This is the second interview in Business Pundit’s Fortune 100 Interview Series.
Remember globalization? Using a predictable outsourcing and penetration model, Western and Japanese businesses would expand into developing countries to capitalize off developing markets and lower operations costs. Shirts would be sewn in Romania; electronics made in Taiwan; and United States residents would relish decent corporate profits and low commodity prices.
According to the Boston Consulting Group’s Hal Sirkin, those days are nearing an end. We’re now hurling towards an era called “globality,” a hypercompetitive world in which established Western companies defend turf they used to take for granted, while challengers in developing markets force them to conduct business in brand new ways. We’ll “competing with everyone from everywhere for everything.”
Consider some of the following facts about today’s global economy (from the Globality press kit):
–Mobile phone users: 2.5 billion
–Internet users: 1.1 billion
–Number of people who live on less than $1/day: 1.1 billion
–Combined population of rapidly developing economies: 3 billion people
–Science and engineering students graduating in India by 2010: 1.5 million
–Those same types of students, graduating in the United States by 2010: 125,000
–India’s economy will overtake the UK, Germany, and Japan in: 10 years
Statistics like these, as well as years of research, led Sirkin and two other BCG executives to compile a book called Globality: Competing with Everyone from Everywhere for Everything. Authors Sirkin, Arindam Bhattacharya, and Jim Hemerling explore what happens when low-cost suppliers from developing countries morph into “global powerhouses,” new markets pop up overnight, and global competition runs rampant.
The book details seven major issues (Seven Struggles) businesses will face in an era of globality, then presents Seven Solutions to help businesses stay competitive in this seemingly chaotic era.
What exactly is globality? More than a single definition, it is a set of characteristics:
1. The rise of rapidly developing countries is changing the world of business.
2. A new generation of companies that will be the next Toyotas, Hondas, Wal-Marts, et cetera are descending on current markets fast and hard enough to be termed a “tsunami.”
3. Globalization is over. The era we’re in, called “globality,” will involve companies—especially from Brazil, Russia, India, and China (BRIC)—competing for talent and natural resources all over the world, from small towns to big cities.
4. The rules of success will be very different in the future.
5. Globality is about making the right choices, because you can’t do everything.
Globality means that many companies from many locations are fundamentally changing the way global business operates. It involves many players with many products moving at an eye-popping pace. “This tsunami,” the website claims, “will make all the previous waves look like a ripple.”
Business Pundit caught up with author and senior partner Hal Sirkin as he commuted to the airport for one of his many business (and research-gathering) trips.
BP: Can you tell us a little about how you researched the book?
Sirkin: Years ago, a group of us noticed that something interesting was going on: Rather than looking at rapidly-growing developing countries as sources of supply, successful new companies were emerging from those places. During the course of our 5-year research, we began by trying to understand the companies, seeing patterns behind what they’re struggling with, and what they’re doing to achieve success (the book mentions 288 companies). We gained the recognition that Western companies like Nokia and Mercedes are starting to struggle more on a globality basis. That was when we decided to break the story down.
BP: If you had one piece of advice for businesses trying to succeed in the era of globality, what would it be?
Sirkin: Don’t go into denial. If there’s one thing we’ve really seen from people in the start, it’s that they go into denial. It’s very easy to say “It’s just China and India, and they’re backwards.”
These companies are actually, in many ways, hoping you DO go into denial because it will be too late to react. It’s more than just low cost that gives them an advantage over you. It’s ingenuity and design. Companies exploit many angles to make themselves formidable competitors. If you just say, “Well, these companies are from backwards countries,” know that no, that’s not really the point. Many of these companies truly work from what they do. The biggest risk you have is underestimating these companies now.
For example, I did a little research during some of my airplane flights in Embraer jets (made by a Brazilian company). I would ask one of the passengers: “Would you ever fly in a Brazilian airplane?” I had a number of passengers say no, they would never fly in a Brazilian airplane. They said this regardless of the fact that (unbeknownst to themselves) they were flying in a Brazilian airplane and liked it.
BP: Can you name some potential opportunities for individuals and businesses in a post-globalization (globalitized) world?
Sirkin: For individuals, people who are excellent at what they do and passionate about what they do will do incredibly well in globality. One of the biggest struggles is the struggle for talent. If you are very good at what you do and passionate about it, you will be in incredible demand. You may be working in Chicago or New York, Mumbai or London, Paris or Beijing. Maybe you can work wherever you want, say, for a Mumbai-based company in the West.
Being excellent at what you do will make you extraordinarily marketable, a highly paid, valuable professional, because you will make a difference to the company. I think there’s lots of opportunity for people if they decide to be good at what they do. You’ll be rewarded for your particular talent. If you’re unskilled, it’s harder.
For companies, there are lots of opportunities. Lots companies’ global reach right now is somewhat limited. Think about if you’re a washing machine company, and all of a sudden you start marketing to developing countries. In India, there are 1.4 million washing machines. There are 180 million people in Brazil getting washing machines. These are markets several times the size of the US markets.
As a US company in developing markets, you have access to 3 billion people trying to work their way out of poverty, becoming consumers, buying things like washing machines and cars and other things you might want to sell them. If you stand back and rest on your heels, you’re not going to succeed in the world of globality. Not that this is a threat—it’s certainly a threat if you don’t do something—but this is an opportunity.
There’s undeniably a scary component underlying globality. Sirkin’s research demonstrates that waiting this one out won’t benefit anyone. These days, business moves so quickly that even temporary inaction could be detrimental. Perhaps the Land of Opportunity slogan needs to be made-over into The Land of Taking Opportunities, Now.
Learning Mandarin or Hindi also couldn’t hurt.
Whatever the next New World Order turns out to be, the advice in Globality will come in useful, for multinationals and individual workers alike.
Find more information and individual reviews on Globality here.
Find a more extensive New York Times book review here.
Harold L. Sirkin is a Chicago-based senior partner with The Boston Consulting Group (BCG) and leads the firm’s Global Operations practice. He is also the coauthor of the book, GLOBALITY: Competing for Everything with Everyone from Everywhere, published on June 11, 2008 by Business Plus.