USAID/Macedonia's e-Biz Project: An Innovative Approach to Building Competitive Industries
A year ago, industry experts pronounced the Macedonia apparel industry virtually dead in five years. The report was shocking the apparel industry is one of the largest employers in the country. Today, these same experts have credited USAIDs e-BIZ project with breathing new life into the industry and positioning apparel manufacturing SMEs to save and/or generate thousands of jobs over the next three years. The e-BIZ project, implemented by dot-ORG, is providing a similar job-development lifeline to other industries. Through strategic use of high impact ICTs, synergies with standard competitiveness activities, and creative links between universities and businesses, the e-BIZ project provides a new model for building SME competitiveness.
Like many developing countries, Macedonia has made job creation a top priority in its economic growth program. Creating jobs, in turn, relies on strengthening SMEs, which account for more than 60% of the country's employment. ICTs are key to SMEs ability to compete in international markets to attract and communicate with customers, modernize their business processes, and employ efficient supply and distribution channels. Yet standard approaches used in other countries to help SMEs adopt ICTs have been less than a resounding success.
The e-Biz Project, launched in October 2003, aims to generate jobs through strategic use of ICT. The project created an innovative approach to using ICT to build competitive SMEs and promote economic growth. It begins with demand. All our centers are demand-driven, emphasizes Janice Brodman, Program Director, We identify a market opportunity and ICTs that will quickly ratchet up the Macedonian SMEs ability to compete in that market. The project then works with local entrepreneurs to develop strong business plans for e-BIZ Centers that offer the high impact ICT services. The local partners co-invest with the project to create e-BIZ Centers, which aim to boost competitiveness of entire industries or clusters. Together, local co-investment and well- conceived business plans fortify the Centers sustainability. The approach uses six key steps:
1. Identify high impact ICT applications. The first step targets key industries and clusters, and identifies ICTs that will quickly have a major impact on SMEs' competitiveness in local and global markets. If the ICTs impact wont be fast and significant, says Brodman, We arent interested. The project also conducts market analyses, industry tours, and Executive Roundtables to determine the demand that exists or will quickly arise for the selected ICT applications. These high impact ICT applications, which are often sector-specific, form the core offerings of an e-BIZ Center.
2. Select local partner entrepreneurs. Using a transparent, competitive process, e- BIZ selects local partners that will co-invest in, own and operate the e-BIZ Centers. Local companies or SME consortia submit proposals with business plans, descriptions of their capacity, and investment bids for an e-BIZ Center. Before we started, we werent sure that entrepreneurs would be willing or able to invest, notes George Peterson, e-BIZ Chief of Party, but weve gotten a great response. Independent advisory teams of industry experts drawn from around the world review the proposals and recommend e-BIZ Center partners. The e-BIZ project has also selected universities as local partners for two e-BIZ Centers.
3. Create a commercially sustainable business. e-BIZ works with its local partners to develop a strong business plan that provides the high impact ICT applications, as well as other ICT services, to entire industries or clusters. These are viable business plans, worthy of venture capital investment. All too often, other development projects establish ICT access centers with purported business plans, says Brodman, but their plans do not provide the financials of a serious business operation. In contrast, each e-BIZ Center business plan is rigorously based on credible financials that will make the e-BIZ Center sustainable. Each of the Macedonia e-BIZ Center business plans projects a break-even point within three years, at which point the Center will generate a profit. Centers established at the universities, like other e-BIZ Centers, have a solid business plan of services that will fuel SME competitiveness.
4. Co-invest to establish the business. Upon approval of the business plan, the local partners local companies, SME consortia, or universities co-invested with the e-BIZ project to establish the e-BIZ Center. In Macedonia, the local partners and the e-BIZ project co-investment ratio was 1:1. The co-investment ensures the local partners commitment to making the e-BIZ Center successful, strengthening sustainability.
5. Build the e-BIZ Center capacity to strengthen entire industries or clusters. For each e- BIZ Center, the project provides business management and technical assistance from sector experts, links with international markets, marketing tours, and day-to-day advice on all aspects of business development and implementation of the business plan. The project is also helping universities understand and respond to needs of business and forging stronger ties between universities and the business community. In addition, the project is building the capacity of local ICT firms, who partner with e-BIZ Centers, to ensure that they can effectively serve SME demand for ICTs into the future.
The e-BIZ approach uses a GDA-style investment model. In Macedonia, the projects $1,000,000 investment into seven Centers has been matched by at least $1,000,000 from local entrepreneurs who will own and run the e-BIZ Centers. In addition, one e-BIZ Center has received $200,000 in foreign direct investment from Italy, with the e-BIZ Center serving as the first step of a $7mm Italian investment plan. In addition, a US firm has invested $75,000 in one of the university-based e-BIZ Centers.
The five industry-focused e-BIZ Centers in Macedonia will directly serve 1,200 SMEs with at least 35,000 jobs, while the Online Management Training Center serves all industries as well as local government agencies. In addition, there are two university-based centers. One, at St. Cyril and Methodius University, provides small, local engineering firms with cutting-edge technology and skills that have opened significant new international markets. The other, at South East European University, serves all industries in the Polog region, while providing hands-on ICT-for-business experience to students. Industry experts have predicted that the e-BIZ Centers impact on job creation and employment sustainability will create or save 10,000 23,000 jobs in the next three years. The Centers direct benefits to SMEs include:
The seven e-BIZ Centers focus on specific industries, sectors, or clusters: National Tourism Portal
The National Tourism Portal is essential to the growth of tourism, a key Macedonian industry. This entrepreneur-run, for-profit Portal is helping tourism companies convert from "exporting" Macedonian tourists to importing international tourists. Market analysis projects that the Portal will foster 30%/year growth of international tourism into Macedonia. Already, queries have come from tour operators from such new markets as China.
Textile Technology Center
In 2004, the Macedonian apparel industry was going head-to-head with the Chinese and losing. The e-BIZ project identified a new, more value-added market niche in Italy, called rapid response, that requires short runs and rapid turn-around. Italian companies had tried to outsource this type of production to the Far East, explained Peterson, but it was too far away. And Macedonia was right around the corner. What the Macedonian companies lacked was ICT, most importantly computer-added design and computer-aided manufacturing equipment (CAD/CAM). Today, the e-BIZ Textile Technology Center offers CAD/CAM services to all textile companies, as well as links with the Italian market. An international industry expert has called the Textile Technology Center a "crucial contribution" to saving this industry and said the center will make a "quantum difference" that could save 5,000 jobs in the next couple of years.
Shoe Technology Center
When the e- BIZ Project began, the Macedonian shoe manufacturers were struggling to survive. Although they produced high quality products, they exported to European markets at very low prices. As with the apparel industry, low-cost competition from the Far East threatened to engulf the Macedonian shoe industry. They needed to enter new market niches that demand high quality design and rapid turn-around. The e-BIZ Shoe Technology Center is enabling the industry to do just that. By providing CAD/CAM and design services, the Center makes possible design, production and sale of higher margin products, and, say industry experts, will help generate up to 5,000 high value-added jobs in shoe manufacturing over the next couple of years.
• Online Management Training Center
The National Entrepreneurial and Competitiveness Council identified improved management skills to be an essential component of Macedonian economic growth. Although several donor projects had provided management training and business services, the quality was problematic. The e-BIZ Online Management Training Center decided to fill the gap. The Center uses ICT, and partnerships with companies across the country that act as service centers, to offer consistent, high quality management training throughout Macedonia. For example, the Center offers a wide range of Web-based management training courses from Skillsoft, a US firm with an international client base. It also uses videoconferencing to "bring in" trainers from the world's top business schools.
• Fashion Industry e-Commerce Center
The apparel and shoe industries, as well as other fashion-related industries, need a range of ICT services in order to compete in international markets. The Fashion Industry e-Commerce Center provides ICT solutions to strengthen SMEs capacity in sales, marketing, freight consolidation and sourcing consolidation.
• Engineering Systems Center of Excellence
Established at the College of Mechanical Engineering, St. Cyril and Methodius University, this e-BIZ Center utilizes Sun workstations, half of which were contributed by Sun Microsystems, to offer fee-based services to build the competitiveness of engineering firms. The Center targets SMEs in the machine tool and other engineering-related industries, offering training and facilities in advanced Java development and engineering design, 3D modeling, simulation, and other skills they need for outsourcing markets. In addition, it is developing a national engineering network to share and leverage the sectors design capabilities, as well as providing fee-based incubator-type services for engineering companies aiming to utilize advanced ICT technology for outsourcing to regional and/or overseas markets. The Center also provides hands-on training in advanced engineering programs to engineering students, who support the Centers day-to-day operations as part of an engineering internship program.
• The University Business Service Center
The Tetovo-Gostivar region of Macedonia, with 15% of the countrys population, struggles with unemployment rates of over 35%. Yet the rapidly growing number of small businesses fuels demand for advanced business development services. The Southeastern European University e-BIZ Center provides hands-on ICT-for-business experience to students, consulting opportunities for faculty, and fee-based ICT-related services to price- sensitive local companies.
The e-BIZ model provides a powerful new approach to building competitive SMEs and expanding economic growth. The approach is applicable to all types of economic conditions, from countries with limited markets, poor ICT access, and tight workforce constraints, to those with growing markets, broad ICT access, and strong workforce resources. By beginning with demand, creatively identifying new market niches, using high impact ICTs to make SMEs competitive in new international markets, co-investing with local partners, and putting all operations on a firm business footing from the outset, the approach can make break-through advances in the competitiveness of entire industries and clusters.