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Filipino
First?
By Michael Alan Hamlin
November 2002
A few years back, James Collins and
Jerry Porras wrote a book called Built to Last. It was quite
popular here in the Philippines (and everywhere else), and we invited
Porras to conduct a seminar which was attended by mostly senior
executives. The book is attractive to senior executives responsible
for strategy because it is based on a study - conducted by the authors
- meant to identify the qualities of enduring firms.
One of those qualities is the propensity
to take on "big, hairy audacious goals." The authors argued
that enduring companies - those that last 50 years or more (and
there aren't many) - regularly set quantum leap goals that, if achieved,
are likely to dramatically change the way business is done in their
industry. By regularly setting big goals, enduring companies institutionalize
change that allows them to evolve and adapt to significant shifts
and other developments in markets, industry practices, and technology.
Another important quality of enduring
companies is their capacity for competing. None of the enduring
companies in the authors' study, for example, have depended for
their success on protection from competition by such artificial
market forces as tariffs or ancient laws favoring local suppliers.
Because they aren't protected, they are under constant pressure
to innovate in a number of ways. Constant product innovation seems
obvious, but these companies also innovate in ways that enhance
business processes through enhanced efficiency and higher productivity.
Although Collins and Porras have
their critics, no one doubts the academic rigor that went into their
study, or their basic findings with respect to how enduring corporations
work. Most discussion of their work revolves around the leadership
role of CEOs. The authors argue that flamboyant CEOs are generally
more disruptive for an organization than good. But for my purpose
here, what matters is that enduring companies don't get well-intentioned
yet fatal favors from government.
There are other studies that back
this up. Michael Porter, Mariko Sakakibara, and Hirotaka Takeuchi
argue in Can Japan Compete? that it is maverick companies
like Sony and Toyota that excel in global markets, not those nurtured
by the once revered Ministry of International Trade and Industry.
They excel essentially because they have nothing to fall back on,
no safety net. They must be great, or die.
Given the hard empirical evidence
for not protecting companies, why do governments; specifically why
does the Philippine government, want to protect large local companies
by increasing tariffs and tilting the playing field in other ways
in favor of local suppliers? The first reason government gives is
that its neighbors don't have high tariffs, and so neither should
we. This of course ignores entirely the logic for competition that
the studies above demonstrate so conclusively. Which is that companies
forced to compete are the only ones that are consistently top performers.
Another reason cited is to protect
jobs. It is interesting that government feels that deadbeat companies
are better generators of jobs than top-performing companies. And
that it likes to reward these companies for low efficiency and productivity
by allowing them to perpetuate their bad habits. Finally, cloaking
this deed in pious concern for the poor workers is, frankly, disgraceful.
The real beneficiaries are the people who own these companies and
are under little or no pressure to compete. It is these people,
also, that pay for the communications plans and political antics
that support their push for protection.
The losers from protectionist policies
of course are you and me. We lose because we have no choice but
to buy products at prices higher than anywhere else in the world
simply because we are inefficient. Consider sugar, for example.
We already pay a 50 percent premium because that's what the tariff
is. Not content with that hefty barrier to competition, the industry
now wants to raise the tariff to 80 percent. And this ostensibly
to protect workers, while mill owners drive around in shinny SUVs
and live in grand villas.
We suffer indirectly from higher
prices, too. Consider resins that go into anything plastic, and
petrochemicals. Local downstream manufacturers are forced as a result
of high tariffs to pay higher prices for raw materials. Who pays,
ultimately, for this premium? Of course, it is you and me, the consumer,
and that group also includes all those workers tariffs are supposed
to be protecting. But instead of protecting them, high tariffs force
workers into a relentless cycle in which they work harder to buy
fewer goods.
For manufacturers who export, it's
worse. Higher tariffs on basic inputs mean the final output is uncompetitive
in terms of cost compared to other international competitors.
Collins and Porras make a good case
for big, hairy audacious goals. In the current environment in the
Philippines, questioning the wisdom of tariff barriers and local
supplier protection is an open invitation to provoke a big, hairy
audacious controversy. After all, politicians love proclaiming they
are protecting the Filipino worker. Government wants to curry favor
from business and worker associations. And the nationalists want
the big, bad foreigners to pay a price for doing business in the
Philippines.
But they're not the ones paying the
price.
(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). He can be reached
at mahamlin@teamasia.com.).
Copyright © 2002 Michael Alan
Hamlin. All Rights Reserved.
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