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Globalization

Today’s flat world has profoundly redefined the economics of distance. Companies of every size are taking advantage of nimble global networks to create new capabilities and capture new opportunities. In its 2008 study, “The Enterprise of the Future,” IBM found that 85 percent of CEOs plan partnerships to capitalize on global integration opportunities.

The globally integrated enterprise is a step beyond what has been known as the “multinational corporation” that has its hub and outposts and costly replication of functions in many locations. Instead, the globally integrated enterprise locates and connects operations and functions anywhere in the world based on the right skills and the right business environments. In doing so, it deploys a business design that can respond efficiently and effectively to pervasive and constant global economic change and the global competition for talent.

The globally integrated design enables organizations to grow and innovate competitively by undertaking dynamic reconfiguration of business processes and operations at high speeds. These processes can then support rapid reconfiguration of capabilities, knowledge, and assets for use in innovative business models. Companies constrained, for example, by an aging workforce are learning to access, attract, and maintain talent from around the world.

Forces driving the global integration of business include the following

  • Economics: Global competition drives the relentless pursuit of better economic solutions.
  • Talent: Local, regional, and national gaps have led to global marketplace for talent, with work moving to the best locations for both cost and quality.
  • Standards: Open standards and interfaces make it possible to quickly connect organizations around the world.

In a globally integrated enterprise, reconfiguration takes place across the enterprise ecosystem as well as within its own organizational boundaries. In making the decision to become globally integrated, businesses need to

  • Define how value gets created in their businesses and ecosystem.
  • Thoroughly map relationships among and between people, processes, and technology using techniques such as component-business modeling.
  • Become engaged with social, regulatory, and government issues in every area where they seek to have business operations.

In an industry where supply-chain transformation has pointed the way to large-scale, global integration, IBM is transforming its operations from service delivery and manufacturing and virtually all support functions, from research and development to sales and marketing. It uses global centers of excellence to tap global talent who provide innovative solutions for clients everywhere.

The globally integrated enterprise is skilled in attracting talent, connecting and leveraging sources of production, and creating value, regardless of the physical location or the organizational ownership of these resources. It fosters close interaction across its ecosystem of internal and external stakeholders, including employees, customers, partners, government agencies, and others.

In my travels to more than 59 countries, I have observed how the emerging global economy introduces a new competitive landscape. To win in this new world, companies have to understand and leverage the economic value and innovation possibilities that this new world introduces. In this era, firms must consider a set of choices that will define their businesses and operating models. In its research, IBM has defined six areas of focus (shown in Figure 1.6) or capabilities that all firms need to develop:

  • Leverage global assets. Use global resources most economically and effectively.
  • Manage value in an ecosystem of increasingly specialized entities. Continually assess where, when, and by whom value is created.
  • Build a specialized enterprise. Enable modular business operations.
  • Enable collaboration. Employ both collaborative and traditional innovation approaches.
  • Manage risk and control. Take innovative approaches to risk management.
  • Serve distinct global markets. Seek new clients and potential partners.
Figure 1.6

Figure 1.6 Six essential global competencies.

One of the key business steps is serving distinct global markets. To seek new clients and potential partners, you need to focus on the right set. You need to use global demographics to segment the market to understand developing versus emerging markets. To serve global markets, firms must think about new ways to segment the market without the constraints of geographical boundaries. Great marketing organizations will tap into, analyze, and leverage global demographical data to capitalize on new global market opportunities.

As you explore niche markets, you will discover global sets of small local markets. Can you supply the same niche market that occurs across multiple geographical locations? For the most part, the decisions that companies make are similar, but the way they talk and think through those decisions might change. How do you scale to take on those challenges? Understanding which products and services that can be applied across multiple local markets with minimal or no customization might be a potential market segment.

Each of those needs to be segmented for you to develop a deep customer intimacy and respond quickly to needs. Here, the use of technology, such as a CRM tool, might help you identify unique needs of diverse cultures and market segments across global markets. Globalization and specialization serve to fuel competitive intensity as new entrants can more easily bring tailored offerings to market. Operating in geographically dispersed markets increases the need to develop a deeper understanding of the local customer and develop capabilities to rapidly respond to their needs. All these factors affect the way you segment in a global world. For instance, you might find that you need to leverage a global ecosystem of partners to deliver customized solutions to win in a new space.

Table 1.2 shows these best practices of companies looking to explore segmentation on a global basis. It shows the steps to grow your capability in the market and your skills in understanding the flatter world. Through its intense research, IBM has been able to help you step through the competencies required from ad-hoc use of segmentation through to world-class segmentation in the global world.

Table 1.2. Serve Distinct Global Markets—Detailed Assessment Criteria

Level 1 Ad Hoc

Level 2 Aware

Level 3 Capable

Level 4 Mature

Level 5 World Class

Practice 1: Use global demographics to segment the market; for example, developing versus emerging markets.

Minimal use of global demographics.

Ad hoc and manual processes.

Lack awareness of need for capability.

Starting to develop processes and capabilities.

Seeking best practices.

Learning from mistakes.

Sources for global demographics are identified and used.

Data is understood.

Staff are trained.

Basic tools and systems are in place.

Global demographic data is standardized and interpreted.

Tools and technology are in place to perform sophisticated analysis on data.

Analysis tools and techniques undergo review and continuos improvement.

New and improved sources of data are identified.

Practice 2: Explore niche markets, global sets of small local markets.

Global markets are not well understood.

Capabilities required to explore niche and small local markets are not understood.

Starting to develop tools and capabilities.

Understand how existing product and services can be applied.

Capabilities and tools have been developed.

Niche markets have been identified.

New products and services are being developed.

New product development factors in global market opportunities.

Ongoing education plans and support.

Intellectual capital relating to global niche markets is harvested.

New methods of analyzing markets are developed and refined.

Practice 3: Develop deep customer intimacy and respond quickly to needs.

Unique customer needs and wants are not easily understood.

Methods and tools are ad hoc and lack standardization.

Starting to develop processes and capabilities.

Seeking best practices.

Learning from mistakes.

Systems are in place to analyze and understand unique customer needs.

Capabilities to quickly respond to needs are being developed.

Organization sheds traditional “plan and push” approach to “engage and collaborate.”

Responsive delivery supported by a flexible and modular internal structure.

Tools and systems enable organizations to track customer lifecycle and predict key needs.

Practice 4: Leverage a global ecosystem of partners to deliver customized solutions.

No or minimal contact with global partners.

Adhoc management of contracts.

Processes to engage global partners are being developed.

Understanding of key capability gaps is developed.

Processes are well documented and understood.

Database of partners that can fill organization’s capability gap is established.

Catalogue of global partners is used to rapidly assemble teams.

Processes are in place to assess and classify new partners.

Extensive catalogue of global partners is maintained.

Processes to identify “best fit” combination of partners is established.

To make these concepts come to life, see Chapter 2, “Segmentation in Action: The Nortel Case.”

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