3 ways to compete sustainably: Lessons from Mexico

3 ways to compete sustainably: Lessons from Mexico

Plant jigsaw image by Pixelbliss via Shutterstock.

Over the summer, 47 business school students were faced with the question: How can Mexico compete over the long-term?

These high potential future business leaders at the EGADE Business School at Mexico's Monterrey Institute of Technology -- a group of carefully selected middle managers and entrepreneurs -- developed four scenarios or "worlds" to answer this question.

In the end, they learned the value of sustainability and how this scenarios approach can be a useful tool to examine the role of sustainability in creating a competitive economy. It's a model that can be transferred to other settings, including businesses, cities and nations.

Among the factors they considered: the role of Mexico in the global economy, education and innovation, the role and future of cities, the energy-water-food nexus, poverty and inequality, transportation, health and technology.

The students were then assigned to each of the four worlds and asked another question: "What would be appropriate sustainable competitiveness strategies for Mexico in 2024?"

Each group came up with its own strategy. The private sector would lead the strategy, but representatives of the public sector, a radical NGO and young entrepreneurs would participate in its development. The proposed strategies differed among "worlds" because they addressed different needs.

In some worlds, Mexico faced north and benefitted from its proximity to the U.S. market. In other worlds, the key drivers of the global economy were in Asia, and Mexico had to adjust as Asian economies competed with its manufacturing economy and South American economies had better historical ties to serve Asian markets.

The final session brought participants "back to the present" and asked what should be Mexico's strategy in 2013 facing an uncertain future. Any one of the four future worlds was plausible.

What were robust strategies that would enable Mexico to compete sustainably in any one of them? What were resilient strategies that would enable it to "bounce back" when inevitably the future did not materialize as expected?

3 lessons learned

Some lessons the students gleaned from the class include:

1. Invest in people

Improve education: No nation can compete in a knowledge economy without a well-educated workforce and educational institutions capable of producing the innovators of tomorrow. Education is also the best tool to bring the benefits of the market economy to the nation’s 53 million poor.

Reverse the brain drain: Mexico is sending its most entrepreneurial and talented citizens abroad; it must provide them the opportunities to fulfill their dreams in their own country.

Use sustainability to attract and retain talent: The knowledge workers of the future will be highly mobile. They will choose to live in attractive, sustainable cities that embody their values and provide a high quality of life.

2. Diversify markets and differentiate products, services and business models

Diversify from the U.S. market: With more than 80 percent of its exports going to the U.S., Mexico is both in a privileged position and vulnerable to the whims of the U.S. market. An important area of opportunity is a strong and growing domestic market, particularly addressing the needs of an emerging middle class with environmentally sustainable products.

Innovate, innovate, innovate: Mexico has a strong tradition of cultural diversity and innovation in the arts and literature, but this tradition has not carried over to business innovation. Too often, business strategies have been based on retreading ideas developed abroad. To compete in the future it must develop products, services and business models that leverage the creativity and innovative capacity of its people. Without innovation, it is doubtful Mexico can generate the growth rates necessary to significantly ameliorate poverty.

Leverage biological and cultural diversity: An important source of sustainable competitive advantage is Mexico’s enormous cultural and biological diversity. These are differentiating resources that few other countries can replicate and can counterbalance an over-reliance on energy and manufacturing sectors.

Promote entrepreneurship: Mexico’s economy is dominated by private and public monopolies or quasi-monopolies. These monopolies have crowded out financing and development of small entrepreneurial businesses that are well positioned to leverage and diversify its energy, cultural and biological resources.

3. Focus on social and environmental sustainability

Address the energy-water-food nexus: Mexico’s greatest vulnerability lies in the energy-water-food nexus. Historical and complex inefficiencies in energy must be addressed urgently, as must the nation’s highly inefficient use of water. The need to feed a growing middle class will clash with water scarcity and inefficient energy use.

Create sustainable cities: Cities are, and will continue to be, the drivers of the Mexican economy. Eighty percent of Mexico`s population lives in urban areas (63 percent in major metropolitan areas that contain 80 percent of the population with advanced degrees and generate 80 percent of GDP). Sustainable cities are an urgent priority to address urban poverty and to attract and retain a highly mobile global knowledge workforce.

Build a sustainable infrastructure: Situated on two oceans, with access to the U.S., Asia and Europe and potentially a gateway to Latin America, Mexico has huge geographic advantages. It lacks a telecommunications and transport infrastructure commensurate with its sustainable competitiveness opportunities. A carbon-efficient infrastructure would position it as a hub of global commerce.

Develop the countryside: The most extreme poverty is in rural areas. Sustainable employment opportunities must be found for rural areas to relieve pressure on cities and to provide sustainable income sources for the rural poor.

Promote sustainable production and consumption: Much work remains to be done to develop environment-friendly and poor-friendly products, services and business models. Public education is important to focus on sustainable consumption as a growing fraction of the country’s poor move into the middle class and adopt middle-class lifestyles.

A great deal remains to be done, but a great deal has been accomplished. An eight-week summer business school course could not identify all the problems and solutions of creating a sustainably competitive economy in Mexico.

But aside from teaching students the potential of using a scenarios approach, these future business leaders also learned the value of sustainability. Most of them were not particularly focused on social and environmental sustainability at the beginning of the summer, but they now recognize that sustainable competitiveness is not just a philanthropic societal need; it is a business imperative.

Plant jigsaw image by Pixelbliss via Shutterstock.