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Occasionally, this newsletter ips devoted
to reviewing a book with a compelling viewpoint relative to
competing in a changing world. In June 2004 the book reviewed
was The Second Century: Reconnecting Customer and Value
Chain through Build-to-Order (Matthias Holweg and Frits K.
Pil, MIT Press, 2004). It was a discussion of the
difficulties being experienced in the automotive industry as
competition and costs converge to choke the profit from many,
and the life from a few. GM's recent pronouncements, missteps,
and seemingly myopic leadership decisions bear testament to
the consequences of trying to stay the same while the rest of
the world changes.
While The Second Century discussed the
automotive industry, a new book brings it into focus for
everyone else. The World Is Flat: A Brief History of The
Twenty-first Century (Thomas L. Friedman; Farrar, Straus and
Giroux, 2005) asks the question, "Where were you when
you discovered the world was flat?" By flat, the author
means, the elimination of the usual barriers separating
countries: cultures, education, skills, even language. Mr.
Friedman describes three globalization eras since Columbus'
discovery in 1492. The first, referred to as Globalization
1.0, started when the world was shrunk to something more
medium-sized than the previous huge unknown. Around 1800,
Globalization 2.0 began, lasting until around 2000. During
this period, the key agent of change was the development of
multi-national companies that went "global". The
world became smaller as transportation costs fell in the first
half and communication costs fell in the second half. Around
2000, the world shrank again, to a size "tiny" and
the playing field for individuals became level. The dynamic
force behind Globalization 3.0 is the new found power of the
individual to collaborate and compete globally. Most of the
examples cited refer to the ascension of both China and India
in a variety of markets throughout the world and the ways they
have transcended the old time and distance barriers.
The challenge we face is: How can we in
North America compete in this new globalization era? The
author offers this suggestion: "If you want to grow and
flourish in the flat world, you better learn how to change and
align yourself with it."
He also provides a glimpse of how some
successful companies have done it. These companies have
developed some rules and strategies for operating in the new,
flatter world.
Rule # 1- When you are feeling flattened,
dig inside yourself. Don't try to build walls. Don't try
to protect your current practices. Adapt and
differentiate.
Rule # 2- Small companies should act big.
The key to being small and acting big is being quick to take
advantage of all the new tools for collaboration to reach
farther, faster, wider, and deeper.
Rule # 3- Big
companies should act small. One way to act really small is
by enabling your customer to act really big.
Rule # 4-
Be a good collaborator. In the flat world, more business
will be done through collaborations because the layers of
value creation are becoming so complex that no single firm is
going to be able to master them alone.
Rule # 5- Stay
healthy by getting regular checkups. The goal is to
constantly identify and strengthen the niches served while
re-examining the outsourcing possibilities for those things
that don't differentiate your company. It is partly about
finding ways to lower costs in line with strategy. It is also
about reviewing strategy in light of new competitive
pressures.
Rule # 6- Outsource to win, not shrink.
Being more competitive allows you to grow your business by
emphasizing your differentiation.
Rule # 7- Outsourcing
isn't selling out. A level playing field is a good thing
for everyone. Friedman predicts that China will never attack
Taiwan and risk upsetting a successful supply chain balance.
Suppliers don't want to shoot customers; customers don't want
to shoot their suppliers.
Mr. Friedman's study of the flattening
world is uplifting and encouraging and one of the most
compelling books I've ever read. It also is sobering because
there are still a number of non-flat areas of the world: many
parts of Africa, North Korea, and parts of the Middle East.
One of the major differences that separate the flat world from
the non-flat is perspective: in the flat world people have
dreams and in the non-flat, they have memories. Being
motivated by dreams focuses you on growing. But, if all you
are motivated by are memories of the way it was, it stifles
you. Whether you are functioning in a non-flat region or a
non-flat company with "this is the way we've always done
it" attitudes, recognize that the world is flat. Be a
dreamer!
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