Architecting Your Global Business Footprint:
Are You Asking the Right Questions?
June 2008
__________
Astute managers recognize that they compete globally–irrespective of their size, industry
or location. Some resource critical raw materials worldwide; some sell their products
and/or deliver services in a global marketplace or rely on offshore locations for carrying
out core business processes. Even local companies selling locally face global competitors
in a world where distance matters less and boundaries between industries, organizations,
individuals, and nations are dissolving. Global currency markets are interconnected: while
sub-prime mortgage crisis may have originated in the USA, its effect is felt throughout the
global finance system. In other words: every company to some degree is global even if
their own core business footprint may appear local.
During the 2004 US Presidential election, the heated debate was about 'exporting US Jobs'
and offshoring was a dirty word. In the ensuring four years, much has happened: steady
rise of China and India as global economic powers based on their exports of products and
services to US and Europe; weakening US dollar relative to most other currencies
(including Chinese Yuan and Indian Rupee); and information technologies (computers and
communication technologies) have continued to create functionality that allows for
processes carried out in different parts of the world to be plugged into the global work
grid.
Fast Forward to 2008: the conversations about globalization are still framed around the
misplaced language of 'exporting jobs' 'offshoring' and 'outsourcing' as if nothing has
changed. There's more to global work than moving manufacturing to China or customer
support to India. These value-laden labels and simplistic characterization of business
practices limit our ability to understand the broader shift underway. Looking at the
Professor N. Venkat Venkatraman is David J. McGrath Jr. Professor in Management at Boston University
and Dr. Chris Newell is the Chief Collaboration Officer at Keane Corporation. Both are engaged in
setting up a research program at Boston University to study the management challenges of global work.
They can be contacted at: venkat@bu.edu or chris_newell@keane.com ;
© N. Venkatraman and Chris Newell, 2008.Architecting Your Global Business Footprint: Are You Asking the Right Questions?
changes through myopic and parochial lenses limit our comprehension and stifle our
responses. It's time for us to wake up to the new realities of global business marketplace;
and it's time to ask the right set of questions to frame the debate and discussions.
Question 1: Are you looking at globalization as job displacement or global talent
management?
Vibrant dynamic economic changes impact employment levels, competencies and skill
base. Those companies accused of exporting jobs are simply finding the best talent
available at the best price in a global market. Just as financial markets are interdependent,
so are labor markets. Companies tap into them irrespective of their geographic origin or
historical location of operations. So, what have companies such as Microsoft, Google, IBM,
Cisco and McKinsey done over the last four years? They have simply slanted their relative
hiring emphasis away from the US. People may mistakenly attribute cost as the primary
reason but in reality, the availability of talented global workforce compels multinational
companies to distribute their talent acquisition practices more equitably. Not that these
companies are insensitive to job shifts; they are simply doing what's best for their
business.
As a manager, frame the question as: what's our strategy for talent management on a
global scale? How should we access, recruit, and retain and leverage the knowledge and
expertise of employees? This calls for understanding the key characteristics of the global
market for talent (just like any other market), decide how best to position the firm in such
global market with all its nuanced differences while coordinating and synchronizing
work? That's what customers expect and that's what stockholders demand.
Global talent management is the rallying cry. Leading multinational companies are looking
at talent on a worldwide basis that goes beyond country-specific hiring practices (where
local hires historically had limited mobility or opportunity beyond local boundaries).
When the question is framed as global talent management, the answer calls for revisiting
many of the traditional human resources practices including the characterization of 'expat'
versus 'local' with differing career development paths. Some companies such as Fidelity,
-2-Architecting Your Global Business Footprint: Are You Asking the Right Questions?
Honeywell and Microsoft have started along this journey but we have a long way to go to
truly create global human talent strategy.
Question 2: Do you see China and India as 'emerging markets' or also as 'competency
centers'?
When we have asked managers to describe the role of China, India or Brazil, the common
response is "they are emerging markets with significant growth potential for us." The
frame of 'emerging markets' still permeates how we think about these countries.
Deregulation and liberalization have made these countries attractive for western
multinationals to sell their products and services. The burgeoning middle class is
attractive for traditional multinationals seeking new growth. However, viewing these
countries (and others such as Indonesia, Vietnam, Brazil and Russia) as just emerging
markets to sell products and services misses a broader possibility for accessing critical
competencies. These countries need to be nurtured as competency centers.
When viewed as competency centers, these countries become part of the extended
worldwide network of resources. They are not at the periphery of a company's portfolio of
competencies but integral to the core operations; not just back-office support centers
somehow lower in hierarchy and status but are centers of value creation critical for future
growth and value creation. Goldman Sachs, The World Bank, McKinsey, Fidelity and
Honeywell are just handful of corporations with a network of global competency centers
that play central part in their ongoing operations. Thus, a company's business footprint
goes beyond simply markets to sell but encompasses new regions of competencies on a
global basis. When taken together–both as emerging markets and competency centers–
these countries play a more strategic role in global strategy of corporations.
Question 3: Are you still 'lifting-n-shifting' work or have you developed the design
logic of global work?
Some companies believe that they have embraced globalization because they have
established offshore centers or entered into agreements with companies that have
offshore sites. When we probe deeper into those operations, we find that have not moved
beyond the practice of lift-n-shift work. Driven by cost pressures, many are simply lifting
-3-Architecting Your Global Business Footprint: Are You Asking the Right Questions?
and shifting their work to low-cost locations without thinking through the logic of
designing global work. Unlike self-contained modules of production subsystems that can
be plugged in to manufacturing processes with relative ease, knowledge processes require
more careful thinking of how the work is done in a globally distributed fashion. Much of it
is tacit and unstructured. True that we can now track and monitor routine, structured
work such as customer-service supported by routines and prompts. Most work processes
are not designed such that they can simply be lifted and ported elsewhere and plugged
into business processes with minimal disruption. The lesson learned from business
process reengineering in the 1990s is that superimposing technology on traditional
processes does not translate into effectiveness gains. The same is true of global work–
whose design involves more thinking than simply chunking parts of process for sending
overseas.
Instead, we need to frame the question as searching for design logic for global work that is
supported by technology across distance and time. Then, a typology that differentiates
work along continuum of codification (e.g., structured; semi-structured or unstructured)
or categorization of linkages between modules (e.g., pooled, sequential or reciprocal) or
the type of work itself (e.g., transactional, transformational and tacit) serves to develop a
systematic approach to design work such that it can be decoupled, distributed and
integrated. Since lifting-n-shifting is a short-term approach to realize minor efficiency
gains, the answer lies in designing and developing a typology of work and then figuring
out the best way to carry these different processes on a worldwide basis.
Question 4: Are you looking at your global footprint for implementing your current
business strategy or for innovating tomorrow's business strategy?
The final and perhaps the most important question is the business rationale for
globalization. Here again, there is a stark contrast–some focus on global footprint to
implement today's strategy while others are more willing to explore it as sources of new
innovations. This contrast is significant because it defines the governance approach a
company will take to explore the potential scope of these different centers of competences.
When focused on implementation, the governance could be shifted from own captive
-4-Architecting Your Global Business Footprint: Are You Asking the Right Questions?
operations to third-party service provider and partners if there are sufficient performance
differential. In contrast, if these centers act as design and innovation labs and as centers of
competencies that serve as platforms for future growth, then the governance choice may
favor captive centers.
A select band of companies have already moved beyond looking at China and India just for
implementation. They are in the midst of crafting approaches that will tap into these
countries for talent to drive new business innovations in sectors such as pharmaceuticals,
software, financial services and entertainment. Consulting first such as IBM, Wipro, TCS
and others are involved in high-value design. Google and Cisco in India and China are
hotbeds of innovations and so on. This raises relevant management questions of how best
to appropriate intellectual property rights when innovation spans multiple countries with
varying degree of protection of IP rights.
So, Are You Ready?
Global business footprint goes beyond production and marketing centers. It's about
globalization of business processes that take advantage of pervasive connectivity enabled
by powerful computers and communication technology. It's about 24-hour knowledge
work cycle that taps geographically dispersed human talent without resorting to massive
immigration and relocation of people. It redefines the definition of workplace; It creates
new opportunities for global cooperation among companies of different size and location.
It broadens and complicates the landscape of competition.
We are at an inflection point. Some companies see the global trends since the 2004 US
Presidential election as a minor aberration and that we will soon get back to business-as-
usual. Unfortunately, they are mistaken: the geography of global work has changed and so
has the locus of value creation. We need a new mindset that embraces multi-cultural
workforce and designs work to best extract value. We need new structures and processes
to respond to these fundamental global shifts.
How you frame the four questions will yield different answers: You may see your global
footprint as ways to tap into low-cost processes and cheap labor or you may view it as an
-5-Architecting Your Global Business Footprint: Are You Asking the Right Questions?
opportunity to restructure your worldwide centers of competence to improve efficiency in
the short-term but also be poised for future growth through innovations. You may even be
able to score points by showing that such an approach impacts your Green Goals by
minimizing wasteful travel incurred by managers at all levels. It's time to think more
broadly about business activities to leverage the global platform for innovation and
implementation.
Authors:
Professor N. Venkatraman, Boston University
Dr. Chris Newell, Chief Collaboration Officer, Keane Corporation.
-6-