Publications

Overview

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"If the entire world were as materially-intensive as North America, it would take more than three planet earths to support the material requirements of the current world population"(1) This is not a model to follow.

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A famous American author and socialist politician Upton Sinclair, said "It is difficult to get a man to understand, when his salary depends on his not understanding."

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This statement encapsulates the core issue for already industrialized countries. The challenge facing emerging economies, like Vietnam is to find an alternative path to the conventional industrialization.(2)

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In this paper, I will review the recent history and business landscape setting the stage for DaLat & Lam Dong province to grasp the opportunities in sustainable development. I will make the case and explain why this opportunity exists now and how it may be grasped. The opportunity, in short, is to serve the underserved with sustainable innovative solutions through which commercially viable business models are engaged and local markets are developed. Guidelines of engagement in exploring the path will be proposed and five economic sectors of the underserved will be identified as targets. DaLat & Lam Dong province’s unique competitive value will be defined. The various channels of development explored in the master planning session are applied as a means to serve the identified underserved markets, providing a road map through which DaLat and Lam Dong could bring forward their unique value. 

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Our path of philosophical thought

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I will now turn to look at two channels of the journey that have brought us to our current collective condition. One is the path of philosophical thought and the other is the recent industrialization. Both of these are worth your consideration as you make your decision on whether to follow the conventional path of industrialization or the alternative path of sustainability. The world is at a particular turning point in history that provides Dalat and Lam Dong with the special opportunity to come forward to lead and to set an example for all the world by delivering a prototype of a sustainable community.

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Consider that from the beginning of the industrial revolution some three hundred years ago, Newtonian science ruled western thought. This now outdated theory viewed the universe as a machine-determined, fixed, predictable(3) and fragmented. From this perspective nature was created to serve mankind. It is no wonder that in western society today, the majority of the people who still engage in this system of thought are experiencing a sense of meaninglessness and disconnection from themselves, their communities and the rest of the world.

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It is in the last forty years, based on thoughts seeded by Einstein that western physicists began to question the Newtonian perspective. In 1968 a Swiss physicist proposed that if you take a two particle system, separate them by 10,000 kilometers and change the spin on one particle, the other particle will simultaneously change its own spin. (4) In 1972, a physicist at the University of Paris, conducted such an experiment which scientifically confirmed (5) that all phenomena are essentially interrelated and interdependent. Thereafter, a study commissioned by the US government and undertaken at the University of California at Berkeley concluded that this experiment had brought forward "the most profound discovery in the history of science".(6)

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Whole systems thinking, western terminology for the understanding that everything is connected and indeed is a whole system, as you know, is rooted in early Asian(7) thought and deeply rooted in Buddhism. It had however not emerged as part of western thought (other than in esoteric studies of Asian philosophy) until the 1950s, when aspects were engaged to maximize business performance.

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It wasn’t until 1980 that Dr. David Bohm, a professor of theoretical physics in London and the man Einstein thought best qualified to carry his work forward, proposed(8) that "both the material world and consciousness are parts of a single unbroken totality of movement."(9) "The world in effect is fundamentally inseparable."(10)

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For the western world this represents an unprecedented convergence of thought all across the disciplines of physics, science and philosophy. The significance of this is gradually permeating through various parts of western society.

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These developments mark the beginning of an era in which science is confirming what religion and age old Asian spiritual disciplines have long espoused. Indeed this journey brings leading thought in the west full circle in alignment with Buddhist philosophy and such Asian proverbs as 'If you cut a blade of grass, you shake the universe.' 

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Our journey of industrialization

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So while we bear in mind this journey of philosophical thought underway on one track, let’s review the journey of industrialization that has been underway on a parallel track. Industrialization and modern capitalism(11) put very simply, views the purpose of business singularly to produce profits and growth. This philosophy contends that in so doing, business improves life by increasing GDP and per capita income. This economic philosophy exists separately from any concern for the quality of life and the well being of individual people which it views is best addressed by development aid and charity from the entities who reap the profits, if they chose to provide it.

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Industrialization and Modern capitalism have indeed increased per capita GDP in capitalist countries. Nevertheless, by the 1960s, voices of dissent against pollution emerged with the onset of Cancer and the noticeable destruction of the environment. As the environmental objections grew in the United States, so did stricter regulations from the Environmental Protection Agency (EPA). From the 1960s to the ‘80s these regulations forced the major polluting corporations to clean up and to export their manufacturing facilities to the developing countries where they would not be hampered by environmental regulations. The multi-national corporations (MNC) were also driven by their expectation that the former Soviet Union, its allies, China, India and Brazil would enable the next great business bonanza for them.(12) While the last decade has seen the explosion of cross border trade, life expectancy and literacy rates,(13) the challenges and problems that globalization have created are equally as great.

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Stuart Hart, the world’s leading expert on sustainable global enterprise and professor at Cornell’s Graduate School of Management in his latest book "Capitalism at a Crossroads" concludes that after a decade of economic globalization, privatization and growing free trade, (quote), "where as the wealthy in industrialized countries have grown richer, the vast majority of nations and people in the world have yet to benefit from the apparent triumph of capitalism and liberal democracy. The forty trillion dollar plus economy is simply not growing fast enough to provide the jobs for the tens of millions of young people from around the world joining the work force every year.(14) Contrary to popular belief, the decade of the 1990s was actually the slowest-growing decade in the world economy in the past forty years".(15) The middle class in industrialized countries shrank and the underclass grew. "The poorest countries in the world have had zero to negative growth since the early 1980s."(16)

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Stuart Hart contends "In the process, the industrialized and industrializing countries’ abuse of natural resources have exponentially increased and put entire underlying systems that support human economies in crisis.(17) It is not only the climate change effected by carbon emission but entire eco-systems that have been degraded including forests, fisheries, soil, resulting in dire consequences."(18) Add to these, the challenges of an increasing population and of keeping food production up with that growth in the face of soil erosion and the expansion of deserts.(19) Cows are Mad, the birds have flu, plastics have entered the food chain through our fish, a chemical compound of Teflon has been found in the umbilical cords of babies and in most Americans’ blood streams and new strains of strange diseases are increasing.

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According to Stuart Hart, (quote) "The so called Washington consensus; The International Monetary fund, the World Bank and the World Trade Organization are all under increasing fire.(20) Most importantly by insiders that have made their objections loud and clear such as Joseph Stiglitz(21), Jeffrey Sachs(22), and George Soros(23). A rising anti-globalization movement is supported by wealthy protestors from industrialized countries that organize major demonstrations against the MNCs, and the institutions of global capitalism: THE WTO and the World Economic Forum."(24)

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The significant diversity of opinion within the United States (USA), may not be as apparent to those living outside it. The American public has been polarized for more than a decade in two contrary channels of philosophical thought. For instance, President Bush’s refusal to sign the KYOTO protocol has not stopped those in the USA that wanted it signed from pursuing the inherent goal by other means. Twelve states, several cities and environmental groups filed a law suit against the American EPA, arguing that under the US Clean Air Act, the agency is obligated to regulate the greenhouse gases that contribute to global warming. Recently the U.S. Supreme Court announced that it will rule on the issue of whether the EPA is legally required to regulate carbon dioxide and other greenhouse gas emissions.

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It is useful to bare all this in mind as well as the significance of Small and Medium Enterprises (SME) in the industrialized countries, in the course of your deliberations. In all industrialized countries up to seventy percent of new jobs are created by SMEs(25) and ninety-five per cent of all radical (disruptive) innovation(26) emerges from SMEs. SMEs represent the fastest growing segment of The United States GDP and a surprisingly significant percentage, an even higher percentage in Europe, and up to 80 percent of the GDP in India, China, and Japan.(27) The importance of increasing and sustaining SME participation in GDP can not be under estimated.

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Indeed the America portrayed in advertisements and TV shows is driven by the MNC’s that pay for the advertising, is designed to sell brand images, products and services. It does not show the terrible side effects of pollution, stress, obesity, drug addiction, and homelessness that abound in industrialized society. While this advertising drives the emerging markets’ fascination with American culture, at the same time it belittles local cultures making them seem less important and archaic, even trivial.(28)

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Stuart Hart, writes (quote) "Anti globalization sentiment is organized around concerns for environmental degradation, inequity, human rights, cultural imperialism and loss of local autonomy,"(29) (unquote). There is a growing voice among scholars and some business leaders that seek a more organic globalization, a more inclusive capitalism and, (quote) "the abandonment of ‘Development’ in favor of a new concept that gives a greater voice to the views and aspirations of local people",(30) (unquote). Paradoxically, the development era has created massive poverty by breaking down community ties and cutting millions of people from direct access to land and water.(31) "At the same time, the net effect of this development era has been to transfer wealth in the amount of approximately Forty Billion Dollars per year since 1985 from developing countries to developed countries."(32) After sixty years, it’s time for modern capitalism to evolve, to be revisited in the context of the world today and the results it has produced. Just as changes have evolved in the way economists identify factors of production; traditionally there were three: land, labor and capital. Today, this view has transformed to include a new core factor the knowledge economy.(33) Technology (and the knowledge on which it is based -information, productivity, education, and intellectual capital) is now viewed as an intrinsic part of the economic system.(34)

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So here we stand in front of a pyramid in which some eight hundred million of the world’s wealthiest have per capita purchasing power parity (PPP) of more than USD 15,000 per annum; an emerging middle class in the developing countries of 1.5 billion people with per capita purchasing power parity between USD15,000 P.A. - USD 1,500 P.A. and over four billion people at the bottom with per capita purchasing power parity of less than USD1,500 P.A.(35)

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The World Watch Institute, in their report, "The State of The World 2004" defines the "consumer class" as the population with per capita purchasing power parity (PPP) greater than USD 7,000.00 P.A.(36) Under this parameter almost 50% of the 1.7 billion persons in the consumer class as of 2004 already lived in the developing countries. Scholars from the leading US business schools(37) contend that the developed markets are no longer the majority of the world market but rather a "shrinking part" of it, since only 14% of the world’s population live in the industrialized economies.(38)

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This is the world stage on which Dalat and Lam Dong province could emerge as a showcase for sustainability with a knowledge economy. But how could this come about? The very short answer is by serving the underserved in a sustainable way, serving the underserved with sustainability. The great opportunity in front of us is sustainable development which is composed of social development and wealth creation on a massive scale among those who have been underserved by capitalism to date and /or exploited by globalization.(39)

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Let’s take a moment here to clarify some terms. 

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What is Sustainability?

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The Sustainability concept to which I refer is that defined by U.N. World Commission on Environment and Development: Our Common Future 1987 ("Brundtland Report") (quote), "A development which meets the needs of the present generations without compromising the ability of future generations to meet their own needs."

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The essential principles(40) are:

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• Consuming the income and not the capital 

• This takes into consideration all forms of capital including human capital, traditional economy capital, the capital of nature, etc.

• Integrating the short-term and long-term aspects 

• Capacity for continuance into the long term future

• Securing multiple forms of capital 

• Triple Bottom Line: Economic value-added, environmental value-added and social value added

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The Priority Criteria are the same as those already identified by Vietnam in the Clean Development Mechanism for industry pilot project undertaken with the UN Development Organisation in cooperation with Austrian Industry.(41)

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• Sustainability: Economic, Environmental, social and institutional

• Commercial viability

• Feasibility

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Sustainability moves beyond ‘Greening’ eco-efficiency, environmental management, all of which mean fixing the existing business, or practice to protect the environment as best is possible. An example of ‘greening’ would be not giving up a profitable business that destroys the environment but rather pacing its destruction. By reducing the amount of damage your current machines, systems, are creating. ‘greening’ remains in the charitable column of the balance sheet.

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Sustainability is an opportunity for commercially viable business through radical innovation AKA Disruptive Innovation. Disruptive innovation completely changes the status quo of practices rooted in the industrialized markets.(42) Not all disruptive innovation is sustainable. Sustainable disruptive innovation engages whole system thinking. It usually uses emerging technologies, sometimes technologies discarded by industrialized countries and/or the distribution of information and knowledge, to leapfrog over existing unsustainable technologies or distribution channels to clean technology and delivery systems. Disruptive innovations typically (but not always) enable the larger population of less skilled or less-wealthy people to begin doing for themselves things that historically could be done only through skilled intermediaries or by the wealthy.(43)

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Breaking out of old mindsets

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Taking a closer look at aspects of the business Landscape will assist us in further understanding this opportunity for an emerging market country and why its available to Vietnam. Why are the MNCs not equipped to do it in the mid term or to do it alone? Why are there only a few MNCs that are prepared, committed and capable of supporting the infrastructure of such an initiative in DaLat but could not drive it?

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There are some sixty-thousand multinational corporations around the world. MNCs have predominantly focused on products and services that address the 75-100 million richest people in the world, and thereafter the remaining 700 million at the top of the pyramid. Their entire product service set is not cost/price effective outside that economic sector. Furthermore, not only is the process through which most products are manufactured harmful to human health, but so also are the resulting products. For example, the situation is so poisonous that both the American Lung Association and the EPA have warned(44) that home indoor air quality is among the top five environmental risks to public health.(45) The point here is that most MNCs are locked into a vicious cycle of growth in an oversaturated market that seeks increasingly distorted methods to continue. A major shift in thinking is required before the MNCs can understand the opportunity in an emerging world that currently remains invisible to them.

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To underscore my point, for past five years leading business scholars from Harvard (46), University of Michigan(47) and Cornell(48) have been advising MNCs on a way out of this vicious cycle, in short that

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1. disruptive innovation(49) and destructive innovation (of old business models) must be engaged;

2. the next fortunes will be found at the bottom of the pyramid.l

3. and by finding answers to the worlds pressing problems(50)

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MNCs are even further challenged to realize these opportunities:

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1. 95 % of all disruptive innovation comes from Small Medium Enterprises (SMEs) not MNCs

2. The MNC executives have no comprehension of what indigenous values are. The major portion of mankind is completely alien to them, and the capacity to interact must be developed.(51) MNCs will have to "learn how to co-develop commercial models in alignment with sustainability aimed at improving the lives of the many.(52) This is a concept in conflict with conventional modern capitalism

3. Their entire concept of the global economy will have to be expanded

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The realities described in this landscape are the reasons why DaLat & Lam Dong now have this opportunity. Most MNC’s have too much vested to move as quickly as emerging markets and their companies to shift course and leap forward with disruptive innovation in the form of a prototype platform of whole system sustainability. Indeed this is also the reason why Vietnam has an opportunity to distinguish its development path from the other ASEAN Nations, which either are further down the road of a conventional industrialization process or have other restraints.

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Let’s look in this landscape for types of codevelopment partners.

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Please note that there are indeed MNCs who are leading the way in the transformation to sustainability, often in the energy and chemical sectors, such as British Petroleum and Dupont. In the late 1990’s Dupont began its transformation from a petrochemical company to a renewable resource company. When choosing partners, it is critical to carefully evaluate the level of commitment and implementation of sustainability of the potential co-development partners’ whole system.

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There are lessons to be learned from the challenge that SMEs have faced in bringing forward 95% of all the innovations. While SME’s innovate, the challenges are many to incubate, get to and build market share. The solution lies in underserved markets, where the development can be entrenched ‘under the radar’ before it is noticed. This lesson can be well applied in emerging market countries such as Vietnam.

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Innovative SMEs from industrialized countries can make good co-development partners. Technology makes these mutually beneficial partnerships feasible. Innovators and emerging markets, such as Vietnam can "avoid head on competition with the incumbent MNCs and their developed markets, which always ends in the undoing of the innovator".(54) The development and growth of innovation can only occur in the developing world in markets not yet fully understood by the developed world.(55) 

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Guidelines of Engagement

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Let’s turn now to some guidelines of engagement in exploring the path to innovative solutions, business models and markets for your consideration:

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• Engage a process to deepen the understanding of the whole system in alignment with indigenous Buddhist values. Avoid getting caught in any "greening "cycle thought process, leap beyond it.

• Develop the local markets, without destroying the informal economy that is held together by indigenous values and community. Taking these away creates hopelessness, violence and crime. Focus on turning the informal economy into local markets. It is critical that any new business models not be disruptive to the culture and lifestyle(56) of DaLat and Lam Dong.

• Recognize and put value on the wealth of indigenous resources and alternative solutions. These include: 

  • The economy of nature and its biodiversity

  • The traditional economy of thriving communities of small enterprises, barter exchanges, sustainable livelihood activities subsistence farming, self-Provisioning, household production, producer cooperatives, communal enterprises,(57) ‘give and take’ of life, extended family care

• Keep in mind that your "standard of living can actually be quite high even though GDP per capita is quite low".(58) 

• Develop and deliver sustainable infrastructure, systems, capacity, products and services for multiple economic levels of society with highest integrity through out the entire system. (Vigilantly avoid being sold or developing pseudo-sustainable solutions. They abound, are insidious and destroy the innovation process from the inside out.)

A geographic guideline; consider that the largest component of carbon emissions is generated from transportation. Serve the communities in Lam dong and the closest thereto first. Consider every aspect of the cost of transportation when evaluating target markets and product and service sets. Export led growth as advocated by the so-called Washington Consensus has come under increased criticism as it results in excess capacity and global deflation.(59) Engage only after full consideration and deliberation have been given to achieving an overall sustainable delicate balance.

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Let us turn now and explore paths to innovative solutions, business models and markets.

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synovations® has broken out five economic sectors of the underserved markets in the pyramid as targets that the DaLat, La Dong platform can serve:

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1. The underserved in the top of the pyramid both in the industrialized and developing countries.

2. The underserved in the Emerging Middle Class in the developing markets in the lower ranges of the WWI Consumer Class with PPP USD 7,000 - USD 15,000 P.A..

3. The underserved in the Emerging Middle Class in developing countries below WWI consumer class category with PPP between USD 1,500 - USD7,000 P.A..

4. The underserved at the base of the pyramid with PPP just under USD1,500 P.A..

5. The growing underclass in the industrialized countries that range in PPP from USD 15,000 - to USD 1,500.

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DaLat and Lam Dong: Exploring sustainable business models and innovations

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I will now address DaLat and Lam Dong province’s unique competitive value proposition.

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Biodiversity Hotspots are areas of the planet with the greatest bio diversity and under the greatest threat. By some estimates, in order to be a sustainable planet we need twenty percent of these areas under enforced conservation (not just official designation) with in the next eight Years. We are only about half way there. These areas contain especially high numbers of endemic species. Today areas of rich habitat in total cover only 2.3 percent of the Earth's land surface. Each hotspot has already lost at least seventy percent of its original natural vegetation. Over fifty percent of the world’s plant species and forty-two percent of all terrestrial vertebrate species are endemic to only thirty-four biodiversity hotspots left.

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This indeed presents the desperate need for some wise and courageous provincial government within one of the thirty-four hot spots to take the lead by delivering a sustainable community living with in a hot spot.

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Vietnam lying at the eastern edge of Indo-Burma hot spot, which spreads across to its western edge at the Bangladesh border, is part of one of the world’s richest bio-diverse eco-systems under threat. The vegetation in the Indo-Burma region originally extended over two million (km2). In total, only 236,000 km2 are officially protected, representing roughly ten percent of the original extent of vegetation in the hotspot. Only 132,280 (km2) (60) are in highly protected areas according to International Union for the Conservation of Nature. Creating a sustainable city and province in the heart of one of the richest ecosystems would be a first in the world. It could set the standard and become the prototype for all developing countries.

Most of the cities are burdened with old infrastructure and incumbent businesses that have not allowed them to move beyond "greening". Dalat and Lam Dong are at an early enough stage in the industrialization process to leap frog with technology to a truly sustainable model. Because of the Buddhist values, the local cultures’ consciousness could naturally support this process and sustainability.

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By 2030, sixty percent of the world’s primary energy demand is projected to come from the developing countries(61) Today China is the world’s second largest polluter. China’s acid rain poisons one quarter of the Chinese land mass and ruins crops in Korea and Japan.(62) DaLat and Lam Dong could truly be the oasis of sustainable life because of its elevation and geographic position, it may be able to avoid the fall-out from some its neighbors, while taking advantage of the proximity to a robustly populated market. DaLat and Lam Dong’s success in sustainability could become the tipping for Asia.

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The various channels of development to be explored in the master planning sessions today and tomorrow are a means to serve the five identified economic sectors of the underserved markets. They present an initial road map through which DaLat and Lam Dong could bring forward their unique value proposition. I will touch on these in varying degrees to present the overarching picture and identify which sectors of the underserved would benefit.

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The city planning and Infrastructure developed and implemented thoroughly with uncompromised integrity will serve all socioeconomic levels of the province.

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The degradation of the environment and global warming impact the poor at the bottom of the pyramid first and most severely. Thus the development and utilization of environmental technologies will probably have the most immediate and biggest impact on these people, but actually will serve us all.

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