IT's New Role
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What caught them so shortsighted?
Sirkin: We viewed these countries as third-world countries. There was a belief that they couldn't do these things. But as the United States showed in the early 1900s, they can do these things; they can stand as equals. Of course, it's difficult to think of how to respond, especially when dealing with other pressures.
The classic example is the Big Three Detroit auto manufacturers. They watched the Japanese come to America, and they were in denial the whole time. If you look at Detroit and companies based in Michigan, you could argue that this country doesn't have a thriving automotive industry. They've struggled mightily to survive and try to thrive in this global environment.
It turns out that the United States does have a thriving auto industry--in Tennessee, Mississippi, Alabama, North Carolina, South Carolina and Texas, where Toyota, Honda and Nissan have plants. Korean and German manufacturers also are coming to put in plants.
The interesting thing is that with the dollar where it is now, we're not a low-cost manufacturing country compared with China. But compared with Europe, we're a midcost manufacturer, particularly if you set up shop in the southern states.
What's the most fundamental thing IT executives need to understand about this trend?
Sirkin: This shift is going to be more IT-enabled than other shifts. All of a sudden, businesses are going to have to grow into truly global operations, not just country-specific operations. The only thing that will bring that together--and one of the things you absolutely have to have--is IT. This becomes a much more important challenge for CIOs.
The traditional way of solving IT issues is to go to a very standardized system of operations. However, to be successful in each of these countries, there's a need for massive customization.
It's the concept of "manyness." Manyness is going to be a challenge for CIOs, because it basically means they will have to deal with more varieties of ways to do things and will need more flexibility, especially with management information systems.
There's going to be less centralized authority. The authority within the company may be around the different standards, but each country--and each operation--is going to want to do things differently. It's going to be crucial for IT to make it work, especially because we're going to see a lot more movement of people, ideas and goods between countries.
There's going to be a fight over resources for everything, including talent. The shortage in the supply of talent is going to be of high-end IT people, because they're going to be in such high demand.
Companies are going to have to find a way to attract those people, but they also will have to find a way to attract customers, because everyone will be fighting for them. Businesses must find a way to better manage suppliers because they're going to become more important. They will need much more robust IT systems for managing intellectual capital, and they'll have to deal with a variety of distribution channels.
This will increase the challenge and importance of IT, and particularly of the CIO, who will have to make a lot of the decisions in conjunction with the business on how this is going to happen, and how to balance costs and add flexibility. Companies will have to manage global footprints. That can't be managed solely on paper--it has to be managed with the aid of IT.
We'll also see many more acquisitions, aligned partnerships and structured deals. The big problem with post-merger integration is integrating systems--that's the long tail--and CIOs will have to deal with this more often. There also will be more partnerships in which information needs to flow freely, and that's another huge issue for CIOs.
This is going to be a major challenge. Companies will ask IT to handle it, and IT won't have a choice.