Hal Sirkin on how to compete as a truly global company
"A revolution in global business is under way." So starts Hal Sirkin's new book, Globality: Competing with Everyone from Everywhere for Everything (Business Plus, spring 2008). Sirkin, senior partner and managing director at the Boston Consulting Group, examines how emerging companies from rapidly developing economies are using their particular advantages to challenge the leading developed-world companies. He identifies 100 emerging-market companies to watch, advises how companies in the developed world can maintain their competitive edge, and details the struggles all companies face in this new business climate. Folia Grace, Oracle vice president of applications marketing, spoke to Sirkin about the emerging era in international business competition.
GRACE: What critical global trends are you seeing now?
SIRKIN: The world is changing in a way we've never seen. There is a wave of new competition coming from countries with large populations, such as China, India, Brazil, and Russia. These countriesand other countries in eastern Europe, Latin America, and Asiaare home to hundreds of thousands of emerging companies that have very strong cost advantages, such as operating and labor costs that are about a quarter of those in the developed world, a large number of engineers, and a population hungry to succeed. Also, there is unprecedented access to resources such as R&D; intellectual property; and the internet, which enables companies to find each other and communicate inexpensively. Because of this, we're beginning to see a wave of new challengers to the "incumbents," the established leading companies in the developed world.
GRACE: How did you come up with the unique title of Globality?
SIRKIN: Most people talk about this trend as globalization, and we think globalization is something that's already happened. We picked the word globality because it describes what we think is going to happen. Globality is about being able to compete not as a company from the United States or France or China but as a truly global company, one with positions in both the developed and the developing worldin terms of customers, manufacturing, production, and R&Dand one with access to all the resources of the world, rather than a narrow slice of geography.
GRACE: Tell us about the Boston Consulting Group's list of emerging market leaders from rapidly developing economies, the "BCG 100 new global challengers," which you identify in your book.
SIRKIN: Each year we identify what we think are the top 100 challengers, or companies for incumbents to watch, in about 22 countries. All these companiessuch as the Russian steel producer Severstal, Chilean shipping leader CSAV, Chinese telecom networking manufacturer ZTE, and Indian outsourcer Infosyshave found success by challenging traditional business models.
GRACE: What are some of the key struggles challengers and incumbents face as they go into this global competitive environment?
SIRKIN: Perhaps the most important struggle is minding the cost gap. You cannot let costs get too far out of line. If you're producing in high-cost countries, you must find a way to capitalize on low-cost countries as either supply or manufacturing sources. Incumbents must be able to think big and act fast. They have to recognize that they're not alone in the world, that they're facing competition from everywhere, and that they have to take bold steps to be able to compete. Executives will have to embrace "manyness"thinking about their company as having not a single center but multiple centers, so that they can be entrepreneurial around the world. These struggles are very difficult for both the incumbents and the challengers. The ones that do the best are the ones that will succeed.
GRACE: How can companies in the developed world compete successfully with these emerging giants?
SIRKIN: The first step is to recognize what is taking place: a threat is looming, and you should take action now. Second, understand where your future competitors will come from. Third, make sure you have the right talent in the right place. Fourth, recognize and segment the opportunities. Go after the areas in which you're advantaged and where there is the biggest profit. Finally, CEOs, CFOs, and COOs must be leaders and push their organizations forward. This means getting on airplanes and traveling around the world, so the biggest downside may be massive jet lag. But incumbent companies will be able to survive these challengesif they're prepared.