What can the public sector learn from the follies of the private sector?
General Motors and Coca-Cola two revered companies and brands in America had shared a common folly: focusing on financial management as opposed to marketing value-added products.
Coca-Cola has regained its bearings – instead of playing the numbers game, i.e., creating the Coca-Cola Enterprise and managing revenue and cost reporting between them and the original entity; it has again focused on marketing value-added products: they redrew their core product architecture to develop and market non-cola beverages, creating a new range of products while expanding the cola category.
But as people now know, General Motors had to be bailed out by the American taxpayers. For decades General Motors given their market dominance early on and the size of their revenues (and later to preserve profitability in a challenging market) focused on the financials (and over time experienced declining market share) while missing to strengthen their core business: developing cars that customers prefer. They tried to create a marketing culture (e.g., hiring an ex-Proctor & Gamble) but it did not take them long to realize that a culture is not easy to change – financial management is more manageable than change management.
It’s like the “Dutch disease”: why worry about fixing a country’s fundamental economic problem when there is an income stream keeping GDP afloat? (The lesson of the “hole in the dike” comes to mind.)
In the case of the Netherlands, their extraction industry gave them a false sense of economic security until they realized that they had to develop a sustainable manufacturing economic base.
In the case of the Philippines, is the over $15 billion remittances from the OFWs giving us a false sense of economic security – they benefit participants (from investors to consumers and everyone between them) in our consumer-driven economy but have not achieved our national development goal of reducing poverty to 17%; that we have yet to develop a larger, more sustainable income stream? Or why the OFWs declared: “The Philippine trade union movement takes issue with the way the government has exploited the Filipino migrant and contract workers over the years,” in a manifesto circulated during the international forum on migration in Manila in October, 2008?
If private business struggles to manage change clearly the public sector (or the country at large) faces an even greater challenge whenever it attempts change. For example it will take some doing for us to witness the realization of: Lee Kuan Yew’s exhortation about discipline; Nobel Prize-winning economist Paul Krugman‘s prescription that “the only way to achieve long term sustainable growth was to have much higher export growth, by attaining export competitiveness” – c/o Cielito Habito, October 19, 2008, Inquirer; and a UK business group’s suggestions on how to encourage greater foreign investments.
The Kosovo war gave pause to the Europeans to the point of embarrassment. Why did it take the Americans to lead the efforts to deal with a conflict within their borders?
In private conversations Europeans were entertaining self-doubt: Are we not over religious persecution yet? Did we not resolve not to allow any more adventurers to disturb the peace in Europe? What do the Americans have that we don’t have? Why is America more progressive? Surely it has nothing to do with brainpower because we had led the world for centuries? Are we too tied down to our proud and glorious past and heritage that we have yet to learn to look forward?
Since then the world has seen the European Union evolve into a more cohesive union while continuing to deal with the challenges inherent in such a human undertaking. Hence the label “Old Europe” is invoked to guard against any tendencies to look back as opposed to looking forward.
Today Americans are themselves entertaining self-doubt and the new president (Obama) has his hands full – aggressively driving his economic agenda beyond the stimulus plan; while the rest of the world has not been spared by the global economic meltdown – with bankruptcies mounting and unemployment in every other country soaring closer if not yet at double-digit levels – clearly traceable to the excesses and greed that Americans acknowledge were “Made in USA”.
The Philippines is experiencing these fallouts first-hand (and local news reports and commentaries are becoming pessimistic even when our initial reactions sounded quite positive) and whatever efforts we had exerted before would not suffice given the enormity of the challenge the world is and by extension we are facing? (The NEDA director in a recent Q&A in Malacanang pointed out that we could not isolate ourselves from the rest of the world given that oil imports account for a large chunk of our foreign exchange needs, among others.)
It is understandable that countries big and small are manifesting a knee-jerk reaction to the global financial crisis: we will protect our interests first. It is noteworthy that level-headed world leaders have expressed opposition to protectionist thoughts by the U.S. and France to name just a couple. The reality, as the NEDA director expressed by using our oil imports as an example, is that the world is interconnected.
As a country we have to deal with the here and now and we are fortunate that we have the OFWs’ remittances – they have been the engine of our economy; and at the same time provide our needed foreign exchange reserves. But the challenge we have as does the rest of the world is both the here and now and the ensuing economic order.
And that brings us back to the fundamental, structural issue of our economy: plugging the hole in the dike is a stop gap measure.
We have to do a better fix on our financial management but the more difficult part is managing change? For instance, the NEDA’s national development agenda spells out these fixes yet we have been unable to execute and tackle the fundamental, structural issue in our economy.
To begin with, we need to drastically raise revenues, i.e., we cannot raise them internally – our aggregate investments are inadequate to generate the level of GDP that we need. (Thanks to our tycoons for their aggressive investment efforts; they are doing their herculean share in filling in our investment void – to raise or double investments to 28% of GDP as set by NEDA and approach the GDP of Thailand and Malaysia and bring poverty to below 20 %.)
Millions of Filipinos have figured that there are not enough jobs in the country to give them the level of income that they need; and so roughly 10 million of us had to bite the bullet and become OFWs. OFW remittances were supposed to be a stop-gap measure – they were in exchange for draining talent – which we had to resort to until we get a fix on our economy.
Whenever the exception becomes the rule, chaos reigns?
What about managing change?
How do we raise our revenues? What products and services do we need to produce? Who will produce, what, when, where and how?
We are a people steeped in culture and tradition yet facing these fundamental questions requires that we start with a clean slate?
We cannot start our problem-solving efforts with a mindset that limits our options? And hence the ideology or cultural beliefs and tradition that we espouse must be held at bay, i.e., push the driving forces and restrict the restraining forces in order to gain traction and move us forward in our development efforts, and win our fight against poverty? Our ideology, beliefs and tradition may be very Filipino – we being the only Christian country in this part of the world – but where do we draw the line between our Christian values and our comfort zone? Like Europeans drawing the line between New and Old Europe? Like Obama drawing the line between American entrepreneurial spirit and greed?
If we do not have the means to substantially raise our investments, should we more than welcome them, i.e., how do we solicit, attract and secure them like our tycoons are doing via their foreign partners? If we don’t have the products and services or the technology to produce them, how do we develop and/or acquire them? If we don’t have the market to sell them, how do we create and win them?
We don’t have to go it alone – to pull together: capital formation, investment, market, technology, efficiency, productivity, competitiveness – we need to partner with the right global players? For instance, as reported in the local papers: (NEW YORK, Feb. 1, Reuters) “emerging markets will likely remain a viable alternative for private-equity investors seeking returns during the deepening global financial crisis, according to an official with the International Finance Corporation”.
But the bigger reason is: the developing world will be the engine of the global economy over the next several years if not decades. This was stressed by Jeff Immelt, the CEO of GE in a recent Q&A forum sponsored by the Wall Street Journal, i.e., GE’s plans are designed to generate greater revenues outside the U.S. over domestic U.S. sales. (This writer spoke, together with a couple of other Fortune 500 representative-companies generating greater revenues overseas, before GE managers in 1992 when GE was stepping up their globalization plans as part of their benchmarking efforts.)
Why? China and India despite their recent economic booms (and last year’s and this year’s projected slowdown) have a lot more room to develop – from their infrastructure needs as well as consumer demands: non-durable and durable goods like housing, cars, appliances, among others. And this also applies to other developing countries like the Philippines which is why even with the global economic meltdown our economy grew and did not contract in 2008.
General Motors and Coca-Cola two revered companies and brands in America had shared a common folly: focusing on financial management as opposed to marketing value-added products.
Coca-Cola has regained its bearings – instead of playing the numbers game, i.e., creating the Coca-Cola Enterprise and managing revenue and cost reporting between them and the original entity; it has again focused on marketing value-added products: they redrew their core product architecture to develop and market non-cola beverages, creating a new range of products while expanding the cola category.
But as people now know, General Motors had to be bailed out by the American taxpayers. For decades General Motors given their market dominance early on and the size of their revenues (and later to preserve profitability in a challenging market) focused on the financials (and over time experienced declining market share) while missing to strengthen their core business: developing cars that customers prefer. They tried to create a marketing culture (e.g., hiring an ex-Proctor & Gamble) but it did not take them long to realize that a culture is not easy to change – financial management is more manageable than change management.
It’s like the “Dutch disease”: why worry about fixing a country’s fundamental economic problem when there is an income stream keeping GDP afloat? (The lesson of the “hole in the dike” comes to mind.)
In the case of the Netherlands, their extraction industry gave them a false sense of economic security until they realized that they had to develop a sustainable manufacturing economic base.
In the case of the Philippines, is the over $15 billion remittances from the OFWs giving us a false sense of economic security – they benefit participants (from investors to consumers and everyone between them) in our consumer-driven economy but have not achieved our national development goal of reducing poverty to 17%; that we have yet to develop a larger, more sustainable income stream? Or why the OFWs declared: “The Philippine trade union movement takes issue with the way the government has exploited the Filipino migrant and contract workers over the years,” in a manifesto circulated during the international forum on migration in Manila in October, 2008?
If private business struggles to manage change clearly the public sector (or the country at large) faces an even greater challenge whenever it attempts change. For example it will take some doing for us to witness the realization of: Lee Kuan Yew’s exhortation about discipline; Nobel Prize-winning economist Paul Krugman‘s prescription that “the only way to achieve long term sustainable growth was to have much higher export growth, by attaining export competitiveness” – c/o Cielito Habito, October 19, 2008, Inquirer; and a UK business group’s suggestions on how to encourage greater foreign investments.
The Kosovo war gave pause to the Europeans to the point of embarrassment. Why did it take the Americans to lead the efforts to deal with a conflict within their borders?
In private conversations Europeans were entertaining self-doubt: Are we not over religious persecution yet? Did we not resolve not to allow any more adventurers to disturb the peace in Europe? What do the Americans have that we don’t have? Why is America more progressive? Surely it has nothing to do with brainpower because we had led the world for centuries? Are we too tied down to our proud and glorious past and heritage that we have yet to learn to look forward?
Since then the world has seen the European Union evolve into a more cohesive union while continuing to deal with the challenges inherent in such a human undertaking. Hence the label “Old Europe” is invoked to guard against any tendencies to look back as opposed to looking forward.
Today Americans are themselves entertaining self-doubt and the new president (Obama) has his hands full – aggressively driving his economic agenda beyond the stimulus plan; while the rest of the world has not been spared by the global economic meltdown – with bankruptcies mounting and unemployment in every other country soaring closer if not yet at double-digit levels – clearly traceable to the excesses and greed that Americans acknowledge were “Made in USA”.
The Philippines is experiencing these fallouts first-hand (and local news reports and commentaries are becoming pessimistic even when our initial reactions sounded quite positive) and whatever efforts we had exerted before would not suffice given the enormity of the challenge the world is and by extension we are facing? (The NEDA director in a recent Q&A in Malacanang pointed out that we could not isolate ourselves from the rest of the world given that oil imports account for a large chunk of our foreign exchange needs, among others.)
It is understandable that countries big and small are manifesting a knee-jerk reaction to the global financial crisis: we will protect our interests first. It is noteworthy that level-headed world leaders have expressed opposition to protectionist thoughts by the U.S. and France to name just a couple. The reality, as the NEDA director expressed by using our oil imports as an example, is that the world is interconnected.
As a country we have to deal with the here and now and we are fortunate that we have the OFWs’ remittances – they have been the engine of our economy; and at the same time provide our needed foreign exchange reserves. But the challenge we have as does the rest of the world is both the here and now and the ensuing economic order.
And that brings us back to the fundamental, structural issue of our economy: plugging the hole in the dike is a stop gap measure.
We have to do a better fix on our financial management but the more difficult part is managing change? For instance, the NEDA’s national development agenda spells out these fixes yet we have been unable to execute and tackle the fundamental, structural issue in our economy.
To begin with, we need to drastically raise revenues, i.e., we cannot raise them internally – our aggregate investments are inadequate to generate the level of GDP that we need. (Thanks to our tycoons for their aggressive investment efforts; they are doing their herculean share in filling in our investment void – to raise or double investments to 28% of GDP as set by NEDA and approach the GDP of Thailand and Malaysia and bring poverty to below 20 %.)
Millions of Filipinos have figured that there are not enough jobs in the country to give them the level of income that they need; and so roughly 10 million of us had to bite the bullet and become OFWs. OFW remittances were supposed to be a stop-gap measure – they were in exchange for draining talent – which we had to resort to until we get a fix on our economy.
Whenever the exception becomes the rule, chaos reigns?
What about managing change?
How do we raise our revenues? What products and services do we need to produce? Who will produce, what, when, where and how?
We are a people steeped in culture and tradition yet facing these fundamental questions requires that we start with a clean slate?
We cannot start our problem-solving efforts with a mindset that limits our options? And hence the ideology or cultural beliefs and tradition that we espouse must be held at bay, i.e., push the driving forces and restrict the restraining forces in order to gain traction and move us forward in our development efforts, and win our fight against poverty? Our ideology, beliefs and tradition may be very Filipino – we being the only Christian country in this part of the world – but where do we draw the line between our Christian values and our comfort zone? Like Europeans drawing the line between New and Old Europe? Like Obama drawing the line between American entrepreneurial spirit and greed?
If we do not have the means to substantially raise our investments, should we more than welcome them, i.e., how do we solicit, attract and secure them like our tycoons are doing via their foreign partners? If we don’t have the products and services or the technology to produce them, how do we develop and/or acquire them? If we don’t have the market to sell them, how do we create and win them?
We don’t have to go it alone – to pull together: capital formation, investment, market, technology, efficiency, productivity, competitiveness – we need to partner with the right global players? For instance, as reported in the local papers: (NEW YORK, Feb. 1, Reuters) “emerging markets will likely remain a viable alternative for private-equity investors seeking returns during the deepening global financial crisis, according to an official with the International Finance Corporation”.
But the bigger reason is: the developing world will be the engine of the global economy over the next several years if not decades. This was stressed by Jeff Immelt, the CEO of GE in a recent Q&A forum sponsored by the Wall Street Journal, i.e., GE’s plans are designed to generate greater revenues outside the U.S. over domestic U.S. sales. (This writer spoke, together with a couple of other Fortune 500 representative-companies generating greater revenues overseas, before GE managers in 1992 when GE was stepping up their globalization plans as part of their benchmarking efforts.)
Why? China and India despite their recent economic booms (and last year’s and this year’s projected slowdown) have a lot more room to develop – from their infrastructure needs as well as consumer demands: non-durable and durable goods like housing, cars, appliances, among others. And this also applies to other developing countries like the Philippines which is why even with the global economic meltdown our economy grew and did not contract in 2008.
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