Developing innovation, entrepreneurship and technology for global competitiveness
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
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.