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CHAPTER 3

The Strategic Relevance

The strategic significance of this phenomenon cannot be understated: Tecnolatinas are the living proof of the capacity of Latin America to take part in the new technology revolution. In a world starving for growth and value creation opportunities, technology-enabled innovation will standout as the most solid avenue for value creation and economic development in coming decades.

The gravity pull of massive debt, climate change and global instability is poised to have a negative impact on global growth for a significant time. In a world marked by secular stagnation and accelerated technology disruption, value creation is bound to be driven by innovation and entrepreneurs who are decided to leverage new technologies to challenge the status quo with superior experiences and business models.

The Tecnolatinas provide a gateway for Latin America into the largest industrial revolution in history and a platform to build the economy of the 21st century in the region. Only innovation provides an engine powerful enough to escape the middle income trap. We need to follow the example of Israel, which went from being bankrupt in 1985 to more than double income per capita by betting on a knowledge economy driven by entrepreneurial innovation. It’s always been the entrepreneur, rather than the incumbent, who would come up with an idea and would strive to create the business that would lead each industrial revolution.

The car industry was dreamt and built by people like Henry Ford and not by carriage makers. The personal computer revolution was led by the likes of Steve Jobs and Bill Gates rather than engineers from IBM or NEC. So if Latin America wants to ride this new revolution, it absolutely needs the fresh, energetic will and power of innovative entrepreneurs.

Tecnolatinas are positioned to transform the regional business landscape in coming decades. They can generate entire huge new industries in areas such as biotech, agtech, internet of things and renewables. They can ride the huge wave of technology-driven value creation, and quickly achieve scale and visibility when successful. They can also redefine the region’s insertion in the technology space. They are positioned to transform the market dynamics and consumer behavior across the board, from finance to consumer goods, from real estate and agriculture to entertainment.

Tecnolatinas will be a critical job creation engine. They are entrepreneurial by nature, they focus on fast growing market spaces, they tap into global demand, they generate high value jobs. The region is much better off with them than without them. A recent study of job creation in the US economy during the last fifty years led by the shows that new businesses account for virtually all net job creation, because existing companies destroy as many jobs as they create in their constant pursuit of efficiency.

Tecnolatinas can also create platforms of opportunity: MercadoLibre not only created thousands of jobs, it also generated the conditions for over 100,000 people to live from selling goods through their platform and supported the development of dozens of startups. Every year tens of millions of young Latin Americans enter the job market. Tecnolatinas will never make up for that gap, but their contribution is certainly valuable and absolutely necessary to push further development.

Tecnolatinas can breed a new and novel generation of business leaders. Their leaders are, and need to be, entrepreneurial, innovative, ambitious in their aspiration and drive for impact, dynamic and global in their outlook, and willing to take risks and give back to their ecosystem. Innovation demands that from them and also their cultural reference to Silicon Valley, where all of these values are not only prevalent but critical. They also need to work with high ethical standards to be able to attract capital and grow freely, without clientelistic links to government. This is a step-grade improvement relative to the traditional operating model on the Latin America business scene that can help inspire our youth, providing valuable role models.

Tecnolatinas provide an opportunity for traditional companies to engage in open innovation and ride the technology tsunami. Wired for control and predictability, most corporations will struggle to catch-up with the speed of change and will be increasingly cornered into reactive adaptation and defensive plays. A massive reshuffle in business leadership is to be expected over the next 10 to 20 years. 40% of the Fortune 500 companies will not be on the list ten years from now. Traditional companies, particularly those in Latin America, are simply not equipped to keep up with accelerated change.

Innovation is not one of their core capabilities and most of them are not sufficiently nimble, agile and customer centric to navigate an era of global disruption. Nevertheless, there is a lot corporations can bring to the table if they decide to collaborate with startups and complement their capabilities. That is what leading companies around the world such as Google, GE, IBM, Procter & Gamble, among others, are already doing.

Tecnolatinas are an attractive opportunity for investors. The value creation potential is huge and the ecosystem is underfunded. In Silicon Valley, capital is considered a commodity and investors flock to fund talented entrepreneurs, who choose among a wide array of proposals the one they consider the best. In Latin America, talented entrepreneurs and inventors still face an uphill battle to get access to capital, mentorship and guidance for their projects. That means investors can cream the market. And it also explains why survival rates in early stage portfolios are often above 70%, a rate that’s consistent with the experience in Israel, where success rates for the funds of the landmark Yozma Program, for example, were above 50%. Under-explored opportunity spaces like synthetic biology are not uncommon in the region.

A new relationship between talent and capital is emerging. Even though the market is still underfunded, the emergence of Tecnolatinas is creating the conditions for a much healthier balance of power between talent and capital. Today a talented entrepreneur addressing a regional or global market can easily benefit from grants and capital from multiple countries and can even resort to crowdfunding. Instead of working for pay as if they were employees, they can choose to work for equity, capturing a much larger share of the value they are creating.

Latin America needs to make the most out of the Tecnolatinas phenomenon to move forward in the path of sustainable development. This opportunity is open to every nation in the region, regardless of their scale. But not only a new mindset is needed, but also a shift in strategic priorities.

Entrepreneurial and creative talent is the most valuable resource in the region. We need to nurture and protect it so it can flourish. And the best way to do this is through candid collaboration throughout the region with a mindset of abundance. In the entrepreneurial innovation space the success of neighbors makes the regional ecosystem stronger and benefits all actors involved with learnings, inspiration, confidence and resources.

 

 

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