Thursday, June 14, 2012

Danger of Cheaper, Faster and Better

The story of SQ is the story of Singapore. Another firm used to to share the same sobriquet: Shell Singapore.

Shell is luckier than Singapore and George Yeo tried to replicate it for us.

Shell used to be run as country businesses but it eventually consolidate them along global business lines, i.e., globalization in practice for businesses. We tried to do the same cutting free trade agreements and other pacts with other nations. Of course our imitation of Shell is very imperfect. After all it is an MNC and head office can exercise complete command and control.

SQ represents the parts of us that cannot be globalized. Predictable rationality dictates that she gets "better, faster and cheaper" This is actually a brain dead idea. Others are coming to your table to feast. That table is not growing as quickly as the diners. Of course if these newcomers are aggressive and effective, SQ will end up with a smaller pie.

"Better, faster and cheaper" is only good for buying time to prepare a new table or hop over to another table where you can give the same pressure to the incumbents what you had just gotten at your old table.

Unlike in the 80s, productivity improvement is not good enough because the top line is also under pressure. We are forced to take a page from Steve Jobs playbook. He recognized that mobile phones will supplant the iPod, so he preempt them with the iPhone.

Markets progress brutally through Schumpeterian creative destruction. It is better to cannibalize your own business to create a new one than let others do it. Sadly our business and government leaders by and large have neither the courage nor imagination to entertain this. Additionally since we are so small, we will always be vulnerable to the Dutch economic disease.

Indeed it is a struggle to keep Singapore going and instead of coming up with bold and imaginative initiatives our leaders in the comfort of their corner offices are stuck with talking brave and driving our workers to the bone with "cheaper, faster and better" This is a sure loser proposition even as we systematically accumulate budget surpluses, pile up our reserves. Instead of using these funds to venture capital bootstrap our economy they are stashed away solely for a rainy day when we might die from other causes before it rains. And if they complain that we do not have the talent then please own up that our education system was an abysmal failure. Government cannot have its cake and eat it.

Fortune favors the courageous. Who has the guts to lead us? I am waiting to acknowledge and support such leaders. I do not know who they will be but  many of us already know who they are not. The present CEO of SQ is certainly not such a leader. He is too cautious with a tendency for half measures.

3 comments:

  1. Our reserves are not "really stashed away solely for a rainy day",that is too safe.
    Our reserves are managed in the hope of getting a higher return,No game No gain,that is what our government believe.
    Pray that they are right.

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  2. The people gambling with our reserves have much to gain when they win and nothing to lose when they lost, because the people are the one bearing the risks and loses in return for 2.5% CPF interest that can't keep pace with inflation.

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    Replies
    1. Those anointed ones gambling with state reserves have much to gain and nothing to lose because the people are the ones bearing the risks for returns of 2.5% CPF interest that cannot keep pace with inflation.

      Delete