1. Hungary
Being Small in a Global World
Interview and
Round 1 vision Best practices Revised vision
analysis
Hyperspecialization Define values Define main issues Revised vision
Key industries Quantify values Best practices Triple bottom line
Compare regions Recommendations
Team information
Team name HOW Consulting Group
Leader Gergely Balázs (Hungary, Rotterdam School of Management)
István Juhász (Hungary, Corvinus University of Budapest)
Members
Jasper de Vries (Netherlands, Rotterdam School of Management)
Mentor Miklós Stocker (Hungary, Corvinus University of Budapest)

2. According to our vision, Hungary can become world-class in
key industries through hyperspecialization by 2022
Hyper specialization can be applied in the following
Round 1 Vision: Why hyperspecialization? key industries
Hyperspecialization1 is an extreme form of the division Pharma ICT
of labor, facilitated by advances in IT and communication
technology. It involves dividing work previously done by
• 2% of GDP • 10% of GDP
one person into more specialized pieces done by several
• 15k employees • 120k employees
people.
+
• 70% is exported • 25% is exported
• 30% of total R&D • 25% of total R&D
Hyperspecialization solves two major issues
• Currently, Hungary spreads its limited resources
around all industries. Hyperpecialization means • Brain drain
• Very high (50%) attrition
focused efforts in key industries (Pharma and ICT) • High sectorial taxes
rate in higher education
–
• Current organizational forms are inefficient. Hyperspec. • Gov’t support uncertain
• No teachers
leads to better, faster and chaper work • Fragmented R&D
Hyperspecialization requires some changes • Better IP protection than
Comp.
adv.2
• Enabled by a top-notch education system and flexible in the East • Experience in ICT
labor regulations, creating a sustainable form of • Fragmented R&D favors • Incubators for start-ups
competitiveness, unique to EE. biotech
• Requires intermediaries, linking firms with specialists
by dividing, merging and checking work; changes in tax
and labor laws; marketing to make this type of work
Pharma is a traditional
Relevance
desirable; and improvement of education
industry in Hungary with ICT industry has regional
competitive R&D significance threatened by
threatened by offshoring to brain drain and offshoring
1. Source: Malone, A., Laubacher, L., Johns, T. (2011). Pharmerging countries
The big idea: the age of hyperspecialization. Harvard Business Review, p.1-11
2. See detailed competitive advantages in the Report
HOW_ChallengeFuture.pptx ChallengeFuture Round 2 2

3. Most values needed for hyperspecialization already exist in
Hungary, but some crucial values are missing1
Areas ranked based on each value: #1 stands for best, #4 for worst. W=west; E=east; ee=Eastern Europe; H = Hungary
Existing values2 Missing competitive values2
High-quality & cheap labor force 1 2 3 4 Strong cultural cringe 1 2 3 4
Quality of math & science education W E H ee National ineriority complex W E ee H
Quality of management schools W E H ee SSCs are prefered over hyperspecialization
Price of labor H ee E W Value chain breath W E ee H
Developed technological infrastructure Non-domistically owned businesses ee E W H
Availability of latest technologies W E H ee Competitive advantage of innovation W E H ee
High firm-level technology absorption W E H ee Low willingness to be a co-operator
High broadband overage W H ee E Preference of being an entrepreneur ee W H
Flexibility of labor regualtions Risks of being an entrepreneurship W ee H
Flexible payments E H ee W High degree of brain drain
Flexible hiring & firing H E ee W Brain drain W E ee H
Negative attitude towards delegation of responsibility
High willingness to delegate authority W E ee H
Firms should collaborate with employees W E H ee
1. Values and metrics based on interview with István Szatmári PhD, metabolism and pharmacokinetics manager at Chinoin Zrt.
2. Interview findings are quantified using metrics from the WEF competitiveness, Tárki European Social and Sass & Fifekova (2011) reports
HOW_ChallengeFuture.pptx ChallengeFuture Round 2 3

4. Hungary can overcome missing values by using best
practices
Preference
Cultural cringe of SSCs Brain drain
If parts of a smaller society or Vertical disintegration in the China was the first developing
community emerge and become mortgage bank industry in the country that participated in the
world-class, cultural cringe can past 30 years. This industry used Human Genome Project. The
Best practice vanish in the community to operate along a fully integrated opportunities generated by the
• Football for Hope value chain, but now it has Chinese in biotechnology
• El Sistema orchestras specialized companies attracted domestic researchers
• Mirror neurons and slowed brain drain.
Support high-potential startups. Standardize information, so Short term: Retention by
International success stories of every company can act upon it providing research opportunities.
Hungarian firms can give a push (build databases)
Recommendation for individuals and intermediaries Simplify the coordiation between Long term: Repatriation by
for Hungary different parts of the value chain, providing career advancement
Communicate success stories so they can be separated by and employment opportunities.
managers and operated by
contributors
People will have the courage and Higher added-value activities are Retention and repatriation
willingness to become a co- outsourced to Hungary
Result operator and to delegate
authority
HOW_ChallengeFuture.pptx ChallengeFuture Round 2 4

5. Revised vision is feasible and desirable for all stakeholders
Implementation guide for stakeholders
Delegate Prepare Execute Integrate Implement
Step
(Hungarian firms) (Intermediaries) (Cooperators) (Intermediaries) (Hungarian firms)
Define tasks that are Recruit and train co- Hyper specialized Work is checked for Implement the
suitable to be operators, then split individuals execute meeting set quality externally sourced
Action executed by the task and divide it part of the task that standards and then solution in internal
specialized co- among them is in line with their integrated to form a processes
operators specialization complete solution
Strength Regulations Infrastructure Labor force quality Infrastructure N/A
Bad attitude towards Cultural cringe Brain drain Brain drain SSCs preferred to
Issue
delegation hyperspecialization
Support promising Communicate Provide research Provide career Simplify the
start-ups success stories of opportunities advancement and coordiation between
Solution
start-ups employment different parts of the
opportunities value chain
Triple bottom line
Financial Bring value added activities in key industries to Hungary and become world-class in them with hyperspecialization
Social Reduce brain drain offering work and research opportunities in Hungary and cultural cringe by showing success
Environmental Shift to knowledge based industries drives down resource usage (eg. manufacturing)
HOW_ChallengeFuture.pptx ChallengeFuture Round 2 5