Globalization at the Dawn of the Synergistic Economy By Joseph A. DiVanna Extracts from: Redefining Financial Services: The New Renaissance in Value Propositions (Palgrave July 19, 2002) And Thinking Beyond Technology: Creating New Value in Business (Palgrave November 14, 2002) Globalization at the Dawn of the Synergistic Economy Globalization and disintermediation are converging forces guiding a new era of competitive pressures on firms providing global services. The challenges that they present are the product of an environment in which the customer-base is continually influenced by technology, which is reshaping our society, culture, and commerce. However, it is difficult to discuss globalization without considering another important factor, disintermediation. Globalization and disintermediation have commonly been associated with modernity; in fact, they have been at the heart of commerce for centuries, recently spawning several social and economic myths. Businesses and media groups describe "globalization" as an expansive force seeding Western products, values, and beliefs to all corners of the globe. Disintermediation, on the other hand, is a compressive force that reduces the number of intermediaries between customers and suppliers. In a historical perspective, globalization is the ever-lasting process of economic integration through expansion of a firm, group of firms, or a country in which the goods of a local geography are made available to other peoples, facilitated by a combination of communications and transportation technologies. Globalization is now associated with larger social-economic issues that are not being directly addressed by either world governments of business. From broken homes to ubiquitous pop music, globalization has been branded a code word used by special interest groups to promote issues such as nationalism, ecology, security and fair-trade, and to conceal underlying social or economic problems Micklethwait and Wooldridge remind us of the conditions that surround the globalization myths: - In many cases, size does not trump all. The history of Western business presents several examples of large multinational firms that did not stand the test of time. Changing business conditions combined with large bureaucratic structures are often too slow to remain viable over time. - The triumph of universal products is predicated on a belief that everyone in the world wants to purchase products that are the same everywhere. Modern marketing is based on mass-customization, treating whole countries as single markets. - Economics needs to be rewritten. The underlying rules of how to make money remain the same throughout time. - Globalization is a zero-sum game. There must be losers in order to be winners in a globalized economy. - The disappearance of geography as corporations continually search for cheaper labour. Companies should move business to remote geographies as labour is cheaper in developing countries. Today, technology is connected to the fabric of corporate activities to an extent that makes it often difficult to separate it from the effects attributed to its use. Furthermore, the value proposition for a firm going or being global and engaging technology to its activities is linked to the five myths in the following ways: - Size trumps all: Businesses will use technology to expand market presence to bring Western products to all corners of the globe. The trend of mergers and acquisitions will continue as industries redefine themselves, and technology will play a larger role in facilitating this process. - The triumph of universal products - The Internet will bring the volume of the world to our doorstep, but market segmentation will be fundamental in a globalized economy, as people do not blindly buy what they do not perceive as useful/necessary. - Economics needs to be rewritten - Technology provides mechanisms to drastically reduce cost and expand revenues; the ways of doing business today are not the same as before. - Globalization as a zero-sum game - Technology enables a global workforce in which anyone can do anything from anywhere. - The disappearance of geography - Technology will enable you to order globally branded products at the exclusion of local products. One could thus argue that as the economies, industrial output, and financial markets of the world become more and more intertwined, eventually world labour rates will reach an operating parity. Moreover, what is sometimes perceived as "losing" or being exploited is, in a given culture, merely seen as having jobs and being able to subsist and progress. Unfortunately, firms with global aspirations in the post-dot-com economy are still reciting the same technology mantra and not realising that the world has changed. Since the number of total consumers who can effectively purchase goods is relatively fixed, there must be winners and losers in the new growth estimates of any technology-company professing to decimate the competition in the emerging markets. In this sense, it is clear that the laissez faire attitude that corporations are taking towards the idea of "globalization" is exacerbating the issues raised by anti-globalization groups. Corporations operating in the global economy must develop a concise definition of their globalization policy in order to identify how they will integrate technology into their value proposition to customers. A brief examination of the five myths isolates the role of technology in which corporations are basing value-generation. Firstly, the terms used by the technology community must be understood in the context of the technologies that they represent and of the actions which firms must take to employ them. In its broadest sense, "commerce" can be defined as interactions and activities that result in transactions between business entities. Secondly, the definition of geopolitical boundaries must be examined to ascertain the relative impact that these factors have in the adoption and implementation of technology by global cultures/nations. Nations or geopolitical bounded states as we know them are a relatively new idea for humankind. The geopolitical map is due to be redrawn in the near future, as technology creates the debate on what constitutes a nation-state, fair and equitable taxation and the role of government in the emerging information age. We must not fear this, as the geopolitical map has changed numerous times in the past five hundred years. Taxation and role of government, coupled with the cultural aspects of consumer taste, must be an integral part of a firm's comprehensive management strategy when deploying brands, products, people, and technology in a global context. Let us examine one practical example. The new connected European economy is evolving as a marketplace in which companies, customers, and competitors collaborate on various aspects of design, development, and refinement of product offerings in leveraging an operating synergy. A synergistic economic interchange or "synconomy" means a state of operation in which the behaviour of the entire marketplace is unpredicted by the behaviour of the collaborating organisations taken separately. As businesses globally move into the twenty-first century, they must embrace a new state of co-opetition that enables them to compete and collaborate in all stages in the services life cycle. In today's synconomy, financial services, for example, must develop complete process-knowledge in order to balance the associated processes of a European wide deposit market, inter-regional risk sharing, interoperable capital markets, diversification of multinational portfolios and new global capital sourcing for business activities. One of the most important value propositions is the establishment of networked repositories of data on corporate performance to relieve the scarcity of investor information. A decentralised network of company information will need to transverse national boundaries in order to keep emerging capital and non-capital markets from becoming detached from the mainstream global investor. Traditionally, the lack of information has acted to hinder growth of individual firms and a protect small to medium size local firms from stock volatility. Removing the barriers of information flow will make firms seeking global capital sources more susceptible to swings in investor sentiment concerning a region or market sector that could be unrelated to the fundamentals of an individual firm. Therefore, another value proposition for financial services firms endeavouring to facilitate European and indeed global capital market fluidity will be to place individual corporate performance into the greater context of global economic activity. In the evolving synconomy, the challenges of culture, labour, technology, consumer adoption, and branding must be considered within two aspects: integrated and differentiated corporate behaviours. In order to have market differentiation, firms operating in a synconomy must maintain a balance in the synergistic relationship between what is shared or integrated between partners and what is unique to a participant in an open marketplace. Collaboration between co-operating financial services firms is not a matter of "if one should collaborate," it is an understanding of when, how and what to exchange. Fortunately, technology is removing the geographic confines of market collaboration, making exchange partners aware of the need to develop core competencies to address the issues of how to collaborate, what to collaborate on, and when to collaborate. Regardless of the level of collaboration, any participation in the new co-opetition-based marketplace will require a clear measurable value proposition to customers, partners, and shareholders. In conclusion, the forces of globalization and disintermediation are changing the business landscape and the geopolitical map itself. Rather than fearing the change and subscribing to old myths created by ignorance, we must embrace these forces in order to actively compete, collaborate, and, ultimately, be present in the new synconomy.