The following is an edited version of the presentation made at the 2018 University of the Commonwealth Caribbean (UCC) Research Conference of the same title:
Physical borders are no longer barriers and competitors anywhere can enter new markets with highly innovative products and services, so implicit in the conference theme is the notion that innovation and technology can be harnessed as drivers to overcome the challenges of global competitiveness faced by firms and that new paradigms of entrepreneurship are necessary to seize the opportunities and overcome the threats emerging in local and foreign markets.
But we are living in exciting and challenging times. We are in a technology-enabled world where we no longer need road maps to travel anywhere, because we have a GPS to tell us where and when to turn with unerring accuracy. We no longer need travel agents. We board planes without boarding passes. We transact activities easily without cash. We connect readily with family and our 5,000 personal friends on social media, knowing everything about everything through google and other search engines.
Is it possible that the more we connect, the less we really communicate, as we are inundated with a rapid succession of Tweets or improvised communications by everyone, including world leaders and other decision-makers? Do we even talk to our children and our families anymore, as everyone is fully wired to the Internet?
The global payment system
In remittances and money transfers new paradigms of value transfer, such as Blockchain and Bitcoin, are emerging and are being seriously considered by institutions globally. Are we seeing the beginning of a revolution in the global payment system that will profoundly affect how individuals, Governments and businesses take advantage of emerging technologies to support their normal business processes involving transfer of financial value across the globe? How will states, through their central banks and regulators, react to loss of systemic control of the payment system and what new regulations will emerge globally and locally?
It is now very easy to transfer funds to my daughter who has just gone off to college overseas, simply by inputting her e-mail address or phone number through Zell overseas or PayPal locally and funds are instantly transferred from my bank to hers. I never even left my armchair. “As yuh quint it reach!” Further, it only cost US$6, instead of the US$35 charged by my local bank, plus the additional fee charged by their foreign correspondent.
Even Amazon also provides this service, intensifying global competition in the remittance industry and driving down profits for those providers who lack synergy with their other businesses, or lack economies of scale and scope or fail to differentiate their services.
Revolution in communication
We no longer wait for the newspaper to arrive in the morning or the evening news to begin; the news cycle is now instantaneous. Events occurring locally and across the globe are reported within minutes, if not seconds, and quickly dominate our consciousness.
We are no longer invisible and anonymous, as Governments and companies can track our shared profiles, Internet searches and purchases and easily determine if we are to be denied or granted access in airports; or determine which items we like, want desire or must have through our actions on the online.
Potential employers, even universities, also recruit or take actions based on this new fountain of knowledge about their employees and potential colleagues; presenting us with new risks, but also great opportunities to recruit and retain talent.
But since information is everywhere it must be managed and utilised by businesses to target customers and increase sales and service revenue. There are both opportunities and risks requiring stronger enterprise risk management (ERM) practices, as firms and institutions face the constant threat of cybersecurity breaches that can be both catastrophic and costly.
Accelerating rate of change and disruption
Not only is the world in which we live changing rapidly, but the rate of change is accelerating, and we are increasingly unable to adapt at the same rate at which these changes are occurring.
In The World Is Flat, Thomas Friedman (UNC Kenan Flagler Business School) notes that: “Whenever civilisation has gone through one of these disruptive, dislocating technical revolutions —like Gutenberg’s introduction of the printing press — the whole world has changed in profound ways…But there is something different about the flattening of the world that is going to be qualitatively different from other such profound changes; the speed and breadth with which it is taking hold. This flattening process is happening at warp speed and directly or indirectly touching a lot more people on the planet at once. The faster and broader this transition to a new era, the more likely is the potential of disruption.”
Others have described the world in which we live as a “VUCA environment” (Kiesinger and Walch, 2012), characterised by volatility, uncertainty, complexity and ambiguity. This notion, first introduced by the US War College, was later adopted to describe the uncertain environment described as the “New Normal” in which businesses must operate, strategise, and manage in an increasingly competitive global environment to extract profits.
To this I would add that there is an Environment of Opportunity, as these changes provide increasing opportunity for entrepreneurship, innovation and value creation. In this rapidly changing milieu, entrepreneurs must be precise in formulating and executing effective strategies infused with global perspectives, while rigorously evaluating and monitoring the achievement of stated objectives and ongoing firm performance.
Success or failure is ultimately judged not just by mere survival, but by superior firm performance, as evidenced by increasing market share, net income, earnings per share, and, ultimately, an increasing stock price, if the firm is publicly traded.
Now more than ever research, and particularly applied research and development, must be pursued and applied by entrepreneurs in this quest for global competitiveness and product or service differentiation. Customers now demand that services exceed their expectations and are more than that which is promised in the advertising. And companies must track and manage customer satisfaction in every step of the interaction.
I emphasise that failure to deliver on these promises results in competitive weakness and customer attrition to competitors. Entrepreneurs must use technology and innovations to manage customer relationships (CRM). The outsourcing of business processes into BPO businesses is both a cost-reduction response to improve cost competitiveness and an effort to deepen customer satisfaction and cross-selling of products depending on the types of B2B services used.
Entrepreneurship, technology and innovation play a critical role in value creation and firms must respond to the opportunities and threats presented by the external environment by taking advantage of their strengths, while mitigating their weaknesses, to achieve global competitive advantages and derive profits.
Onset of globalisation
As we first discussed the competitive environment faced by firms, we note that the neo-liberal period of history that came to the fore during the Ronald Reagan and Margaret Thatcher era witnessed the emergence of supranational institutions such as the International Monetary Fund (IMF) and the World Trade Organization (WTO), as mechanisms to facilitate the opening of economies and the removal of tariff barriers that once protected local industries. These institutions, coming out of the post-World War II environment, were designed specifically to stabilise and foster the growth of large economies and, unsurprisingly, they were deemed unresponsive to the needs of small developing states, who were not even independent states when the rules of engagement were first established.
In this new neo-liberal world order called globalisation nations could no longer deny foreign competitors access to their domestic markets, nor could they protect their local industries with subsidies, as had been the case previously.
Businesses everywhere faced the stark reality that they must quickly innovate and adapt to the new trade realities, the emergence of new technologies. This includes not just hardware and software but re-engineered processes, new modes of communication and new business models.
You may recall that in many small open economies, like Jamaica, with industries such as the dairy industry, were wiped out by the onset of globalisation, as cheap milk powder substitutes were dumped on our local markets. Banana, sugar and other agricultural products became less competitive, as foreign foods entered our markets at lower prices, destroying the economic basis for local agricultural production. These issues were noted in the documentary Life and Debt that can be viewed on YouTube, and highlighted the onset of globalisation while illustrating the reality that both large and small firms everywhere must achieve global competitiveness in the new environment, or they would no longer survive.
Importantly, because of globalisation total global trade flows increased dramatically, and competition intensified commensurately among firms for new and expanded markets globally. We also saw a change in the behaviour of multinational and other corporations, who took advantage of these global trends to carry out “market seeking”, “efficiency seeking”, “resource seeking”, and “strategic asset seeking” behaviours to enhance new production and distribution configurations in what we now know as the global production chain, the global supply chain and the global value chain.
In these new configurations, products may be designed in one country, parts manufactured in several countries based on specialisation, cost and efficiency factors, including labour costs, then assembled in another and distributed in the home country or on global markets.
Global standardisation and economies of scale created new competitive price advantages for such firms to the detriment of entities in markets where such efficiencies did not exist. For example, one Airbus Industries aircraft is assembled from a network of specialised suppliers in several countries producing 150 different parts of the aeroplane.
Yet, many smaller and entrepreneurially driven firms have learnt to be more agile in this new competitive reality and have developed appropriate strategies, including product differentiation and focus. This allowed them to compete effectively in market niches where they could establish a competitive advantage over other firms with high market share or that had achieved positional advantages that benefited from economies of scale and scope.
Capital flow and regional integration
Some of the factors that have given rise to today’s intensified competition in the global environment included the removal of exchange control restrictions on capital movements based on the new tenets of globalisation that required removal of capital restrictions and impediments on both trade and financial flows.
As such there are both pros and cons of globalisation. Technology played a key role in facilitating financial globalisation. Financial markets across the globe became more interconnected, permitting massive flows of capital in the form of foreign direct investments (FDI) from one region to another. This created massive shifts in production patterns from one geographic market to another.
We witnessed the rise of the BRICS (Brazil, China, Russia and South Africa) and the new South-South flows of FDI that resulted. The Caribbean also benefited from increased FDI flows, mainly in tourism and infrastructure.
China emerged as a very strategic production location for multinationals; providing economies of scale and efficiencies in production and creating pricing advantages for many products bearing home country brands. These production arrangements have now been built into the global supply chain of many multinationals. To demonstrate this, the soles of your shoes or the labels in your clothing or the electronic devices that you use daily may well indicate that they are made in China or elsewhere, notwithstanding the company that markets them or their home country.
Regional integration movements, such as European Union (EU) and North American Free Trade Agreement (NAFTA), comprised of USA, Canada and USA and others emerged to seek regional competitive advantages to counter-balance perceived disadvantages in global trade for the benefit of its members. In the Caribbean, Caricom emerged, but has not lived up to expectations.
Regional integration movements are now in decline following a wave of nationalism and the perception that some partners had gained undeserved advantages, hence Brexit (exit of Britain from EU) and renegotiation of NAFTA.
Unfortunately, globalisation was accompanied by the loss of jobs in some home markets and the migration of jobs, which was quite acceptable when the arrangements were first negotiated, but not anymore. This has given rise to significant bilateral trade imbalances and the simmering trade and tariff battle between the USA and China that continues to disrupt world trade and cause uncertainties. Significant efforts are now being made by the USA to change the extant world order that emerged with globalisation.
Hence, there has been a retreat from a more multilateral world order, known as globalisation, in which countries consulted and cooperated closely, to a bilateral one, in which individual countries advance their own agenda for bilateral resolution to the exclusion of long-standing strategic partners.
This phenomenon described as deglobalisation is the process of diminishing integration between certain units around the world, typically nation-states. It stands in contrast to globalisation, in which units become increasingly integrated over time. This is considered inimical to expansion of total world trade.
We now wonder about the future direction of the WTO, which has been criticised for failing to address the issues facing small island developing states (SIDS) after countless rounds of negotiation.
This phenomenon of deglobalisation now represents a new and unstated challenge facing nations, including those of the Caribbean and the companies operating in those countries, as it is said in an ancient African proverb that “when the elephants stampede the grass gets trampled”, meaning that the interests of small open economies could be harmed as they have little control.
But it is our own Bob Marley that said, “Foolish dogs bark at flying birds,” indicating the futility of complaints and the need to creatively and innovatively engage the contending states through diplomacy to ensure that the interests of Caribbean states and our own country, Jamaica, are protected, while the developed nations pursue their own national interests to the exclusion of others, especially SIDS, who are affected by the global warming and rising sea level phenomena among other disadvantages.
Significant improvements in the technology of maritime transport of goods also played a key role in globalisation through the invention and engineering of the standardised 20-foot and 40-foot containers, including refrigerated ones, that increased shipping efficiency. Specially designed and equipped vessels, equipment and infrastructure for trans-shipment also emerged. These technological improvements and innovations also facilitated inter-modal transport, as goods could be swiftly moved to trucks, trains, or even aircraft for delivery to markets in distant lands, thereby increasing firm’s competitiveness. Related ports and canals have become larger, thereby reducing shipping time to market and operating costs and facilitating more efficient trade.
Competitive economies for business success and GDP growth
As we look at the ecosystem in which Caribbean firms operate, we note that slow but steady progress has been achieved by Caribbean states in improving their national competitiveness by promulgating policies and establishing projects to modify some of the six attributes described by Professor Michael Porter in his dissertation on the Modified Diamond Framework of National Competitiveness.
Porter’s model describes dynamic inter-relationships between firm strategy, structure and rivalry, related and supporting industries, factor conditions, and demand conditions, and factors in the role of government and chance, referring to unforeseen events. See Figure 1.
However, at the national level, further useful information can be gleaned from the World Economic Forum’s 12 Pillars of National Competitiveness, which illustrates that there are three groupings of factors ranging from basic requirements, efficiency enhancers, and innovation and sophistication factors depending on the state of development — that are key factors that must be strengthened as a prerequisite for growth. This makes the country attractive to businesses worldwide and creates opportunities for entrepreneurship and innovation to thrive.
These “basic requirements” include institutions, infrastructure, macroeconomic stability, health and primary education and are key for factor-driven economies.
“Efficiency enhancers” include financial market sophistication, technological readiness, and market size.
The more advanced grouping “innovation and sophistication factors” include business sophistication and, ultimately, innovation factors, which are key for innovation-driven economies.
In the search for global competitiveness of firms it is an imperative that in the context within which firms operate Caribbean states seek to achieve higher levels of national competitiveness to enable their businesses to compete globally. This prioritisation better correlates to the higher GDP growth rates sought. They must develop the higher-order competencies described by the World Economic Forum and allocate resources accordingly to unlock the potential for a surge in new businesses created by entrepreneurship.
Advances in technology and data analytics
Today, the emergence of concepts such as “big data”, “data warehousing”, “data mining”, “cloud computing and data storage”, and the “Internet of things” are but some of the advancements in technology and innovation that provide new capabilities and provide critical insights into potential customers and their behaviours which, in turn, fuels rapid innovation to match those identified needs.
There is a need for managers to quickly process vast amounts of available data and make informed business decisions daily to make the firm more innovative and competitive. This remains one of the greatest challenges facing managers today. It also raises the bar for educational institutions to support human development to match these requirements.
According to Tsun Tzu, a Chinese general who wrote The Art of Strategy, Art of War in about 500 BC: “If you know the enemy, and know yourself, you need not fear the result of a hundred battles. If you know yourself, but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
For entrepreneurs to be successful in exploiting attractive market niches there is an unforgiving demand for more specific marketing data and analytics to identify and unlock marketing segments and niches that can be profitably exploited. Firms must also clearly define and strengthen their internal capabilities, conduct market positioning inquiries to identify the innovations and features and customer benefits required by potential customers, and better position their products in attractive niches, where they are competitive and can garner profits.
In analysing competitor and customer data firms must also more closely examine their own internal capabilities, strengths and weaknesses and innovate constantly to achieve appropriate competitive responses as innovation may create temporary competitive advantages that are soon replicated by competitors.
Internet of things ( IoT) and disruption of industries
As we look more closely at our conference theme of ‘Developing Innovation, Entrepreneurship and Technology for Global Competitiveness’, we are forced to consider the new paradigms that have emerged in product and service design, facilitated by the IoT and other technologies and capabilities.
What is the IoT, we may ask? According to Forbes magazine: “Simply put, this is the concept of basically connecting any device with an on and off switch to the Internet (and/or to each other). This includes everything from cellphones, coffee makers, washing machines, headphones, lamps, wearable devices, and almost anything else you can think of. This also applies to components of machines, for example, a jet engine of an aeroplane or the drill of an oil rig.
They go on further to state that “the analyst firm Gartner says that by 2020 there will be over 26 billion connected devices… That’s a lot of connections (some even estimate this number to be much higher, over 100 billion). The IoT is a giant network of connected “things” (which also includes people). The relationship will be between people-people, people-things, and things-things.
It is not hard to imagine how this IoT connectivity will disrupt or influence many industries involving both products and services. Imagine your refrigerator communicating with the supermarket and your groceries being replaced and your bank account charged without any intervention on your part. The sky is the limit.
Self-driving cars like the Tesla motor car and fully automated trucks are now a reality. Aeroplanes, buses and trains will soon follow. Drones are everywhere, filming everything, delivering goods, supporting law enforcement, land surveying, and titling and many other functions cheaply. We have seen how Uber has disrupted the taxi industry with its fleet of private cars and drivers. We have seen how Airbnb has transformed the hospitality industry by allowing householders to provide rooms to visitors over a secure platform that assures payment, some screening of clients, and $1 million in insurance coverage for property damage by guests. This is a reality that is now happening in Jamaica, too, as reportedly millions of dollars of new revenue are being generated across the country from this innovation in tourism, adding to GDP.
The invasion by Amazon, once thought of as a book and product distributor, into the food distribution industry, through the acquisition and integration of supermarket operator Whole Foods is a shocking reminder to competitors across several industries that a new and formidable global competitor, enabled by technology and innovation, can arrive on their doorsteps at any time and intensify competition and take away market share and profits while disrupting their present business models.
If you were managing a major food manufacturer and distributor in Jamaica, or were a supplier, would this trend be of concern? What actions or change to your business model would you be forced to consider in your annual strategic retreat? Do you have a well understood business model?
Entrepreneurs have determined that to survive and thrive in this VUCA environment a key competitive factor is the imperative to create strategic alliances and networks across the globe, to partner in other firms global supply and distribution chains, rather than undertake head-to head competition and risk declining profit margins and loss of market share. Some firms have partnered with Amazon.
In the pursuit of new opportunities for growth and profits it is often said that firms must “think locally but act globally”. There is often debate on exactly what this means and how this should be operationalised and whether the two are mutually exclusive.
As firms seek to adapt products to better match the requirement of customers wherever they are located adjustments must be made to provide specific product, packaging, branding and design attributes reflecting local culture, language, and taste preferences.
Local may therefore mean not only being adapted to home markets, but also adapted to foreign markets through innovation so that products are more readily accepted and the barriers to foreign market entry, such as the perception of “foreignness”, “language” and “culture” are overcome.
Some companies have reorganised themselves as multi-domestic companies where each subregion has the flexibility to adapt to the local situation, versus an international structure where the international division at home office dominates and the competencies at home office are evident in the products or services delivered in the foreign marketplace, perhaps uncompetitively.
Competing effectively in foreign markets requires far more than simply slapping a label on a product and shipping it. Consumers there may have preferences regarding the distribution channels through which the goods are to be purchased. This may require engaging in distribution arrangements, partnerships or joint ventures with local firms to overcome these hurdles, so firms must consider carefully the modes of foreign market entry available, including equity (hierarchical) and non-equity (arm’s length) modes.
Entrepreneurship and the entrepreneur are vital elements in meeting the competitive challenge. According to William B Gartner in the Journal of Venturing: “The debate about what constitutes the nature of entrepreneurship can be characterised by these eight themes.
1. The entrepreneur: The entrepreneur theme is the idea that entrepreneurship involves individuals with unique personality characteristics and abilities.
2. Innovation: The innovation theme is characterised as doing something new as an idea, product, service, market, or technology in a new or established organisation.
3. Organisation creation: The organisation creation theme describes the behaviours involved in creating organisations.
4. Creating value articulates the idea that entrepreneurship creates value.
5. Profit or Nonprofit: The profit/nonprofit theme is concerned with whether entrepreneurship involves profit-making organisations only.
6. Growth: At issue in this theme is the importance of growth as a characteristic of entrepreneurship.
7. Uniqueness: This theme suggested that entrepreneurship must involve uniqueness. (this could simply mean doing an ordinary thing in an extraordinary or unique way)
8. The Owner-Manager. This theme suggests that entrepreneurship involves individuals who are owners and managers of their businesses.
Clearly entrepreneurs play a key role in adroitly seizing business opportunities that have been created out of new technologies, or the application of old technologies to solving new or existing problems.
Entrepreneurs are key drivers of economic growth in any country and governments must provide the enabling environment and remove institutional rigidities impeding business growth and success. Importantly, the architecture of supporting industries and resources must be provided to generate success and growth of local entrepreneurship.
Business innovations today are increasingly supported by simultaneous advances coming from the Internet, the emergence of Social media and new modalities of financing, including venture capital, crowdfunding, and in Jamaica access to the Junior Market of stock exchange.
Firms who innovate and embrace transformation and change including digitising information and digitalisation of their business processes will not only thrive but can succeed beyond their wildest imagination.
Entrepreneurs often leverage innovation and uniqueness themes to create returns on their investment. It is their propensity for risk-taking and “going where no one has gone before” metaphorically that distinguishes them from the ordinary businessman who also seek to make a profit.
Role of tertiary institutions
Today, as we consider the role of important tertiary institutions like the UCC, the Mona School of Business and Management other institutions of learning we are forced to consider how we may identify and best develop the traits of entrepreneurship and innovation of more of our students to make them creative risk-takers, innovators and entrepreneurs.
Firms, too, must continue to rapidly accelerate and improve internal employee training by building partnerships and alliances with tertiary and other institutions to strengthen employee skill levels and performance while taking advantage of consulting services available to strengthen business performance.
As educators, we must ask what changes to our curriculum, teaching methods, and student development and mentoring is required in these times and what changes should occur in the eco-system of business that are urgently required to support entrepreneurship, innovation and value creation. Much has been done, but are we doing enough to innovate in education? Can we do more?
We must ask and seek to determine through research how innovative are our Caribbean firms and how can they respond and adjust their products and business models to suit the new reality that is emerging. Will current theories of how firms achieve competitiveness need to be re-examined through research and new critical thinking to identify the new paradigms and responses required for greater innovation and entrepreneurship? Where are the academic research gaps that can be filled by the Caribbean’s many fine academics?
I commend the UCC, its sponsors and others who are willing to commit scarce resources to conferences on these issues that can undoubtedly have practical outcomes for human development, competitiveness, and firm performance in Jamaica and the Caribbean.
Ralph Thomas is a consultant, director and lecturer at the Mona School of Business and Management at the University of the West Indies, Mona. He is former ambassador extraordinary and plenipotentiary and resident head of mission, the Embassy of Jamaica, Washington DC and permanent representative to the Organization of American States, as well as ambassador extraordinary and plenipotentiary and resident head of mission, the Embassy of Jamaica, People’s Republic of China. Send comments to the Observer or [email protected].
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