Wednesday, November 22, 2006

Making the Most of the ‘Flat World’

The frog in the well: imagine a frog born in a well, that’s lived its whole life in the well. It’s worldview is the well. And then the walls of that well come down, and all frogs begin to communicate with all the other frogs in wells. That’s what happened when the Berlin wall fell, frogs celebrated because they knew they were able to learn about the whole world, and participate in it. That challenge remains.

Zoom In
Whether you’re a small creature, struggling to make it to a pond, somewhere to thrive, or you’re the biggest fish, with all the resources, the world has rules, and these rules are changing.

In the modern world, small companies can act big, and big companies must act small, to make the most of what Thomas L. Friedman calls ‘the flat world’.

Your world depends on:
Who you are
And where you are
The world is the relationship between individuals in an environment.
Where these interrelationships happen – for human beings at least – has become increasingly irrelevant.

If you’re a shepherd boy in Lesotho, you wouldn’t agree. Being so remote, you’d argue that you don’t have access to so many of the resources that are available to others. If you’re, say, a cyclist…perhaps someone doing the Pro Circuit in Europe, like David Zabriskie, (who has beaten Lance in a time trial), the chances are he frequently draws on plenty of services and international brands. Cyclists are frequently away from home, so he’d probably use the internet for lots of emailing, and he’d watch CNN, in English, to find out what is happening. But I wonder, which services do these guys have in common? Today, maybe it’s Coca Cola. They probably don’t both use Amazon, or Heineken. In time, perhaps the shepherd will go to work at a Nando’s restaurant (a South African brand expanding abroad) or become a lawyer in Johannesburg and find out about the world using Google, and watching TV.

The world experienced by the shepherd is very different to the world experienced by the cyclist. It’s like a frog in as well, unaware of all the other frogs. For the shepherd, the world is round, it’s vast, it’s huge. He’s stuck. For the cyclist, it’s fast, it’s flat, it’s small (and accessible) and it’s full of usable brands and services. Good news for the shepherd is: the cyclist’s world, with its technology and services, is rapidly infiltrating his environment. Two quick examples: Vodacom (the cellular network) and Eskom (supplier of electricity) already have a presence in remote and rural Lesotho.

What are the features of a Flat World?

A global supply chain of services means that it’s possible to have supermarkets like Wal-Mart or Pick ‘n Pay, and twenty different car brands driving down Nelson Mandela Road.
Because of mass production and efficiencies in production, we’ve seen the middle class benefit, and the average individual growing far more powerful. In today’s society power follows wealth. In the past, it was the opposite.

In a Flat World, everything moves faster. To simply stay where you are compared to the competition, you’ve also got to pick up the pace.
Speed is the most vital innovation today: success often depends on merely being faster than a competitor, or put in another way: being the best means being the first to innovate.

10 Forces That Flattened The World, according to Thomas L Friedman’s book:

1. The walls came down. The Berlin Wall, the end of the Cold War, the end of Apartheid – all these allowed capitalism to makes us unequally rich
2. Peek into the world. Netscape suddenly put the whole world onto the same playing field, enabling the internet, and allowing cyclists and shepherds to talk to each other
3. Moulded technology. Work flow software enables the service industry the way Henry Ford enabled Manufacturing. It means accessing talent anywhere in the world, 24/7/365
4. Mozilla – Firefox, a free web browser. Brings us the benefits open sourcing. It means setting up infrastructure, but commercial software companies (or data management companies) must go a step further, and focus on differentiating themselves and their services
5. Outsourcing. How did the world get around Y2K? Outsource drudge work to save on labor costs and to focus on the big projects.
6. Offshoring. China make things, then sell them somewhere else.
7. Supply Chaining is a very important flattener. Wal-Mart and Pick ‘n Pay have supply chains that encircle the Earth.
8. Insourcing is an exciting idea. UPS does it beautifully, and here’s their mantra: Your World Synchronised. They create value horizontally. They pursue deep collaboration. For this sort of business you need huge amounts of trust. UPS employs Toshiba technicians, their systems are at work inside pizza delivery services. If you order Nikes online, its routed through UPS. UPS core business is helping small businesses achieve parity.
9. In-forming. It’s even more subtle than Insourcing. It’s self-collaboration, becoming your own self-directed, self-empowered researcher, editor. In-forming is searching for knowledge. Google does it. Their goal is to make easily available all the world’s knowledge to everyone, in every language. Google employs hundreds of mathematicians. Google wants to democratize information. It’s about searching your own memory more efficiently. Search out collaborators. In this area of business, reputation, or brand power, becomes vitally important.
10. The Steroids. Digital gadgets, cellphones, music in your pocket, notebooks, all mobilize the flatteners. And now there’s VOip: Voice over Internet Protocol. Phone calls over the internet will revolutionize the telecoms industry.

How should companies operate in a flat world?

Companies in the flat world need to develop their inner sanctums instead of putting up outer walls. Small can act big, and big companies can flourish by acting small. The best companies in the end are the best collaborators. Companies will also need to identify and strengthen niches, and outsource the rest of their business. Why? Outsourcing aids faster innovation. As far as possible, especially if technology systems flow through your business, make your business into a buffet, a digital buffet.

Imagination is what drives us to innovate, and develop eventually, a higher operating consciousness. Imagination is an important instrument of innovation, because it gets us to the Blue Ocean, and allows us to develop and implement Blue Ocean Strategy. Blue Ocean Strategy is simple, but if you fail to implement it you can find yourself in the Dead Sea. Here are the basics of Blue Ocean Strategy*

Head to competition is damaging
 Red ocean filled with rivals
 Blue oceans: uncontested market space
 Create and capture blue oceans
 Reach beyond existing demand
 Focus on the big picture, not the numbers
 Reconstruct market boundaries

To overcome the challenges of global resourcing, instead of downloading the past, just upload the future. Instead of mere management of data, move towards the creation and evolution of data. And while all this is happening, remember who you are! Develop and stick to an identity with integrity, and nurture a culture that’s open and adaptive. Then, all that’s left is to understand the pattern of commerce in the world, anticipate changes, expect things to speed up again and again and remain in sync. No one said living in the flat world was going to be easier!

The World is Flat; a brief history of the twenty-first century, by Thomas L. Friedman.
*Blue Ocean Strategy, How to create uncontested market space and make the competition irrelevant, by W. Chan Kim and Renee Mauborgne

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