<h1>Powering Mexico's Gazelles</h1> <h2>by Dr. Mark White<br> Partner, White & Associates</h2><br> <h4>3 January 1997</h4><p> <p> Innovation creates economic growth and wealth. The novelty may come from bureaucrats suddenly permitting some prohibited activity. That's how Latin-practice nations (i.e., those that effectively prohibit what they don't permit) typically grow. I call that growth economic mobilization, since it mobilizes existing resources to use a known process to make a known product or service. Or, the novelty may come from entrepreneurs (or intrapreneurs) combining pieces of known products, services, and processes in a new and useful way to create an entirely new product, service, or product. That's how Anglo practice nations (i.e., those that effectively permit what they don't prohibit) typically grow. I call that growth economic evolution to contrast it with economic mobilization.

Economic mobilization can produce impressive results in the medium-term. When Kruschev told the West that his Soviet Union would bury it, the East had had economic growth of over ten percent annually for at least a decade. If the East had maintained that pace for decades more, it certainly would have buried the West. Ironically, the East's growth stagnated just when Kruschev made his threat. Since Kruschev's bureaucrats ran out of Western processes that the Communist variant of Latin practice could or would permit, Soviet growth slowed down before it ever caught up to the West, and passing time just left it trailing along farther and farther behind the West.

Medium-term growth spurts from economic mobilization are common. Germany, France, and Japan offer prime examples of bureaucratically-permitted growth occuring more or less at the same time as the Soviet Union's; Korea, Singapore and Chile offer later examples that will hit their slowdowns sometime into the future, much as China will. Mexico, of course, had its own bureacratic growth spurt in the fifties and sixties, and has been in the slowdown now for decades. You can spot economic mobilization quite easily: initially the economic winners all find friends in high places, and later the growth always slows down before living standards catch up to those in the United States.

To my limited knowledge, Hong Kong is the only Anglo- practice nation that has grown at mobilization rates for any significant length of time. It is the purest Anglo-practice nation in the world, and if it weren't for China's looming takeover in July, I would predict fairly confidently that Hong Kong's living standards, having already surpassed England's, would soon surpass those of Australia, Canada, and, finally, the United States. However, the powers in China are far too bureacratic to ever let Hong Kong's entrepreneurs achieve that distinction for that city-state, or for China as a whole.

Nonetheless, I do believe my new employee-compensation formula can help entrepreneurs in other Anglo-practice nations to permanently raise the growth rates for economic evolution to levels that approach the early stages of economic mobilization. This formula, which I call the Innovator Stock Ownership Program, or ISOP, awards stock to employees who propose innovations, with stock quantities determined by the success of their corporate implementation. Corporations that adopt this incentive program should continuously generate successful innovations, for Holland's Law (from complex adaptive systems scientist John H. Holland) says: "... improvements are always possible and, indeed, occur regularly."

With incentives for all their employees to act as intrapreneurs, ISOP corporations should grow like gazelles for generations, captivating every potential client they encounter by continuously upgrading product and service values even as they lower costs and prices with continous process improvement. Indeed, ISOP corporations should frequently spin off daughter corporations as experienced intrapreneurs leave to pursue irresistable entrepreneurial opportunities, and the daughters spin off granddaughters, and so on. With so many gazelles in the economy, even economic evolution's continuous destruction of obsolescent static and dynamic corporations won't significantly slow down the growth and wealth that innovation generates. Quite soon, Anglo-practice economies simply won't have any static or dynamic corporations based on fixed procedures.

In Mexico, entrepreneurs have surprised me with their expressed willingness to subsume their unique identity and personal control to launch ISOP corporations. By motivating their own employees to transform themselves into intrapreneurial teams that discover the stream of new products, services, and processes that will carry the ISOP corporation into the unknown and unknowable future, these pioneering Mexican entrepreneurs are creating a future quite different from the past we've known. Then again, they are entrepreneurs, so perhaps I should have expected all along for them take the calculated risks necessary to pioneer new paths to Mexico's future.

Readers with questions or comments for Dr. White can call 011(525)595-6045, fax 011(525)683-5874, or email white@profmexis.sar.net

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