Smell Opportunity, Not Just Upheaval, In Globalization
By Rob Preston
Broach the subject of globalization at the water cooler or watering hole, and prepare to get an earful. For its ardent supporters, globalization is a force for economic expansion and prosperity, the way for small and large companies alike to access new markets, products, materials, and talents and elevate standards of living. For its harsh critics, it’s a form of brute force,where the powerful crush the weak and the rich exploit the poor in the que st for profit.
Argue all you want about which definition comes closer to the truth, but globalization is a force that will stay in forward motion. Some 90% of the 217 senior executives worldwide surveyed by advisory firm EquaTerra see globalization as unstoppable, even in the face of protectionism and an economic downturn. More than a third of those execs view increasing globalization as a threat or challenge on some level, but one that will be more than offset by new market opportunities. So for those still unconvinced that their company and profession will continue to take a more global turn, it’s time to face facts:We can’t stop this economic movement any more than we could have stopped the Industrial Revolution more than a century ago. Just as advances in manufacturing and transport altered the economic landscape in the late 1800s, the Internet (and related communications, logistics, and collaboration technologies) is the backbone of an economy that will increasingly transcend borders. You’re a key enabler of globalization, not just rolling with its punches.
In their new book, The New Age Of Innovation, University of Michigan professors C.K. Prahalad and M.S. Krishnan lay out example after example of how companies with superior access to global resources are winning. This isn’t just a “race to the bottom,” as critics maintain, with companies chasing sweatshop labor and cheaper materials. It’s also a race to unlock in developing countries the kind of ingenuity, ambition, and entrepreneurship Americans pride themselves on.
At the center of global business expansion is the supply chain, a once back-office function that is becoming a competitive differentiator across industries. The global companies in AMR Research’s Supply Chain Top 25 index, for example, earned an average return of 17.9% in 2007, compared with 3.5% for S&P 500 companies. Among U. S.-based companies in the Top 25 are Apple, Best Buy, Coca- Cola, Dell, Nike, Procter & Gamble, and Wal-Mart.
Holding back companies, according to an AMR survey of 198 organizations, is a shortage of trained supply chain management pros and an overemphasis on engineering and logistics vs. product development and manufacturing chops. Meantime, a lack of consistency across organizations as to what constitutes supply chain best practices makes it difficult to establish standardized training and university curriculums for the profession. General Motors CIO Ralph Szygenda, in an interview with my colleague John Soat, insists that 95% of companies still aren’t truly global. Most companies, Szygenda says, maintain only “global presences”—a few offices here, some resellers there, most of them acting locally or regionally. Even GM’s big IT suppliers aren’t global,he says. Only through GM’s massive purchasing power has it been able to negotiate global IT contracts, Most other customers, he says, must still deal with “10 different IBMs, 23 Ciscos.”
Other executives have more modest views on what globalization means. In its survey of business execs, EquaTerra asked whether their companies are inve s ting in foreign markets (46% are) and locating and recruiting local talent (35%). Th a t ’s just Globalization 101. A better measure is whether companies are leve raging their operations around the globe as manufacturing, distribution, R&D, and other centers that feed operations and serve customers in other regions.
So if there’s such a thing as a business technology profession of the future, it’s in developing, building, managing, and cultivating global supply chains, better described as value networks. Most companies haven’t even scratched the surface.
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