Book World Live: Harold L. Sirkin, Author of 'Globality'
Monday, November 3, 2008; 2:00 PM
In a world of emerging markets, new kinds of companies and technological breakthroughs, the old rules of international business are changing quickly, as Harold L. Sirkin, James W. Hemerling and Arindam K. Bhattacharya write in their new book, Globality: Competing With Everyone from Everywhere for Everything.
Harold L. Sirkin is senior partner of The Boston Consulting Group's Chicago office. He also co-authored Payback: Reaping the Rewards of Innovation, which was named one of BusinessWeek's ten best books on innovation for 2007.
He was online Monday, November 3 to discuss international business competition in the age of "globality.".
A transcript follows.
Join Book World Live each week for a discussion based on a story or review in each Sunday's Book Worldor in the weekday Style Section.
Harold L. Sirkin: Good Afternoon. I'm Hal Sirkin and I am one of the authors of the book, Globality. I hope that you enjoyed the book and stimulated your thinking about how the world is changing. I'm looking forward to your questions and hope we can have a lively conversation for the next hour or so.
I think I have a few questions already in the queue so I will begin working on them.
Munich, Germany: Current multinational corporations do have a head start in issues such as employee performance assessment and planning and building long-term careers for the most talented employees, but eventually Chinese and Indian companies, who already strive to emulate the business practices of Western multinationals, will develop these skills as well, perhaps by hiring experienced people away from the multinationals. How long will it take for these skills to migrate to corporations from the developing world?
Harold L. Sirkin: These skills are already beginning to migrate and the companies in the rapidly developing economies are tailoring what they do to their cultures.
But as you point out these are just beginning to migrate and it will take a decade or more before they become the normal in these environments.
I don't think that they will look just like the Western practices. They will have an Indian or Chinese or other country approach which will make them more valuable.
And they are already hiring people who can help them.
Philadelphia, Pa.: I see China has developed the ability to compete with global markets by imitating specialty markets: Italian shoes, English furniture, American steel, etc. Should we have been considering direct challenges to others' markets, or what strategies should American business have considered? Finally, since business decisions are a collective of individual entrepreneurial decisions, how does one guide a collective respond to global issues?
Harold L. Sirkin: Countries begin by imitating markets - often it's the ones with the most labor content (like textiles) and then they move up stream. We will see more of this from China and other rapidly developing countries.
However, while more industries will see this change, we are also seeing something else and that is innovation. No longer are companies in these industries are providing "copies" - they are providing better versions.
Perhaps one the best examples is from Goodbaby - the world wide #1 manufacturer of baby strollers. More than 400 million households in the world use Goodbaby products and 28% of all strollers sold in the US are from Goodbaby.
While Goodbaby has lower costs, it not just a cost play. It's products tailored for the local market. For example, in Scandinavia, they have products with that sleek Scandinavian design. In Japan, they have strollers that fold up into the smallest space - because space is at a premium in Japan. And in the US their strollers look like SUVs - large and with lots of cup holders, just like Americans want.
It's this type of competition that we need to be ready for and ensure that Americas companies use our innovative skills to succeed.
Washington, D.C.: Mr. Sirkin, Your book sounds fascinating. The U.S. needs to get on the ball to be able to compete with countries such as China and India when it comes to manufacturing and technology, to be sure. But how about banking? -- which seems to be our big wound these days. Can you imagine a day when the big banks (and Wall Street muscle) moves East to those countries?
Harold L. Sirkin: Another great question.
Some US banks (like Citibank) have been big global players for a long while and have a presence in many markets.
Right now they are in recovery mode but I expect that the strong banks and Wall Street will be very active in the rapidly developing economies. The Investment Banks are currently looming large given all the potential acquisition activity.
Philadelphia, Pa.: In perhaps too simplistic economic terms, countries far away from the US have been able to undercut some of our markets, despite having to pay higher transportation costs to get their goods to American markets, because their labor and production costs are less than within America. Yet, as the economies in these other countries grow, shouldn't their wage rates increase, and shouldn't their costs of production increase as they realize the need to pay for externalities? What type, if any, of a bridging the competitive gap do you see between the costs of American and foreign country production?
Harold L. Sirkin: You make a very good point.
Right now wages in China are about $2.50/hour and are over $20 per hour fully loaded on average. There is a very big spread.
Wages and the Chinese currency (RMB) are also rising quickly, so the gap is closing but it could be 20 years before they are hald of the US rate. And at the same time productivity in China is rising so the real increase in rates is smaller in productivity terms.
So it's going to be a while.
Therefore, we need to be more innovative and more productive. And we need to use proximity to our advantage - shorter supply chains and more customized products with faster deliveries.
Mitchellville, Md.: In your view, what are the most valuable skills necessary to compete successfully with everyone, everywhere for everything?
Harold L. Sirkin: This is a real tough question because so many skills are valuable.
However, I think it boils down to flexibilty and responsiveness. We can't know all the people we will be competiting with and where they all will come from and what the basis of competition will be so, we need to be looking around and reacting quickly including borrowing the ideas from the people who are doing it best and responding quickly so the challengers to our customers and people don't gain ground.
New York: I am very opposed to exporting jobs that should go to Americans. What is the biggest challenge our next president will face considering exporting of jobs undercuts the economy?
Harold L. Sirkin: Great question.
There are many issues that the next President will face on this.
Perhaps two of the most important are the consumer pressure for low cost goods (even if it means losing their own jobs) since they will have less money to spend so therefore need cheap goods to maintain their standard of living as well as the needs for US businesses to compete on the world stage and if they don't have low cost components to put into US manufactured high end products they won't be competitive.
There are many more. Fundamentally, the next President will need to find a good balance and that's going to be tough.
Vienna, Va: Is there a discernible difference in organizational structures and management techniques that can be perhaps categorized by country?
Harold L. Sirkin: A very good question.
We see some very crtiical differences. Perhaps the best place to look for different structures is India.
Cipla, the Indian pharma company, has a very flat structure with no titles.
And Tata, is very decentralized with the 96 businesses being almost completely autonomous with a Group Corporate Center (GCC) and it has a limited role - it sets the overall strategy for the group, it helps on financing where the individual companies have some difficulty, assisting in acquisitions, sharing of ideas and giving companies an occasional push forward.
We are seeing lots of new models that will work in many places. And they will be combined in different ways to fit the needs of many companies.
Harold L. Sirkin: Thank you all for joining me today.
We have a lot of challenges that we will face as the world changes but I am sure that we will do well.
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