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Bumps, Mountains, and Superhighways: The Need for Balance

The world is not completely flat. In our rush to understand and embrace this flat world, we need to recognize that we live in a world that is flat and round, modern and ancient. Global trade regulations, national laws, trading blocs, and other factors add to the lumpiness of the world. Although businesses operate as members of networks, they are incorporated as independent firms, so there is always a balance between the view of network orchestration in the outer circle and the firm view in the center. Sometimes it might make the most sense to take a firm-centric view; other times it is best to look at the network. Controls might be needed in some areas, while empowerment is needed in others. Value can be created through specialization as well as integration. The flat world creates opportunities for greater orchestration, yet there are still opportunities for more traditional approaches.

One of the most significant sources of lumpiness in the flat world is the result of national trade regulations. Different countries create regulations to gain advantage or protect local industries, goals that they feel cannot be achieved through open markets. They create restrictions and import barriers designed to slow the flattening of the world and position their countries to advantage. Favorable trade status is given to certain countries, creating expressways that ease the flow of goods. Others are punished with trade barriers. Some of these have nothing to do with trade, but are a byproduct of geopolitical objectives.

Decisions about the shape of the network change with each new ruling by the World Trade Organization (WTO), each new bilateral trade agreement, and each new protective regulation. Today the political geography can shift very quickly to protect domestic markets or reward allies. The contours of the world can change overnight. This makes markets less efficient, and it makes orchestration all the more important. Network orchestrators can monitor the bumps, look for the superhighways, recognize how they are changing, and find the most efficient way through these changes as early as possible.

Another set of lumps in this flat world has to do with the risks of interlinked systems, from currency to political risks. These risks need to be assessed and managed, and they can reshape the playing field for business, adding to the lumpiness of the terrain. Natural disasters, currency risks, political instability, terrorism, local wars, and environmental issues such as global warming also add to the risks and lumpiness of the world.

Other lumps in the flat world for business are a result of the relationships and trust that are necessary in doing business. Transactions can be digitized, but trust cannot. It can be useful to consider why an exchange such as Alibaba.com, the leading online marketplace in China, has not taken over the entire market, as had been predicted. Like the online bank Wingspan, business-to-business marketplace, VerticalNet, or the online shopping service WebVan, which rose and fell during the dot-com bubble in the United States, this type of efficient exchange would appear to be unstoppable. In a completely flat world, this might be true. These sites promise much more efficient transactions without the cost of a middleman. What they lack, however, is orchestration and a recognition of the diversity of customer segments. Not all customers are motivated only by one-off or short-term efficiency and cost. In a world of lumpy relationships and bumpy national regulations, there is a need for something more than a platform for transactions.

One of the roles of the network orchestrator is to balance the flat and round worlds. The orchestrator needs to come up with the best customer solution given the current terrain, and then adjust that solution when the landscape shifts tomorrow, as it will. The orchestrator needs to keep one eye on the possibilities of the flat world and one eye on the very textured realities of the unflat world.

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