May 23, 2006

Business sector selection for developing countries

One theme at TechLeb was that developing countries need to focus their efforts on particular technology industry subsectors. It’s a lot easier to come up with a government program that’s really effective for a few kinds of businesses than it is to come up with a plan for strengthening “all” kinds of enterprise. And of course it’s crucial to get to a critical mass, so that proven success – and proven successful people — in an area spawns more opportunities in similar ventures.

Kevin Carroll confirmed something I’ve long thought was true – the Irish success story shows that you do NOT need engineering-driven businesses to have technology industry success. Ireland now has the second-highest per-capital GDP in the EU, largely on the strength of its tech industry (including life sciences). Yet that industry has been concentrated in manufacturing and call centers. There’s certainly also some R&D, but that hasn’t been the engine of growth in the way that, say, Finland’s tech prosperity stems almost totally from the product-driven success of Nokia and, to a much lesser extent, open source software creators. Other examples of engineering-light success include Costa Rica in call centers and various Southeast Asian countries in electronics manufacturing. Engineering-led success has been wonderful for a considerable number of countries – e.g. the US, Germany, Sweden, Finland, Japan, India, Israel, and Estonia, among many others – but it’s not the only way to participate in technology industry opportunity.

That said, there are plenty of product-driven opportunities as well. Anybody could strike it rich with a dotcom success, whether global (Skype) or regional. Enterprise products localized for language, enterprise size, etc. are still needed in many categories, all around the world. Arabization is still a big opportunity, since global vendors haven’t done a great job with right-to-left languages. Particularly needed is a run-time screen-scraper so lightweight that it could be plopped willy-nilly on top of existing apps, localizing screens on the fly with acceptable performance. Fortunately, both dotcom and SaaS businesses have the option of locating their main servers offshore, should telecom service or data protection be deficient in their home countries. Frankly, I think just about every developing country should try to set up at least a small software/web incubator, if for no other reason than to ensure access to the best technology and web marketing for that country’s other businesses.

But beyond that, it is not necessary for every country to pursue an IT/communications/electronics development strategy. If you don’t already have a lot of well-educated engineers working in the global tech industry, it may be too late to make that an emphasis now. Life sciences will be at least as big a business over the next century as electronics, and in many ways it is much less mature. For example, it currently has almost no regionalization, in terms of agricultural biotech, focus on regional diseases, medical differences among people of different races, etc. What’s more, the US – while still very strong — isn’t as dominant in life sciences as it is in classical high-tech. For one thing, the Germanic world has always been strong in that business. Military research, a traditional source of educational subsidy, doesn’t have the same spinoffs in life sciences it does in IT. And if the political trends don’t reverse, the US will be weakened further, as radical religious rightwingers seem intent upon sabotaging both elementary biology education and advanced biological research.


One Response to “Business sector selection for developing countries”

  1. The Monash Report»Blog Archive » Why an actual peace treaty is essential in Lebanon on July 31st, 2006 9:24 am

    […] I ran a panel at the recent TechLeb conference. On that panel, we extrapolated from the successful experiences of countries such as Ireland, India, and the United States itself, trying to figure out how best Lebanon could grow a technology industry, with all the benefits tech-led economic development brings. And there were lots of good, specific suggestions. But those details aren’t important now. What is essential — more than anything — is that there be a reliable peace. Nothing else matters – not pride, not vengeance, not even justice. Just a secure peace, internally and externally alike. […]

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