If the subtitle of their book is disconcerting, make no mistake -- it reflects the reality of the new hyper-competitive world that Western companies increasingly find themselves in, according to Harold L. Sirkin, James W. Hemerling, and Arindam K. Bhattacharya, authors of Globality: Competing With Everyone From Everywhere for Everything (The Boston Consulting Group, 2008).
They define "globality" as the emerging economic environment in which "business flows in every direction. Companies have no centers. The idea of foreignness is foreign. Commerce swirls and market dominance shifts. Western business orthodoxy entwines with eastern business philosophy and creates a whole new mind-set that embraces profit and competition as well as sustainability and collaboration."
It's a vision of the end-state of globalization that raises serious questions about the ability of established companies based in the developed economies ("incumbents," in the authors' terminology) to survive.
Sure, the battle between entrenched players and overseas challengers is nothing new; one thinks of the rise of the Japanese export economy in the sixties and seventies. But the explosion of enterprises from the developing nations, particularly India and China, will unleash a tsunami of change bigger than anything the world has seen before, the authors argue.
The new challengers are different: They can tap into enormous domestic demand for new products as well as low-cost labor pools; they have unprecedented access to global sources of wealth, including intellectual property, and education; and they have an insatiable hunger for achievement, which manifests, for example, in workers' willingness to put in grueling hours to build a prosperous future.
Sirkin, Hemerling, and Bhattacharya communicate a sense of urgency in describing the new reality. Commenting on one executive's belief that his company had five or six years to figure out its response to the rise of new global competitors, they note that "twiddling their thumbs will likely prove to be a mistake for his company, as it will for most companies throughout the world."
The bulk of the book delves into the struggles that all companies, incumbents and challengers alike, will face in the age of globality. The authors document the astonishing resourcefulness and strategic sophistication of the new global players and show how the incumbents can learn from them. Many of the contenders, for example, historically have used alliances with established Western multinationals to acquire know-how and eventually build a competitive position. Similarly, incumbents can learn from and leverage low-cost markets by entering into joint ventures and other types of collaborative arrangements with firms in the developing economies, Sirkin, Hemerling, and Bhattacharya argue.
Take, for instance, U.S.-based phone manufacturer Palm Inc., which forged an alliance with Taiwan's HTC. The partnership enabled Palm to hand off much of the electrical and mechanical design of a new product, cutting months off development times and boosting profit margins by about 20 percent.
Or take Nokia, whose experience in China provides an example of resilience and determination that rivals anything the contenders can claim. The company was among the first mobile providers to take the leap into China back in the early '90s, and it quickly built up a 30 percent market share. But it soon found itself swamped by local competitors that sold their products through networks of distributors and retailers in the smaller cities and deep in the countryside, and by 2003, Nokia's market share had slipped to the low teens.
The company responded by mounting a massive effort to understand retail relationships at the street level, revamping its sales strategy, and expanding from 10 cities to 400. By 2006, its share of market volume was back up to 35 percent.
Whether other incumbent organizations can match Nokia's agility and tenacity remains to be seen, but for any corporate strategist pondering the challenges and opportunities of globalization, this book is an indispensable guide.
