ACREINC@20: Lessons in Enterprise Development

This is the start of a series of articles on The Asia-Pacific Centre for Research (Acre), Inc. Acre, Inc. is a full service marketing research and IT consulting agency. It will celebrate its 20th year as an enterprise on August 23, 2009.

In terms of assets and using Department of Trade’s definition, Acre, Inc. remains an SME after 20 years. As compared to the criteria set by Colins and Porras (Built to Last), Acre, Inc. has yet to cross the bridge of greatness which these scholars set at 50 years or more of sustainable operations. In terms of annual revenues, Acre, Inc. has yet to break into the category of the top 1,000 corporations in the Philippines.

However, there are other criteria, not usually emphasized in management books and industry standards, where Acre, Inc. has done considerably well. The company deliberately and purposely focused on these standards to create breakthroughs and raise the bar of excellence in management, marketing research and enterprise development.

I will be writing these articles from several perspectives.

First, as the founder of Acre, Inc. and as its Chief Executive Officer. From this perspective, I may be able to share historical insights and milestones which contributed to the continuing viability and struggles of Acre, Inc.

Second, as an educator. I have been a part-time professorial lecturer at the DLSU Graduate School of Business since 1987 teaching courses in strategic management, performance management and marketing management. From this perspective, I may be able to step back and evaluate Acre, Inc.’s history with objectivity to present lessons in enterprise development and decision making.

Third, as an entrepreneur. I am managing several SMEs including those that I have founded. I have helped many other entrepreneurs start a business. From this perspective, I may be able to internalize and share the challenges of enterprise development – the start up problems, day-to-day challenges, and the kind of business environment that tends to influence long-term viability of companies, large or small.

Fourth, as a student of performance management. As I write this introduction, universities and practitioners are testing and implementing new and more responsive concepts in performance management. As a student, I continue to keep an open mind on the principles that could best work in industry and government. From this perspective, I may be able to rely more on the more recent principles in management and rely less on current standards or dogmas.

This series comes in six parts. I hope that I will have the time to blog these articles way before the deadline on August 23, 2009. I do not discount the possibility of blogging articles other than what should be included in this series if conditions dictate.

The first part includes the pre-Acre, Inc. days (pre-1989). What were the conditions that led to the development of this new enterprise? What were the challenges? What were the management and enterprise development principles that became the bases for the new enterprise? What were the resources needed to start it up and roll over for long-term viability? This article attempts to provide answers to these questions and summarize lessons learned in the pre-Acre, Inc. days. This is a very interesting phase in the life of Acre, Inc. and, if I may, in the life of an enterprise conceived through a combination of randomness and purposiveness.

The second part is about the start-up days (1989 to 1994). What is the main purpose of the business? What are the secondary purposes of the business? What markets and customers will the enterprise aim to serve? In what processes should it excel in a business where systems, methods and technology are victims of obsolescence? In what way should the enterprise position itself in an industry dominated by multinational companies or companies that have been operating for many years? This part discusses the important decision-making days and documents the impact of these decisions on the future of the enterprise. Some are book-line strategies and decisions. Some are blue ocean scenarios.

The third part is about organizational and corporate transformation (1995 to 1999). There is usually a time in the life of an enterprise where management challenges the business and the concepts that gave the enterprise its corporate life. Should we continue to be a player in the industry where we now operate? How can we leverage the resources and experience that we have to expand or venture into other businesses? How do we create an enterprise that grows faster and earns more? This is one of the most challenging moments of Acre, Inc. It was at that time when the environment was changing and business was growing fast. The speed by which technology was changing was also very evident, putting pressure on capital investments and process improvement.

The fourth part is about the company’s physical environment (part of 2000 to 2005). Should we transfer from the tourism center to the financial district? Is it better to investment in an office space rather than lease the space? How far ahead should we plan our physical facilities? For over 10 years, Acre, Inc. was located at the Philippine International Convention Center (PICC) where all facilities were conveniently available. However, it was a city or two cities away from most of its clients. At the same time, PICC was no longer as tenant-friendly as in 1990.

The fifth part is about going back to the basics – the company’s core ideology and roots (2007 to present). With opportunities in research growing, should the company invest in this industry or should the company continue to find opportunities in the IT sector? Can research and IT, as separate businesses units, co-exist or should the company focus on only one business? Alternatively, should there be a third operating division that will focus on performance management, an area where the company has been well recognized? It is in this period that research experienced robust growth but mainly from foreign research clients and partners. Foreign companies from different countries started reviewing business opportunities in the Philippines. In 2008, there were more inquiries for research not only for the Philippines but also for other countries in Southeast Asia. It is also during this period when our talent pool was considerably more than at any point in the company’s history.

The sixth part is about the future of research, predictive analytics and performance management. Is research a growth sector? Will IT continue to grow? In which specific sectors in IT will growth continue? What should be the future of Acre, Inc.? Alan Kay writes that the best way to predict the future is to invent it. The picture of Acre, Inc. on its 50th year has been defined. The first 20 years of the company comprise the first big milestone. There will be other milestones, some shorter in years, and they will be discussed in this article.

(for comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)

Politics of the Sidewalk

Where I live, one has to walk or jog on the street. Not that the street is free of traffic. The area has one of the highest per capita car ownership in NCR. Rather, sidewalks have been taken over by gardens and fences. This scene is typical of many residential and commercial areas in Metro Manila.

Marikina City Mayor Marides Fernando, speaking during the general membership meeting of the Philippine Institute for Supply Management, shared some insights on how the city transformed Marikina to a local government unit that most city mayors envy.

The city implemented several initiatives one of which was simply to give back to the walking public the sidewalk that they deserve. It was a simple initiative that immensely contributed to the transformation of Marikina into a well-governed, multi-awarded city. That initiative turned out to be an effective driver that changed the way Marikina residents and visitors behaved.

Alex Lacson’s book talks of 12 simple things that every Filipino should do. One of these is to follow traffic rules. It is a basic value driver. Following traffic rules drives other important and positive social values. Obeying traffic rules, like proper use of the sidewalk, needs two basic ingredients – a responsible user and rules that are uniformly applied and well implemented. One cannot prosper without the other.

Obviously, Marikina City decided to create an environment where side-walking became pleasurable and street-walking inexcusable. Some statistics: Sidewalk concreted, curbs and gutter : 247.60 kilometers. Cleared Sidewalk : 219.49 kilometers. Total Length of Bicycle Lanes : 24 kilometers.

It is a good, basic program for every city or municipality that envisions a respectable quality of life. It is not going to win elections. However, it will put the city on the governance map and can certainly add political points for future elections.

There are three important dimensions, probably more, about sidewalks – social, economic and political.

Social dimensions of sidewalk

Along some main thoroughfares in Metro Manila, you see many sidewalks used as playground – for basketball, badminton and kids’ games. Occasionally, they are used as an extension of the dining room for parties and social drinking. They become a resting or practice ground for fighting cocks. Sometimes, they become a second bedroom during summer or when the house gets so crowded. It is common to see residents and commercial establishments use these sidewalks for parking. Sidewalks disappear once it is landscaped by the adjoining occupant. They are everything for anybody except as a sidewalk.

Economic dimensions of sidewalks

Around the Remedios area in Malate, cafes take over at night or whenever permitted, following the practice in some places in France and Italy. Sidewalks become romantic meeting places where you get the best coffee and food. In Divisoria, Quiapo, Paco and other designated public markets, sidewalks disappear as vendors and stalls take over. They become free spaces for the huge underground economic enterprise.

Political dimensions of sidewalks

Sidewalks in a city have stakeholders with political clout or influence. Those that have dominated have interests that usually clash with public order. The last time I visited Divisoria was a few years back when I gave my nephews a tour of the city. Very visible were unrestrained economic and social interests which could only be tolerated by political realities. The same may be said with the situation in Baclaran. Visibly tolerated, for obvious reasons, are socially disadvantaged people who, for lack of a workable social assistance program, practically live along the sidewalks. Cause-oriented groups would take up their cause for any attempts to remove them.

Giving back the sidewalk to the walking public is a simple government gesture that could possibly lead to positive social, economic and political changes. It represents many positive things -- Rule of law. Social equality. Safety. Convenience. Unity. Environment. Discipline.

(for comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)

Human Neglect

Pictures shown here are the result of human neglect. Centuries-old mangroves in Barangay Salog in Catbalogan, Samar are dead because of human neglect. The cost of doing nothing. A construction company dumped chemicals around the mangrove while working on a river rehabilitation program. After the heavy rains, water and the deadly chemicals were trapped instantly killing the trees.

The following story, which I borrowed from John Fischer, tells us the cost of doing nothing and doing something silly instead.

In a quality-poor community, the mechanic told the car owner, who coolly agreed to the solution: ‘I couldn’t repair your brakes so I made your horn louder.’

In that community, you can just imagine people honking and making loud noises to tell others that they are passing by, or, if passersby don’t listen at all, you can envision twisted metals and lives lost. It becomes a society racing out of control.

It is a foolish way to solve a problem. But don’t we live our lives a lot like this? Our brakes go out so we speed up, blowing our horns until we run into something.

When companies implement quality programs, say a total quality management system, people talk about the cost of quality. The experts conduct cost-benefit analysis and use sophisticated ratio analyses to justify the investment in quality programs. Rarely do they analyze the cost of not doing quality programs. The absence of quality programs remain an impression.

That is similar to the cost of doing things. Experts worry a lot about the cost of the work to be done or activity costs. But they do not analyze the cost of doing nothing or the cost of idle time. Idle time is hidden in the cost of doing things.

When we talk about the cost of keeping customers, we rarely talk about the cost of losing them or even the cost of replacing them. For some industries today, like the telecommunication and the service industry, the cost of acquiring customers is substantially more than the cost of keeping them. This is a universal trend. Yet we invest more in acquiring customers than in keeping them. Thus, the average cost per customer is higher than what is should be.

We talk about quality products and services. What about life, quality of life? What is the cost of not investing in the quality of life? I have a feeling that it is immense, including economic, environmental and social costs.

(For comments, email to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)

Prosperity, not just sufficiency

A World Bank study published in 1999 reported that Science and technology, including the Green Revolution for agriculture, underpinned the economic and social gains in Asia over the past 30 years. Between 1970 and 1995, cereal production in Asia doubled, calorie availability per person increased by 24 percent, and real food prices halved.

Although the region’s population grew by 1 billion people, food production kept pace with population growth achieved largely through the application of science and technology -- the cultivation of high-yielding varieties (HYVs) of rice and wheat -- accompanied by expansion of irrigated areas, increases in fertilizer and pesticide use, and greater availability of credit.

Unfortunately, we have not seen the fruits of that green revolution in the Philippines. As cited by Henry Lim Bon Liong, CEO of SL Agritech Corporation, when he talked about the rise of the super hybrid rice in the Philippines during the PMA 2008 Agora Conference, “between 1982 and 2000, average world prices of rice have been falling by 0.58% yearly. In contrast, Philippine wholesale prices have been rising by 10.60% yearly suggesting that production has been declining.”

Right to food is a basic human right. Food security is a move towards securing that right. The goal of the Philippine government has been towards rice sufficiency. Sufficiency however is a fancy term that is difficult to attain. First, sufficiency is relative. Its magnitude and complexity change over time. As you reach the goal of sufficiency based on certain parameters defined 10 years ago, conditions and challenges change.

Moreover, aiming for ‘just enough’ or ‘sufficiency, is usually counterproductive. It hardly inspires people to action. What does? A vision that is drastically transforming. A vision that positively alters the lives of our children and our children’s children. From insufficiency to prosperity, not just sufficiency.

Economist Paul Pilzner, author of several books including Economic Alchemy, Unlimited Wealth and God Wants us to be Rich, illustrates the urgency of this paradigm shift. He challenges the framework of economists about the need to manage limited resources arguing that it is based on an obsolete assumption – that resources are limited. He offers a new paradigm – the concept of unlimited wealth.

Henry Lim Bon Lion’s vision for a hybrid rice is greater than the millions of people that it will feed, and the billions of taxes that it will raise for government. It is a paradigm shift – very much consistent with Paul Pilzner’s new economics. It challenges the old order. Obsolete thinking. It demonstrates how knowledge can overcome adversity and transform society.

(This article is based on the author’s synopsis of Mr. Henry Lim Bon Liong’s presentation ‘The Rise of the Hybrid Rice during the PMA’s 2008 Agora conference.’ to comment, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)

Economy is Expanding

The Purchasing Managers’ Index (PMI) is a narrowcasting tool designed to estimate economic trends and complement standard economic indicators (such as Gross Domestic Product) that require three to six months to finalize. It is a response to the need for economic policy makers for timely, high-quality, internationally compatible economic data for planning and decision making.

The PMI –

1. Overcomes most of the problems associated with GDP data.
2. Is produced very rapidly, released on a monthly basis, covering important private sector economic activities; is never revised; and acts as a reliable and accurate indicator of official data that are subsequently published.
3. Is produced using the same methodologies around the world.
4. Tracks actual events, rather than business confidence or expectations.
5. Has a better track record of measuring final GDP estimates than the first estimates produced by the Office for National Statistics – the latter tending to be revised numerous times following initial publication.
6. Methodologies are easily compared internationally.

The value of the PMI is anchored on two major factors. First, it follows the principles of simplicity regularity, relevance, repeatability, reliability, cost-efficiency and scalability. These are the same principles used to estimate the PMI in 26 countries. The PMI of the Institute for Supply Management in the United States has been a leading source of economic indicator since 1936.

Second, it stands on the belief that purchasing or supply chain managers are reliable data sources of economic activities in the private sector. The PMI’s sustainability and ability to comply with the seven basic principles largely depends on the participation of purchasing or supply majors and their role as a gatekeeper of economic activities within the firm. According to experts in supply management:

“Purchasing is at the center of everything. The PM knows what is happening to production or manufacturing, finance, and the profitability of the company. In a way, the PM is a source of a lot of information about the company’s operations.”

PMI data from January to March 2009 measured the deep fall in the country’s economic activity at the time when they actually happened and when government was pronouncing an uptrend. Data released this month confirms that indeed, the economy nosedived in the first quarter with a GDP growth of only 0.4%, way below what the policy makers forecasted.

PMI data in April and May indicated a reversal in trend at a time when they happened and when government policy makers were suggesting a possible recession. Government forecasters and advisers were making a forecast based on data in the first quarter. PMI was reporting actual events as they happened.

(for comment, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)

The Filipino Traveler

I have always wondered how the Filipino is looked upon in the global world. I have heard of many stories. But it takes one’s own experience to formulate a picture of the Filipino in this globalized world. Let me mention five based on my own personal experiences.

First, the Filipino as a traveler and security risk.

You find a Filipino wherever you go. This is a 20^th century spectacle. Travel trends indicate that this will continue to be so in the 21^st century. Filipino travelers are generally labeled as a security risk. There are many anecdotes on this tag. I have personally experienced this special treatment everywhere: in America, in Asia and in Australia. Unfortunately, that tag seems to be at work in the Philippines as well. Putting on a blazer and a fancy hat does not change this tagging a bit.

Second, the Filipino as a good singer and nothing else.

I am proud of one part of this label. It is distinctive. We share this distinction with very few ethnics in the world. Sadly, it is the only thing that stands out in the minds of business colleagues and friends from other countries. After business meetings, when we break for dinner or cocktails, the microphone is passed on to me, with everybody, from the Koreans to the Europeans, expecting me to deliver a grand performance.

Third, the Filipino as a good worker but low-wage earner.

This is puzzling to me. The world demand for talent exists. There are few ethnics that can match the resiliency and patience of the Filipino worker. I could never imagine a two- or three-job rotation. But many Filipinos, in countries where the demand for workers is high, willingly take two to three jobs a day. They work hard throughout that rotation every day and every hour of the day. Despite all that, the Filipino is, generally and arguably, known to receive lower wages. While the average family income of Filipinos in the U.S. is above average, a job-for-job comparison suggests that the salary can improve.

Fourth, the Filipino as an entrepreneur but low-tech.

I am sure this is image-driven. But image has a reality of its own. This is how we are normally positioned in the minds of business people from other countries. We populate the web with business inquiries. We compete with many countries in clogging the web space. In my industry, we are ahead of most countries in requests for evaluation copies and samples. But we stand dead last in implementation.

Fifth, the Filipinos as hospitable people but undeserving of a visit.

I have represented an American company in the Philippines for the last 15 years. Each year, we have Asian and World meetings. Each year, a poll is conducted to determine site preferences. The Philippines is never ever mentioned. The Filipino as an international host no longer exists in the minds of business people: An airport that needs improvement. Convention centers that do not meet world standards. Traffic and pollution. Poor time management. These are some top-of-mind remarks.

The Filipino, in a global economy, has to be purposely repackaged: fun traveler from a security risk; versatile from just being a singer, highly paid worker from hardworking; achiever from cautious user of technology; and an excellent host deserving of a visit.

(Email comments to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)

Knowledge as Resource

Before the turn of the century, management experts Hamel and Prahalad predicted that in the future, the most important wealth of companies will be their core competencies. In that scenario, Hamel and Prahalad defined core competencies as the collective skills of employees in the company. They made the fearless forecast that companies with a deeper pool of core competencies will have the real competitive advantage.

Less than 10 years since this scenario was painted, the foresight has become hindsight. What was predicted has happened. Technology has been so democratized that any company may acquire the ability to produce any product that is as excellent as any other, and distribute these products as fast as any other company.

What differentiate excellent companies are their core competencies – the collective skills of their employees -- and how these companies use these skills.

Core competency can be limitless. It is so because it is based on knowledge which is an unlimited resource. Knowledge is boundless and has no limitations. Knowledge resides in every person without exception. Every person has the power to become a repository and enabler of this knowledge.

At about the same time, Paul Kennedy predicted the resurgence of the power of population. He defined power of population as the capacity of the human mind to find new ways of doing things, to invent new devices, to organize production in improved forms, to quicken the pace of moving goods and ideas from one place to another, to stimulate fresh approaches to old problems.

A global survey among executives to determine the greatest marketplace challenges show that executives are now recognizing the power of population. CEOs in North America and Europe list “shortage of key skills” as one of the marketplace challenges in the coming years.

On the other hand, Asian CEOs feel that they have an abundance of skills/talent. Asian countries (except Japan) are net exporters of talents and labor. Japan evaluated their IT staff requirements and came to the conclusion that they will fall short of the required IT workers by 50,000. It is a serious shortage that they have launched a campaign to certify IT workers in the Philippines, Vietnam, Thailand, Indonesia, Malaysia and India.

Given the right conditions and motivation to acquire, and even nurture, knowledge, the more individuals there are the more knowledge there will be. The more knowledge there is the more core competencies. The more core competencies, the more powerful a society becomes. Under such condition, countries with the bigger population and that provide avenues for people to acquire knowledge and translate them into core competencies, will become the most powerful.

(For comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)