Swiss Bliss No Mystery – For Answers, Look to History

As I mentioned in my blog on the 2013-2014 Global Competitiveness Index (GCI), the World Economic Forum (WEF) ranked Switzerland for the fifth consecutive year as the world’s most competitive country. Such consistent success in the face of global economic turmoil is noteworthy, particularly when you consider that the United States was the last country to hold the leadership position.

Switzerland has, for some time, benefited from a positive public image. When most people think of that country, they imagine chocolates, watches, banks or skiing. Even the name is Disneyesque with an air of romanticism about it. The country’s rapid accumulation of wealth in the 20th century is commonly referred to as “The Swiss Miracle.”

In this context, it would be easy to dismiss the country’s latest accolade as hyperbole. But the GCI isn’t a popularity contest. It is based on an objective evaluation of 100 factors in 12 competitive performance categories that ranks 148 countries. And while other countries in the top 10 have fluctuated over the years, Switzerland has remained at or near the top.

Call it what you will but, for starters, let’s label it “The Swiss Measurable.”

Interestingly, Switzerland didn’t rank first in any single performance category. It owes its overall top ranking to a consistently strong showing across the board in every category – second in innovation, labor-market efficiency and business-sector sophistication; fifth in public institutions; sixth in infrastructure; and 11th in financial markets and macroeconomic environment. But that’s just the “what.”

Here’s the “how.”

Part of it is structural. Switzerland’s macroeconomic climate is among the most stable in the world. Here are two reasons why:

1. In 2003, as many neighboring countries and the United States were borrowing heavily to finance growth, the Swiss implemented a “debt brake” – a mandate that limits government spending to an average revenue growth rate.

2. Historians are well aware of Switzerland’s passionate commitment to neutrality. That commitment has kept it from becoming a full member of the European Union. Switzerland retains its own currency, insulating it from the Euro crisis that swept Western Europe in the wake of the global financial crisis. (That’s not to say it was immune. Swiss banking giant UBS suffered severe financial losses. As a country, however, Switzerland fared better than its EU neighbors.)

Part of it is cultural. WEF Executive Chairman Klaus Schwab says that, in today’s marketplace, the biggest differentiator among competitive countries lies not in whether they are “developed” or “undeveloped,” but in their ability to foster innovation. The WEF gave Switzerland, which ranks second per capita in the number of patents and fifth per capita for Nobel laureates, high marks for its support of innovation – specifically, the country’s excellent education system, commitment to continuing education, and close ties between business and the many leading scientific institutions. By comparison, the United States ranked sixth in innovation.

Of course, all of that would be for naught without a supportive and transparent public sector. Since 1959, instead of a single partisan head of state, the Swiss executive branch has comprised a seven-member coalition of the four major political parties, with each party having a number of seats that roughly reflects its share of the electorate and representation in the federal parliament.

Switzerland’s stable administrative and macroeconomic pillars have fostered an innovative, progressive and highly productive business environment known for its sophisticated products, ranging from watches and industrial machines to pharmaceuticals. This differentiation as a provider of high-end, high-quality products has helped maintain export volumes despite a significant increase in the value of the Swiss franc.

The interesting thing about innovation is that it knows no borders and is no respecter of persons. From the industrial revolution to the digital age, technological breakthroughs have been birthed in garages as well as laboratories. The message I want to leave you with is one of hope. While Switzerland has held the top rank for several years, the United States and other nations are recovering and Schwab says the future belongs to the country that best supports and embraces innovation.

What holds true for countries is also true for global enterprises. Change management and innovation ranked among the top 10 concerns of executives in the North Carolina State ERM Initiative/Protiviti Executive Perspectives on Top Risks for 2013 study. I expect these to be concerns in our 2014 study, which is currently underway.

What is your company doing to foster innovation? Do you discuss it at the board level? Is there a chief innovation officer responsible for managing innovation in your organization? Is there an innovation process that captures, recognizes and acts upon innovative ideas generated by the organization’s employees? Here’s some food for thought:
Technology: Cloud computing, social media, high-definition and mobile technologies are revolutionizing the customer experience in the marketplace. Are you actively seeking innovative ways to leverage these disruptive technologies?
Analytics: Are you making the most of big data? Are your decision-makers getting the insights they need out of the data and information your organization and its business model generates?
Agility: In uncertain times, the ability to adapt and respond to the unpredictable is critical. How resilient is your company in the face of change?

Which countries or companies do you think are doing a good job of fostering innovation? The United States is moving back up the GCI ranking, as are Germany, Hong Kong, Sweden and Japan. Which country do you think is going to be the next “most competitive” nation on Earth?

Jim

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