Back to Basics

The global economy is changing the rules in the game of business.

For the last 200 years or so the most important consideration was efficiency—producing products for the lowest cost. But now we are part of a global labor force. Mauritius can no longer compete on efficiency alone because their labor costs (also known as our salaries) are so high compared to labor costs in countries like China, India, Bangladesh, Vietnam and so on…

In Mauritius were we conning ourselves when we thought that we were a low cost producer of goods, namely textiles? How much of the economic success of the past twenty years were due to productivity, protection, innovation and entrepreneurship?

Today in comparision with the emerging economies, we are definely no more a low cost producer protected with customs barriers preferences and quotas for our export.

The rule of the game has changed.

What is to be done? Will the economic boom for some countries be economic doom for others? It could be if the only economic force we consider is efficiency. But we are missing something important when we do this. In addition to efficiency there is another economic force called responsiveness. Efficiency is what provides us with basic products and services at the lowest price. Responsiveness is what wraps those products and services in a blanket of value-added services that make them more valuable to each of us. The environment has changed. We are passed the Uruguay, Doha rounds. The new WTO world is our reality. Our responsiveness has to evolve to match our new challenges of today and tomorrow.

People in the global world want what they want. They want a good price but that doesn’t mean the lowest price. They pay extra for other features as long as those extra features meet expectations. Responsiveness includes things like how products are produced, delivered and consumed. People willingly pay more for a good cup of coffee made just so and served in a cozy setting. People willingly pay more for fresh organic food grown in a sustainable manner. These value-added services make us happier and healthier than is possible with just the basic products themselves.

The key to success in the global economy is to sustain an evolving mix of products and value added services that create wealth for many different types of customers. All businesses live on a continuum with efficiency at one end and responsiveness at the other. If you are a business in Asia you are probably more focused on efficiency. If you are a business in North America you need to move your focus more toward responsiveness. These are the realities created by the division of labor in a global workforce. A variation of efficiency and responsiveness depending of the industry we are and the maket we are serving.

Here’s another thing to consider: All value added services are information based. That’s because they must be customized to meet particular needs of particular customers. What is valuable to one customer in one situation is not valuable to another customer in a different situation. And since customers and their needs are always changing, companies themselves need to get good at continuous change. They need to sell a continuously evolving offer of products and value added services that they mix and match to meet the individual needs of their customers.

Finally we are Back to Basics. The right product at the right place at the right time at the right place for the right person is what should be sought for.

Inspired by Michael Hugos