Mexico’s Businesses to Benefit from Making Necessary Mistakes

Persistent market volatility and compounding uncertainties in the global economy are making subsequent innovation investments appear as high-risk activities. Nevertheless, if Mexico is to emerge as a global technology and innovation hub, companies need to continue pursuing innovation initiatives. As companies prepare for a forecasted economic downturn, the country needs to build a culture of tolerance towards mistakes, conduct risk-management and build a national ecosystem dedicated to innovation, according to industry leaders. 

“The numbers clearly indicate that companies that innovate have a better return on investments and enjoy greater market longevity. Moreover, countries that support widespread domestic innovation are more globally competitive, thereby pointing to a missed opportunity on behalf of Mexico which has slipped in recent years,” said Vladimiro de la Mora, President, AmCham Mexico.

Market conditions established and sustained by the COVID-19 pandemic prompted companies to accelerate their pursuit of digital and procedural innovations that effectively allowed them to reach consumers, survive and even grow even amid unfavorable conditions. Across industries, companies made significant investments in cloud computing, data-analysis and cybersecurity, among other areas, to culminate in a digital “quantum leap at both the organizational and industry level,” according to a McKinsey Global Survey of executives. Among them, early adopters and innovators were uniquely positioned to become market leaders, effectively cementing technology as a prerequisite to domestic and global leadership. However, market conditions have continued to evolve. High inflation, continuously rising interest rates and geopolitical fragmentation have spelled out new market challenges that necessitate more conservative fiscal policies. 

Countries have responded to these series of shocks by looking out for themselves, but “fragmentation in the world economy means we might see shifts in supply chains that impact on the cost structures on a more permanent basis,” said Kristalina Georgieva, Managing Director, International Monetary Fund, in a press conference in Washington. 

Meanwhile, amid this reconstruction process, it has become clear Mexico has the potential and capacity to become a global hub for technology development and innovation. Moreover, supporting this opportune transition has the potential to curb foreign technology imports, accelerate the nation’s migration to Industry 4.0 and establish Mexico as a center of multidisciplinary innovation, according to academic directors at the Universidad Autónoma del Estado de Puebla (UPAEP). Building up this productive capacity, however, rests on infrastructure that currently does not exist and will require significant public and private investment to construct.  Until then, companies will be charged with driving innovation in a country with limited support by the federal government, according to industry leaders at Mexico Business Forum 2022 ECHO. 

A primary and actionable starting point for greater state participation “is the formal creation of a national association dedicated to supporting an innovation ecosystem that includes all business entities,” says Fernanda Guarro, General Director, 3M Mexico. “In this respect, Mexico is behind other emerging countries like Brazil, which has relied on a federal agency for innovation (FINEP) to ‘transform Brazil through innovation´ since 1967,” she added. 

Currently, the closest semblance to a state institution supporting innovation domestically is Mexico City’s Digital Agency for Public Innovation, established by Major Claudia Sheinbaum in 2019 with the goal of “promoting transparency within the government, closing corruption loopholes, simplifying procedures and deploying technology to improve public policies,” according to Cities Today.  Consequently, with disaggregated clusters of innovation spread throughout the country and no clear focal point to exchange and build upon ideas, Mexico’s holistic innovation capacity is considerably debilitated. In this respect, “companies should not fear association or collaboration opportunities, as they stand to benefit from organizations specialized in aspects that their companies can learn and benefit from,” said Mariano Perotti, Country Manager, Diageo Mexico. This was a “hard-learned lesson for IBM, which used to think that innovation was something that it could carry and lead in on its own. Co-creation is infinitely more efficient,” said Mauricio Torres, President and Technology Lead, IBM Mexico. 

Beyond this initial jump-off point, “Mexico’s federal government should also consider revisiting its entrepreneurial regulatory framework, which largely restricts the viable entry of new competitors that could disrupt market conditions and drive innovation,” said Silvia Davila, President and General Director, Danone LATAM & Mexico. Other considerations include greater investment in the generation of STEM talent, increasing accessibility to capital and the development of supporting infrastructure,” added Guarro. 

In the meantime, however, business leaders can drive innovation within their organizations by instilling a “culture of tolerance towards mistakes.” The caveat is controlling allocated budgets towards potential mistakes so that they do not hurt organizations, suggested Davila. Furthermore, companies also stand to benefit from the anticipation of emerging technologies and trends by comparing internally developed conclusions with external perspectives, including those of clients, competitors and forums that may view the same problem from a different perspective, said Perotti. Considering this outside perspective is helpful to “balancing priorities between short-term delivery on products and solutions and long-term business longevity” he added. Given that innovation is a continual and unrelenting cyclical process, organizations need to be intentional about making time and space to encourage innovation, argues Guarro. Lastly, building an internal capacity for data analysis will play a defining role for companies in 2023 which promises to help “companies run at the rate of change within the market,” said Torres.