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Promoting Global Competitiveness
By Michael Alan Hamlin
June 21, 2004
The capacity to effectively manage
change within organizations seems to be an important characteristic
of enduring firms. Microsoft, HP, and Sony are all great examples.
Microsoft bought what became DOS, which stands for disk operating
system in case you've forgotten, from another fledgling firm which
eventually disappeared. HP was founded to design and manufacture
scientific instruments. Sony wound up producing consumer electronics
when one of two founders observed the other lugging around a heavy
tape recorder.
All of these companies changed when
something unexpected happened, and their top executives had the
good sense to abandon less promising development strategies. Usually
this kind of fundamental, successful big change happens fairly early
in a company's history. The longer a company finds success doing
certain things a certain way, the harder it is to get it to change.
This is nothing new, but I started thinking about managing change
in the Philippine organizational context during the 4th Anniversary
Conference of BayanTrade (Full Disclosure: BayanTrade is a client
of my firm.) last Friday.
BayanTrade has evolved constantly
during its first four years, and that's one of the principal reasons
it's survived. When BayanTrade was founded, it was an e-marketplace.
That was a very trendy thing to be just before the Internet bubble
burst. The company quickly realized, however, that there wasn't
any real money in being an e-marketplace. Margins were too thin,
and many companies worried about security instinctively shied away
from the notion of joining a public e-marketplace.
Today the company has become a sourcing
and procurement services provider to firms that wish to outsource
these processes to cut overhead and operating costs. BayanTrade
appears to have found its niche. Approximately P23 billion has coursed
through the company via 1,700 sourcing events and 150,000 purchase
orders. It has thousands of buyers and suppliers, and has introduced
value-added services that enable BayanTrade to help companies increase
productivity and efficiency along entire supply chains.
As a result of these changes, and
the way they've been managed, BayanTrade is now cash-flow positive
and doesn't rely on its shareholders for additional developmental
funding even though the firm is still very young. By yearend, it
hopes to be near profitability, or better. And it is expanding.
In January an office in Singapore was opened, and BayanTrade announced
new partnerships in Indonesia and Thailand during the conference.
The keynote speaker for the conference,
SocioEconomic Planning secretary Romulo Neri also talked about the
benefits of successfully managed change, but in the context of changing
the way a country works, and not just its companies. Neri's remarks
were forward looking, not celebrating a history of accomplishment;
instead, expressing hope for the future.
Among the benefits of change Neri
sees are increased global competitiveness. For instance, he says
that agriculture should be liberalized so that labor costs are aligned
with those of competitors like Thailand, Malaysia, and China's booming
coastal regions. To do that, tariffs on imported agricultural products
must be removed and that's a politically difficult thing to do because
the agricultural supply chain will get squeezed. The squeeze will
put the middlemen primarily responsible for the high cost of food
out of work, but they will complain about lost farm jobs to resist
that fate.
Like most everyone, Neri also feels
that the cost of energy must be reduced. That will require opening
the distribution sector, as is planned, and providing incentives
for power generators. Likewise he suggests that infrastructure must
be modernized to facilitate the efficient movement of goods and
people. Because government is so short of resources, modernizing
infrastructure will require vast amounts of foreign investment.
For that investment to materialize, the Philippines must change
its propensity for changing the rules of investment midstream, and
do more to assure the success of infrastructure projects.
And like other thoughtful observers,
Neri believes that increased access to education and knowledge is
vital to change and development. The Philippines is unlikely to
ever be able to generate many labor-intensive jobs even if labor
costs come down. And so the country must better prepare its young
people for the jobs that will be available, which at least for the
next decade or so are going to be white-color e-enabled services
positions and indirect employment generated by these service providers.
Generating the resources to train hundreds of thousands of graduates
a year will also require dramatic liberalization of the educational
sector.
BayanTrade is a single company, but
its success so far clearly demonstrates the benefits of change,
even when that change is fundamental, and often painful. Making
the changes on the national level that Neri says are necessary will
also involve some pain, and it's going to make some people very
unhappy, many of them with considerable political clout. But consider
the alternatives. Or rather, consider the alternatives that just
aren't there.
(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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