Sunday, September 27, 2020

Here is why Botswana should identify what’s working outside manufacturing

Huawei, a China born company ranked at number 83 in Global 500 companies manufactures almost nothing but its designs have led to one of the world’s top selling consumer products and services. Huawei is in top three in China’s smartphone market share as at 2017 and is in top five globally. The company’s success validates the ‘new age’ business model of running a business without actually owning or being involved in the physical resources needed to create the products. This model has brought similar feats for other international companies such as Facebook, Air BnB, Uber which in a similar way as Huawei use intangible resources from which they generate revenue. 

Speaking to African and Latin Journalists at Huawei Headquarters on Tuesday last week in Shenzhen, an innovative city in China where the company was founded Director General in Huawei’s International media affairs department, Guo Fulin, said that though Huawei is commonly known to be a mobile phone company it is in actual fact an intellectual property company whose core service is design. Fulin shared the company’s growth path from its early stage in 1987 when it was created to what it is today as a global giant. Important to this story were the things he highlighted as having driven the company’s sustained growth over the past three decades. Fulin said persistent investment in research and development (R&D) was a driver in the company’s breakthroughs. Fulin pointed out that the relentless re-investment into the company through continually building ICT infrastructure with the backing of R&D is what sustained the company’s growth in  addition to a value driven system that rewards its workforce. 

One might ask what the relevance of Huawei’s story is to Botswana. Notwithstanding brick and mortar has traditionally formed the blueprint of business success, but the advent of the internet of things (iot) has allowed businesses to focus on actual core services and use third parties to physically produce and deliver the products. In a world that is increasingly applying new digital solutions it offers traditional industries such as manufacturing a new lease of life to rid themselves of what is no longer working and find what could work. In the case of Botswana where the manufacturing sector has over past decades gobbled a significant share of government coffers in hope of having it sustainably contribute to the economy, much of such investment to date remains to bear solid results. The sector is struggling today as it has been in the past and to make matters worse government’s budget isn’t as big as it used to be which means that the sector will going forward receive less support. The question that follows is how does the sector overcome its inherent limitations at the face of lesser government support?

The first idea is that perhaps the sector should look at the other side of production. In other words, instead of simply looking at production as either the physical or mechanical process of developing products inside manufacturing plants, the sector could consider an equally important component of that activity which is creating designs behind products to be produced. This is what Huawei is doing. It focuses on continuously building ICT infrastructure which enable and drive the creation of designs that are then given to third parties to manufacture products marked with Huawei brand name. If the local manufacturing sector has failed dismally to take off over the past decades couldn’t the missing link be design? One could argue that no country is ever without human ingenuity that can in the same way as in countries like China produce own local innovations. Though at an initial stage of growth Ditec Mobile, a 100 percent Botswana citizen owned company founded in 2002 supports this argument. Ditec Mobile designs and manufactures mobile phones and envisions being the preferred African handset producer by 2020. Ditec Mobile is already involved in what Huawei does, the difference is the revenue streams between the two companies but one could conclude that this local company is on the right path. Like Huawei Ditec Mobile should focus on R&D to further develop its designs. Perhaps government should deliberately support companies such as Ditec Mobile if significant traction in the manufacturing sector is to be finally made. Another area where government could play a role is in Education. Every year the education sector is given priority in the nation’s development budget, one could suggest that the sector can be strategically used to hone on specific skill development in line with product designs to allow companies such as Ditec Mobile to draw from a talented pool of local Batswana designers. 

The story behind Huawei’s growth did not simply weave itself. Fulin shared that between 2010 and 2017 the company focused on ICT convergence in multiple business lines but this started somewhere. From inception Huawei worked on early stage growth, then focused on developing domestic market following which global expansion took place. It was only after those preceding things did it establish itself as a true intellectual property company with multiple business lines. Even in Botswana local companies have the same opportunity and ones like Ditec Mobile have already proven that to be possible. If Botswana’s inherent limitation of a small market has impeded the manufacturing sector in the past then it might be worth considering doing the actual production elsewhere as long as Botswana companies own the designs.

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Sunday Standard September 27 – 3 October

Digital copy of Sunday Standard issue of September 27 - 3 October, 2020.