The recent article “Navigating the Five Currents of Globalization” by The Boston Consulting Group (January 2005) identifies five underlying global market changes which will have a profound impact on the future operation and organization of commercial businesses.

• “… Rapid growth of RDE markets”
• “… cost and capital advantages of RDEs”
• “… development of talent and capabilities in RDEs”
• “… migration of customers to RDEs”
• “… emergence of RDE-based global competitors”.

Certainly the economies of the developed nations (the United States, Japan, Western Europe) will continue to grow. In real terms, these economies will continue to represent the bulk of the GDP for the foreseeable future. The rapid growth of the RDE economies, however, can not be ignored.

Developing a partner in a RDE can be viewed as a two way street. In the short term, the business gains low cost region price advantages and the RDE supplier finances growth. In the long term the RDE supplier gains experience and knowledge in the design and manufacture of globally competitive products. The business has the potential to use the RDE supplier as the entry point into the RDE market.

Rather than viewing the RDE supplier as a potential threat, maybe the businesses in the developed nations should view the exchange as a future opportunity for mutual growth.

The New York Times published an article (“War on Terror Dominates Talks Given at Graduation“) by Sam Dillon which gave excerpts from several commencement addresses given to the 2005 college graduates. The personages ranged from Tom Hanks, actor, Vassar College (New York), to Mario Batali, chef, Rutgers College (New Jersey), to President Bush, Naval Academy. A few attracted both my interest and may have some bearing on the topic of this BLOG.

Mario Batali
Chef
Rutgers College (New Jersey)

Pay attention to the truth. It’s not an intellectual thing. It’s a gut thing. … It’s an idea. It’s a dish. It’s an icon. It’s an experience. It’s not rules. And as you cook up your life, I hope you never let anyone else’s recipe for success intimidate you or get in your way. Rules are overrated.

Samuel W. Bodman

Energy Secretary

Georgia Institute of Technology

After so many years of American dominance in science and technology, the rest of the world is clearly starting to catch up. Countries like China and India, which have been sending their best and brightest students to study in America, are now working to keep more of their young scholars at home. They are building their own networks of fine research universities, and forging their own partnerships with government and private industry, and establishing their own high-tech communities.

Bill Moyers

Journalist

Graduate Center, City University of New York

The web of cooperation is under siege. A profound transformation is occurring in America as the balance between wealth and the commonwealth is threatened by that “winner-take-all” ideology. … You are going to be needed if we are to recover America as a shared project.

—

“Rules are overrated” … or “thinking outside the box” or “if it is not broken, break it!!”.

The location shift of science and engineering talent pools to Low Cost Regions …

“Winner-take-all” ideology …

What did I gleam from these few paraphrases??

The truth changes, are you sure that the underlying “rules” on which your business is built are still valid?

Does the science and engineering talent always have to be in-house?? Is it possible to take advantage of lower cost, 24/5 task management offered by LCR talent centers??

Business interaction has to be mutually beneficial … the trick for Develop Nation companies is to stay closer to the customer, leveraging that advantage to stay ahead of LCR competitors.

The Wall Street Journal (June 8, 2005) published a piece in the Opinion page entitled “The Art of Outsourcing” by C.K. Prahalad, Harvey C. Fruehauf professor of Corporate Strategy at the Ross School of Business at the University of Michigan. The “tag line” is what catches the readers attention – “We are not exporting jobs, but importing competitiveness.“

The concept behind that brief statement is the corollary of the classic – the cup is not half empty, but half full! What benefits can come from a sourcing arrangement with an off shore supplier?? The obvious answer is product cost. In this article the author identifies several other possibilities which can enhance the outsourcer’s business competitiveness.

It is understood that outsourcing, particularly to an offshore supplier thousands of miles and several time zones away, requires excellent, detailed documentation/ specifications and clear, concise communication. What is excellent and clean documentation worth??

The time zone difference can work for the outsourcer by permitting a task to be worked essentially around the clock. The essentials are excellent statements of work and timely project management. What is enhanced time to market worth??

A very timely perspective on the issue of outsourcing to Low Cost Regions.

A recent column (Economic Viewpoint) in the May 2, 2005 issue of Business Week titled “Stop Scapegoating China – Before It’s Too Late” by Laura D’Andrea Tyson provided some interesting data on the USA – China trade relationship. If you will recall, Ms. Tyson was the National Economic Advisor to President Clinton and the Chairman of the White House Council of Economic Advisors. She is currently dean of London Business School.

The article starts with the statement: “ … China, which sends one-third of its exports to America, accounts for 26% of the U.S. trade gap. Most of its exports to the U.S. are manufactured products, made by workers earning only 4.5% of the average U.S. factory wage. …” The article continues with: “But the fate of U.S. Workers depends primarily on domestic conditions, not the trade gap. A Brookings Institution study … found that trade accounts for only about 12% of the nation’s manufacturing job losses since 2000. Most of the losses stem from weaker exports … The main source of the deficit isn’t China’s … low wages, or export subsidies, but imploding U.S. savings rate – … The U.S. current account deficit – the gap between what America spends and what it produces – recently hit a high because of a sharp drop in personal savings and out-of-control federal spending. “

We also conveniently forget that our prolifgate spending has been financed by “… China, along with Japan and few others, … financing the U.S. current account gap via huge purchases of dollar-demoninated securities at relatively low interest rates.”

These economic relationships between U.S. and China – American’s love of the inexpensive Chinese products – the U.S. is a huge market and one of the few strong economies – bind us in a symbiotic relationship.

What is the answer to the question on how to compete? One answer is to focus on “value added”. What is the primary value your company adds to the product or service? The rest should be open to the most cost effective approach, such as out sourcing, OEM (original equipment manufacturer) relationship, etc.

Save what you can . Be prepared to compete on a global basis.