Wandering the World…

I was just emailed a link to the keynote presentations from the conference in Oxford: “Confronting the Challenge of Technology for Development: Experiences from the BRICS” and I realized I should post a copy of my abstract and some follow-up thoughts from my presentation (which was about the diffusion of innovation in developing countries through microfranchising).

(For a basic introduction to microfranchising, you can go here or here)

Follow-up thoughts:

• Microfranchising is an powerful, intuitive concept that will most likely spread exponentially in a similar way to microcredit.
• It addresses both social and economic problems in a novel and effective way.
• There are unsuccessful microfranchises (one of which I learned about at the conference), and I need to do more exploration as to what factors were involved.
• The innovations needed for developing countries are not just product innovations, but also innovations in system and process (as the ones which are implemented from developed countries often fail) - and microfranchising is a great example of that.
• Microfranchising is a useful concept for developed countries as well, and for govt and education as well as business.
• I want the journal we choose to publish our article in to be free and online, in order to reach the most people of the key target audience.

Here is the abstract…
The Diffusion of Innovations in Emerging Economies through Microfranchising

P. Clint Rogers, Ph.D.
Jason Fairbourne (Director, MicroFranchise Development Initiative),
Robert C. Wolcott, Ph.D. (Founder & Director, Kellogg Innovation Network; MBA & EMBA Faculty, Innovation & Entrepreneurship)

Abstract:
Emerging markets present a host of challenges for the traditional structures and operations of multinational businesses. Everything from different consumer needs and marketing obstacles to product distribution challenges and human resource management issues (Srinivas, 2002). These challenges provide opportunities for innovation not only in product development, but also in organizational structure and management (Brown, 2004). In this article we present an innovative business management model called microfranchising which has successfully facilitated the introduction and scalable distribution of innovations in emerging economies. The impetus behind the origination of the idea was to provide sound business opportunities and services to the world’s poor by introducing scaled-down business concepts found in successful franchise organizations. The key principle is replication– replicating success to scale through three enabling characteristics: (a) organic nature, (b) modularity, and (c) micro-scalability.
In this paper we discuss how microfranchising can solve many of the problems of traditional approaches to introducing innovations in emerging economies, and we describe as case studies two microfranchise organizations offering ICT (Information and Communication Technology) services in emerging economies: Drishtee and One Roof. At the core, Microfranchising addresses four primary challenges found in emerging economies: (1) the lack of jobs in many communities, (2) the lack of business skills among the poor needed to grow a successful business, (3) the lack of goods and services available to the poor (e.g. lack of efficient technologies), and (4) the lack of MNC’s understanding or ability to operate successfully in this vastly different context. We also illustrate how the concepts involved apply to a broader context of business and government.

Keywords: Knowledge Transfer and Innovation in MNCs/MNEs, Corporate Governance in Emerging Markets, Entrepreneurship in Emerging Markets, Marketing in Emerging Markets, Sustainable Development, Technology Transfer, Microfranchises

Attending a conference at Oxford last week (“Confronting the Challenge of Technology for Development: Experiences from the BRICS”), I heard several of the speakers refer to Finland as an example of one of the most successful countries in terms of development and productivity growth over the last couple decades (one speaker even referring to it as one “Superstar model”). Being back in Finland again, I have asked myself why has Finland been so successful (when so many other countries struggle and fail to do what Finland has done)?

[FYI - There are all kinds of quotients and formulas out there to measure the “productivity” of a country, and people are constantly debating about what should be included in them. Usually included are a combination of things like GNP, import/export ratio, capital accumulation, growth per capita, patent applications made, publications, Research and Development ROI, etc…]

So why can you give money to Finland, and they very effectively turn it into productivity and growth, when you could give it to other countries and not have nearly the same result?

Here are some of the ideas I have thought of or heard from others (You should vote for one of them or suggest your own). Why Finland has been so productive and successful:

1. Because Finland has such a low corruption rate (one of the lowest in the world), the money doesn’t get embezzled by government leaders, and people work together better because they can trust each other more.
2. Finland is very homogeneous - this also helps with getting people to work together and trust each other.
3. Finland is very egalitarian (perhaps due to the Lutheran influence?)- and so this helps to mediate some of the glory seeking and conflict. [e.g. I heard from one man that all government officials at a certain level are required to take a business economics course in which they get assigned a role that is not their own, then use real data and numbers from Finland’s economy to make decisions and policy recommendations. This helps them see that they need to work as a team, and appreciate the insights they learn from those with another expertise.]
4. Finland is used to pulling together to face very difficult challenges and great odds. [e.g. when China started becoming more of a threat economically, they flew over some of their top people who came back with a much different approach.] This is like the “sisu” mentality - which comes from things like enduring months of freezing cold weather with virtually no sunlight, living in the woods for years without talking to another person, or sharing a boarder with a country that likes to keep you on your guard.
5. There is a hypothesis that a country’s productivity level and growth is directly proportional to the amount of Karelian pasties they consume?
6. Perhaps by requiring men to wear speedos at all public pools - this bring a special camaraderie, creating a better environment for working together? Kind of symbolic of stripping issues down to the meat and bones and avoiding anything extra.
7. The fact that Finns don’t engage in much small talk (e.g. ignoring each other rather than saying “hi” to each other as they pass each other) maybe saves time for them to be more focused and productive?
8. Perhaps it is because people around the world serendipitously thought “Nokia” was a Japanese company - and so invested in it heavily?

Any other ideas that you can think of for why Finland has been so successful?

The ambassador to the United States for the European Union (”His Excellency” John Bruton, former prime minister of Ireland), gave a Kennedy Center lecture at BYU yesterday.

He shared a lot of interesting information about the EU, how it functions, and why it is important to the US (e.g. over 70% of foreign investment in the US is from Europe). Two things stuck out in my mind from his speech. One is the imbalance of wealth in the US and EU compared to the rest of the world (Europe has 30% of world’s wealth with 7% of the world’s population; the US has 28% of world’s wealth wit 5% of the world’s population) - and ideally as a result the stewardship we should feel to make the world a better place (I know that is optimistic of me, but at least I can hope).

The second thing that stuck out to me, although I wish he would have gone into more detail, was when he mentioned the differences between Europe and the US.

In response to a question about public opinion in Europe toward the US, he said he would not talk to a US audience about it, but then he told us what he would say to a European audience. My paraphrase of the speech he would give to Europeans:

“Even if the president of the US changes, or even the party in power charge changes, don’t expect too much change from America. It always has had its:

• Own special interests that it tends to cater for
• Own sense of history, what works and what doesn’t work
• Own political system with certain reflexes built in

We are different. It is OK that we are different. Just recognize the difference, try to understand those differences and respect them. Just like American’s should understand that Europe is different, and we have different expectations, reactions, etc.”

So the most obvious question is whether you agree that it is OK that there are differences between the US and Europe? I imagine that some differences obviously cause more concern than others (e.g. policy towards war vs. favorite foods).

But that is not where I want to start. I prefer to explore and try to understand what more of the differences are first before judging some of the most obvious and controversial ones. So I want to start by asking:

What do you think are some of the differences between Europe and the US? (your personal perception)

He didn’t go into that much from his perspective, but I wish he would have. Then I’d like to ask:

Of those differences, are they “OK” and should we just “understand” and “respect” them? Why or why not?

I am currently in the Helsinki airport, returning from a great trip to China. One of the books that I read during my visit was China Shakes the World, by James Kynge. I had been to China three times previously and could sense the scope of what is happening there, but it wasn’t until I read this book that I felt like I got a good macro-picture idea of the forces inside China and interacting between China the rest of the world.

As soon as I get back to Joensuu, I want to briefly summarize some of the thoughts and my reactions regarding the following four topics:

The size and scope of industry in China

The strengths of China

The weak spots of China

The challenges and questions in the future for all of us

(Me at Chongqing, on the Yangtze River - city talked about in Chapter 2 of the book. Perhaps in the coming decade Chongqing might become the largest city on earth, with nearly 32 million people currently in the immediate municipality)

As a part of the IMPDET Cross-Cultural Research Group, we have started a “Reflection Wiki” that allows us to post situations in cross-cultural interactions that we wish we had more perspective on - to check if our initial interpretations of the situation were accurate or misleading.

The hypothesis behind it is this: In most interactions we probably make too many assumptions about the meaning behind what people say or do. Cross-cultural interactions magnify this. So the hypothesis is that perhaps more meta-communication tools can help us learn more about what others really mean, and also more about ourselves.

I wanted to cross-post one of my first entries here, in case anyone else reading it (especially anyone from Finland) might have some insight into the phenomenon I describe.

1. Situation:
   In Finland I notice how no one really smiles at each other in public places. On the street, on the bus, in the halls of the University - quite often people don’t even make eye contact, much less smile at me or say hi. My Finnish friends are extremely welcoming, kind, hospitable and friendly, but it is just strangers and new acquaintances that are more stand-offish than I am used to.
2. Expectations:
   I didn’t even realize I had this expectation, but I guess from growing up in the US I did have the expectation that if people are nice and friendly then they smile and say hi, even to strangers. (My subliminal expectation: nice + friendly = smile at others, or at least acknowledge their presence with a nod or something)
3. Interpretation:
   My gut level interpretation and emotional reaction is that, in general, people are not as friendly, nice, happy, etc… with strangers here, and that they are less interested (at least initially) in becoming friends with me or letting me get to know them. But cognitively I tell myself that might be more of my emotional reaction, when I don’t really know what is going on in their minds, or what the meaning is behind the unwritten rules of public conduct.
4. Response:
   I talk less to strangers than I otherwise would.
5. Questions:

To anyone else who has been to Finland – Did you feel the same when you first spent time in Finland, or is it more like what you are used to in South Africa, Sweeden, Spain, etc.?
How did you see it? How did you respond?

To anyone from Finland – From the Finnish point of view, what do you think might be the deeper meaning/reasons why behavior is like this in public in Finland? What might I be missing in my gut-level interpretation from my cultural expectations?

To anyone – Any other insightful thoughts (or funny comments)?

I heard Brian Reynolds, second secretary/vice consul at the U.S. Embassy in New Delhi, India, speak at BYU Wednesday about the rising economies of India and China.
He wanted to emphasize his title (the end of American economic supremacy) is a question, not a statement. His disclaimer is that his opinions are his own, not representing the department he works for.

But he has worked extensively with the state department in both China and India. It was a great presentation, but I won’t duplicate all my notes here. I’ll just point out a couple of interesting things about each area.

Currently:

13 trillion gross domestic product (GDP) - USA

10 trillion GDP - China

4 trillion GDP - India

India:

India has labor resources that have remained untapped. India focuses primarily on education - families and extended families sacrificing a ton to get children to receive an education. The goal is to put the child in a position to receive a job that makes them competitive in the global market, but there are not enough jobs for them to have in India - so there is a lot of frustration and underhanded things. Corruption is a big thing.

In India, the high-paying jobs are not in the manufacturing as much as in the service industry (similar to the US). Lots of managing off-shore site call centers. Very transitory work environment - lots of turnover, not a lot of job loyalty.

Work visas are frequently given in the US for Indians who qualify for jobs that have been advertised but not filled. They come with expectation of earning great wealth - then they are surprised to see the cost of living is so much higher. Still, they see the jobs more and more as entitlements for their hard work and education. Americans may not feel the same way.

These people are very smart, intelligent, competent at jobs. If not hired here, American companies will often go there to hire them. This is a hot button with Globalization.

India has a bureaucracy that is incredibly difficult to navigate- payoffs, bribes, old laws.

China:

First off, the scale of things in is huge!

Thee are no “summarizable, identifiable characteristics of China” - as the scale and complexity and change is so great. There are only very loose generalizations. Many business people come to China and are amazed at the opportunity and at the same time overwhelmed by the bureaucratic mass.

There are more people speaking English in China than in the US (430 million speaking English or taking it right now).

Already China is losing some advantage - in certain areas there is a labor exhaustion so companies need to bring more labor in. Other countries (Viet Nam, Indonesia, other SA countries) benefit from difficulty of costing and keeping labor. Cost of labor goes up every day in China. An offer for 10cents a day more will cause you to switch jobs.

Do we exaggerate the rise of China - when they still have out-of-date technology, and other issues?

Are there better uses for China’s boon than spending a lot on the military?

Information technology is changing attitudes in China. People can more easily share opinion, find better work, and all this alters feelings about situation. It is interesting that there is no concept of communism in the strictest sense from the average Chinese worker - they feel they deserve more if they work longer, are more educated, have more experience, etc.

Another interesting example: there was a television program similar to “American Idol” called “Pretty Singing Girl” where people could text in their vote of who they thought was best. After about three episodes, the government shut down the program, because supposedly they did not want to send the message that the mass of people should be deciding what was best.

Unfortunately, China has passed up the US as the largest polluter in the world.

30 million people fall below the poverty level - they look for work and find low-paying labor jobs in cities, and still live beneath the poverty level.

Early days - economic decisions were a lot more limited in China. Now there are a lot more choices.

In China, 30-40% of income is saved by the average family. In the US - it is more like 0%. Their ideas for social entitlement are much different than ours. The 1 child policy is a big thing, with a lot of spin-off issues - much pressure on whether that child be able to support parents… The average Chinese worker in their 40s will be supporting 4-6 people in their retirement years. Does this cause an influence on things like female infanticide (because you want your one child to be a male - in order to support you and carry on family name, etc.)? Now there is a surplus of 40 million young men - who can not find a woman to marry - is this associated with crime, prostitution, etc?

There is a lot of concern over trade deficit. There is a lot of concern over work visa (and zenophobic reactions).

Statesman, CEOs, other VIPs go to China and try to help come up with policy.

The exchange rate has been 8.41 for RMB. People argue that it is way to high - that it has doubled its value. One of the things that moves the Chinese economy along is that things are so cheap. Lots of involvement in trade - difficult market for the US.

IPR (Intellectual Property Rights) violations - pirated dvds, etc. Perhaps this is the biggest economic concern from Congressional VIPs. Software manufacturers, Hollywood, books, etc - all are violated if they have any economic value in Chinese economy - they will be copied. There is now the 500 law - if you don’t have more than 500 illegal copies of the software, etc…you will not be prosecuted. Very difficult to enforce. When they do enforce, there is a lot of hype about it for the cameras, but not much happening beyond cameras.

A big goal of Chinese govt. is to sustain growth.

There is a disparity in countryside vs rural areas in China.

Industrial growth, service sectors are growing.

_________________________________

So that was what he talked about.

I personally find both countries, India and China, to be so much more than sources for labor or exportation/importation - but what are the best ways to minimize the dark sides and encourage each to further develop as places of incredible human potential and vibrant thought, places where valuable innovations will come from, and places where if developed, supported and trusted can contribute in many ways to help make the world a safer, better place?

Maybe it is naive of me, but I’m not as concerned with economic supremacy as I am with other things. I adhere to the abundance mindset (that there is enough and to spare) and try to steer away from the scarcity mindset (that only certain people or groups can have, and that they have at the expense of others). It is true that many Americans seem pretty complacent - thinking that just because we have been in a certain position for all of our living memory, then that means we always will be. Well, it looks very likely that America will not be in the same position, and I do not think that is all bad. I do think we are in a great position to take the best parts of America (of which there are many), and contribute those with the best parts of the rest of the world (including India and China) to create a new future that is a lot more synergistic than protectionistic.

Anyone agree or disagree?

I followed the example of Rich Hoeg in using Google Co-Op to create a Search Engine that indexes current and archived business management and strategy podcasts from top academic business schools (MIT, Harvard, Stanford, Dartmouth, Wharton, and Insead - with campuses in France and Singapore). I also used RSS Include to embed custom RSS Feed readers for the most recent podcasts from a couple of the above mentioned schools.

If you are reading this post from an RSS Feed, you will have to link directly to my blog to see the search engine and automatic feeds.

• Search Engine:

• Podcasts:

Stanford:

Harvard:

MIT:

Insead:

I was sitting in on a lecture given by Dr. Albrect, one of the top accounting experts in the US, and paid particular attention to his unique perspective on the international trends in accounting standards.

Accounting is the life-blood of any business (as it monitors and measures the cash flow) and standards are absolutely necessary for having common reporting practices. For years the board that creates the accounting standards in the USA (the FASB), and the majority of university programs and accounting professionals assumed that the American standards in accounting would end up being the world’s standards. Well, recently and quickly it looks like the tides are shifting more toward the standards created by the more recently established IASB (International Accounting Standards Board). Although nearly 80% of the standards are the same, there is a huge need right now for people to understand the differences.

If I wasn’t afraid of boring you, I’d be tempted to give an exposition on all the fascinating international issues in accounting: with more jobs going overseas to less-expensive workers, subsidiaries and products being bought in foreign countries, products being created in one country and “bought” by a subsidiary of the same company in a different country in a way to minimize taxation by having a majority of the profit recognized in the country with the lowest tax rate (e.g. Cayman Islands, Puerto Rico, etc), translation and transaction issues with fluctuating exchange rates, etc., etc., etc. - more and more international issues present themselves than ever before.

In the 1950’s most everything a US company bought, produced and sold was all done in the US.

Today, with an engineer in the US costing about $80K/year vs. one in the Philippines costing about $10K/year or a programmer in the US costing about $75-85K/year vs one in Eastern Europe costing about $7K/year - it is easy to see how even the workers of US companies will increasingly be individuals in other countries. Immediate cost savings in salary is obvious, but other difficulties arising from things such as cultural differences and expectations in work environments, communications and relationships are less obvious.

Dr. Albrect shared a specific example of how England, Ireland, and Canadian accountants debate “ad nauseam” with accountants from the US over standards in education and certification of accountants. Whereas the US puts a lot of emphasis on a major exam that is a standardized test and 1 year of experience to receiving the CPA certification, formal education and big tests means less in these other countries - instead a lot more emphasis is placed on a 3-4 year apprenticeship model towards becoming a chartered accountant.

Well, this entry has been a mesh of a bunch of issues - but the essence of it is (1) Americans need to be a whole lot more sensitive to international issues than they are, and (2) that the network of people who we work with and/or receive even daily services from will increasingly be of an international flavor (I read recently a post on how perhaps even fast food ordering will soon be outsourced internationally).

My goal is to look at the way in which technology is connecting us all in international collaborations - and the ways in which cultural differences can be turned from liabilities and into assets - for all of us.