Manage globalization as a learning process

Manage globalization as a learning process. Global expansion always exposes a company to unknown unknowns. Even as smart a company as Infosys got its strategy wrong when it entered China. It assumed that, given China’s vast pool of well trained computer science graduates, it could start by establishing global delivery centers in China. However, after getting its feet wet, the company realized that, notwithstanding their training, its Chinese staff members lacked the necessary English language fluency and process rigor to serve global customers outside China. Having learned from its experience, the company is now targeting the domestic market within China. Infosys is hardly an isolated case, as is illustrated by the case of Wal-Mart noted above. In short, managers must think of globalization as akin to entering a new line of business. Notwithstanding good strategic analysis, you will make unexpected mistakes and encounter fundamental surprises. How good you are at learning from experience will be as important a factor in eventual success as sound strategic analysis from the get-go.

Build a robust China strategy. China’s economy is already more than three times as large as that of India. Further, given its massive investment in infrastructure, China’s growth rate continues to outpace that of India. It is a near certainty that, sometime around 2025, China will become the largest economy in the world. Not only will it become the world’s largest market for most goods and services, like India it will also remain a major platform for global cost efficiencies, global R&D, and the rise of ambitious and extremely capable global competitors. In fact, within ten years from now, Indian companies will find that having a robust China strategy is perhaps more important than even a robust US or Europe strategy. The time to prepare for that reality is now, not ten years from now. If you doubt the validity of this thesis, just look at what the leaders of Chinese companies such as Huawei, Lenovo, Haier, and Alibaba are saying today. In each of these companies, the top leaders have publicly stated that becoming number one in India is core to their long-term global ambitions.

Last, but not least, cultivate a global mindset. By 2020, the identities of companies will have undergone a profound change. Look at IBM today. It sources almost a third of its hardware from China and has located almost a third of its staff in India. Its revenues, asset base, R&D capabilities, top 200 leaders and shareholders are distributed globally — a trend that is accelerating. Thus, by almost every measure other than historical roots and the physical location of its headquarters building, IBM is not just an American company but also a European, a Japanese, an Indian and a Chinese company. In fact, if IBM had thought of itself primarily as an American rather than a global company, it could not have built the software and hardware capabilities in India and China with the speed that it has. Following similar logic, any Indian company that aspires to emerge as one of the global leaders in its industry by 2020 will have to transform itself into also becoming a Chinese company, an American company and a European company.

In 2001, there were less than five companies from India and China in the list of the world’s 500 largest companies. By 2008, the number had grown to 36. We deem it entirely possible that, by 2025, this figure could be larger than 100. Notwithstanding the bleakness of the current economic situation, one must remember that the sun will rise again. When it does, companies from India and China could be the biggest beneficiaries of the rebound. However, this will not be an automatic process. It will require discipline, determination, as well as openness to new ways of thinking, organizing and behaving. It will be prudent to remember that every new era needs a new mindset.