Enterprises must prepare for a world beyond globalization

The political situation is altering dramatically, and geopolitical equations are being realigned as countries such as China emerge with huge surpluses and increasingly are seen as the engines of the world economy, as opposed to the U.S. Evidence of this is also apparent in the way cross-border M&As have undergone a fundamental shift. Examples include Mittal Steel’s takeover of Arcelor in France to form ArcelorMittal and Tata’s purchase of Jaguar and Land Rover from Ford.

Strong economic forces also are at play, redrawing the world with a change in the sources of innovation. For example, China overtook the U.S. in the number of patents filed during 2007. There is also a reverse FDI of sorts, as we saw with the deluge of emerging-market sovereign wealth funds to bail out the U.S. financial system during the sub-prime mortgage crisis and even, to some extent, in the current expanded financial meltdown.

In the future, the ICT related activities of enterprises will be more closely linked to globalisation. You must understand how to exploit ICT globally and leverage support through the use of technology in global markets. The challenge for organisations is to reproduce their partnerships and IT capabilities in newer locations, which have different cultures and unfamiliar or significantly fragmented supply chain relationships.

Huawei, a Chinese telecommunications industry multinational company, has 57% of its sales outside China, with a 15% market share in Asia and 9% in Latin America. Of the 1.2 billion new cellular-phone subscribers that are expected worldwide by 2010, 86% will be in developing nations. During the next decade, developing nations’ share of world gross domestic product is expected to grow from one-fifth to one-third, according to the World Bank.

These trends will continue to strengthen beyond the 2015 time frame from a macro-economic perspective as well. During the next two decades, BRIC nations alone will add to their populations some 225 million consumers who will earn at least $15,000 a year which is more than the combined populations of Germany and Japan. Emerging markets will comprise 69% of all new car sales by 2030, as compared with 26% in 2008.

There is a new breed of multinational competitors across many industries, including the ICT industry. Enterprises must look at change on a number of different fronts, including where their markets will be, where competitors will come from and where future ICT support will emerge. The challenge for enterprises is to face change on many fronts, often in unfamiliar environments in emerging-market situations. Challenges include how to compete and collaborate in these regions and whether to acquire other firms or be acquired. CIOs must discern the best shareholder value propositions in this new world order and must work with business stakeholders to make it happen.

Some organisations are already exploiting the borderless world’s opportunities. These firms always have sought the best technologies, intellectual capital and manufacturing capabilities from around the globe.

Boeing looks all around the world for the best technology, the best intellectual capability and for the best manufacturing capability in a serious effort to improve their competitiveness. Part of the design for the Boeing 777 was done at the Boeing Design Center in Moscow. Boeing’s 787 Dreamliner has more than 40 partners in 15 countries around the world, including Russia, India, China, Japan, Italy and France.

Globalization now is bringing together the best and brightest from around the world.

P&G radically transformed its innovation process, effectively more than doubling its market capitalization to more than $200 billion dollars. P&G realised that its globally networked internal model (designed in the late 1980s) could no longer sustain the growth it needed to stay on top of its business, if it relied on internal processes.

For every researcher inside P&G, at least 200 well-qualified researchers were outside P&G. Innovation was increasingly being done at small and mid-size entrepreneurial companies, and these firms and individuals were eager to license and sell their intellectual property. Universities and government laboratories were seeking industry partnerships and ways to monetise their research. P&G also realised that the Internet opened up access to talent markets throughout the world. A few forward-looking companies, such as IBM and Lilly pharmaceuticals, were beginning to experiment with the new concept of open innovation, leveraging one another’s (even their competitors’) innovation assets — products, intellectual property and people. Technology was not the driver in this business transformation. However, it was an essential ingredient in many elements in the new enterprise without walls collaborative innovation strategy.

Enterprises of almost any size and scale must prepare for a world beyond globalisation in how they think of, plan for, acquire and deploy ICT resources, whether these are people, software, hardware, services or innovation. These issues must be addressed in the context of region, then industry, then enterprise.

An important factor to consider is how much time there is to do something about these concerns. CIOs and strategic planners should assess the effects and potential timing of the messages and themes outlined here on your enterprise’s ICT investments.

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