How to Navigate a Flat World

See also: 9 Alternatives to Indian Outsourcing

Globalization is harder than it looks. In their forthcoming book, Getting China and India Right, Anil K. Gupta and Haiyan Wang argue that doing global business well is a prerequisite for survival for many large companies. The co-authors are saddled by a suddenly dated subtitle, "Strategies for Leveraging the World’s Fastest-Growing Economies for Global Advantage," but their larger message remains intact. This excerpt looks at the role of key connective elements in a globally integrated enterprise.

We take as a given that it is better for companies to err on the side of over- rather than under-investment in information and communications technologies. Companies such as IBM and Accenture are making access to a sophisticated IT infrastructure easier and less expensive.

• It is critical to have a common IT architecture [such as e-mail systems and databases] across the entire global network. No amount of sophistication in soft integrators [e.g., social networks and formal organizational links, as opposed to hard integrators like IT and supply chain] can overcome the challenges that would be created by an inability to access real-time reliable data effortlessly.

• Companies should maximize the intracompany deployment and use of Web 2.0 technologies such as Wikipedia, Facebook, blogs, idea markets and the like. These mechanisms permit large numbers of people to collaborate with each other easily, voluntarily and inexpensively.

• Companies should strive to increase the bandwidth of communication links. A leading example is Cisco’s TelePresence, which permits near-lifelike high-fidelity video communication between geographically dispersed individuals. The cost of high-bandwidth communication continues to decline dramatically.

The goal of any well-designed and well-functioning supply chain system must be to ensure forward and backward visibility, responsiveness to fluctuations on both the demand and the supply sides, and, of course, efficiency on a total cost basis. As value chains become more finely disaggregated and companies rely on a larger number of production centers (as well as external suppliers), the importance of forward and backward visibility rises. Extended value chains increase the number of points where defects can enter the production network and cause catastrophic failure later.

Formal organizational links include a variety of mechanisms. Organizational decisions should be driven by a bias to induce integration of the hub with the rest of the global enterprise. A global hub that is poorly responsive to the needs of peer units in other countries becomes a deadweight rather than a source of competitive advantage.

The primary reporting relationship of the global hub should be to the worldwide activity or business unit leader. With respect to incentive systems, key decision makers at the global hub must have a stake not just in managing internal activities at the hub, but also in ensuring that these activities lead to commercial success by peer units in other countries.

An effective way to build this responsiveness is to decompose the incentives for hub leaders into two parts: one part driven by functional excellence in how the hub is managed and the other driven by the financial results of the product lines and business units that depend on it.

Interpersonal familiarity and trust play a particularly important role in whether people are willing to share nonroutine information and their own judgments about the real story behind the hard numbers.

The importance of social networks is even more important in global hubs based in China and

India. In both cultures, interpersonal relationships are known to play a significantly greater role than in Western societies.

Social networks can be fostered through multiple channels. Some are periodic in-person visits to each other’s locations (which should be designed to also include social interactions outside of the work environment), collaborations in cross-border teams, joint participation in management development programs and, in the case of high-potential employees, cross-country job rotations that foster professional development while also building social networks.

Excerpted with permission of the publisher John Wiley & Sons from Getting China and India Right: Strategies for Leveraging the World’s Fastest-Growing Economies for Global Advantage. Copyright © John Wiley & Sons

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