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A New Vision?
By Michael Alan Hamlin
December 01, 2004
Jose L. Cuisia, president &
CEO of AIG-affiliate Philippine American Life Insurance Company
in the Philippines, told me in a 1999 interview that "in the
next five to ten years, the Philippines will regain its position
as one of the leaders is Asia." But to do that, the country
"must get its act together." Cuisia believed that Asia's
now nearly forgotten financial crisis would provide the impetus
for broad reforms necessary to strengthen government institutions
as well as private-sector accountability and transparency. How have
we done?
Fortunately, not as bad as many like
to assume, and argue, but not as well as we could have, obviously.
Despite significant hurdles, the economy is growing at around five
percent, according to the International Monetary Fund. Telecom reforms
during the administration of Fidel V. Ramos have helped spark significant
interest in the Philippines as an outsourcing destination, a form
of investment that is an efficient job creator both in terms of
investment per job and development cycle. In fact, jobs are being
created faster in business process outsourcing sectors - which include
contact center, software, design and engineering, animation, and
financial services - than educational institutions can churn out
qualified applicants. That's a downside, the result of neglected
educational infrastructure. So is the fact that the Philippines,
despite impressive growth, is growing slower than every one of its
neighbors. Yet while things could be better, they could be far worse,
too.
Politically, Filipinos appear to
have matured. Instead of electing another popular but clearly unqualified
actor as president earlier this year, voters rehired President Gloria
Macapagal-Arroyo for a full six-year term, despite their clear ambivalence
toward her. While the president herself has contributed to strengthening
that sense ambivalence since her election with a series of clearly
unpopular political appointments, her administration seems serious
about tax reform, streamlining the bureaucracy, and addressing corruption.
It should probably be noted, however, that addressing corruption
has less to do with prosecuting wayward officials than it does with
acquiring technology necessary to increase transparency and decrease
opportunities for collusion between bureaucrats and suppliers.
Both these developments are having
an impact on the way the private sector manages itself. Most notably,
the sudden inflow of business process outsourcing investment is
rapidly introducing world-class management practices. This has at
least two principal results. First, many first-time employees are
being indoctrinated in Western management practices, and enjoying
the benefits - both tangible and intangible - of working for firms
used to competing aggressively for smart people, and demanding the
most of them. Second, businesses that supply these companies - telecom
firms, computer and network manufacturers, recruitment firms, advertising
and creative agencies, construction and office equipment suppliers,
for instance - are adopting world-class supply and procurement practices
as well as global standards of product and service quality.
As a result, we're seeing a gradual
change in the way businesses are conceptualized, grown, and managed.
At the core of these changes is the business model.
BUSINESS MODEL CHANGES
Strategy and Focus. While opportunities are
increasingly plentiful in the Philippines and Asia as the regional
economy recovers, opportunity-driven growth - a product of developing,
protected markets - no longer provides reasonable prospects for
rapid growth and sustainable success. There is instead great pressure
to administer corporate resources efficiently and in an effective,
focused manner to capitalize on distinct competencies. Top managers
as a result spend more time thinking about vision and strategy,
value-driven products and services, and continual improvement in
the hopes of sustaining competitive advantage. Indeed, consecutive
annual surveys by PriceWaterhouseCoopers show that most big-name
CEOs and other top managers spend most of their time "setting
corporate strategy and vision."
Shifting Profit Zones. There are still plenty
of managers out there that spend a lot of time trying to think of
the easiest way to separate potential one-time customers from their
money. But such short-term thinking is on its way out as traditional
sources of profitability are drying up, and managers realize that
repeat customers are more profitable than former victims. Attracting
and keeping profitable customers is the new mantra. Even for well
managed firms, things are changing. Quality and high productivity,
for instance, are mere requisites of doing business rather than
providers of competitive advantage. Competitive advantage instead
is a product of innovation in addressing the needs and desires of
a demanding client base most notable for its constantly changing
preferences. This is apparent in the Philippine banking industry,
where high net worth individuals are courted with special perks
from gold cards to credit lines. Loyalty cards providing 20 percent
discounts lure frequent customers back to expensive restaurants.
Even Mercury Drug - once the epitome of customer disdain - rewards
loyal customers with discounts, gifts, and raffles.
Constant Revitalization. Innovation isn't limited
to sexy technology industries and exporters. Rather, consistent
innovation is a requisite in every industry as the competition to
capitalize on shifting profit zones heats up and the traditional
cachet accruing to market share evaporates. From food processing
to business services, management excellence is characterized by
the capacity to think differently. For MTV Philippines, that means
attracting new sponsors and viewers with a fashion awards and a
youth festival. Real estate developers no longer offer housing,
they offer an environment.
Tuning into the Consumer. The consumer really
is king, at last. After decades of lording it over a captive marketplace,
lumbering private-sector bureaucracies are learning to be customer
intimate or perishing. This is a dramatic development that will
gain additional momentum as prosperity increases in the Philippines
and Asia and consumers become comfortable "throwing around
their weight." The second top priority of Asian decision-makers
is staying in contact with customers according to PriceWaterhouseCoopers
surveys. BMW offers customers and prospects a day with a new model.
Ford calls customers to schedule maintenance, and again afterwards
to make sure things went well. Who can think of a fast food restaurant
that doesn't deliver?
Expansion to New Markets. Liberalization is
not one way. While Philippine and other Asian companies must gear
up, consolidate, and merge to compete in Asia, Western markets are
free game. And technology - especially Internet and e-commerce technologies
- will make it easier for Asian companies to move into Western markets.
But a good idea still holds a premium. WEBWORKS OS founder and fellow
Enterprise columnist Joey Gurango is a good example. In a little
over a year, he's built a company that provides focused software
development expertise not to large enterprises, but to commercial
software solution developers the world over.
NEW CORPORATE CHARACTER
Observers, analysts, and pundits rightly criticized
Asian governments, ponderously uncompetitive conglomerates, and
inefficient, poorly regulated banks for delaying structural reforms
as the severity - and prolonged duration - of Asia's financial crisis
became increasingly apparent in the late 1990s. The framers - and
principal beneficiaries - of the now mythical Asian miracle fought
an untenable battle to preserve a comfortable way of commercial
life tied to privilege and payback. But Asia's new generation of
leaders refuse to be held back by their Jurassic predecessors. For
this new generation, leadership has more to do with communication
skills than connections. And no competitive advantage is sustainable,
not even the capacity to think faster than the competition, as one
international consultant proposed. There are other differences.
Consider technology. For the new generation of business
leaders technology is far more than a productivity-enhancing convenience,
it is a means to address strategic concerns: 1) understand the company's
real sources of revenue; 2) identify profitable customers; 3) build
new strategic models to capitalize on shifting profit zones; and,
4) identify new business opportunities. Then there are the people
themselves. The new generation of leaders seems to realize that
people, not a closed market, are the critical resource. Getting
the right people, in the most important positions, with the right
tools and the mandate to do their jobs is requisite to industry
leadership for these new managers and entrepreneurs.
The Philippines catharsis that began with the Asian
financial crisis provided an opportunity for fundamental change.
Despite significant hurdles to change - political uncertainty, bureaucracy
and corruption, and entrenched elites, for example - change has,
and is, taking place. New entrepreneurs are being created, a world-class
brand of managers is taking charge of Philippine enterprise, and
consumers are demanding global standards of quality, service, and
value. While the Philippines may not be an Asian leader yet, it
can get there. As long as it continues to get its act together,
that is.
(Michael Alan Hamlin is the managing director
of consultancy TeamAsia and the author of three books on Asian economies
and companies. His latest book is Marketing Asian Places,
of which he is a co-author (Wiley, 2001), and he is currently
at work on High Visibility: The Making and Marketing of Asian
Professionals into Celebrities. Write him at mahamlin@teamasia.com.).
Copyright © 2004 Michael Alan Hamlin. All Rights
Reserved.
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