Reinventing Caribbean firms for the Future

Silburn Clarke, FRICS

Vice Chairman: Labour Market Reform Commission, MLSSChairman: Technology, Innovation and Productivity Committee

Chairman/CEO: Spatial Innovision Limited

10th ILO Meeting of Caribbean Ministers of LabourILO / MLSS / CCL / CEC

Kingston. Jamaica February 22nd, 2017

a. The Innovation- Productivity-Competitiveness-Prosperity Challenge

b. We are in the throes of Knowledge-based Economy / Fourth Industrial Revolution• Emergence of Knowledge Economy

• Correlations

c. Where does Firm Sustainable Competitive Advantage arise from• Firm Level

• Knowledge, Innovation, Creativity (KIC Factors)

d. Status of Caribbean Firms• Review of Firm Capacity for Innovation

e. Conclusion: The Triple Helix Model / Paradigm

f. Take Home Thoughts to Ponder

PRESENTATION OUTLINE

DEFINITIONAL

Value creation in the market from New or Improved products, processes, methodologies, business models, or services

PRODUCTIVITY EFFECT

Productivity improvement is paramount for achieving sustainable and inclusive economic growth (GDP), growth in employment, improved living standards (GDP/Capita) and global competitiveness …… without productivity growth the well-being of society will either stagnate or deteriorate.

FIRM INNOVATION BEGINS WITH INDIVIDUALS

Clarke 2012

The Innovation-Productivity-Competitiveness-Prosperity

Link

Innovative Capacity

Competitiveness Improvement

Prosperity

Begins with research and development

Productivity Growth

Present Status: 2001-2015 period (JPC)

Average 14year TFP: -0.5% pa: (level of efficiency & intensity of labour and capital in producing output)

Factors: Quality of management, governance, investment climate, innovation, technology, knowledge and information

2012-2015: +ve TFP trend

Jamaica’s economy had been trapped in a low-growth, low-productivity mode for nearly four decades resulting in the stagnation of the standard of living of its peoples (Jamaica Productivity Centre, 2010 and World Bank, 2011).

Present Status: 2001-2015 period (JPC)

Average 14year CP: -0.1% pa: (Capital stock outpacing GDP)

2009-2015: +ve CP trend

INNOVATION CRISIS, PARADOX and CONUNDRUM

Over the 14-year period (2001-2015) labour productivity measured as output (real value added GDP) per worker declined at average rate of 0.7% per annum (JPC)

Paradoxically, for the past two decades, Jamaica has enjoyed both exceptionally high levels of foreign investment (Williams & Deslandes, 2008) as well as a rate of total fixed investment, over the two decades from the 90’s to the mid-2000’s, which was close to those of the fast-growing East Asian region (World Bank , 2011).

One explanation of paradox : Low skills levels in the workforce

Global economy has been in transition since the 1980’s to what is variously termed a New Economy, Digital Economy or a Knowledge Economy

B. THE NEW KNOWLEDGE ECONOMY

The traditional economic model is dead !!

•The model of the last 2 eras (agricultural and industrial ) indicated that Land, Labour (low-cost) and Capital (LLC) were the key factors of economic production

•Knowledge has become the main resource

Welcome the New Economy!!

Umemoto 2006

POLICYMAKERS PERSPECTIVE - VISION 2030

High Threat Levels: Jobs/Tasks/Activities that are simple, repetitive, routinized

Low Threat Levels: Jobs/Tasks/Activities that require creativity, innovativeness, thinking, intellect

Fourth Industrial Revolution

Driven by continuous advances in:

Machine Automation, Nanotechnology, Global Communications, Ubiquitous IT, Quantum Mechanics/Theory, Pervasiveness of Mobile Devices, Big Data / Analytics, Apps / Software, Robotics, Artificial Intelligence, Cloud Platforms, Particle Physics, Smart Energy Tecnologies

Global Shift to the Knowledge Economy

RESOURCE-BASED ECONOMIES EFFICIENCY-BASED ECONOMIES INNOVATION ECONOMIES

TransitionI to II

Honduras Venezuela

TransitionII to III

BarbadosCosta RicaPanama

Stage II

GuyanaJamaica

Dom Rep

Stage III

Trinidad

Stage I

HaitiNicaragua

Countries compete based on theirfactor endowments: primarilyunskilled labour and naturalresources.

Compete on the basis of price andsell basic products or commodities,with their low productivityreflected in low wages.

Countries begin to develop moreefficient production processes andincrease product quality.

Competitiveness is increasingly drivenby higher education and training.

Wages have risen and they cannotincrease prices

Companies must compete byproducing new and different goodsusing the most sophisticatedproduction processes and throughinnovation.

Wages will have risen by so much thatthey are only able to sustain thosehigher wages and the associatedstandard of living by higher valueproduction

The Shift to Knowledge and Innovation

WEF 2014-15

INNOVATION EXPANDS THE PRODUCTION POSSIBILITY FRONTIER

•Through Knowledge, Innovation and Creativity (KIC)

•The Resource Based View (RBV) identifies the combination of Valuable, Rare, Non-Inimitable and Organisation (VRIO) resources and capabilities as the source of firm modern competition (Wernerfelt 1984, Barney 1991)

•Valuable resources and capabilities ….only gives competitive parity

•Valuable and Rare resources and capabilities ….. only gives temporary competitive advantage

How can businesses create wealth and prosperity?

C. Sustainable Competitive Advantage

• Resources and capabilities which are Valuable, Rare, Inimitable plus supported by an Organisational context, culture and processes that can exploit these resources and capabilities especially where these are tacitly embedded or intangible (VRIO).…yields Sustained Competitive Advantage (Wernerfelt 1984, Barney 1991, Peteraf 1993, Bounfour 2003)

•Dynamic Organisational Capabilities flows from a grounding in Knowledge, Innovation and Creativity (Teece et al 1997, Grant 1996, Eisenhardt and Martin 2000)

•Knowledge resources are identified as being at the heart of the advantages under the Resource Based View (Conner and Prahalad, 1996) and in building national intellectual capital for global competitiveness (Stahle and Bounfour, 2008)

How can businesses create wealth and prosperity?

SUSTAINABLE COMPETITIVE ADVANTAGE MODEL

Is the resource or capability valuable ?

Is it heterogeneouslydistributed across

all firms ?

Is resource or capability imperfectly mobile ?

Competitive disadvantage

Competitive parity

Sustained Competitive Advantage

Temporary Competitive Advantage

YES

YES

YES

NO

NO

NO

Mata, Feurst, Barney (1995)

Acquired /Imported Innovations

IndigenousInnovations

Is the organisational model embedded

?

YES

•Caribbean cannot assert any globally distinctive VRIO resources or capabilities from factors derived from factors structurally bounded to the old agro-industrial model

•They are no longer relevant; have not been relevant for a long time

•We have no distinctive land assists, no low-cost labour factor, no unique capital factor

•The English-speaking Caribbean investments in social capital (including education and training) lags the rest of the Caribbean and the general CALA region (Beckles, 2017)

•Blue Ocean Strategy: We have to start investing our time and energies into creating, enhancing, preserving our own KIC factor for maximal global economic leverage.

•Caribbean has to build its own capacity for continuous improvement and for creating indigenous innovations.

Reorienting the Caribbean Firm

Review of Firm Capacity to Innovate

The WEF GCR sub-index “firm capacity for innovation” for Jamaican businesses revealed a dismally low collective national rating of 107 out of 139 when compared to national ratings in other economies around the globe in 2010, (WEF, 2010).

On the recent 2011 Global Innovation Index Jamaica was ranked 92nd out of 125 countries (INSEAD, 2011 ).

INNOVATION CRISIS, PARADOX and CONUNDRUM

D. STATE OF CARIBBEAN FIRMS

FIRM-LEVEL INNOVATION ACROSS CARIBBEAN

Resource-rich ≠ capacity to innovate

WEF - Firm Capacity for Innovation

Pronounced uniform regional group inflexion

How do we radically transform the Firm Innovation Outcomes ?

IMPROVING STATE OF CARIBBEAN FIRMS

E. Building Tripartite Consensus – The TRIPLE HELIX Model

The "triple helix" is a spiral model of innovation that captures multiple reciprocal relationships at different points in the process of knowledge capitalization.

The triple helix denotes the university-industry-government relationship as one of relatively equal, yet interdependent, institutional spheres which overlap and take the role of the other.

Triple Helix – DNA for National Innovation

Rests on Pillars of:

Vision, Leadership, Innovation, Collaboration

· The first dimension of the triple helix model is internal transformation in each of the helices,

· The second dimension is the symbiotic influence of onehelix upon another,

· The third dimension is the evolution of new overlays oftrilateral networks among the partners,

( adapted from Etzkowitz 2002)

1. Are the institutions comprising the training and education ecosystem presently optimised for delivering the workforce of today and of the future (ECLAC, 2015)

2. Are the level of investments (public & private) supporting the creation of knowledge and intellectual capital adequate to energise and drive the necessary economic growth which the region seeks

3. How do we ensure that our Helix partners continually improve the training and educational ecosystem for most effective delivery

4. How do we mitigate the loss / leakage / outward migration of talent to the metropoles

F: Some THOUGHTS for TRIPLE HELIX Partners to Ponder

Innovation comes out of creative thinking and creative performance; we must learn to think creatively and to do creatively

Requires reshaping the mental models and mindsets by learning by doing

Requires both Divergent and Convergent thinking

F. BUILD a CULTURE and PROCESS for CREATIVE PROBLEM-SOLVING

Firm Innovation starts with individual employee creativity; creative thinking, fact finding and creative performance.

Firm Leadership which builds Supportive Work Contexts facilitate Intrinsic Motivation which nurtures Employee Creativity

EMPLOYEE CREATIVITY

CREATIVE PROBLEM-SOLVING

Creativity Thinking Skills Innovative

Results

=

Content

+

Process

+

Process

Skills

+

Tools

+

Style

Create OptionsNo JudgmentNo Logic

Evaluate OptionsYes JudgmentYes Logic

Basadur 2012

“If we remain in pretenceWe will be on the wrong side of the fence“ (adapted from Bob Andy, Fire Burning)

Strategic plans projections for a future of sustained high growth in Caribbean economies must be undergirded by growing current investments in training, education, skills development, managerial quality. The one will not happen without the other

Need to restructure economic payoffs to favour innovators and the innovating firms in order to drive sustainability, flexibility, competitiveness and prosperity

Expand / Enhance the quality & quantity of the human talent pool by infusing creative thinking, creative problem finding and solving within schools, universities, business firms and the government

Adopt Triple Helix Model as broad collaborative framework for building tripartite consensus and providing a structure, process and culture for operationalising a sustained shift in national and regional innovation outcomes

G. MESSAGES TO TAKE HOME

About the Author: https://www.researchgate.net/profile/Silburn_Clarke

https://www.linkedin.com/in/silburnclarke/

Labour Market Reform Commission: https://www.linkedin.com/in/labourmarketreform/

Publications:

https://www.researchgate.net/publication/313314490_Breaking_down_barriers_to_Caribbean_prosperity_through_a_restructuring_of_the_economic_payoffs_for_innovation

https://www.researchgate.net/publication/260638458_Strategies_for_enhancing_Jamaican_competitiveness_in_the_global_knowledge_economy

https://www.researchgate.net/publication/305687139_Priority_policy_recommendations_for_transforming_individual_productivity_and_SME_competitiveness_in_Jamaica

https://www.researchgate.net/publication/299747565_Towards_a_talent-driven_outward-oriented_globally-competitive_SME_framework_Discussion_Paper

https://www.researchgate.net/publication/303114038_Synthesis_of_major_cross-cutting_recommendations_from_the_TIPC_Working_Groups

https://www.researchgate.net/publication/299604127_Human_Factors_Affecting_Productivity_in_Jamaica_Technical_Report_on_Preliminary_Findings

Links

THANK YOU !

Silburn Clarke, FRICS

silburn@spatialvision.com