In his new book, The Right Place: How National Competitiveness Makes or Breaks Companies , Arturo Bris gets beyond entrenched perspectives to identify the building blocks of a competitive economy and discusses the typical mistakes countries make. His expertise as Professor of Finance, IMD, and Director, IMD World Competitiveness Centre, adds to the depth of this Routledge title.
How do you perceive the national context as an outer driver of a company’s performance?
Very often, we do not realise that companies fail or succeed because of external factors, such as the country’s economic characteristics or the availability of digital infrastructure in the place where the company operates. Tesla Motors could not have happened in Lebanon, Brazil or Indonesia. It became a high-value innovation because it grew in an ecosystem with good regulation, capital availability, and talent provision. As Warren Buffett said, “the secret to my success is that I was born in the right place at the right time.” Noting that the external environment is important — sometimes more important than the company strategy itself — it is key for corporate leaders to understand and influence such a national context.
Why are productive countries not necessarily ‘competitive’, as it is often thought to be?
Competitiveness refers to the ability of economies to generate prosperity for their people. Prosperity requires jobs, salaries, quality of life, and provision of public services such as health and education. Of course, these services require financing by both the private and the public sectors, and therefore, a productive economic system that guarantees sustainability. Productivity is a necessary but not a sufficient condition for competitiveness. For a productive economy to be competitive, it needs that economic resources are not wasted (through bureaucracy or corruption). The country invests where it matters (perhaps a focus on digital skills without the appropriate digital infrastructure is like throwing money into a bottomless hole).
How far can an economy’s digital quotient impact its performance?
There are two imperatives today for countries to become and remain competitive. One is sustainability, which is the combination of social, environmental, and governance objectives that allow an economy to preserve the prosperity of its citizens in the long term. The second one is technology, as a key to remain productive. At the country level, digital competitiveness requires a digital infrastructure (which includes the capital to finance it) that facilitates the digital transformation of companies. Secondly, countries need to develop or attract digital talent by investing in education. Finally, the most digitally advanced nations display the right attitudes (both at the individual and corporate level) towards technology. At the individual level, with acceptance of technology as a crucial part of our lives. At the corporate level, with agility and speed in implementing digital transformation.
A country’s GDP is the economy’s thermometer, but not its medicine. How do you respond to that?
For years after the Second World War, it was considered that GDP was the right metric of a country’s success. However, and particularly due to the work done by the IMD World Competitiveness Centre, governments and international organisations around the world have come to realize that GDP is not an appropriate KPI for government policy. It is easy to grow an economy, but it is more difficult to translate it into prosperity. For that, countries need to make choices regarding industry policies, public spending and education. That is what competitiveness encompasses. Therefore, GDP is a measure, but not a driver of success, and governments need to realise that policies based on economic growth as an objective fall short of achieving competitiveness sometimes.
Where should national strategies focus so as to ensure inclusive prosperity? Why do you think consultants are best avoided?
First of all, inclusive prosperity requires a redefinition of our economic models, so nobody is left behind. Competitiveness requires the reduction of income inequalities. Gender equality is also an important factor to guarantee an even distribution of prosperity. In that sense, we have claimed that “inclusive prosperity” as a new label for successful economies is not different from the concept of “competitiveness” that we coined already 30 years ago. Think about that: when income inequality is rampant, governments find it more difficult to raise taxes and finance the budget: rich people have ways to avoid taxes, while poor people cannot pay them. Then it becomes a death spiral for the country because the inability of the country to support the economy only exacerbates such inequalities.
In relation to business consultants in public policy, we first need to realise the impressive growth this sector has had in the last years. In some countries, there is no single government decision that is not supported by a consultant. Consultants do not have skin in the game; they provide off-the-shelf solutions; they focus on strategy but not on its execution. At the end of the day, it should be the responsibility of politicians to make decisions and execute country strategies. It is very easy — albeit very costly — to delegate your country strategy to third parties: the consultant will not be there if the strategy fails or never executed.
The value collaboration can bring in the 21st century context, especially in the post-Covid scenario…
Professors Daron Acemoglu and James Robinson have described the combination of a strong government and a powerful civil society as a “Narrow Corridor” where liberty flourishes. That is, a strong government needs the private sector to succeed. Conversely, the private sector is unable to pull the economy without public support. Such metaphor can be extended beyond liberties and applied to competitiveness as well. The most competitive countries have promoted successful collaboration between the public and the private sectors. Think about the digital transformations of Denmark or Estonia. Any objective of public policy may now include private sector involvement. Similarly, companies need to develop their nonmarket strategies and partner with the government and society for companies to succeed. Out of the 17 Sustainable Development Goals, the most important one is the last one indeed: “Partnerships for the Goals”. The UN has perfectly understood that water sanitation, no hunger, and so on are desirable objectives, but they cannot be achieved only by the government or by the private sector alone.
The Right Place: How National Competitiveness Makes or Breaks Companies
By Arturo Bris
(The reviewer is a Chennai-based writer)