Formula 1 is one of the most recognized competitions in the world, where only the best car manufacturers can compete. They have high budgets for ongoing innovations and improvements. Every day, each team aims to be better than the day before, looking to optimize aerodynamics, engine power delivery, and how to change tires faster in the pits. Each year, every team strives to produce a better car than the previous one, measuring their improvement to see if it is 2%, 3%, or 5% better; but that number is irrelevant if at the same time your competitors have improved by 6%. Being competitive is relative to your competitors; that is the difference between competing or running alone. 

Formula 1 teams understand that being part of the championship does not guarantee a permanent spot; they must be competitive year after year. Only one team in the entire history of the competition has managed to participate every season; others have temporarily disappeared when they were not competitive, only to regroup and return years later, and some have disappeared permanently. 

With this context in mind, let’s look at our country: Chile has been competitive in some productive sectors for years. This is evidenced by the mining development, where competitiveness is strongly linked to productivity and production costs to attract investment due to the virtually nonexistent ability to differentiate commodity prices. In this sense, Chile and the mining industry have had significant comparative and competitive advantages over other producing countries, with favorable economic, political, tax, geographic, and climatic factors for copper extraction, which propelled the country to have the largest concentration of copper mining operations in the world. 

However, the same tone has not been the norm in other sectors. In the past three years, more than ten companies from various industries have announced the cessation of their production operations—a clear example of the loss of our  national competitiveness. Among the most notable are the closures of the sugar mills in Linares and Los Ángeles from Iansa in 2020, Unilever’s plants in the same year, and Maersk’s container factory in San Antonio in 2018. The difficult thing to accept is that the reason is not the market’s attractiveness, as Iansa still sells sugar, Unilever sells cleaning products, and Maersk continues to transport cargo in its containers to and from Chile: the reason is that it is now cheaper to import goods and products from elsewhere in the world to sell them here than to produce them in our country. 

In other words, for these companies, manufacturing domestically is no longer competitive because the margin, profitability, or sustainability they can achieve by producing elsewhere is higher, even considering transportation, import, and storage costs, among others. The national effect is confirmed by the recent drop in the competitiveness ranking issued by the IMD, where Chile fell to the lowest position in the last 20 years, ranking 44th out of 63 evaluated countries. One of its most significant drops is in the “business efficiency” category. 

Unfortunately, the loss of competitiveness of a company does not seem to generate a massive crisis, either at the national or sectorial level, to warrant public debate. It does, however, affect the company’s workers, suppliers, surrounding communities, and other stakeholders. And when I say workers, I am not only referring to operators but also to administrative staff, supervisors, and executives of the company that disappear. 

The entire organization, particularly senior management, has the responsibility and challenge to keep companies competitive, to manage allocated resources to generate the expected returns, but in a sustainable and enduring manner. In other words, to move from merely preserving companies to constantly creating value. 

Competitiveness is a relative term, not absolute or permanent. While companies do not make investment decisions or drastic changes every day, they do so every 3 to 5 years: it is the responsibility of companies, and particularly their leaders, to remain competitive and to constantly improve; not only compared to the previous year but also relative to their competitors in today’s globalized world. 

The Fourth Industrial Revolution has brought a series of concepts and technologies to the forefront, which seem obvious to implement. Why not robotize the entire production line? As advanced by Codelco, AMSA, and BHP with their integrated operations centers capable of operating entire plants from an office in Santiago, or automate back-office processes? As banking has done with the launch of 100% digital accounts, where there is no need to visit a branch, interact with a representative, or sign any physical paperwork. 

It would be easy to simply follow this strategy and quickly incorporate new technologies, but the complex part is identifying which is the best investment for the company according to its strategy, needs, and particular operational reality. Then, determine if this investment is subject to technology implementation. 

Furthermore, the implementation of new technology, no matter how expensive, needs to be accompanied by preparation and training of the people and organization to fully leverage its potential, understand it, and continuously improve it. Following the initial example, a Formula 1 driver does not just need the best available car; they must prepare to drive it and push it to its limits to win and continue improving it for the next race or championship. Therefore, rather than preparing the organization for the adoption of a particular technology or solution, it is necessary to prepare it for change and innovation, to be and remain competitive. 

Publication prepared by Esteban Heidke, Project Director