The Competitive Advantage Of Switzerland. Is It Sustainable? Is It Replicable? It Is Where Design Thinking Is In Action.

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We are trying to fix the world, the companies and many of our wicked problems that were mostly 100% man-made. Economists, policy makers, academics are spending too much studying our dysfunctional organizations and societies and trying to figure out why the high level of poverty, joblessness and hopelessness and how we are struggling with competing against low-cost producers and how low-cost producers are struggling with ultra-low-cost producers. The reasons are quite obvious and the problem is at a systemic and structural level. Capitalism has been suffering from major setbacks for the last 10 years and the future in its curent form is uncertain.

Switzerland has a very high living standard. Even compared to the London, Seoul, Tokyo, Hong Kong and San Francisco. It has few natural resources, yet it has managed to have one of the highest per capita incomes in the world. It has a decent private health care system and a sound currency and a very efficient public transport system. It has one of the lowest marginal tax rate on average income workers in the world at 20%. And no capital gain tax. Average folks in Geneva, Basel or Zurich would need to work for 7-8 hours to make enough to buy an iPad mini, pretty much the same as in London and New York. Geneva and Zurich cost around 45-50% more for food which I still don’t understand why and the food is not great, perhaps I am paying a prenium for super-organic-fair-trade-politically-neutral food. This very small country can maintain leadership in multiple industries from pharma to chocolates, watches and banking and insurance is a miracle. How do they do it?

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They did it without the benefit of a large domestic market. And they did it without extensive integration in supply chain which is a key competitive advantage in electronics industry as an example. Switzerland is no question the most innovative country in Europe, ahead of second-placed Sweden followed by UK, according to an annual study by the European Union. Switzerland is no perfect model, but it has a lot for others to learn. Singapore is trying hard to do that. And Canada and Australia should do the same. The Swiss are super practical people and that is being reflected in how companies are being managed.

Switzerland is both united and divided. That’s the beauty of it. This is where Design Thinking is in full action. It perfectly fits my definition of Design Thinking which defines Design Thinking as the search for a magical balance between business and art, intuition and logic, concept and execution and control and empowerment. Switzerland is a country that should not do well as it defies most of the norms for strategy. No common language, lack of scale, high labor costs, overly divisified in different industries, lack of deep political beliefs. It is a country made from linguistic, political, historic and religious divisions and yet maintaing that balance. And it is not political, comparing these crazy politics happening around the world that literally stopping our world from moving forward.

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Switzerland’s strict neutrality is an important driver and many countries should consider adapting the same. We need to de-politicize the world. It is creating more problems that it can solve. “They swore an oath to remain different from one another”, wrote Denis de Rougemont, Neuchâtel-born philosopher. “The reason for their solidarity was not to attain collective power but rather to maintain the autonomy of each individual.”

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Switzerland’s wealth is driven by the multinational companies in highly innovative and competitive sector. I am not sure exactly how that happened and curious to do some investigation and study. Studies and studies will tell you this is the result of a well-developed higher education and public-private co-publications. I suspect there is more that that. Honestly if you ask them, most cannot tell you why they did well.

Here are a few Swiss innovations that you may not have known other than the first form of cheese:

  • Electric telegraph 1774
  • Cut pattern for clothes 1844
  • Chococlate bar 1849
  • Army pocket knive 1891
  • Meat beef cube 1908
  • Toblerone 1908
  • Potato chips 1950
  • Electronic wristwatch 1959
  • Electric toothbrush 1960
  • Helvetica 1957

Despite all, Switzerland is still behind in terms of commercializing its innovation and IP. Perhaps a little more design thinking will help them to stay in the top.