Tuesday, 30 June 2009

Business model vs political model

Outside the Box
John Mangun
Business Mirror
http://www.businessmirror.com.ph/home/opinion/12463-business-model-vs-political-model.html

There is the BusinessMirror (BM), and there are all the other newspapers in the Philippines. Every day, you have a clear and definite choice of what to read, what to focus your attention on.

The “others” talk about why there cannot be any successes until certain problems are solved. BM talks about what is being accomplished in spite of the problems. BM operates in the real world of what “is.” The rest live in the theoretical world of what “should be.”

There should really be only two daily newspapers; BusinessMirror and “PoliticsMirror.”

There are only two governing models, only two models of the thought process: the business model and the political model.

Each of these models has a different purpose, a different strategy of implementation, and different priorities. Therefore, each has a different result and outcome. And much more important, each model measures it success in a completely different way.

An excellent example of the difference in the two models can be found in the Comprehensive Agrarian Reform Program (CARP). Over the last 20 years, some $3 billion has funded this program. The accomplishment of CARP is usually measured by the millions of hectares distributed to the formerly “landless.” Included in the funding are, of course, other resources, including fertilizer, training, some modernization, among other things, made available to participants in the program.

I do not want to get into a discussion of the merits as such of CARP. However, there is no doubt that CARP and its implementation, goals, and measure of success is part of the political model, not the business model. Go to the Department of Agrarian Reform (DAR) website and you will clearly understand what I mean. Although the DAR speaks often of the delivery of agricultural services to the farmers, in fact, this is not the primary purpose of the DAR. Note the principles of the 1998 CARP law: “The welfare of the landless farmers and farm workers will receive the highest consideration to promote social justice and to move the nation toward sound rural development and industrialization.” Further, “The state shall be guided by the principles that land has a social function and land ownership has a social responsibility.”

That is a political statement, not a business statement of principle.

Read this vision statement from Ayala Corp.: “Anchored on values of integrity, long-term vision, empowering leadership, and commitment to national development, we fulfill our mission to ensure long-term profitability, increase shareholder value, provide career opportunities.” Or, “PLDT will be the preferred full service provider of voice, video and data at the most attractive levels of price, service quality, content and coverage, thereby bringing maximum benefit to the company’s stakeholders.” And Megaworld: “To our stockholders: Megaworld pledges to live up to your trust and expectations through a consistently outstanding performance. To our customers: Megaworld aims to ensure your utmost satisfaction. To our employees: Megaworld endeavors to be a company where you can build a long-term fulfilling career.”

The difference between the models is the business model must be self-sustaining. The political model says that what it is doing has a “social function and a social responsibility.” So what? Telecommunications, banking, real estate, and everything else in the business model also has a social function and responsibility. But it also must survive and thrive.

Most important, for the business model to sustain itself, it must live up to its function and responsibility in the economy and society, otherwise it dies. The political model can go on forever because its measure of success is much more limited.

For example, the business model decides to build a factory. But that is not where it ends. It must also ensure that the factory be profitable and self-sustaining, or then simply building the factory is a waste of resources, which cannot be allowed to happen.

The political model of CARP was to distribute land and the idea was that this would “promote social justice and to move the nation towards sound rural development and industrialization.” Nowhere can you find any statistics, information, or even opinion that CARP was successful in meeting this goal. Land was distributed. Period.

The business model to build the factory not only must consider self-sustaining profitability, but before one shovel of dirt is moved, we know how many jobs will be created, how much money will go into the local community, what the long-term impact may be on the general economy, and plan where the factory will be in 20 years—all ideas that the political model can and does ignore.

The original CARP law expected that total implementation would take 10 years. Some 20 years later, CARP is still not finished with its original mandate. Further, rural farmers still are poorer than their landless urban counterparts are. Agricultural production did not improve with CARP implementation.

Who gained economically from this political model? The farmers? The former large landowners? The government? The nation? No matter. It was a political decision. And because it was political, then maybe the benefits were political also, rather than economic.

The success of the business model can be measured directly. How many new jobs? How much newly created wealth? How much benefit to the nation? And if the answers to these questions are not worth the expenditure, unlike with politics, the plan is stopped.


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