THE KEY INGREDIENTS FOR SUCCESS in the new economy are pretty much the same for a small company as they are for a global giant: Exploit your intangible assets (talent, knowledge, relationships and reputation) better than your competition does. But knowing where to find these assets and how to use them is not so simple. The authors of Race for the World, all consultants at McKinsey & Co., sketch out a future in which only those world-class companies that understand these issues will survive.
Some of their thinking goes against current new-economy dogma.
The race, for example, may not always be to the swiftest but to the most deliberate. Some winners will be those companies that are able to delay strategic decisions, the better to take advantage of the global flow of information that technology is facilitating.
Another shrewd point: While global economies of scale are desirable, it may be more profitable to focus on markets where customers still have limited choice and most of the competitors are local incumbents with mediocre skills.
But the grand opportunities for market share won't all be in emerging markets. Companies looking to take advantage of economies of scale should note that currently the most intense market integration is occurring within and between the United States and Europe. Such integration, which brings a reduction of regulation and creates an increasingly homogeneous pool of consumers, makes selling and marketing a whole lot less costly.
With clear and easily digestible arguments and figures, Race for the World disabuses readers of the notion that globalization has extended...globally. One-third of the world's industries operate in locally defined markets (such as education, real estate and medical care); one-third in national markets (business services, power suppliers and branded consumer goods, such as beer or shoes). Only the last third (say, telecom equipment, shipping, manufactured commodities and consumer electronics) has, to date, gone global.
However, the book makes bold predictions about globalization's advance. It estimates, for example, that consumers will have access to 80 percent of the world's goods within 30 years, a quadrupling of their current access to a mere 20 percent. Similarly, companies will increasingly have access to the world's best resources: the best labor, technology and low-cost, high-quality suppliers. Of course, so will their competitors. Therefore, even companies that now dominate their national markets will come under intense pressure.
All the basic points here are about the overabundance of choices most companies must face, whether it is choosing markets, partners or technology. Race for the World is a strong guidebook for any executive contemplating those choices.
-- Gary Abramson