THE RAPIDLY CHANGING GLOBAL ENVIRONMENT

Globalization is a complex topic that many business leaders commonly misinterpret as internationalization, which is the process of exporting goods and services internationally. Jagdish Bhagwati, University Professor at Columbia University and special advisor to the UN on Globalization, states “economic globalization constitutes integration of national economies into the international economy through trade, direct foreign investment…short-term capital flows, international flows of workers and humanity, and flows of technology.”

Technology and the Internet are the driving forces in the current rise of globalization, and when combined with the rise of emerging countries – Brazil, Russia, India, and China – new pressure is put on leaders to change. This is a wake-up call for organizations not focusing on the importance of constantly learning and building new capabilities, since low-cost countries with nothing to lose are willing to take on the developed world with the availability of new technological enablers.

Four main factors play a large role in the globalization process:

• Competition
• Innovation
• Outsourcing
• Knowledge and Talent

Competition

Levels of competition are increasing and many companies have leveled the playing field by copying business models, technologies, and processes. Implementing ERP software and outsourcing to low cost nations is now considered table stakes. Driven by technological improvements and societal changes, it is easier for companies of all sizes to not only serve a global audience, but to also efficiently manage costs and work continuously in multiple time zones.

Innovation

The outcome of increased competition is the rapid launch of a continuous stream of innovative products and services. The customer benefits are readily apparent at lower costs, quicker deliveries, and higher quality, which make serving a global audience a common beginning practice for startup businesses. For example, rather than creating a geographical limitation, internet-based companies like Skype, Youtube and Google began by tapping into a global marketplace of billions of people.

Outsourcing

Most companies outsource some major processes to gain key potential benefits, including:

• Saving costs
• Gaining experts
• Better focus on core competencies

For example, in a recent cost-cutting move, a large candy corporation announced plans to close their US plants and move production to lower-wage countries – Mexico, China, and India. In another case a large banking corporation outsourced their Information Technology processes to an Information Technology services corporation. This strategy allowed them to gain access to technical expertise and keep their resources focused on the business of banking.

Knowledge and Talent

Peter Drucker believed that knowledge-based organizations require everyone working there to take responsibility for the company’s objectives, as well as their own contributions and behaviors. This implies that all members of the organization must carefully think through their objectives and contributions, taking personal ownership for both, thereby creating an environment where there are no subordinates, and only associates.

In such a model all members must have the ability to control their own work through a process of feedback that is based on a measured correlation between their results and their objectives. Everyone is required to act as responsible decision makers and to view themselves as executives. Members must ask themselves ‘what is the one major contribution to this organization that I can make at this particular time?’

Growing Demand

Organizational value is shifting from tangible assets (plants and equipment) to intangible assets (patents and pure know-how). While Google and Yahoo continue to battle fiercely for superstars, the war is spreading outside of the technology industry to areas like consulting and finance, where success and competitive advantage are fueled by brainpower.

According to The Economist and 80% of HR executives, talent shortages are particularly acute in growth markets and in specialized skill sets; more than 60% face shortages in leadership talent. The quality of job applicants has decreased by more than 10% in just 2 years, and many organizations are forced to hire below-average candidates to fill critical job openings.

Conclusion

Every role in an organization will be touched by change, and a company must be able to organize and re-organize quickly and without boundaries in order to adapt to external competitive pressures. No matter what a company’s size, structure or strategy, it will always be strategically easier to navigate rapid change when a culture of growth and competitive focus is being maintained. When the boundaries remain rigid and impenetrable they create a lack of flexibility and a slow response rate, keeping an organization locked into old – and ultimately – self-defeating patterns.

Ronald Ashkenas, author of The Boundaryless Organization, argues ‘the challenge for organizational leaders at every level will be to create this boundaryless capability through change processes that are, themselves, boundaryless.’

Alan Todd, CorpU Chairman of the Board