You have coined a term for a new and different global reality that will affect us all. What is it, and what are its key characteristics?
We call it ‘globality’. If you look at the definition of globalization, it has largely been about a movement of corporations from the developed world to developing markets, from West to East. But the new reality is that the movement is not just from West to East, it is also from East to West, from North to South and from South to North. All kinds of companies are going global, from places like India, China, Turkey, Brazil, South Africa and the Eastern European countries, and they have lots of advantages, which they are leveraging. These include rapidly-growing markets in India and China; cost advantages; and some specific talent advantages. They are also led by very ambitious and aggressive leaders who are determined to achieve a high level of growth within their lifetime.
Who are some of the big players in globality, and what sets them apart?
From India, you have the Tata Group and the Reliance Group, both of whom have made some major acquisitions. There are also some interesting players in China: we studied a company called Goodbaby, which is the largest producer of baby strollers in the world; Nine Dragon Paper Ltd. is one of the world’s largest paper companies; and [insert company name] manufactures 60 per cent of the world’s marine containers. All of these companies are going far beyond their home markets. Just a few years ago, they never would have been suspected of driving such an important global trend.
You have compared this wave of ‘global challengers’ to a Tsunami that is defined by three characteristics. Please describe them.
The first is that these companies have the advantage of ‘owning’ business in their home country -- which in some cases is an extremely large, high-growth market. Secondly, they have the advantage of access to very good talent. And finally, many of these countries have started liberalizing their economy in the last two decades. Prior to this, they had been restrained in their ability to grow, and as is the case when you release the pressure in a pressure cooker, there is now a huge kind of force being released of these leaders who want to grow and become global in as short a time-frame as possible. They have unbridled ambition and aspirations.
Globality differs from the earlier waves of globalization in that the previous waves didn’t have access to such global networks, where at the click of button you can access ideas, talent, even financing. Today you can do these things. If you are able to strike a deal with a large retailer in the U.S., you can have instant access to huge markets; 20 or 30 years ago, you had to go dealer by dealer or retailer by retailer. So these aspects have dramatically changed.
One of the seven key struggles of globality is something you call ‘pinpointing’. Please describe this concept.
In the world of globality, you need to create the best-possible value chain. It is not just about trying to create the lowest cost but the best individual parts of the value chain -- and by this I meant pinpointing all the parts of the chain and locating them in whichever country gives you an advantage over your competitors. This does not necessarily mean putting all parts of the chain in the lowest-cost country: there might be issues of access, talent or IT issues, or issues to do with combining market access with cost, so by pinpointing we mean being able to take a part of the value chain and locate it in the optimal place in the world, wherever that may be, to form your global value chain.
Another of the seven struggles is ‘embracing manyness’. Please explain.
If you step back and look at past waves of globalization, one of the most common ways that companies have approached it was to take their business model -- which included their product, the kind of plants that they have, the sales approach, etc. -- take it to a new country. They have tried to create a mirror-image model of the home- country business. We call this approach ‘one-ness’, and it was done because companies didn’t want a huge level of complexity in their global organizations, so they tried to align around one business model. However, we believe that ‘manyness’ is the concept that will make companies succeed in globality, because there is so much divergence in market conditions between different countries. It is very difficult to apply the same business model and win everywhere, particularly in emerging markets. Companies need to be able to operate with multiple models with regard to designing products, going to market, their manufacturing footprint and so on. This is no easy feat, because generally as human beings we dislike complexity and we like to create standardization, because we believe this leads to efficiencies. In many ways, manyness creates more complexity, but it also allows you to meet the specific needs of different markets much more closely, and this a requirement to win in globality.
You have found that the global challengers practice their own particular style of innovation: ingenuity. What does this look like?
Let me answer with an example. Let’s say that one of the up-and-coming challengers in India is in the automotive industry. How do they go about competing with the established global players and building R&D capability to compete with them? Most leading companies, we have found, look inside for solutions. They have a very structured process to find answers to some of their R&D or new product challenges. The challengers from rapidly-developing countries don’t have that ability, so instead, they look out. They try to get answers wherever they can find them: they’ll go out and partner with someone, learn from them, experiment with the new knowledge, and if it doesn’t work, they modify. The speed at which they do all of this is remarkable, and this is what we call ingenuity. Simply put, ingenuity means finding a solution through non-traditional ways and building capabilities to address opportunities in the market for which you do not currently have capabilities, but you end up finding the required answers to a problem through non-traditional means.
What do you mean when you say that companies have to ‘define their future global shape’?
[This article has been reprinted, with permission, from Rotman Management, the magazine of the University of Toronto's Rotman School of Management]