Mental Models for Global Venturing

Silburn Clarke, FRICS Chairman, Spatial Innovision Limited Chairman, Jamaica Business Development Corporation

PRESENTATION OUTLINE
a. The Innovation Productivity Competitiveness Connexions
b. Macroeconomic Challenges and the SMEs Role in Export and Economic Stability c. Nature of Global Knowledge Economy d. Thoughts on Innovation Capacity d. Innovation drives Productivity e. A Sustainable Competitive Advantage Model f. f. Findings on Motivation from US High-Tech firms Case Study: Born Globals / International New Ventures

g. Case study: Jamaicas first Global Enterprise

h. Take Home Messages

The Innovation-Productivity-CompetitivenessExport Link

Competitive Global Marketspaces
Export Entry

Competitiveness Improvement
Increased Productivity

Innovative Capacity
Begins with knowledgeable engaged motivated human resources

Going Global
Typically the most productive local firms are the earliest to go global: a. The firm has the confidence that they can play on the global stage a. Having maxed out markets domestically, they need the global marketspace in order to maintain their growth trajectory

The Urgent National Export Imperative

Radical Reversal of Persistent Unsustainable Trade & Services Deficits

Current Account Deficit is Staggering

Avg 5yr CA deficit : US$1.8bln

Output must grow by 6% minimum to maintain economic stability

Planned Primary Surplus for 2012/2013 New Taxes NHT Contributions Planned Primary Surplus (post-implementation) Interest Cost on Debt NDX Interest Savings Cost of Principal Repayment Net Primary Surplus -8.2% 1.3% -6.5% -6.1% 5.2% of GDP 1.3% 0.8% 7.3%

Minimum GDP Growth Required

6.1%
Source: Caribbean Association of Actuaries

Economic Stability Model

In stable economies; Debt approximates to GDP Primary Surplus ________ Long Term Interest Rate

The higher the tendency to a level of equality is the more stable the economy is.

but in unstable economies ; Debt is not equal to GDP Primary Surplus __________ Long Term Interest Rate

Source: Caribbean Association of Actuaries

Economic Stability Model

The higher the level of disequilibrium is the higher the tendency to instability In Jamaicas case: Our Debt to GDP ratio is severely out of alignment with our ratio of Primary Surplus to LT Interest Rates

The numbers:

140%

to 67%
Source: Caribbean Association of Actuaries

SMEs are VITAL to Countrys Survival

Imagine 1000 SMEs exporting US$1million in goods and services: Thats US$1.0billion contributing to our Current Account Now imagine 2000 SMEs exporting US$1million in goods and services: SMEs combined would add US$2.0billion and so

CLOSE OUR CURRENT ACCOUNT DEFICIT

GROW OUR GDP

STABILISE OUR ECONOMY

The Global Knowledge Economy

Umemoto 2006

The models of the last 2 eras (agricultural and industrial ) rested on Land, Labour (low-cost) and Capital (LLC) as key factors of economic production

In the current period Knowledge is the main resource

THE NEW KNOWLEDGE ECONOMY

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

Global Shift to the Knowledge Economy

(variance in GDP explained by KEI in model)

The Shift to Knowledge and Innovation

Stage I Transition I to II Jamaica Guyana Stage II Transition II to III Trinidad Barbados Stage III

Honduras Nicaragua

Dom Rep Panama Costa Rica

???

RESOURCE-BASED ECONOMIES

EFFICIENCY-BASED ECONOMIES

INNOVATION ECONOMIES

Countries compete based on their factor endowments: primarily unskilled labour and natural resources.

Countries begin to develop more efficient production processes and increase product quality.

Compete on the basis of price and sell basic products or commodities, with their low productivity reflected in low wages.

Companies must compete by producing new and different goods using the most sophisticated production processes and through innovation. Wages will have risen by so much that they are only able to sustain those higher wages and the associated standard of living by higher value production

Competitiveness is increasingly driven by higher education and training.

Wages have risen and they cannot increase prices

Thoughts on Innovation
Pronounced uniform regional group inflexion

Mission: To create new Innovation Outcomes for Firms

What is Innovation

Creation of added-value from new or Improved products, processes, methodologies, services, business models, or markets

NATIONAL INNOVATION BEGINS WITH INDIVIDUAL INNOVATION

Clarke 2012

Innovation drives Productivity

JPC: 2001-2010 period

Contribution of Industrial Sectors to Overall Performance

GDP Performance 2002-2011

Growth Drivers and Firm Types

Small

Replicative Firms

Innovating Firms

Efficiency Factors

Businesses
Henrekson, Stockholm School of Economics

V.R.I.O MODEL
GROWING SUSTAINABLE COMPETITIVE ADVANTAGE
NO Is the resource or capability VALUABLE ? YES

YES

Is it homogeneously distributed across all firms ? Ie RARE

NO Is resource or capability IMPERFECTLY mobile ?

Acquired /Imported Innovations

NO

YES

Indigenous Innovations
YES

Is the ORGANISATIONAL model embedded ?

Competitive disadvantage

Competitive parity

Temporary Competitive Advantage

Sustained Competitive Advantage

Mata, Feurst, Barney (1995)

Study of IWB of Employees in US High-Tech Services Firms

Employee Innovative Behaviour in Workplace

Organisational Context

Individual Motivation

Intrinsic Motivation Organisational Context Model explains (Rsq)

=0.327 24%

Integrated Motivation
=0.267 21%

Identified Motivation
=0.195 14%

Employee Innovative Work Behaviour

Autonomous Motivation Explains 36.1%

Case Study #1
Born Globals / International New Ventures (INV)

T. O. K.
Four 17 year olds straight out of school (Campion) decided on recording career Travelling, performing and harvesting revenues globally within 3 years of start-up Classic INV firm SCA based on their unique content and singing style (VRIO) Recently completed a multi-year deal for The Voice / Guiding Light to be on Japan Air Line (JAL) playlist for inter-continental and domestic flights

Case Study
The first Jamaican Global Enterprise

The UNIA
At its peak in the 1920 the UNIA had over Divisions : 1,900 Countries : 40 globally including : United States, Cuba, Panama, Costa
Rica, Ecuador, Venezuela, Ghana, Sierra Leone, Liberia, India, Australia, Nigeria, Namibia, Canada, Nigeria and South Africa.

If you have not confidence in self, you are twice defeated in the race of life. With confidence, you have won even before you have started.

MESSAGES TO TAKE HOME

Need to structure economic payoffs to favour innovators and the innovating firms in order to drive sustainability, resilience, flexibility, competitiveness, export growth and prosperity SMEs are vital to increasing exports and stabilising the economy
Jamaica cannot assert any globally distinctive VRIO resources or capabilities from factors derived from and structurally bounded to the old agro-industrial era Your mental models, global mindset, confidence, persistence, motivation are critical factors for taking your firm global With confidence you are a winner before you get started (Garvey)

THANK YOU !

Silburn Clarke, FRICS silburn@spatialvision.com