subways, and cell phone connections are all more modern and efficient. It has become common in many locations, including parts of Africa, to leapfrog whole generations of technology, for example, by skipping the installation of landlines for telephones and the build-out of a nationwide retail banking infrastructure, and instead moving straight to e-commerce via cell phone. Top talent, too, can come from previously untapped sources, as Ingrid's bank is learning. Workers in an ever greater number of professions must both collaborate and compete with colleagues from other continents.
Western firms have been scrambling to augment their presence in global markets, where they are anticipating further growth. They encounter rival enterprises that were once primarily local, but which have now expanded beyond their home markets to compete with fellow multinationals worldwide. Huawei competes fiercely with Cisco, Lenovo with Hewlett-Packard, Hyundai with Ford, Emirates with British Airways, SABIC (Saudi Arabian Basic Industries) with Germany's chemical giant BASF, and Tata Consultancy Services with Accenture.
This trend is gathering momentum: McKinsey estimates that whereas 95 percent of the Fortune Global 500 was headquartered in the developed world in the year 2000, by 2025 almost half of the world's companies with a billion dollars or more in revenue will be headquartered in other markets.9 Due to rapid growth, along with mergers and acquisitions, leading global enterprises in economic sectors once integral to Western technological prowess now have owners based in Asia, the Middle East, and South America (see Sidebar 1.3).
Sidebar 1.3 Major Industries: Leading Global Enterprises
● Steel: ArcelorMittal (India), BaoSteel (China)
● Mining: Vale S.A. (Brazil)
● Shipbuilding: Hyundai (South Korea)
● Oil Production: Saudi Aramco (Saudi Arabia)
● Automobiles: Toyota (Japan), Hyundai (South Korea)
● Personal Computers: Lenovo (China)
● Cell Phones: Samsung (South Korea)
● Food Processing: JBS S.A. (Brazil)
Implications For Leadership
The global economy's ongoing transformation is a mixed blessing, bringing thrilling opportunities for some and headaches or deferred dreams for others, regardless of their location. The upshot for almost everyone is likely to be a career with more contacts and competition from all over the world – as well as a vast number of new leaders from emerged countries.
Instead of the outdated contrast between developed versus emerging economies, it is now more relevant to compare markets growing at different rates. Leaders and organizations that aren't aware of rapidly shifting customer tastes and preferences in fast-growth markets such as India will be left behind as other firms grow more quickly. On the other hand, those who fail to make careful strategic choices in slow-growth markets such as Italy or France are likely to wither in the face of high costs and fierce competition. Global organizations must make decisions and develop strategies for different regions, and encourage meaningful participation by people from those locations who possess the deepest market knowledge. Some common differences between the two types of markets are listed in Table 1.1.
TABLE 1.1 Fast-Growth versus Slow-Growth Markets
Successfully navigating today's global business environment requires that companies straddle the inherently competing demands of both fast- and slow-growth markets. Here is an example of the cross-border business challenges this global contrast can produce.
Air Filters for Shanghai
Alan, an expatriate based in China, comments, “Global headquarters just keeps slowing us down here; they don't understand how China works. We need more flexibility on the ground and more decision-making power. For instance, at the end of Q3, we had an overstock of aging air purifiers in the warehouse just outside Shanghai that we needed to move quickly. My local team came up with the solution to initiate a promotion to sell them.”
Alan suddenly becomes animated by frustration and begins to raise his voice and speak more slowly for emphasis. “It takes three weeks just to get the discount application for this promotion signed by the global team. Then, halfway through this approval process, the entire southeast region of China got hit with extremely serious air pollution – and suddenly everyone needed air purifiers. Within the span of one week, we sold all of our inventory and the warehouses were completely out of stock.
“This is what I mean by needing more flexibility. When we tried to reverse the discount application and replenish the stock of air purifiers, we got a message back from the global supply team asking for a three-month lead time in order to fit into the global supply planning process!
“How am I supposed to do business here in this market with processes that take three months? I am competing against local companies who don't have to wait, and who wouldn't dream of implementing such a rigid process. They would just call up their suppliers over the weekend and work night and day with them to make 20,000 new filters in two weeks. The market here is constantly changing; we can't survive if we aren't flexible. But the global team just does not understand this, and they always push back that we are not following procedure or providing enough lead time. They don't realize that these procedures make my life impossible here.”
Alan's struggles illustrate that a one-size-fits-all process or mindset could be fatal for organizations seeking to succeed globally. Individuals and corporations that have grown up in one kind of environment or another must now adapt to multiple worlds, thinking and acting with both slow-growth and fast-growth parts of their brains.
The shifting global economy has several other implications for people in almost any country. Many companies are expecting more than half of their growth to occur outside of their familiar strongholds in the coming years, which underlines the constant requirement to be agile. Present or future leaders will likely need to traverse new borders in several ways: crossing unfamiliar geographical boundaries, adapting to a changing home environment, and challenging artificial boundaries imposed by outdated mental models.
● Crossing unfamiliar boundaries. Many people will be asked to go to places they have never visited or perhaps never even heard about previously. Europeans can expect to do business in China, Chinese in India, Indians in Africa, and Africans in Europe. And beyond the usual capital locations, leaders may find themselves drawn to expanding second-tier cities such as Surabaya in Indonesia's province of East Java, Chongqing in southwestern China, or Belo Horizante in Minas Gerais, the Brazilian state north of São Paulo.
● Adapting to a globalized home. Once-familiar places are also changing rapidly. Urbanization, migration from abroad or within the same country, economic growth, and other forces are all altering what is “known” – whether that is in Los Angeles, London, Beijing, or Kolkata. Old physical boundaries that once provided clearer demarcations between different national cultures have grown more porous and flexible. Meanwhile, new kinds of borders – socioeconomic, religious, ethnic, linguistic – have arisen in places we thought we knew. As China's economy has grown and previous restrictions on individual movement have been relaxed, Tier 1 such as Beijing and Shanghai each have attracted millions of poor migrant workers from other parts of the country; these internal immigrants speak different dialects and have set up their own community networks for mutual support. Europe's Islamic population is already 6 percent and increasing quickly relative to other groups; there are 9 million immigrants or children of immigrants from Turkey alone. Demographers also predict that white citizens of the United States will no longer be the majority by 2050, while the country's Hispanic population will comprise almost 30 percent of the total.10
This massive flow of people across former boundaries within and between countries has numerous practical consequences. For example, immigration has markedly impacted the domestic health care industry