Strategy in a Global World

In a tight labor market, staying employed can become a full time job.  One must constantly retrain, learn new skills, or even move to another country, just to avoid from getting fired.  But, what about corporations? What options do they have to avoid filing for bankruptcy?  How should they ‘reinvent’, reorganize, restructure, or expand to remain competitive? In short, what must CEO’s do to keep their jobs?

For years ‘going global’ or ‘globalizing’ meant expanding sales to other countries.  As companies ventured into emerging markets, they soon learned that by moving their production facilities to China, for example, they could produce their products for less. China offered cheap labor and a reliable capability to fill large orders on a consistent basis. As companies made the move, they created an eco-system of interconnected local suppliers that have essentially dominated the global supply chain for large orders.  How else could Apple have manufactured and sold millions of IPhones and IPads within such a short period of time without a massive cadre of capable Chinese workers, ready and able?  The firms that moved their global production to China helped to create a defacto low cost supplier for companies worldwide.

China’s dominance over the world’s supply chain has forced CEO’s to seek competitive advantages elsewhere.  Some CEO’s have turned to academic institutions for new ideas and approaches.  What they heard may sound surprising to you.  Leading business management professors claim that globalization is no longer just about selling and adapting to new markets but rather an opportunity/obligation to test a firm’s capabilities on the world stage. Unlike Pilates, a popular exercise class, globalization is not a fad or another reason to network.  It is a behavioral change that should become an integral part of every company’s corporate fabric.

At MIT Sloan’s Executive Education (executive.mit.edu), I attended a two-day workshop on this very subject, “Strategy in a Global World”.  There we evaluated trends, theories, and best practices from leading firms. One example that caught my attention involved an interview with the CEO of Haier, Zhang Ruimin.  Haier, which has no meaning in any language, is a top home appliance maker in China. During his interview Mr. Ruimin articulated a vision for globalization that treated the world as though it was his own personal university course catalog, where he could learn from proven competitors and work with top talent to design appealing products.  For a small spacer-saver refrigerator product, for example, Haier coordinated the efforts between an Italian-based designer and Japanese engineers.  Both were considered the best in their class.  To maintain close proximity between engineering and manufacturing, a key success factor, Haier moved one of their headquarters to Japan, not to dictate their terms but rather to learn from world class design engineers.  Haier’s ability to select premium vendors among top-notch eco-systems anywhere in the world ensured that their manufacturing capabilities, a core competency, would always rank at the top of the list of their closest competitors.

Haier’s success to be in multiple places at the same time, also a Harry Potter phenomenon, can explain the renewed focus on globalizing through integration. Using video conferencing, collaborative software, and a slew of similar affordable technological support systems, companies like Haier can decentralize and centralize the flow of information at will, hence, channeling ideas throughout the company (or to a network of partners) as though the “firm” were housed under one seamless roof.  New ideas that flow freely from a local market to multiple headquarters in real-time can be disseminated by management for competitive strategic analyses or rerouted for further field evaluation.  What evolves when ideas can naturally locate their best options within a firm is an organization that acts more like a living organism rather than a pile of stock certificates.

To fully appreciate the new role of global integration, CEO’s must be prepared to abandon traditional thinking where globalization had become just another scheme to increase profits quickly.  They should embrace globalization as a top company priority defined with clear goals and objectives including metrics and benchmarks to monitor progress.  As the Chairman of IBM, Samuel Palmisano recently stated, “ Global integration is no longer an option but an imperative.”

MIT’s Executive Education workshop demonstrated to me how global integration no longer has to be a game of chance but can follow a self-correcting, systematic approach that any company can adopt.  Executed as designed, the process can intuitively identify a company’s capabilities and gradually hone in on their most viable competitive advantages. What surprised me most was that what I learned in two days at MIT was not rocket science, nor does it need to be.  Instead it was pure common sense that could make the difference between a firm’s unsteady survival and its sustainable success.

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