Developing a new or existing industry can be a highly rewarding experience, especially when, decades later, you can look back and see the thousands of jobs created and the impact it has had on people’s lives. This was the case for my father, who, 30 years ago, was part of a team responsible for developing the textile industry in Honduras. Today, this industry employs more than 100,000 people and accounts for over 15% of the country’s GDP. Now, if you wish to develop an industry in your region or anywhere in the world, how would you go about it? And why would you do it?
Why do it
Based on what I saw growing up in Honduras, industrialization enables people to escape poverty on a large scale by providing a more stable source of income and greater certainty about the future. Industries have the power to make a significant impact on villages, cities, and entire nations. Ultimately, lives are changed, and those involved can enjoy being part of a workplace with better conditions and more fulfillment than what was previously available. I believe these assertions are true for both developing and higher-income countries.
The more an industry contributes to wealth distribution, the longer the impact it has on a region. For instance, the textile industry tends to concentrate on its core expertise—textiles—which means that any other needs for their operations are outsourced to local businesses and entrepreneurs. This leads to a greater transfer of wealth, knowledge, and experience within the local business landscape.
These local businesses provide essential services such as logistics, construction, cleaning, banking, human resources, and maintenance. Over time, these businesses grow in complexity and size, evolving into larger enterprises that hire more people and expand their services to other industries and regions, as illustrated in the diagram below. This is beneficial for long-term wealth creation because even if the main industry declines, these companies can continue to exist by servicing other sectors and continue to employ people.
At the start of Honduras’ textile industry, most companies were foreign. However, over time, local entrepreneurs started co-investing with foreign ones or even launched their own textile-related businesses. The growth they experienced enabled them to later diversify their investments into other sectors, including energy, real estate, and tourism, significantly expanding their business horizons. However, not all industries feature such a dynamic business landscape. Some industries operate in a more monopolistic manner by controlling their entire operations with minimal to no subcontracting. For example, in the mining sector, I’ve seen companies offer good salaries, but as soon as they depart, they leave no significant business landscape behind, prompting many to migrate elsewhere for work.
So, why develop an industry? The benefits for reducing poverty and emigration are evident, but what else? There are various other reasons and strategies. For instance, some might be looking to increase the economic output of a region for competitive reasons, or have an interest in developing new technologies like AI. Others might want to enhance regional self-sufficiency through stronger agricultural capacity, increase exports for a currency exchange advantage, or, more popularly, pursue a higher-level mission such as improving ecological sustainability or better access to healthier products. The diagram below outlines a conceptual map of the different reasons and strategies for developing industries.
Clearly defining the vision, the why, and the goals you aim to achieve will lay the foundation to get started developing an industry.
How to do it
Developing an industry requires an entrepreneurial spirit, although not the conventional kind focused on launching a single business, but rather a unique interest in promoting the growth of many businesses within a region. Indeed, even a small group of individuals can make a significant impact. They can either expand an existing industry or pioneer a new one by identifying a market need and then encouraging businesses to fulfill that demand.
I recently had the opportunity to speak with Thea Berger and Luciana Markstein, graduate students from IHEID in Switzerland, who are in the conceptual design phase for launching a domestic menstrual pad industry in Ghana. Their goal is to alleviate menstrual poverty in rural areas while also creating a new revenue stream for entrepreneurs. By utilizing an innovative, low-cost machine from India that manufactures pads using locally sourced materials, they aim to introduce this technology to rural communities in Ghana. What makes this initiative particularly exciting is its independence from government intervention, demonstrating that it can be driven by individuals like you and me.
Key steps in this endeavor include validating the market opportunity, securing investment for growth, adopting innovative technologies, and developing a skilled workforce. Current industrial development frameworks are geared towards government officials to implement grand policies and strategies in place. I couldn’t, however, find a framework for regular citizens to foster industrial growth in their region. If you know one, post it in the comments below! In the meantime, here’s a first try at it:
- Identify and validate a market need – either domestically or internationally
- Find the technology or product that meets this need
- Define skills needed and partner with others who can provide training on both the technology and best practices to run a business
- Locate entrepreneurs who already have these skills or are interested in venturing into this industry
- Partner with others to secure financing for their business operations
The Future
When the Industrial Revolution began in Britain in the 18th century, many people flocked to factories in major cities to meet the high levels of productivity enabled by modern machines. This migration caused significant disruption in rural areas, a trend that continues to this day. Now, imagine a world where innovative industries can flourish anywhere, including rural areas and even favelas, offering a variety of products and services.
The convergence of technologies such as the internet, eCommerce, digital payments, social media marketing, and Artificial Intelligence is empowering communities around the globe to acquire new skills and launch businesses from their hometowns, eliminating the necessity to migrate to major cities. Meanwhile, many governments around the world will continue to facilitate digital platforms for legal registration of businesses and online tax declarations. Furthermore, banks and fintech companies will expand options to open business accounts and secure loans seamlessly online, ushering in a new era of accessibility and opportunity for aspiring entrepreneurs everywhere.
In conclusion, the development of an industry, as exemplified by the textile industry in Honduras, illustrates the capacity of industrialization to transform economies and uplift communities. Through the creation of thousands of jobs and the promotion of wealth distribution, industries can significantly reduce poverty and encourage local entrepreneurship, thereby fostering a dynamic and sustainable business ecosystem. As we look to the future, the potential for innovative industries to thrive in diverse settings—be they rural areas, favelas, or small cities—promises a more inclusive and equitable global economy, empowered by technology and driven by the aspirations of communities worldwide.
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« Developing an industry requires an entrepreneurial spirit, although not the conventional kind focused on launching a single business, but rather a unique interest in promoting the growth of many businesses within a region » great thoughts David Venegas I also very much liked the counter example with the mining industry!