Connecting Globalization & Innovation

From John Hagel, edgeperspectives.com. Mr. Hagel also has a blog.

"Connecting Globalization & Innovation: Some Contrarian Perspectives (Prepared for the Annual Meeting of the World Economic Forum in Davos, Switzerland January 25 – 30, 2006)"

"We are only now beginning to grapple with the full implications of a globalizing economy. Tom Friedman captured our imagination with the powerful metaphor communicated in the title of his new best-selling book - The World Is Flat - but he tells only part of the story. In the process, he may leave many with a misleading impression. The world is not just flattening; it is also creating significant new opportunities to innovate and build strategic advantage. Much has been written about globalization and innovation as distinct topics, but few analysts have focused on exploring the connection between the two. Those who understand this connection - whether they are wellestablished Western enterprises or entrepreneurial companies in emerging economies like China and India - will be able to create economic value on an unprecedented scale.

any companies in China and India are developing an innovative set of management techniques specifically focused on exploiting these opportunities. They are pursuing a radical, yet very pragmatic, bootstrapping approach to build capabilities while addressing near-term market opportunities. In a world of intensifying competition and increasing uncertainty, even the very largest companies need to master these bootstrapping techniques to compete successfully.

This leads to three contrarian messages:

First, bootstrapping is not just for small, entrepreneurial companies. In fact, large enterprises are most in need of bootstrapping techniques if they are to evolve successfully in this flattening world.

Second, the United States is no longer the global center of innovation in management practices. In fact, the private entrepreneurial sector in China is rapidly emerging as the global center of management innovation, pioneering management techniques that most US companies are struggling to understand, much less master. In part, this innovation stems from necessity especially the lack of a well-developed financial system to serve the needs of privately held, entrepreneurial companies.

Third, product innovation is not the most powerful form of innovation, even though this is what most Western executives focus on when they think about innovation. In a globalizing world, product life cycles are compressing. While product innovation remains critical to survival, any individual act of product innovation has diminishing impact in the marketplace. In this environment, innovation in management practices becomes much more powerful because it provides the key to accelerating and sustaining product innovation. As we will discuss in more detail below, it also provides the key to getting better faster as an institution so that more value can be generated from the products or services offered to the market.

In fact, the deeper we get into our research agenda, the more we find ourselves coming up with contrarian observations that challenge conventional management wisdom. These observations are not contrarian for the sake of being contrarian. Rather, they reflect more fundamental changes occurring on the global landscape as a result of the convergence of IT innovation and public policy shifts reducing barriers to movement. These changes are forcing us to re-examine some of the most basic assumptions we have about our institutions, whether we are talking about corporations, schools, government bodies or social institutions. In effect, we are seeing the emergence of a new common sense model, requiring a new, and often quite counter-intuitive, set of assumptions.