"Are you enjoying globalization yet?"

Sun, 2006-01-29 22:51.

Irving Wladawsky-Berger, Vice President for Technical Strategy and Innovation at IBM comments on an interesting article (pdf) published by Mercer Management Consulting:

"Globalization is changing the nature of competition and value creation in ways more subtle and fundamental than simply cost. By incubating scores of new business models that can unseat established companies, globalization is creating opportunities for new value creation and highly profitable growth at the two ends of the value chain––new customer connections at one end and new models of innovation at the other."

"Globalization makes strong business designs stronger, and weak business designs weaker. That’s true in part because new competitors from all corners of the globe are combining low cost and high technology to build market share very quickly."

In a world where customers have more and more choices from a vast array of increasingly commoditized products and services, highly personalized customer connections are a company's best opportunity for differentiation. Products and services might be commodities, but you never, ever want your customers to feel like they too are just commodities. A successful business will make each of its clients feel special by understanding and addressing their unique requirements.

This presents a seeming paradox: the more global and commoditized the economy, the more local and personal the customer relationship must become to ward off competition. This is not easy. It requires a deeper knowledge and more specific management of distinct customer types and segments, "a new game - call it the Cambrian explosion of new segments - with new rules" the article says. A business has to be very good at market segmentation and at serving those markets as efficiently as possible.

While multinational firms will have to learn again to "think local" for global competitive reasons it also gives great opportunities for flexible regional companies, that are really closer to their markets to find a sustainable niche for their products and services or to integrate into specialized innovation networks.