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How to Compete in a Global Age

2009 November 15

Tom Friedman insists that the “The World is Flat.”  Richard Florida says that it isn’t; in fact the world is “spiky” with towers of activity and flatlands of obscurity.  Both offer compelling, but seemingly polar opposite views of the way our world is changing around us and what we need to do to compete.

Who is right and how should it affect the way we run our businesses?

To be honest, both men have their detractors and I myself find both a bit too in love with their own conclusions for my taste.  However, their ideas do have some merit.  The business and marketing environment is transforming as never before and if we don’t understand the forces at work, we’re liable to get run over by the unstoppable locomotive of change.

Therefore, it makes sense to examine both propositions and give the matter a little thought.

Friedman’s Flat World

On a trip to Bangalore, Friedman found himself amazed at what he saw.  A high-tech metropolis in a third world country filled with very capable middle class, net-enabled people.  He sees first hand how they can collaborate and compete with their first world counterparts while earning a fraction of first world salaries.

My own experience living in Eastern Europe mirrors Friedman’s India observations.  In Kiev, it is not uncommon to hire a young girl who looks like a supermodel, can do econometric modeling and speaks five languages.  While skill sets are impressive, starting salaries amount to less than minimum wage back in the US (a few hundred dollars per month).  When I go home I wonder, “How can we compete?”

Flatteners and Convergences

In his book, Friedman posits that the flat world is a result of three factors:

The Fall of the Berlin Wall: The end of communism opened up a large portion of the world.  I witnessed this unfold myself in Eastern Europe during the late ‘90s.  The end of the Cold War helped to change the incentives for non-aligned third world countries as well.  International commerce is thriving to an extent not seen since before the first World War.

Technology: The internet and mobile devices have made the world more connected.  Moreover, costs of connection have plummeted.  20 years ago, a call between cities was expensive and therefore one thought twice before dialing. Today, through internet telephony, calls throughout the world are dirt cheap; virtually free.

Business Process Innovation: In the past 20 years, Companies have adapted to the new political and technological realities.  Firms have transformed the way they do business. Multinational organizations are increasingly the rule rather than the exception.  Even if you work for a company based in your own country, you likely have international co-workers.

Friedman’s vision is far reaching and compelling.  It amounts to a wake-up call for the Developed World.  As the energies, talents and ambitions of the Third World are unleashed, the playing field is drastically transformed.  Fareed Zakaria paints a similar picture in his book, The Post-American World.

Having spent over a decade in Emerging Markets, the message hits home for me personally.  Some of the most tragic casualties of the Cold War were the lost achievements of those who did not lack endowments, but opportunities to actualize them.  Now that walls, physical as well as those of time, place and ideology have come down, it seems inevitable that a great flattening takes place.

Or is it?

Florida’s Spiky World

Soon after Friedman’s book came out, Richard Florida published an article (pdf) in The Atlantic Monthly proclaiming that the world is not flat at all, but “spiky.”  Furthermore, he insisted that it was getting more so, not less.

Florida wasn’t making idle claims; he came armed with reams of data.  Populations, economic activity, patents, scientific citations – you name it – all are concentrated in relatively few places.  In startling contrast to Friedman’s flat world where everyone is equal, he insists that the greatest challenge we face is to manage growing inequality while not limiting, and benefiting from, the progress made in the centers of world activity.

The Creative Class

The article wasn’t a knee-jerk response on Florida’s Part, but based on his research on the Creative Class and his book describing the phenomenon.  He points out that economic development is driven by a core class of people who create new things.  Moreover, because collaboration is crucial to innovation, these people tend to concentrate themselves in particular places.

While he doesn’t dismiss that communication technology permits long distance collaboration, he does make a strong case that collaboration is predominantly a short distance phenomenon.  After all, innovation doesn’t just take place exclusively in labs and on white boards, but also in kitchens, hallways, on cocktail napkins, etc.

Finally, Florida asserts that innovative people congregate in specific places not by chance, but because they are attracted there by specific attributes.  Furthermore, he describes three mutually dependent conditions that draw them: Talent, Technology and Tolerance.

The first two conditions are well known, attracting lots of smart people and giving them the tools to work with are common sense solutions that civic planners have focused on for years.  However, the last point is original and counterintuitive (and also controversial, there are some serious people who dispute Florida’s analysis).

The implications of Florida’s work are interesting and deserve some further  examination.  After all, top quality engineers can go anywhere, why wouldn’t they want to go to a place that has an active bohemian culture which fosters creative thought.  NY times columnist David Brooks calls these people “Bourgeois Bohemians”  or “Bobos” for short.

The Soviet Union had “secret cities” where they shipped scientists to, but if they had the choice they would probably want to go somewhere nice, with good music, restaurants and lots of free thought.  Maybe good coffee does make good science.

A Post Soviet Example

Creative cities are not exclusively a western phenomenon.  In Poland, Warsaw is the capital of government and commerce.  Having spent some great years there, the city is a special place for me, but having been destroyed in World War II nobody would describe it as beautiful (although it is improving).

With its central location and history, Warsaw has its share of creative people and interesting things to do, but they aren’t immediately apparent.  It manages to overcome its unfortunate inheritance with energy and enthusiasm.  It is also a tolerant place, not only overcoming much of it’s ugly history of antisemitism, but it has become the home of a thriving gay culture as well.  A basket case 20 years ago it now competes favorably against many Western European cities as a business center.

Polish cities like Krakow, Wroclaw and Poznan have beautiful Old Towns and are culturally very vibrant.  They are also hotbeds of hi-tech activity that outperform their size and infrastructure. Each has spawned internationally competitive technology firms.

Russia presents a stark contrast.  Moscow is probably the least tolerant place I’ve ever been.  While there is no shortage of financial and infrastructure investment, public spaces in the city center are almost non-existent.  Clubs promote “face control” rather than cool music.  Racial violence is commonplace.

One goes out at night in Moscow to be seen in “VIP sections” rather than to meet and converse with interesting people.  Social life centers on exclusion rather than inclusion.  I have no desire to live there again and it is no wonder that companies have to pay huge salary premiums to lure talented people.  Otherwise, no one would go.

Despite a well educated population and vast oil and mineral wealth, I know of no Russian company that is competitive in an intellectual capital business outside of the former Soviet Union.  In Silicon Valley, however, it is not hard to find successful entrepreneurs with Russian surnames.  Change the substrate and you change the organism.

How to Compete in a Global Market

Jane Jacobs, from whom Richard Florida borrowed heavily, said that “When a place gets boring, even the rich people leave.”  I would suggest that the same goes for companies.  Increasingly commerce and community are inextricably linked.

In truth, there is no reason to assume that Friedman’s and Florida’s ideas are mutually exclusive; in fact they appear to be mutually reinforcing.  If people can work anywhere, they will probably choose to go someplace where they can do interesting things and meet fascinating people.  In a world that increasingly runs on talent,

In the new potentially flat, but actually spiky world time and place have become choices rather than constraints and complexity increases exponentially.  Therefore, it is ironic that the evidence points to a surprisingly simple answer to the question of how to compete in a globalized world:

Create a place that people want to go to.

– Greg

20 Responses
  1. November 15, 2009

    Hi Greg, Nice article. I can see your point that neither Friedman or Florida are absolutely right or wrong and that the world is an exploration in progress. I think that what technology has done is to reduce the ‘spikes’ and open up opportunity where before, none existed. Living in South Africa I see how technology creates innovation born out of need. Services and financial security that are taken for granted in the developed world may not exist or be restricted for the majority and this has led to ‘new’ ways of doing things that ultimately travel upstream to the developed nations. I also believe that collaboration and tolerance are more evident in developing nations as there is a hunger to learn and innovate.
    I think this is why India, South Africa, Brazil and China are fast becoming hot beds of talent and technology.
    It would be my ideal if this helped to build a less polarized global society not only financially but socially. All understanding comes from communication, understanding breeds tolerance and tolerance is the catalyst for collaboration.
    All the best – Gordon

    Greg Reply:

    Gordon,

    Thanks for your input. Another point is that emerging markets don’t have legacy technology to hold them back. They can jump rght into the 21st century.

    A good example is banking services. When I first went to Poland in the late ’90s there were you had to go to the post office to pay our bills. When they modernized, they went straight to online banking. No checks or bank by phone.

    – Greg

  2. suchita bhhatia permalink
    November 17, 2009

    very interesting observations Greg, especially about Russia and work culture there. And regards Friedman, he should have come to Mumbai, he would have been shocked with the contrast that the city offers.

    Greg Reply:

    Suchita,

    I’m glad you liked it. Thanks for coming by and commenting.

    – Greg

  3. Stuart Nicholson permalink
    November 17, 2009

    Interesting article, Greg,

    I agree with everything being said, especially how technology is creating a level playing field for developing and developed countries alike.

    Its true that talented people are becoming geographically mobile.Its pretty true to say they gravitate toward nicer places.However, cultural factors can often affect the extent to which this happens.Its interesting to note that in London we opened our doors without setting any obstacles to the last large batch of countries that were admitted to the EU.It is notceable however that while the influx of Polish workers has been huge, that you would struggle to come across Hungarians, Czechs and Romanians in London.Thats not just because Poland is a bigger country, it is an indication of how conservative the cultures of some of the countries are compared to others, even though probably the proportion of well-educated engineers is probably very similar in all of those countries, not least becuase of the legacy of good education systems.

    Greg Reply:

    Stuart,

    I think in that case historical factors have a lot to do with it. Throughout history, Poland has been in the middle of greater powers. The country was partitioned in the 18th century and ceased to exist until after WWI. Therefore it has always been quite common for Poles to have familky members abroad and to consider going abroad themselves.

    The big difference in the last few decades is how many of them end up going back to Poland.

    – Greg

  4. James Sinclair permalink
    November 22, 2009

    Another super interesting exchange. I’d love to see a visual representation of the geographical clustering of creative hubs overlaid or crossreferenced with web based intellectual clustering or entrepreneurial collaborations etc etc. A healthy little spike obviously growing up around the D. Tonto. Thanks again Greg.

    Greg Reply:

    James,

    It’s always rewarding to see great copywriting combined with an intuitive visual sense forming support for Digital Tonto:-))

    – Greg

  5. Yegor Kuznetsov permalink
    December 2, 2009

    Hi Greg, great story, as usual!

    A question:

    You write – ‘I know of no Russian company that is competitive in an intellectual capital business outside of the former Soviet Union.’

    How about Kaspersky or ABBYY? Or InvisibleCRM?

    However, to think of it, I was able to name just three, and I’ve been in technology PR/marketing for the last 10 years…

    Greg Reply:

    Yegor,

    To be honest, I never heard of InvisibleCRM. ABBY is primarily used for Russian translations, so I don’t think that qualifies. Kaspersky is a possibility. I use it. It’s good and they service their product very well. However, to my knowledge it’s not popular outside of the CIS.

    Another possibility is 1C, but again, I think it’s mostly a product for post-Soviet (especially the double bookkeeping capability ).

    – Greg

  6. Yegor Kuznetsov permalink
    December 2, 2009

    Greg, when you have chance – take another look at ABBYY: I ran into them when I worked for Brainware, they are offering very sophisticated data capture solution that can read some languages no other software can. They went way beyond translation.

    1C is a good example, too.

    There are also very neat accounting programs, including ones for cooking books. 🙂 Enron would probably kill for that stuff.

    Greg Reply:

    Yegor,

    I think Abbyy is fine, but I’ve never seen it anywhere except for Russian speaking countries.

    – Greg

  7. Thomas Bonetti permalink
    December 9, 2009

    Greg,

    Very interesting article. In addition to the social elements, I also support your ideas regarding leap-frogging of legacy technology.

    While you were in banking, I was leading business development efforts in telecoms in Eastern Europe and elsewhere. To re-inforce your point, because their legacy systems were so antiquated (after all the last thing the Soviet Union wanted was to make it easy for the people to communicate with each other), the former Iron Curtain countries were able to bypass and go directly to fiber optics, digital switching, broadband wireless, etc. Thereby empowering a highly educated and disciplined work force with the latest in technology and global access.

    With that being said, as you so correctly point out, these skilled workers have in many cases “chosen” to move to the more “in” places where a concentration of like minded people and skills congregate.

    Why? Because they can. And in many cases we are better off because of it.

    Thanks,
    Thomas

    Greg Reply:

    Thomas,

    Thanks for sharing. I remember those days when you had to wait months to get a phone installed. Mobile phones caught on a lot faster than in the west:-)

    – Greg

  8. Evgeny Ivanov permalink
    January 28, 2010

    Hi, Greg,
    very interesting post, thank you. Some nice food for the mind.
    As for Russia, I have to agree with you on “social life centers on exclusion rather than inclusion” and would not like to live or work in Moscow.
    As for Poland my views are absolutely opposite. I find it very intollerable and don’t see major shift in social conciousness. It’s biggest advantage is geographical position, which benefits both economy, politics, and makes it look different from Russia.

    Greg Reply:

    Evgeny,

    Dziekuje za komentaria:-))

    – Greg

  9. February 12, 2010

    As a Global Creative, I started a virtual company 16 years ago with the understanding I could plug in from anywhere. Thanks to technology and all the social platforms, my model has been enhanced. However, my favorite spot is in the South of France, not exactly a boom market, so my point, find the place that works for you on this planet, plug in and make it happen.

    Greg Reply:

    Nice thought Jim.

    Thanks.

    – Greg

  10. Geoff permalink
    March 5, 2010

    Greg;

    A great article contrasting a concept we are all trying to get our hands around, whatever perspective you come from! I found Freidman’s book an eye opening experience, then after stepping away a bit, realized it is not as flat as we think.

    A recent discussion with some IT friends of mine highlighted the extremely fertile environment their industry enjoys, especially in the western U.S. Applications and software developers collaborate together, even if not very closely physically, by creating an environment in a region providing energy, enthusiasm, and ideas that they seem to thrive on.

    Another important thought here is that this plays into the way the newest generations (both X and Millennial) tendencies, and as they become more prevalent in the world, it will be interesting to see how much of the “old” ways, if any, they pick up and carry forward.

    Thanks Greg!

    Greg Reply:

    Geoff,

    Thanks. I’m glad you liked it.

    – Greg

Comments are closed.