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Archive for September, 2008

The business of a global organization is ultimately a collection of local realities. Even companies like Lenovo that pride themselves of being a HQ-less networked organization in the end needs to succeed in local markets.

Their success depends on achieving a difficult balance. The first part of this involves enticing the local populace with sharing in a global value. In the 1980s, Levis jeans was attractive to rock music listeners across the world: the brand symbolized a common bond. Apple’s iPod is a contemporary example. One’s local experience becomes part of a global community; and that gives people–though it may sound tacky–a sense of belonging. It’s basically global community created through the local marketplace.

The other part of the equation is the local experience. Call it the global tuned to the local. This is an essential trait, according to a recent Washington Post article, of companies that one “cares about,” that is, companies that create an emotional attachment in their customers. It can’t be measured in numbers, directly at least. It’s amorphous, qualitative, another manifestation of that sense of belonging.

The article identifies four US companies–Starbucks, Apple, Google, and Amazon–that have been globally successful in creating local followers. They, the SAGA, have balanced standard global services and products somehow with an intensely local customer base, and they’ve done it through transforming “some important aspect of contemporary life.” Ledbetter and Weisberg, the authors of the article, go on to note:

Each has had an appreciable impact on our daily routines, taken on a looming presence in popular culture, and often engendered an intensity of feeling more often associated with tastes in entertainment or political views. Together, they have created a new model of business innovation, culture and values.

So while McDonald’s becomes the recipient of anti-globalization political backlash, these companies blend much more easily into their environments. While each company is a giant, to the local customers they don’t seem like “monoliths imposed on other countries from abroad.”

This is the challenge, the benchmark, for global brands: can they create local stakeholders who would provide cultural, emotional, and very importantly, political, support through the turbulence of an increasingly globalized world?

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There’s a new book out by BCG consultants called Globality. The idea is that doing business is not the same anymore, because as a firm, whether you like it or not, whether you know it or not, you are “competing with everyone from everywhere for everything.”

The consulting company I founded with two other partners, Red Bridge Strategy, is based on the exact same premise, corroborated by my own academic research on globalization. Harold Sirkin, James Hemerling and Arindam Bhattacharya, authors of Globality, argue that the leanest, hungriest, and sometimes the most profitable competitors you’ll meet are usually from the emerging markets. They list 100 such “challengers.”

Hyper-competition has been real for quite some time. Challengers from emerging markets, in the shape of companies as well as national policies, have also been around for quite some time. But what’s unclear is what this means for you, the medium-sized business, and how you navigate successfully in these treacherous waters.

Large, established multinationals are used to competitive environments and have the resources to engage in elaborate strategic planning and execution processes to shape and react to complex competition. But many smaller businesses, most of whom may be focused not just on a domestic market segment, but even more narrowly, on a regional market segment, are unaware of what globality means for them.

In our work, we emphasize this as the first step: understand the extent of your competitive environment and the implications for the business. But this requires some analysis that most businesses are still unwilling to take on a regular basis.

The second challenge is that the few who are well-aware of hyper-competition often fall into a risk-exaggeration trap. That is, their analysis is driven by competitive threats and not complemented by detailed analysis of competitive opportunities. But this is where the value of analysis begins to show compellingly.

The third challenge is to then figure out a way to both manage the risks and unlock the opportunities. And here, in a hyper-competitive world, it is crucial that strategies are fully customized. In the olden days, many consulting firms used a toolset or standard methodology successfully. It worked when the number of players (markets and firms) was limited. It does not work as well under hyper-competition where uncovering opportunities require innovative thought. It is here–in understanding opportunities from ‘globality’ and acting to seize them–that a lot of value remains dormant for medium-size businesses.

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