Liz Alexander, PhD | Futurist. Author.Consultant. Speaker.
Dr. Liz Alexander has been named one of the world’s top female futurists. She combines futures thinking with over 30 years’ communications expertise to produce publications that showcase the advice of fellow futurists on issues including the future of education, and how businesses can practically benefit from working with the futures community.
Dr. Liz is the author/co-author of 22 nonfiction books published worldwide, that have reached a million global readers, and has contributed to leading US technology magazine Fast Company, Psychology Today, and journals such as Knowledge Futures, and World Futures Review. She earned her PhD in Educational Psychology at The University of Texas at Austin.
How can we become better prepared for challenges such as those accompanying Industry 4.0 technologies, the trend for more services activities within manufacturing firms, and shifting trade patterns? One answer is to build capabilities in order to boost competitiveness in a world in which rapid and reliable global connectedness is vitally important. These are what’s known as the three Cs: Competitiveness, Capabilities, Connectedness, and they are all intrinsically intertwined.
Yet the execution of such strategies can often be unexpectedly thwarted. For example, a policy research working paper produced by the World Bank Group, in partnership with the Turkey Ministry of Science, Industry, and Technology , found that with regards to the servicification of manufacturing in that country: “Although servicification has the potential to boost firm performance, the opposite appears to be the case in Turkey: manufacturing firms with service affiliates tend to be less productive.” The report then goes on to explain why: Because a number of reforms and the easing of regulatory restrictions were needed before it was possible to bring about the desired outcomes.
That is one of the problems with taking issues out of context and believing that—even collectively—these three Cs are a panacea. This is particularly highlighted when we examine those examples in the area of global competitiveness, and what it really takes for such high-performing countries to reach that particular goal.
As the IMD World Competitive Rankings for 2020 show, there are patterns to be gleaned from those countries that ranked highest on global competitiveness: Singapore, Denmark, Switzerland, the Netherlands, and Hong Kong SAR. One pattern that caught the attention of the IMD data analysts is that they are all relatively “small economies.” While there is no single agreed definition for this term, generally speaking “small economies” are considered to be countries with a high GDP relative to the size of their populations.
As Arturo Bris, Director of the IMD World Competitiveness Center and Professor of Finance, is reported to have said, “The benefit of small economies in the current crisis comes from their ability to fight a pandemic and from their economic competitiveness. In part these may be fed by the fact it is easy to find social consensus.”
In other words, small economies have the advantages of agility and flexibility, even if many of them don’t always live up to that.
A multitude of other factors was shown to play a key role in these successes, among them robust international trade and investment, high employment contributing to a strong labour market, and business efficiency.
What these findings also made clear was that countries that dropped dramatically in the rankings from the year before, such as the United States (-7) and China (-6), had become mired in major issues like trade wars and various forms of social, economic, or political turmoil. Hence the concept of “competitiveness” is not simply a question of business and industry acting alone or stepping up their efficiency and productivity. There are broader economic and social considerations that feed into a country’s ability to boost its competitiveness.
While it is tempting to think there are definitive lessons to be learned from studying and trying to emulate countries that score highest on the measure of competitiveness—and sometimes there are—we should not lose sight of the fact that the factors contributing to those successes are deep-seated in culture as well as policy. Take the Nordic countries for example (Denmark, Finland, Norway, and Sweden), all of which ranked in the top ten on business efficiency that plays such an important role overall in competitiveness. Not only are they known for being open cultures, but they place a high value on maintaining strong health and education systems— paid for by some of the highest tax rates in the world—which has helped to support their robust labour markets.
That aside, as the World Economic Forum pointed out in the executive summary to its Global Competitiveness Report Special Edition 2020, in relation to the current pandemic: “This unusual moment calls for innovative and much-needed policy shifts.”
According to one definition the capabilities of an organisation are: “the capacity, materials, and expertise an organisation needs in order to perform core functions.” In short, they embrace everything from customer relations to materials-and IT-management. Certainly, firms need to strengthen their ability to produce higher value-added products and services, driven by R&D and innovation.” But how best to do that?
As with competitiveness, there needs to be a shift in thinking in addition to policy. More specifically, to embrace what has been called “open innovation.”
To think that one’s greatest capabilities lie only within the walls of your office, manufacturing plant or factory has been shown to be a fallacy. The business world is replete with examples of collaborations between competitors, supply chain partners, customers, and even the general public that have broadened the capabilities of companies and led to the production of new products and services.
As reported by TorbjØrn Netland, Chair of Production and Operations Management at ETH Zurich, open process innovation is the future of operational excellence. Sharing proprietary machine data with machine suppliers, for example, not only helps those suppliers gain valuable insights, leading to “a cost-effective way to outsource and unlock process innovations for particular machines.” This kind of openness also generates a competitive advantage for the company against firms that prefer to keep such data under wraps.
Netland cites a cluster of companies operating in the high-end electronics space in Scandinavia that realised they had less to fear from each other than from foreign competition. The members of this cluster actively cooperated to innovate their processes by, “opening their factories to local competitors, organising joint seminars, and sharing process problems and innovations in dedicated workshops.” Each cluster member thrived in what would otherwise be a marketplace in which they would have had to face fierce competition alone—both internally and externally.
In the Netherlands, international brand Philips opened their High Tech Campus Eindhoven in 1998 not just to technical universities, but to other companies so that they might all share knowledge and insights within an “inspired R&D playground.” Philips’ approach to openness has led to the company being called “the innovation titan of industry,” resulting in them making over 1,700 new patent applications in 2017 from ideas and knowledge shared among those whom other organisations might consider “competition” rather than collaborative partners.
That gives another meaning to the 3rd C in our list: Connectedness, in showing how connecting with competitors enhances capabilities.
One of the questions raised during the current pandemic has been whether we are seeing the rise of deglobalisation. After all, the microscopic virus known as COVID19 has single-handedly achieved a decline in global connectedness, in terms of products and people crossing international borders. Thanks to digitisation, however, services have been less affected.
Despite the challenges—political, economic, and logistical— brought about by the pandemic, the consensus of opinion, certainly among those international experts taking part in one IMD roundtable , is that while globalisation may have slowed down because of the coronavirus, it’s still on an upwards trend.
In reviewing DHL’s Global Connectedness Index 2020 for this article, two things jumped out at me. The first was how many countries appear in both that index and the competitiveness rankings, underscoring the point I made earlier about how the 3Cs are intertwined:
The second point was seeing Malaysia listed as one of the “top outperformers,” exceeding expectations by the widest margin with regards to both the depth and breadth of its connectedness. Depth (how much of a country’s economy is devoted to imports and exports) is said particularly to spur economic growth, with breadth indicating the extent of a country’s international connections.
Half of these top ten notable countries are in SouthEast Asia: Cambodia; Malaysia; Singapore; Thailand; and Vietnam. As the DHL report goes on to say: “SouthEast Asian countries benefit from linkages with wider Asian supply chain networks as well as ASEAN policy initiatives promoting regional economic integration.”
Hence one might conclude that it is not necessarily global connectedness (breadth) overall that is most advantageous to a country’s economy, but the strength of its regional ties. Asia seems to have an edge in that regard. Perhaps all it takes is embracing a more open attitude towards sharing knowledge and ideas with regional partners and “competitors”, rather than believing that one’s country capabilities are the be all and end all.
Who knows where that might lead and who knows where that might lead with respect to boosting competitiveness overall.