In his 2005 book “The World is Flat,” Thomas Freidman describes a number of technology factors that have created a “flatter world,” without the barriers that years ago may have prevented companies in different countries from doing business with each other.
“We believe the strategic implications of a ‘flat world’ should be understood by the technology and business leaders of all companies, large and small,” says Joe Brouillette, vice president of business development at Avvantica Consulting. “The business world is flat; there are virtually no barriers any more.”
Smart Business talked to Brouillette about how doing business on a global stage has changed over the last decade.
Has the United States missed this phenomenon?
The United States did not miss the ‘flat world’ phenomenon because it was not a one-time event, but rather an evolution of events that have reshaped the playing field, globally.
The U.S. business community has been distracted by many significant events over the last five or six years — the Y2K technology threat at the end of the 1990s, the U.S. response to the 9/11 tragedy, global terrorism and the financial chaos brought on by the collapse of Enron and WorldCom, to name just a few.
For the business community in general, the silver lining out of these dark clouds was an internal focus on how, why and where they conducted business. The need for more controls, security, speed and flexibility collided with the demands for efficiency, lower delivered cost and higher quality, all in an effort to maintain competitive differentiation in a rapidly commoditizing world.
The same technological innovations and excessive quantities of network capacity (bandwidth) that were created for an e-commerce marketplace that never truly met expectations enabled access to very low-cost information-processing and transmission capability.
What are the major factors that contribute to the world becoming flat?
There are three critical factors that should really matter to business/technology leaders.
First, today’s software platforms allow work that contains knowledge components to be broken down to its most elemental parts, managed, transformed and communicated instantly, and then reassembled to its desired form in seconds, thus delivering value at speed. It’s somewhat analogous to the period in the early 20th century when the concepts of scientific management and time-and-motion studies were being developed and applied to the industrial workplace. This time, the work that is being managed is knowledge work, not industrial or manufacturing work.
Second, the availability of relatively cheap bandwidth and network connectivity allows information to be moved virtually around the globe for a minimal cost.
And third is the availability of vast new labor markets in areas such as India, Russia, Eastern Europe and China.
Why does this matter?
Over time all businesses compete on cost and the primary implications of a ‘flat world’ is cost optimization/minimization. In other words, over time work will always be performed in the most cost-effective location.
As the enablers of a ‘flat world’ continue to evolve, organizations must understand what it means to them.
For instance, outsourcing and offshoring have become commonplace in certain manufacturing and services segments. In a ‘flat world,’ companies must now be concerned that many components considered knowledge work can be outsourced or taken off shore. Customer call centers are typical of function being outsourced, and in the ‘flat world’ there are virtually limitless possibilities for all processes.
So what do you do to prepare for a ‘flat world’?
From a business perspective, we believe that leadership should understand in detail those areas of their company that are truly differentiated from the competition and form the basis of their competitive advantage. Processes that are not differentiating and are of a support nature may be very attractive candidates to the opportunities of the ‘flat world.’
For technology executives, we recommend that they help the organization to define and implement a robust architecture for both technology infrastructure and business applications. This will allow them to take advantage of a ‘flat world’ in ways that make sense for their specific situations.
JOE BROUILLETTE is vice president of business development at Avvantica Consulting. Reach him at (214) 379-7928 or [email protected].