Over the years, we have changed the nature of our economy on the basis of new competencies. We migrated from an agricultural economy to manufacturing and heavy industries in the 1980s to escape from the vicissitudes of commodity prices — first with import-substitution industries, and eventually, into export of manufactures, chiefly electrical and electronics. We were able to diversify the economy because we were willing to learn new skills.
Then in the 1990s, we realised that there was greater productivity in service and knowledge-based industries.
So, we have the services sector that contributes some 60 per cent of our gross domestic product while manufacturing has doubly shrunk to contribute roughly a third. Again, superior competencies enabled the country to jump to this new paradigm.
If there is a lesson to be learnt here, it is that businesses have to constantly renew their competencies if they want to grow and create value for their shareholders, customers and suppliers. Only then they can gain a competitive edge and stay ahead of competitors.
In the evolving dynamics of globalisation, there is now a trend where increasingly businesses are headed to the emerging markets.
Ram Charan, a business consultant and writer, captures this shift admirably in his book The Global Tilt.
While Charan raises the alarm for businesses in the West to aggressively respond to this shift, it holds valuable lessons to businesses in emerging countries, including Malaysia, as they welcome this migration.
The emerging markets may be down for now but they are not out yet. When the global economy revives, we can see their resurgence, accelerated by this pivot to the south.
In his oft-cited quote, professional ice hockey player Wayne Gretzky has this to say: “I skate to where the puck is going to be, not where it has been.”
Competitive advantage does not last long. Competitors will soon copy your strategy and technology, or substitute them with something better.
So, it behoves businesses to look into the future to spot trends and gather what they must to survive in this challenging marketplace.
Businesses have to rethink the traditional debate of making or buying their technology and raw materials for the manufacture of their final products.
Harvard Business School management guru, Michael Porter, contends in his book, Competitive Strategy, that companies must sieve through their operations with a fine-tooth comb to identify which activity in their value chain that costs more than its contribution to the company’s margin. Where feasible, the company should eliminate that cost-sucking activity or outsource it.
There is merit in this argument. However, companies are there for the long haul. Retaining such cost-draining activities may well continue to provide synergies for the other parts of the company’s operations.
Equally, they will continue to offer a learning experience to build up expertise and institutional memory. These will come in handy in the future as the company diversifies into new products. Taking the long-term view of things will help a company build its competencies for the future.
Lenovo, for example, continues to invest in the future despite losses in the short-term. Take the visionary thinking of Masaru Ibuka, the founder of Sony, that created the Sony Walkman. The Japanese are adept at miniaturisation to serve a population that cannot afford bulky appliances in its tightly compact homes. The development of miniaturisation technology then led to the Walkman shrinking to the size of a thumb drive.
Apple, too, had an eye to the future. It developed iTunes to assuage the conscience of music lovers who, without much choice then, were illegally downloading music files from the Internet.
How should companies go about developing their competencies for the future?
Gary Hamel and C.K. Prahalad, two business academics, assert in their book Competing for the Future, that winning in business is not about being No. 1, but who “gets to the future first”. As such, companies should develop a strategic architecture that maps out where their competencies reside.
Companies then should develop extensive communication networks across the organisation. They can then tap into their competencies and combine them to seize with celerity market opportunities. For example, Sony requires its engineers, technologists and marketers to have a sound understanding of customer needs and collaborate with customers to yield products beneficial to them.
What is the government’s role in this? How can it help companies compete in the future?
FIRST, the government can bring companies together to share knowledge and research efforts that can spark innovation among them.
SECOND, build innovation labs, akin to Sirim testing labs. Such labs will allow companies to come together to develop new knowledge.
THIRD, make it easier for companies to use government research facilities, which in some cases, are far superior to those of the industry, to co-create new technologies and products. Companies can then combine joint-research output with their respective competencies to create new demand or markets — the “blue oceans”.
Competencies are prerequisites amid disruptive forces of global competition. Companies should accumulate and take advantage of them. They should never make the mistake that Kodak did — it invented digital photography, yet failed to capitalise on it. Instead, it focused on its better-returns business model based on film that doomed Kodak to bankruptcy.
Companies should ask the burning question of whether to continue to compete in an existing business or build new competencies to reshape existing markets or create new ones. Williams Jennings Byran, an American orator and politician, says: “Destiny is no matter of chance. It is a matter of choice. It is not a thing to be waited for. It is a thing to be achieved.”
Datuk Dr. John Antony Xavier is the head of the Strategic Centre for Public Policy at the Graduate School of Business, Universiti Kebangsaan Malaysia