgaria and Romania in a relatively short period have experienced the ups and downs of their economies.

This blog has discussed the power of the mindset before. And given my respect for academic rigor, I make it a point to compare notes with academe even when my perspective comes from the real world. For instance, my old MNC company, once a takeover target, is today the number one brand in the category globally. And is the only brand – out of 11,000 brands – that has penetrated more than 50% of global households (in the sector at 63.4%, with the next brand doing 44%.)

But perhaps more relevant to PHL’s MSMEs would be my Bulgarian client – and they were the ones that inspired me to start this blog 6 years ago. “We’re poor Bulgarians, we cannot sell products at more than 50 euro cents. The world has left us behind – 500 years under Ottoman rule and 50 years under Soviet rule. We take things as they come. A bright future is beyond our perspective.” But then my now Bulgarian friend had another idea. “I want to move up to the next level. I’ve been in the business for 8 years and I know what I know but there are things I don’t know. How do we move up to the next level? We’re not profitable and must become one sooner than later.”

Those are examples of what Dr. Dweck calls a fixed mindset on the one hand and a growth mindset on the other. What do they mean? Those with a fixed mindset look outside self with very little sense if their situation could be any different. While those with a growth mindset challenge self to grow and develop.

“Internationalizing small firms,” Cielito F. Habito, The Philippine Inquirer, 19th May 2015. “Across the Apec region, small firms consistently account for more than 97 percent of all enterprises; for the bulk of the region, including the Philippines, the share is in fact 99 percent or more. But there is a wide divergence of their contribution to the economy. Contribution to gross domestic product varies from a low of 21 percent in Russia to a high of 59 percent in China and Indonesia; the Philippines is lower than average, at 36 percent. Contribution to total employment ranges from a low of 25 percent in Russia to a high of 92 percent in Indonesia (with Canada a close second at 90 percent); we are again below the average (67 percent) at 61 percent.”

“As for exports, the small firms’ contribution ranges from below 15 percent (Australia, Chile and Peru) to nearly 70 percent (China). Unfortunately, we lack reliable data to be able to determine exactly where the Philippines lies in this range, but indications point to our MSMEs’ export contribution being near the bottom end. What we know from sample survey data is that the bulk of Filipino enterprises do not export at all.”

How do we develop a growth mindset? We must first recognize that many of our neighbors, even before and without APEC, became Asian Tigers. Because they didn’t point at others to sugarcoat their weaknesses. And instead would draw upon their inner strengths. In short, they wanted to grow – and succeed!

There is no denying that the platform and mechanisms made available by the formation of economic blocs like NAFTA, EU or even APEC would be helpful. But at the end of the day, the game is all about competitiveness. For example, both the US and Singapore have taken the mindset that they are falling behind in competitiveness. On the other hand, we Pinoys like to harp on what we’re good at or the positives in our culture. Those are examples of the two mindsets that Dr. Dweck talks about.

Where would they come from? Critical thinking which means we must question our assumptions. And emotional intelligence which means we must manage our disappointments and be results-driven. To be focused on outcomes while influencing the rest of us – with fixed mindsets – to attain collaboration. It is the exercise of leadership such that change is embraced by the people. 

Similarly, it is not enough to know the techniques of how things must be pursued, say, via a well-thought out strategy and be under the umbrella of an APEC. In fact successful change comes from autonomy, self-mastery and a sense of purpose. In other words, we have to paddle our own canoe and develop mastery in competitiveness and demonstrate that as a people we share a common purpose.

For example, we should have had a collective agreement as a people re power generation and vital infrastructure like yesterday if we wanted to move forward as an economy? What about the FOI and the competition law and peace in Mindanao? Or has our hierarchical-parochial bias made us gloss over these imperatives? In other words, APEC cannot keep our house in order for us; we have to do that ourselves!

We’ve always assumed – over decades – that we weren’t prepared to face the world? And thus embraced import substitution, shunted foreign investors, and vacillated in putting up new power generation given its impact on electricity prices? They were juvenile tendencies when compared to what the Asian Tigers embraced? Both Lee Kuan Yew and Mahathir Mohamad advised Deng Xiaoping to seek Western money and technology!

Admittedly, for a people to develop and embrace a sense of purpose is not a cakewalk. And autonomy and self-mastery are not a given either. Yet the reality is performance cannot be dictated and compelled from above. Team members must develop the impulse to perform at peak performance.

And between the West and my Eastern European friends, if there is a common denominator that makes them able to demonstrate competitiveness, it is that bosses and subordinates can be “in your face.” Still, bosses know they can’t pull rank whether brainstorming new product ideas or marketing or sales initiatives, while subordinates don’t pull their punches.

Very recently my Bulgarian friend who owns his company came over to explain an idea that didn’t fly with a subordinate. He was not lobbying for me to get on his side but to explain where he was coming from. And as the discussion went on, he realized that he was off-base and came around to support the subordinate. And this happens all the time! And it is all about the imperative of competitiveness. Simply put, rank does not bestow competitiveness. It is earned collectively by a group or an organization committed to attain peak performance.

Given today’s highly competitive world, what is our option? “You can’t stop the machine,” Fareed Zakaria, Washington Post Writers Group, The Manila Times, 23rd May 2015. “The two most powerful forces that have transformed the world in recent decades have been the expansion of globalization and the information revolution. These two great engines have been chugging away, integrating Asia into the global system and ushering in a digital age that is now invading every corner of life . . . You can’t stop China from growing. You can’t prevent Africa from deepening its integration into the global system. These forces, now deeply entrenched, will continue to gain steam.”

Fareed Zakaria may be a pundit. But what about the real world? My Eastern European friends just developed a couple of new products while tapping and leveraging technologies in the US and Italy and designers in New York and Rhode Island. “It’s a small world,” indeed, Mr. Walt Disney!

Sunday, May 24, 2015

Stop corruption and . . . say no to “drugs”

. . . The ones of listening to what we want to hear [and parochialism]? “Pope to bishops: Stop ordering faithful around, fight graft,” AP, Manila Bulletin, 18th May 2015. Pope Francis is giving marching orders to his bishops, telling them to strongly denounce corruption and to act more like pastors than ‘pilots’ ordering the faithful around.”

“He also complained that the Catholic Church often organizes conferences where ‘the same voices’ are heard over and over, an apparent reference to the practice of hosting only like-minded speakers. Francis said such a practice ‘drugs the community, homogenizing choices, opinions and people.’ He urged bishops to instead go ‘where the Holy Spirit asks them to go.’”

But what to do with corruption? “Roots of corruption, Ana Marie Pamintuan,” SKETCHES, The Philippine Star, 20th May 2015. “Recent corruption controversies should give urgency to the passage of a law overhauling and regulating campaign finance. Many sweetheart deals and other transactions involving large-scale corruption have their roots in campaign donations and expenditures. Even election violence can be blamed partly on the huge cost of mounting a campaign.”

“Corruption must be fought relentlessly,” Former Senator Atty. Joey D. Lina Jr., 20th May 2015. Not a few were horrified at what seemed like a cruel joke, but were somehow relieved days later when Justice Secretary Leila de Lima made an apparent turnaround as she clarified last week that the third batch of cases pertaining to the pork barrel scam would still be pursued in court.”

“The continuing clamor for accountability and punishment for crimes concerning the infamous pork barrel system should serve as a litmus test for our legal institutions to rise to the challenge of dispensing justice to appease an enraged citizenry. Let us always bear in mind the words of Pope Francis, when he came to visit our country four months ago, as he challenged ‘everyone, at all levels of society, to reject every form of corruption which diverts resources from the poor.’ It takes commitment to safeguard government from thievery and plunder. Let us be unrelenting and fight corruption to the finish!”

Beyond corruption, what else should we guard against? While good news is always welcome, we can’t fall into the trap of listening only to what we want to hear? “PIDS flags risks as economy seen to miss growth target,” Danessa O. Rivera, The Philippine Star, 20th May 2015. “The biggest drivers for growth will be private and government consumption . . . The state think tank’s forecast is a tad lower from the official target range of seven to eight percent this year.”

“Last year, gross domestic product (GDP) grew 6.1 percent, slower than the previous year’s 7.2 percent. Among the risks PIDS highlighted for the economy is the decline in government revenues. This is attributed to the lower oil importation, tax exemptions on de minimis benefits and productivity bonuses of workers and higher tax exemption ceiling on the 13th month pay . . .

“This has serious implications on government spending for infrastructure and social services . . . While the Philippines exhibited resiliency when the US Federal Reserve announced it will start easing its multi-billion dollar bond purchases in 2013, the PIDS still counted equity price risks and capital outflows among threats to economic outlook. It also stressed that the long problem in infrastructure, weakness in exports and the impact of the El Nino phenomenon are among the major risks this year . . .”

“. . . [T]he Philippines could sustain a seven percent growth beyond 2015 by working on several policy responses. Among the policy responses recommended by the PIDS include ensuring the reliability of power supply and transport infrastructure, facilitating the transmission of resources from the financial to the real estate sector and closely monitoring regional and global developments. . . [T]he Philippine government should take steps in narrowing down the saving-investment gap. Mobilizing long-term capital could be done through massive market research and project development under infrastructure and agribusiness at the local government level . . .”

The above policy responses recommended by PIDS are not new! But would they reflect the need for us to leverage the power of the mindset (i.e., develop a sense of purpose, respond to challenges and focus on what we can control because the buck stops with us) and dig deep into our emotional intelligence (i.e., the capacity to manage shortcomings and demonstrate results orientation, collaboration, leadership and change) and look beyond our borders and overcome parochialism?

For example, “Internationalizing small firms,” Cielito F. Habito, The Philippine Inquirer, 19th May 2015. “It is often said that small firms are the backbone of any economy. If they are, then we don’t seem to be taking care of our backbone too well, and unless things change, our economy may find itself stooped and bent some time in the future. If it’s any comfort, we are not necessarily alone in this situation. Across the Apec region, small firms consistently account for more than 97 percent of all enterprises; for the bulk of the region, including the Philippines, the share is in fact 99 percent or more.

“But there is a wide divergence of their contribution to the economy. Contribution to gross domestic product varies from a low of 21 percent in Russia to a high of 59 percent in China and Indonesia; the Philippines is lower than average, at 36 percent. Contribution to total employment ranges from a low of 25 percent in Russia to a high of 92 percent in Indonesia (with Canada a close second at 90 percent); we are again below the average (67 percent) at 61 percent.”

“As for exports, the small firms’ contribution ranges from below 15 percent (Australia, Chile and Peru) to nearly 70 percent (China). Unfortunately, we lack reliable data to be able to determine exactly where the Philippines lies in this range, but indications point to our MSMEs’ export contribution being near the bottom end. What we know from sample survey data is that the bulk of Filipino enterprises do not export at all.”

“We need to continue to build financial institutions... We need to uphold transparency, be mindful of contagion and risks...,” the BSP chief said. And as banking systems in Southeast Asia are set to integrate as part of the planned ASEAN Economic Community, Mr. Tetangco said there should be “effective management of risk exposures and enforcement of governance culture at the bank level.” [No room for complacency despite economic gains, Daryll Edisonn D. Saclag, Business World, 20th May 2015]

No room for complacency? Is that a commitment or a rhetoric?

“Ugly politics and why we have to change now (!),” Bobit S. Avila, SHOOTING STRAIGHT, The Philippine Star, 21st May 2015. “ANC reported that the Liberal Party (LP), the reigning or party in power is starting to break up simply because many LP members cannot agree with DILG Sec. Mar Roxas as their standard bearer. Rep. Edgar Erice wants a Roxas-Poe tandem, while other LP members want a Poe-Escudero tandem . . . How many times have we written that political parties today have become irrelevant to our people and have given way to personality politics? This is why we need to change our system of governance right now…not tomorrow!”

Have corruption, being inward-looking and parochial drugged us? Sadly beyond them, there are fundamental skill sets (e.g., visionary and strategic thinking and priority setting, critical thinking and problem solving, among others, which in one word is creativity and defined simply as connecting the dots by Steve Jobs) in nation-building that we need but will miss?

For example, we take it for granted that the elite class can do no wrong given our hierarchical culture – and they call the shots? But should the right to pontificate and moralize come with the responsibility and accountability to answer for our failings? See above re Pope to bishops.

Sunday, May 17, 2015

Human capital development

“Philippines ranks 46th in human capital report,” Alden M. Monzon, Business World, 13th May 2015. “THE PHILIPPINES ranked 46th among 124 countries surveyed by the World Economic Forum (WEF) as those nations conducive to developing its human capital, particularly in the fields of education, skills development, and deployment.”

46th sounds good until one reads “in the 15-and-under age group, the Philippines ranked 73rd . . . 51st in the 25-54 age group.” Pleasingly, we do better, “20th in the 15-24 age group . . . 40th in the 55 to 64 age group, and 33rd in the 65-and-over group.”

The 15-and-under ranking so poorly at 73rd should deeply bother us. These kids haven’t done anything except to wake up in our broken system. And while not doing as badly, to be 51st in the 25-54 age group means that those that are more recent entrants or well into their careers need a get fairer shake. Which can only be a reflection of our inability to be competitive and attract FDI and industrialized and overcome underdevelopment.

And indeed we should miss the good old days: I averaged 13 months doing my first 4 jobs because jobs were aplenty. [And I was not even a diligent student, voted least likely to succeed by my high school class.] That must be what Steve Jobs meant when he spoke to Stanford graduates in 2005, “Stay hungry, stay foolish.” But our young people may not be getting that chance today? And we can’t just keep failing them!

Thankfully, this writer came across the following: “House OKs school feeding program,” Jess Diaz, The Philippine Star, 17th May 2015.“Approved on Wednesday night was House Bill 5618 or the proposed National School Feeding Program Act that aims to address incidence of malnutrition, declining academic performance and dropouts among school children.”

But we need more than that to fix a broken system. Again, thankfully, two articles somehow have thrown a ray of hope. “Bill seeks to shore up budget reforms past Aquino tenure,” Mikhail Franz E. Flores, Business World, 11th May 2015. And “Speaker: Economic Cha-cha among gov’t priority measures,” Paolo Romero, The Philippine Star, 16th May 2015.

“Clearly, the passage of this bill will fortify the government’s accountability to the people for its use of public funds through a more efficient public financial management that facilitates greater transparency and delivery of direct, immediate and substantial services . . . the measure seeks to bring the country’s public financial management system up to international standards.” [Flores, op. cit.]

“What matters now is to ensure that PFM reforms are sustained and even further escalated beyond the present administration . . . Under the proposed law, Congress will take on additional powers: monitoring and review of agencies’ spending performance; review of fiscal policy strategies and consider annual financial statements. Economic agencies such as the Department of Budget and Management, Department of Finance and the National Economic and Development Authority will likewise prepare reports which will outline the government’s fiscal strategy in the near-term, medium-term and long-term.”

“The proposal to ease the restrictive economic provisions of the Constitution is just one part of a bundle of reform measures prioritized in the House of Representatives to ensure the economy will not slide back into a boom-bust cycle, Speaker Feliciano Belmonte Jr. said.” [Romero, op. cit.] “We need a well-crafted law that focuses on economic efficiency rather than on size and market structure alone, and which address improper business conduct and excessive and harmful market power that result in the reduction of output or increase in price,” Belmonte said.”

“While I understand that such amendments do not constitute the only solution in attracting more investments, I believe that it is high time that we worked to attune and adjust our economic policies more strategically to the needs and demands of our time,” the House leader told members of the Philippine Bar Association on Thursday.
“On the final stages of approval is the Anti-Trust Bill or the proposed Philippine Competition Act, which seeks to dismantle monopolies and prevent unfair competition.”

It may be too early to celebrate these new initiatives by our legislators. Beyond the credibility issue that they can’t just shake off, a similarly big question is are we as a people indeed predisposed to reform? Or does ideology remain a stumbling block as well?

“Politics is big ‘business’ here at home (!), Bobit S. Avila,” SHOOTING STRAIGHT, The Philippine Star, 14th May 2015. “A good friend, Romy Ronquillo sent me a report from Money Magazine where its editor Kurt LaVine said, ‘If Philippine Politics can only be listed as a public corporation, more investors will pour their money to more of the most profitable businesses in Asia.’ Phil. politics listed at US$10 Billion is the 2nd most profitable business in Asia, beating Toyota and Samsung.”

“Department of Justice (DOJ) Secretary Leila de Lima already said that she is not prioritizing the filing of cases against the 3rd Batch of Senators and Congressmen who are in the list of the so-called Janet Lim Napoles files. This is why corruption in this country especially the ones committed by those so-called “Honorable” politicians (and allies of Pres. Aquino) could never be eliminated because the people tasked by the State to hunt down the corrupt and the damned and throw them to jail just don’t care.”

As if politics aren’t hurdles enough, we also have questions like “Why we should want free trade,” BusinessMirror Editorial, 10th May 2015.“There are also those that believe that the oligarchs, the large companies that have a ‘too-large’ a share of Philippine business, do not want the competition from free trade. If that is true—and we are not saying it is—then both the Left and the oligarchs have the same goal of wanting the people to be dependent on either ‘big business’ or the government for their economic prosperity.”

“Without free trade between nations, we face the condition of autarky where an economy depends on consuming only what it produces and producing only what it consumes. That generally works badly as North Korea is the best example of autarky. People and nations depend on each other through trade for their economic well-being. Try raising your own chickens if you doubt that truth. The division of labor among people and among nations is the essence of civilization.

“Trade is the ultimate example of cooperation between nations. Otto T. Mallery, a late 19th-century economist in his 1943 book Economic Union and Enduring Peace, states, ‘If soldiers are not to cross international boundaries, goods must do so. Unless the Shackles can be dropped from trade, bombs will be dropped from the sky.’”

Conflicted as we are about trade is, surprise, surprise: “The Philippines is experiencing continued declining competitiveness despite the passage of the AFMA 17 years ago. And while agricultural exports are increasing, the pace of importation is so much faster, thus widening the trade gap even further.” [Lame efforts to reform agriculture sector, Rey Gamboa, BIZLINKS, The Philippine Star, 14th May 2015.]

“An in-depth look at the situation reveals only one problem: inadequacy of government to deal with the challenges and issues. We have a law – in fact, several laws covering agriculture, some of which have been on the verge of conflicting – that has remained lame through the years. Despite the many studies in past years that attempted to pinpoint the major problems and their solutions, nothing substantial has happened.”

How do we learn to change?

“The pope said that he was, indeed, a changed man, as John L. Allen recounts in his new book, ‘The Francis Miracle.’ The pope said he was filled with ‘interior freedom and peace, and that sense has never left me.’” [Pope Francis and the Art of Joy, Timothy Egan, The New York Times, 15th May 2015]

Wednesday, May 13, 2015

The test of the pudding

“Something seems really, really wrong in the way voters choose their political leaders. A candidate’s management acumen is not necessary for as long as he can sing, dance, make them laugh and give dole outs to get elected. That is probably why we have political leaders who are more interested in how to recoup the money they spent during the campaign than how to make sure that every peso of public money is judiciously spent for activities and projects with the most benefit to the constituency.” [Why are we poor (?), Tita C. Valderama, 10th May 2015]

“It is how the city government spends its revenues, including the P1.9-billion annual internal revenue allotment from the national government. How much of it goes to corruption should be pruned to the barest minimum, if it could not be completely stopped. If you go to the inner streets of Manila in Intramuros, Divisoria, Escolta, Malate, Pandacan, Sta.Mesa, anywhere, the city stinks, sidewalks are either occupied by hawkers or shanties. It doesn’t feel safe to walk even when you are not alone.”

The test of the pudding is in the eating. Translation: ours is a broken system. One way we can react is to play back the narrative that we are victims – of our past. Unfortunately, victims are losers not winners. Or we can step up to the plate. This blog has discussed the “power of the mindset” which is something that we have yet to embrace?

What does the science say? “To believe that if something is not working or is ineffective . . . we must ask, ‘What is it that I can do differently to change the situation?’” [Robert Brooks, faculty of Harvard Medical School; served as Director of the Department of Psychology at McLean Hospital, a private psychiatric hospital; he reinforced the 1970 work of Susan Kobasa, PhD, a clinical psychologist at the City University, New York.]

“It has been observed that if there is one factor hindering the Philippines from catching up with its dynamic neighbors in the Association of Southeast Asian Nations, it is the outdated mindset that has remained with us from the last century . . . ‘Customer orientation’ has long been the crux in business operations and it is clearly understood that failure to internalize this culture will result in a loss to competition and eventually the replacement of the boss.” [The 21st century mindset, Cesar B. Bautista, Mapping the future, Philippine Daily Inquirer, 10th May 2015]

There is a new determination for quality execution of plans, conscientious monitoring of progress and achievement of deliverables. All these can only be done in coordination with other government units, which implies that a ‘conductor’ has to be in place. However, this approach has not caught fire yet, perhaps due to the historical silo mentality which prevents outsiders of an office from moving into the turf of others. Overlapping ‘legal mandates,’ bureaucratic terrain, desire for personal glory/fame dampen the enthusiasm of senior officials to pursue out-of-box modes in addressing strategic challenges . . .”

“. . . Sec. Petilla had other proposals for the electric power industry that would have been beneficial to power consumers, which he can no longer pursue because of his impending replacement.” [The toughest Cabinet job, Boo Chanco, DEMAND AND SUPPLY, The Philippine Star, 11th May 2015]

“But Sec. Petilla failed to obtain passage of the proposed law giving emergency powers to President Benigno Aquino III to purchase government-owned power plants. Apparently, that was a major income-generating measure for election purposes of the P-Noy administration. I speculate that this failure of Sec. Petilla is the main reason for his untimely replacement.

“If Sec. Petilla runs for the Senate . . . We could then place in the Senate an ally of the consumers against some of the private power generation companies, which are the main group of capitalists trying to make money by exploiting the political weakness of consumers, and corrupting government agencies, regulatory bodies and electric cooperatives in the process.

“He was said to have told a group of power generators they should be ashamed for raking in windfall profits at the expense of the consumers. Even if it is an independent agency, Ikot was vocal in saying the ERC must stop acting like a captive of the power industry it regulates. Ikot also feels there is something very wrong with the way the power industry pretends we have a free market in the power sector.

“By the very nature of the large capital requirements for putting up power plants, those who dare to be in it are also those who have a big influence in determining government policies overall. In other words, with power generation in the hands of the private sector, the most powerful of our social and economic elite are the guys a Secretary of Energy must deal with… very carefully. As is often the case, these folks are powerful enough to go over the head of the Energy Secretary, if he displeases them.”

Why are we poor? Is it because of: (a) “the way voters choose their political leaders”; (b) “we have political leaders who are more interested in how to recoup the money they spent during the campaign”; (c) “the outdated mindset that has remained with us from the last century”; (d) “the group of capitalists trying to make money by exploiting the political weakness of consumers, and corrupting government agencies, regulatory bodies and electric cooperatives in the process”?

But do we have the power of the mindset? “To believe that if something is not working or is ineffective . . . we must ask, ‘What is it that I can do differently to change the situation?’”

“[T]he thrust of the report, titled ‘Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity’ and scheduled to be presented at a panel discussion in Washington, is a scathing indictment of 35 years of economic policies . . .” [Report by Clinton Adviser Proposes ‘Rewriting’ Decades of Economic Policy, Amy Chiozick, First Draft, The New York Times, 12th May 2015] It is “an aggressive blueprint for rewriting 35 years of policies that he says have led to a vast concentration of wealth among the richest Americans and an increasingly squeezed middle class.”

“‘It’s not just a matter of redistribution,’ said Joseph E. Stiglitz, a Nobel laureate in economics who has been an influential adviser to the Clinton campaign and will present his report on Tuesday. “Rewriting the rules of our market economy would reduce inequalities in market incomes.”

The US has Stiglitz, and in the Philippines we have the JFC and Arangkada. If indeed we believe that something is not working or is ineffective, Arangkada is asking, ‘What is it that we can do differently to change the situation’?

But where is Philippine society at large? We have to go beyond asking “why are we poor”. We have to learn and embrace the power of the mindset?

Focusing on the economy

These articles ought to get the government – the current and the next – focusing on the economy like a laser? (a) Amending the economic provisions of the Constitution, Business Mirror Editorial, 5th May 2015; (b) Limited FDI inflows show that the Philippines is uncompetitive, Benjamin E. Diokno, Core, Business World, 5th May 2015; (c) Aquino gets last-ditch reform push, Melissa Luz T. Lopez, Business World, 5th May 2015.

But to focus there must first be clarity in thinking, and thus in government policy formulation and priority setting? And that calls for leadership and unlearning “crab mentality”? This blog has often raised Clinton’s “It’s the economy, stupid” mantra. Consider: “The proposal to lift the moratorium on granting of new exploration permits, however, got the cold shoulder from the Mines and Geosciences Bureau (MGB).”[Lopez, op. cit.]

“The rationale of the Executive branch: why would it allow new mining projects if it would incur more losses for government with a lesser share in revenues? Then it’s better to not issue permits until the share of government is more equitable,” MGB Director Leo L. Jasareno said by phone. It is sticking to that position for now,” he added, clarifying that the Environment department issued an order that took effect on April 2, allowing area expansion for existing mining exploration projects. The moratorium on new mining projects was imposed in 2011 and extended in 2012 through Executive Order No. 79.”

The point goes beyond the new mining projects. It is about clarity, or the lack of it. Is government talking apples and oranges? For example, while the reform under Arangkada recognizes the imperative of higher government revenues, its overarching goal can be spelled out as follows: (a) to double GDP growth in 3 years; (b) while generating US$7.5 billion in annual FDI or $75 billion over 10 years; (c) US$ 100 billion in exports; and (d) 10 million jobs – which at the end of the day will yield over one trillion pesos in revenue for the Philippine economy within this decade. []

“Over one trillion pesos in revenue.” Of course we can’t have confidence in that perspective since we don’t have the ecosystem of a competitive economy. But we have to start somewhere. How has the government translated Arangkada to reflect clarity in thinking, policy formulation and priority setting? A fundamental challenge faced by the Philippine economy – if it is to create the ecosystem inherent in economic development and nation building – is the need for a balanced portfolio comprised of: (a) industry, (b) agribusiness and (c) services. Sadly, ecosystem and portfolio management don’t figure in our economic model. They are imperatives we can learn from the private sector.

It’s no secret that the economy is skewed to services through the sacrifices of 10 million OFWs . . . while we contend with an oligarchic economy that has proved reform-proof. Because we the people – or just the elite – celebrate it?

Says Arangkada: “Remittances of Filipinos abroad increased 187% in 9 years to approach US$ 20 billion [which has already been surpassed] and will soon be the country’s largest source of foreign capital. They stimulate an increasing share of GDP growth and shield the elite from pressure to reform.” Where are we or who are we, really?

“In an increasingly interlinked and competitive world, accelerating growth is an imperative, not a choice. The Joint Foreign Chambers of Commerce in the Philippines (JFC) estimates that, to achieve these results, the country must focus on more rapid development of the Seven Big Winner Sectors and move twice as fast! 

“Arangkada Philippines 2010: A Business Perspective is about creating a bright future for the Philippines . . . Adopt a plan to double GDP growth in 3 years and target US$ 7.5 billion in annual FDI and US$ 100 billion in exports . . . The Philippines has lagged for too long, losing competitiveness, despite its immense potential and location in the fastest growing region.

“Philippine growth has not been inclusive. In 2006 there were 24 million poor Filipinos, about the same percentage of population as in 1986. By contrast, the other ASEAN-6 eliminated poverty or reduced it by half. In the fast-growing Asian region, the Philippine economy is becoming relatively smaller, in share of total GDP and in PCI, among the ASEAN-6.

“Although located in the world’s fastest growing region, the Philippine economy has long grown slowly. China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan, and Thailand have grown an average of 7% for over 25 years. India and Vietnam may eventually join this group. The Philippines must have an 11.6% growth rate to reach a PCI of US$12,000 by 2030, assuming a 2% population growth rate declining to 1.5%.

“Investment is needed for higher growth, yet the investment rate has fallen from 25% in 1997 to 15% in 2009. FDI is weak, and government has inadequate revenue for capital spending. Doubling spending on physical infrastructure (to 5-6% of GDP) and social infrastructure (to 8-9% of GDP) would greatly improve the investment climate and support higher, sustainable rates of growth.

“Philippine FDI inflows are the weakest of the ASEAN-6. Political instability deterred foreign investment in 1970-89, when net FDI averaged US$ 200 million. Net FDI rose to a US$ 1.4 billion average in 1990-2009, reaching US$ 3 billion in 2006 and 2007. From 1970-2009 the country received US$ 32 billion in FDI, but Indonesia, Malaysia, and Thailand each received 2-3 times as much.

“Philippine commodity exports reached a record high of US$ 50.5 billion in 2007, contributing 35% of GDP but face many challenges. The top exports are electronics (60%) and other manufactured goods (25%). Agro-based products (6%) and mineral products (4%) are underdeveloped. IT-BPO service exports – valued at US$ 8 billion in 2010 – could more than double to US$ 20 billion by 2015.”

Do we need more roadmaps when these challenges have been played time and again by most everyone who care about the Philippines? But where is government? Where are we or who are we, really?

“These issues have been on the agenda of business organizations for a long time, including in Arangkada . . . Sought for comment, Presidential Communications Secretary Herminio B. Coloma, Jr. said MalacaƱang remains receptive to suggestions. ‘We are always open to proposals from the business sector and other stakeholders,’ Mr. Coloma said via text. ‘Concerned government agencies are expected to give due attention and consideration, and give feedback to these stakeholders.’” [Lopez, op. cit.]

With due respect, words and more words? Who will do what, when, where and how?

“The Aquino administration, in its final year, and the next administration, has to move heaven and earth to drastically reform the Philippine economic landscape.” [Diokno, op. cit.] “The moral of the story is clear: success in a competitive world requires hard work. We cannot leave it to chance. Yes, the Philippines is growing, but so are our competitors. And our competitors are many years, even decades, ahead of us. Yet, they don’t rely on national elections to boost their economies.”

In other words, while we are faced with the demands inherent in freedom and democracy – and thus the rule of law – they go beyond the exercise of the right to vote. Elections are not a panacea. What we've witnessed over decades is that freedom and democracy Philippine-style has struggled being the mirror image of who we are as a people. And as ought to be, the future is in our hands.

The pursuit of development indeed is a challenge yet it is not about reinventing the wheel. Consider: man by nature learned and developed to become a community, local and then regional if not global, because of his inherent needs starting with the barter trade. But why have we stubbornly remained parochial? Meanwhile que sera sera has confined us to the caboose and, chances are, will remain there given the demands of progress in the here and now, the 21st century, are running at warp speed.

Not surprisingly, we read: “We thought the good Speaker has forgotten all about such amendments (to the economic provisions of the Constitution) given MalacaƱang’s expression of lack of interest in them. But the Speaker is obviously unimpressed by the Palace’s stance. And for good reason. If we do not remove these restrictive provisions, we might, as well, dissipate any notion of development for our country’s economy.” [Business Mirror Editorial, op. cit.] Translation: The Philippines must have an 11.6% growth rate . . .” [see above] – not the 7% that makes us gaga!

Friday, May 8, 2015

Will the Millennials save us?

Does assertiveness mean being disrespectful? While in Manila earlier in the year, a niece explained to me what the Filipino median age (23.5) means. “We are not disrespectful but we speak up, are assertive and not subservient.”

“Sixth grader who cut off Barack Obama: ‘I was just nudging him to get on,’” Nick, 30th Apr 2015. “The sixth-grader who made Internet headlines on Thursday for his sharp interviewing style with President Barack Obama says he meant no disrespect.”

“I didn’t mean to cut him off. I was just nudging him to get on,” said Osman Yahya, 12 . . . The Bennett Middle School student from the Salisbury, Maryland, school district stole the show on social media when he stopped the president from giving a lengthy answer on his love for reading.

“I think you’ve sort of covered everything about that question,” Osman told the president during their interview, when Obama began to again speak of his love for reading.

“The interview with Obama came during a “virtual field trip” hosted by Discovery Education at the Anacostia Neighborhood Library in Washington, D.C . . . Osman, who said he is interested in pediatric medicine for a career, stressed that it was his job to keep the president from going on too long.”

Hierarchy in our culture implies not only rank or age but also expertise. And so we defer to rank, to our elders, to our experts. It would take a Chinoy to understand the nuance and where assertiveness is a must. For example, who are the world’s leader in the fast food business, the real experts? It brings to mind why benchmarking is imperative. Not even the best in the world can claim perfection.

“How Jollibee beat McDonald's in the Philippines,” Cathy Rose A. Garcia, ABS­, 11th Feb 2013. “With over 2,000 branches around the country, there is bound to be a Jollibee anywhere you go in the Philippines. Jollibee's continued success in the Philippines and the company's aggressive expansion overseas is making international headlines.”

“Jollibee's Filipino-­Chinese founder Tony Tan Caktiong is now on the cover of Forbes Asia's February issue. Tan talked to Forbes Asia about how he started his business with an ice cream parlor and how his restaurant with a bumble bee mascot managed to beat American fast-food giant McDonald's in the Philippines.

“After opening the ice cream parlors in 1978, Tan said he decided to shift from ice cream to hamburgers when he saw customers wanted sandwiches. However, the entry of McDonald's in the Philippines in 1981 was a cause of concern for the fledgling fast-food chain. Tan recalled how they went to the US to study McDonald's operations, and studied how Jollibee compared to the American fast-food chain.

“‘We found that they excelled over us in all aspects – except product taste... It suited Americans but not really Filipinos. Our (food) tends to be sweeter, more spices, more salty. We were lucky as it was not easy for them to change their product because of their global image,” Tan told Forbes Asia. Jollibee worked hard to compete with McDonald's, from advertising to stores to service. And their hard work paid off.

“‘We were surprised customers ranked us higher in courtesy and service style. Maybe they felt we were warmer? And then they liked our marketing, promotion and advertising better. And then customers kept just coming back,’ he said. One advantage Jollibee had was offering hamburgers and other fast-food with a distinct Filipino flavor. For instance, Jolly Spaghetti has a sweet meat sauce with hotdog slices.

“But what is the secret to Jollibee's phenomenal success? ‘We keep things simple and fill a simple need: very tasty food at a reasonable price. To this day I repeat to my people what my father told me – you have to make sure your food tastes really good,’ Tan said.”

“Design thinking is only partially about design. It is more a thinking and problem-solving process. It is useful for systemic, ‘wicked’ problems with unclear solutions.” [Ricardo A. Lim, Notes on design thinking, Asian Institute of Management, 2015]

“The first thought about ‘thinking’ in DT is that the best ideas come from users and customers. DT practitioners must let go of their own narratives and biases. They must observe their users at work and play, and be able to accept a large amount of customer-user feedback and needs and continue to be open-minded, in spite of potentially painful insights. The essence of DT is that all design must be empathic, and centered around what humans need...DT is sometimes known as “human-centered design” or HCD. In DT it is rare that a super brain like a Steve Jobs comes along.  Instead we rely on observations and stories of users to insight what they need.

“A mantra of DT is in fact that experts may not have good insights. Experts may get in the way of progress, if they attempt to advance their own ideas before users. Expert ideas, while important as in the case of Steve Jobs, are more often regarded inferior to the contributions of an entire group working together.

“DT complements analytical thinking. If analytical thinking is deductive and linear, DT is abductive and non-linear. DT unrestricts problems through brainstorming, or the more modern term, ‘ideation.’ DT is iterative: its practitioners flip back and forth from design to prototype to redesign and will change their minds (‘pivot’) frequently.  

“But DT is not free-wheeling, endless creativity. Ideation and pivots are finite, and final products must be constrained by practical costs and technical limitations. Risks are important and must be managed. Metrics are defined and carefully monitored. It is not all abstract art.

“People will line up for the latest iPhone 6's for days, and pay arms and legs to get it. Who can resist a fine German car, or a French handbag or a fine woven Persian carpet? But the majority of great designs are simple.”

How many Pinoy enterprises can replicate Jollibee? Not if we assume that we can’t be any better than the best and the brightest. And that being the regional laggard is a given. And not if we claim we have our ways and invoke Pinoy abilidad – and when it translates to: we’re already doing the best we can? “We found that they excelled over us in all aspects – except product taste... It suited Americans but not really Filipinos.” That’s a perspective. There is a benchmark of excellence to aspire for. [Still, down the road, we cannot be marketing to Pinoys alone even when 10 million of them are overseas. Globalization means the world is a market that is much bigger, above and beyond 100 million Pinoys.] 

I consulted with a one of our largest enterprises 10 years ago and the managers assumed that they had no influence in the decision-making process. And yet they knew that a more efficient practice would give them an uptick in margins. They periodically would do a “fire-sale” that everyone accepted as a given. Thankfully, two of them expressed concern: how do we keep an eye on margins? And so we quickly put together a simple program. “We will do this as a pilot and demonstrate how simple it is. And then you as managers can keep running the program so that everyone involved in the process gains the knowledge and, more importantly, the confidence.”

And it is all about keeping it simple: “We keep things simple and fill a simple need: very tasty food at a reasonable price. To this day I repeat to my people what my father told me – you have to make sure your food tastes really good.”

And to ensure that every snack brand they want to introduce will pass the acid test, one of the largest (global) manufacturers employ outsiders/typical consumers in their panel of taste-testers. It is what Design Thinking or Human-Centered Design is all about: that the best ideas come from users and customers. DT practitioners must let go of their own narratives and biases.

But first we must learn how to assert. I keep my fingers crossed that our millennials will save us and not take being a regional laggard as a given.