Rethink following best practice strategy

There has been a tendency to follow the best performers' footsteps with the hope of replicating the success. Particularly, international consultancies, think tanks, and lenders have created lucrative businesses in giving such prescriptions. Hence, less developed countries have been investing in education, R&D, and training for being high-income ones. Similarly, they have been increasing technology adoption and building infrastructure with the hope that it will spur economic growth, as they did in advanced countries. In accelerating such 'following' practices, there has been a growing tendency to recruit international consultancies to prescribe the practices of leaders and borrowing from global lenders to implement them. But will following advanced economies empower less developed countries to keep growing, reaching high-income status? If that assumption is valid, why is a growing number of university graduates in less developed countries remains unemployed? Although Malaysia's semiconductor foreign direct investment started in muddy paddy fields, and America's Silicon Valley started in orange gardens, why are glittering high-tech park infrastructures in less developed countries remaining empty or becoming warehouses of e-commerce companies?   

WEAKENING EDGE OF THE FOLLOWING STRATEGY:  In the 1990s, Indian IT companies found a scalable growth model. Instead of developing software for the clients, they started training fresh graduates with IT competence and leasing them to foreign clients. They also started improving physical, power, telecom, and Internet infrastructure to facilitate it. The growth of India's linear model started encouraging a few other less developed countries. Hence, upon the advice of international consultancies, aspiring countries started borrowing from multilateral and bilateral lenders to follow India's footsteps. But after more than 25 years of following, they find their successes extremely negligible compared to India's more than $100 billion IT/ITES service export.

On the other hand, less developed countries have been following advanced ones for increasing per capita income. One of the areas has been education. Unfortunately, although the income gap between high school dropouts and college graduates in the USA has been growing, graduates of less developed countries are finding the bleak reality of shrinking.  

SUCCESSES FROM NOT FOLLOWING THE LEADER: Often, we believe that Japan or Taiwan succeeded in experiencing sustained growth to reach high-income status due to following the footsteps of advanced ones. Hence, international consultancies, think tanks, and lenders are busy feeding the 'following' prescription to less developed ones. But perhaps, history gives a different lesson. While the US firms were busy making electronic products like TVs and Radios out of matured vacuumed tube technology cores, Sony-led Japanese companies took the decision to change the proven technology core with a newly born infant one. If Japan had relied on international consultancies to figure out how to build an industrial economy, the pathway could have been following the matured technology core.

Similarly, although global imaging icon Kodak rejected the newly born digital image sensor, Sony pursued it to create success out of it and make Kodak bankrupt. On the other hand, in the 1980s, while technology firms of Silicon Valley were creating the wave of success by pursuing integrated device-making (IDM) models fueling the PC wave, Taiwan took the option of creating the 3rd party foundry model anchoring infant mobile handset. In retrospect, the spectacular success of Japan or Taiwan has been due to not following the so-called best practices of the leaders. On the other hand, by following the footsteps of Mitsubishi, Malaysia's Proton could not build a profitable automobile company.

PRACTICES OF INTERNATIONAL CONSULTANCIES: In recent times, by providing the 'following' prescriptions, international consultancies have succeeded in developing lucrative advisory service businesses in less developed countries.  Unfortunately, development agencies are their significant clients. Furthermore, think tanks have been behaving like consultancies too. But why should we be sceptical about it? As explained, 'following' has a weak track record of replicating success. On the other hand, the underpinning of the success of Japan or Taiwan has been due to pursuing an alternate route-often, the opposite one. But unfortunately, international consultancies are after packaging and promoting the following steps. Hence, they come up with a voluminous literature review, showing how far away less developed countries are in their preferred indicators like the level of technology adoption, density of university graduates, publications, infrastructure, and many more. This approach creates sensation and nervousness among the stakeholders of their clients representing less developed countries.  Such exercise leads to a set of advice to reduce the gap, without adequate justification why that will repeat the success. The predominant justification is that as it has happened in other countries, it will also repeat the success in aspiring less developed ones. 

LENDERS' AGENDA AND APPROACH: After designing and disbursing loans to less developed countries, lenders are taking them back with interest. As a result, there has been a growing linkage between these lenders and international consultancies. Once international consultancies succeed in selling the best practice prescriptions in the form of a roadmap or strategy, lenders show up with the lending package. As the loan is for replicating the past of advanced countries, procurement packages find easy justification to compel loan recipients in less developed countries to import goods, and services to implement past ideas. 

ROLE OF GOVERNMENT AND LOCAL THINK TANKS OF LESS DEVELOPED COUNTRIES: As borrowing is a more accessible approach than saving to show quick results, most less developed countries have been following the borrowing strategy in development financing. Hence, multilateral and bilateral lenders have found these countries a lucrative market. In many less-developed countries, these lenders have a physical presence. But to justify the lending, lenders need to promote development agenda. As it's far easier to promote the past footprints of advanced countries than the unproven ones, they are after lending to follow the proven path as the best practice. Ironically, no question is asked: will it repeat the success? Unfortunately, although less developed countries have been increasing investment to scale up infrastructure, public service, and even education, hardly any investment is being made to create thinking capacity. One of the reasons is that such capacity development raises questions about the easy path of following through borrowing and foreign procurement. Ironically, local think tanks behave like the back office of lenders-as opposed to thinking and questioning the merit of following. One of the reasons has been that offering back office or loan packaging services is their primary source of income for survival.

Although following the so-called best practice is a preferred development pathway in less developed countries, it does not always repeat the success. If that were the case, why are advanced economies have a record of struggling to retain their success? In retrospect, development takes place due to reinvention, following risky unproven path. On the other hand, there is a sharp contrast in the economic development strategy pursued by less developed and advanced countries. While advanced economies are after knowledge and ideas for creating wealth, less developed ones are after natural resources and labour. Hence, the return on investment from education and R&D varies-making the following practice nonproductive. Furthermore, technology has been having a growing role. Unfortunately, the race to create economic value out of technology possibilities have a natural tendency of monopoly-resulting in taking all by the winner and leaving nothing to the followers. It does not mean that followers should not draw lesson from the leaders. Instead of borrowing for following, the focus should be on analysing the context, assessing the limitations of following, gathering lessons, estimating the maturity of development waves, predicting unfolding possibilities, and figuring out smarter alternatives to derive prescriptions for progression.

1. Rokonuzzaman, Ph.D is academic and researcher on technology, innovation and policy. [email protected]