Knowledge
Ahead of the Best of European Business awards ceremony in Portugal, jury member Emilio Rui Vilar, argues that enhanced knowledge is key to gaining the competitive edge. Cultivator of the European "dream," the President of the Calouste Gulbenkian Foundation* and jury member of the Best of European Business award, Emilio Rui Vilar, argues that companies should generate better information and promote knowledge to gain perspectives for the longer term and hold on to their competitive edge. The question of companies' competitiveness is often heavily debated. There are various forms of measuring competitiveness. Is this a good exercise? I think the companies that participate in the market should do this exercise and continuously repeat this self-assessment of their capability to remain competitive in their respective industries. There is, of course, a great number of tools that vary with the type of products and services produced and sold, and with the market in which the company operates. So this should practically be an individual exercise? I think it should start as an individual exercise, and when the industrial sectors have become more homogeneous and the information that circulates between the entities that constitute the industry has become reasonably transparent, the exercise can also be done at the industry level. What are the fundamental indicators? The indicators always have to be based on cost of production, brand value, marketing and sales channels, and also on cultural relations with existing and potential customers. What is the validity of a European award when the situation in the individual countries is actually very different? I find it very interesting and useful to place companies from countries with very different economic backgrounds but operating in a single market in a context where they can be compared to one another. I think the final decision of the European jury may hold some surprises, because some of the countries that are less competitive on a global scale may produce very interesting individual companies. This comparison is very useful for the companies, as it gives them the opportunity to not only compare themselves with their competitors on the national level but on a much larger scale. This is a very useful exercise for Portuguese companies and should also be a very interesting task for the jury. | ||||
What are the main obstacles to companies' competitiveness in Portugal? The response that is generally given to this question lists a number of factors that are beyond the companies' control. I think we should be humble enough to start looking at the companies themselves and to the fact that many of the factors inhibiting competitiveness are indeed internal to the organizations. This is the result of a very simple analysis: companies with very different competitive conditions can be found in one and the same industry. The education and skills of the managers, the professional training of employees and workers affect a company's competitiveness as much as the functioning of the entire system surrounding a company's activities in a given country, such as the infrastructure, accessibility and even the functioning of the legal system or the efficiency of the tax system. There seems to be more agreement on the external factors. That's a cultural issue. We always try to find external reasons for our problems, instead of demanding more from ourselves. The Best of European Business award wants to draw attention to the opportunities offered by the New European markets. Portugal has not paid much attention to this region. That is true, because geographically, we are the country most distant from Central and Eastern Europe and because there have never been close cultural ties with these countries, with perhaps the exception of Romania. In addition, we often have communication problems due to the different languages. Germany is certainly in a much better position, not only in terms of geographic proximity and size, but also because many people in CEE countries speak German. However, I think that we should analyze the issue of internationalization under two different aspects: maintaining commercial relations on the one hand and offshoring activities and making investments on the other. Very often we think internationalizing only means investing abroad. Although direct investments that typically require great financial resources are only accessible to large corporations in Portugal. And there aren't that many of them to allow for a significant presence in new markets. Nevertheless, the commercial tradition of Portuguese companies and the great opening we experienced especially from the late 1950s when we entered EFTA, will enable companies to adjust to trading with these countries. This more closely matches our companies' traditional profile. | ||||
In the case of SMEs, this presence will probably continue to depend heavily on government support. We should expect less and less government subsidies. I would turn this question around: What can we do for the government (fulfilling and demanding) and not what can the government do for us. I think we need a change of paradigm in the attitude of Portuguese companies. Public funding is being rolled back and the government is less and less in a position to provide solutions. We have this culture of looking to the government for solutions. This really needs to change. Do you see signs of this change? Yes, I do see companies acting very independently. The best performers define their strategies and manage their actions very independently from the government and public policy. Given its social model, do you think Europe can confront the new globalization driven by China and India? This is a very complex issue. We know very little of these facts that are very diverse and extremely complex. Just take the fact that the Chinese population is still divided into two large groups: the urban population and the rural population. The latter is subject to different legislation as well as considerable restrictions. This is why the Chinese and Indian economies are still unknown to us in many aspects. We have only very fragmented knowledge of these facts. And we cannot assume that the path of these economies is a clear projection of their recent developments. Gaining a better understanding of these economies should be our first and foremost step. What type of information are we still lacking? We need more information about the political developments in these countries, about social developments and what their relations will be like with neighboring countries such as Japan, Korea or Russia. It is a very large complex of variables. This is why I am saying that we cannot just project actual reality into the future without allowing for any variations. There are think tanks dealing with this, but the results of this investigation are not yet fully available. The lack of transparency in China's financial and currency exchange systems is a problem that affects the reliability of statistical data. | ||||
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Is Europe in a position to confront these challenges?
We are a great power in scientific terms. The knowledge at our universities and research institutes creates great potential that has not yet been fully exploited. This is because, among other things, we are encountering difficulties in transferring existing scientific and technological knowledge into business know-how to boost our competitiveness. We should also use this knowledge to attract a greater number of international students. We have to make our universities more attractive, like American universities. And, above all, I think we should not abandon our values. I would not trade our democracy and our freedoms for short-term competitive success. What about the issue of protecting vested rights? So far this issue has been discussed purely in terms of legal aspects, but not in sociological and evolutionary terms. European society has to acknowledge the fact that the percentage of older people within the population is growing, while the active labor force is shrinking. We have to find solutions to rejuvenate our population, either by increasing legal immigration or boosting the incentives to have children. We shouldn't have a static vision of reality and, most importantly, we should not make arithmetic projections without appealing to political will to change the circumstances in which we lived. As a democratic society, Europe has the virtues to find the capacity to change and face the problems of the future. And compared to other societies, we have a tradition of rationalism and of applying scientific knowledge, which is a great benefit for us. It is no coincidence that the Enlightenment started in Europe. This is why I oppose alarmist, short-term visions. Mobilizing public opinion for great causes is one of the noblest political tasks. How can businesses participate in this reflection? They are in the front line. It is the obligation of universities, research centers and others to think long-term and provide more comprehensive insights, something that cannot be expected from those who are in the front line every single day. But businesses also need to try and generate information and knowledge to help them develop longer-term perspectives and adjust to a constantly changing environment. The future will certainly not be the one we will experience in the very short term. It is much more complex and requires much more thinking and reflection. How do you see Portugal ten years from now? If we can solve the short-term problems with respect to the necessary balancing of public finances, which are creating a pessimistic climate and distrust that in my opinion exceeds the problem's true dimensions, Portugal can get back on the path toward growth and more in line with the European convergence criteria. Is the budget deficit jeopardizing companies' competitiveness? The problem of rebalancing public finances will have a very negative impact on industry and on the general business climate. If Portugal is able to balance its budget, we have a chance of getting back on track with the convergence criteria. After all, we have managed to maintain a few reasonably competitive sectors. There is still room for adjustments in social terms, therefore business can still be flexible and get back on track in terms of improved performance. A climate of distrust has emerged that affects the business atmosphere in general. A sense of crisis has been conveyed, although this crisis exists mainly within the government and in some economies with which Portugal maintains close business relations. *The Calouste Gulbenkian Foundation is a Portuguese private institution of committed to public service in the fields of arts, charity, education and science. This translated interview conducted by Dora Ribeiro was first published in Best of European Business Media Partner Jornal de Negócios in its original language. The Portuguese Best of European Business awards ceremony takes place on 18 October. If you have questions regarding this or other news stories, please do not hesitate to contact us:  | ||||
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