William Dunk is an international business consultant based in Chapel Hill.The summer Olympics in Greece remind us that small countries are hatching most of the big, bold surprises these days.
Who would have thought that Athens could remake itself and put on a first-class event? Or that Australia would be doing as well as Russia, the United States, or China in the race for Olympic medals?
A few months ago nobody would have dreamed that dark horse Greece would quash the rest of Europe in the July Euro 2004 soccer championship. The Cold War has ended, and the Mighty have fallen several notches. As a consequence, we are at pains to focus our clientele on so-called marginal countries…the nations which are, in the words of Pico Iyer, “Falling off the Map,” but are now increasingly on the charts.
More jobs, worse work
That’s not to say that the superpowers are not full of shocks and surprises. But usually they are about shortfalls and diminished expectations.
On July 24, 2004, for instance, Stephen Roach of Morgan Stanley wrote about “More Jobs, Worse Work,” for the New York Times, a highly significant essay that is worth a read. The number of U.S. private-sector jobs, from the low-point of the last recession in November 2001, has only risen 0.2%, strikingly worse than previous recoveries. The bulk of the jobs have come in “restaurants, temporary hiring agencies, and building services.”
Even with some growth in professional services, many of the better jobs are moving aboard where the same skills can be bought for much less. The implication is that we’re not doing as well building a knowledge economy full of high-end jobs as we need to do in our high-cost, advanced economy.
And we might suspect that purchasing power is disappearing overseas, since low-end employees cannot gulp up the same amount of goods and services as unionized workers in the manufacturing sector. At this stage, globalization appears to be pricking our balloon.
Finally, the world is truly on our doorstep, and we must deal with the discomforts it presents. The global imperative demands a reconstitution of all our institutions to a degree we have not attempted since the Civil War.
GE reads the tea leaves
In a few weeks, we will publish our Annual Report on Annual Reports 2004, a study we have now done for more than 20 years. As is often the case, we find that General Electric has gotten on the right business issue. Its 2003 report is entitled “Growing in an Uncertain World,” laying out the pervasive global trends with which we must come to terms. (See our past editions of our Annual Report on Annual Reports, see www.globalprovince.com/annualreports.htm.)
Unlike many, many other companies, GE is dramatically repositioning itself to deal with a volatile global economy from which one cannot isolate oneself. We estimate that GE is laying siege to perhaps 50% of the opportunities such an economy offers a huge multinational. In other words, it is making some new big bets as part of a giant makeover.
It has quadrupled its position in healthcare, from about $4 billion in 1996 to a projected $15 billion in 2005. In 2003 it put itself on the line for $30 billion worth of acquisitions.
It is making deep commitments to the Hispanic, Chinese, and infrastructure (such as energy equipment) markets. Once a slowboat overseas, it’s pushing to get the percentage of its global revenues over 50 percent, with $60 billion plus of its $134 billion in 2003 coming from abroad. Simultaneously, GE is pulling back somewhat from financial services (insurance), which, in many senses, was its core activity under former chairman Welch.
Running in place
Most companies are treading water, not knowing what they should do. The uncertainty felt by chief executives is palpable, fueled by puzzling economic conditions:
We tend to think the economic inertia and business uncertainty in our country directly mirrors and is probably caused by our political deficit. Living in the past, the Bush Administration seems to be fighting the Cold War again, even without a Soviet Union, and this is mingled with an economic policy that is also a throwback to Fortress America.
The combination has brought our public finances to the edge of bankruptcy and, in fact, Peter Peterson’s “Running on Empty” more or less says we are already broke when you total up the unfunded costs of all our federal benefit schemes. Indeed, we are running on the money supplied to us by foreigners, which you can verify by looking at our balance-of-trade deficit or the amount of our debt held by foreigners.
That said, the President’s chances of re-election seem to have risen above 50 percent (despite the polls, the gamblers still seem to rate Bush a slight favorite), simply because Massachusetts’ John Kerry has not offered a policy to deal with the new global order where power…military, economic, and political…is so diffused about the globe.
A study in ambivalence, he symbolizes the very condition of uncertainty we need to remedy. As Christopher Hitchens said in a recent review of Kerry’s “A Call to Service: My Vision for a Better America”, the book, and by implication Kerry, amounts to “chloroform in print,” a pithy expression that Hitchens borrows from Mark Twain. Neither chloroform nor Cold War thinking are remedies for globally induced uncertainty.
We would attribute the growing political impotence and faltering economic performance of the major developed powers (and of multinational companies and institutions) to national parochialism. Those in trouble have become insufficiently globalized to deal with the new ballgame. So the U.S., France, Germany, Japan, and Italy…to name a few…just sputter along.
Whether investing, or running a company, or forging government policy, the task before us is to see how we are thinking and acting globally. Ten years ago, management gurus advised us to think globally, but act locally. But now, we must in all senses be global.
We must pour ourselves in to every crevice of the world. For companies that means much more than raking in global revenues. We want to see many more CEOs from other countries take the helm at American enterprises. Breaking with its tradition of inventing all its executives internally (promoting within), GE, upon its recent acquisition of Britain’s Amersham, appointed Sir William Castell as head of all its healthcare operations and made him a vice chairman. China recently, for the first time, put a foreigner (albeit an old China hand) on the board of one of its State Owned companies. For years, and quite by mischance, one American insurance company (American Family) has gotten a massive chunk of its revenues from Japan, playing well in a market where others have stumbled.
One domestic American oil exploration company has bet its whole future on an investment in Australian gas fields which completely transforms the character of the company. Likewise, Dell and Wal-Mart have achieved a certain degree of worldly excellence by forging global supply chains that are without parallel.
Some years ago, America’s Conference Board gave itself a new lease on life by taking its wares overseas and luring executives of many countries into its network. Amore Pacific of South Korea has managed its way into the high end of the perfume market (with 2.7 percent of the French market and a presence in 90 countries) by astutely creating a purely French brand linked to trendy French designer Lempicka. More and more, those directing or analyzing an enterprise will have as their central task the measurement of just how globalized the enterprise has become. This is precisely how we evaluate our own clients.
To learn more about William Dunk Partners and The Global Province, visit: www.globalprovince.com/williamdunkpartners.htm