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Globalisation: Business, Politics, and Economics

Globalisation
Globalisation
Globalisation

In the early days of 2019, one Big Idea looks a little shaky. Ten years ago, its status seemed assured. Now its future is not so clear. What is Globalisation, and what is its future?

Sadly, I have no crystal ball, so any comments I make about the future of globalisation will be nothing more than opinion. But I can, at least, tell you a little about what this big idea is, and what it means for managers.

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Theodore Levitt: Marketing Myopia

Theodore Levitt’s principal contribution to management was in lifting marketing up from a functional place in business to a strategic role. So it is perhaps surprising that he is often remembered as the man who coined the term ‘globalisation’. Mis-remembered*, it turns out. The greater irony is that he simply brought the word to prominence. But that shows the impact of his writing; in particular a series of classic articles for the Harvard Business Review, which he edited from 1985 to 1990.

Theodore Levitt, 1925-2006
Theodore Levitt, 1925-2006

Short Biography

Theodore ‘Ted’ Levitt was born in Germany, in 1925. His parents moved the family to America in 1935, and Levitt served in the War. He earned his Bachelor’s degree at Antioch College and went on to do a Ph.D. in economics at Ohio State University.

After time as a consultant, and then teaching at the University of North Dakota, Levitt joined the Harvard business school in 1959. There, he quickly started teaching marketing, despite having no formal education in the topic. But in the following year, 1960, he published a landmark article in the Harvard Business Review (HBR), which he descried as a manifesto.

Marketing Myopia

In Marketing Myopia, Levitt argued that corporations should not think of themselves as producers of goods or services. Instead, they are ‘buyers of customers’ who create goods and services to tempt customers into a commercial relationship. Companies are organisms that create and maintain customers. Indeed, in his 1983 book, The Marketing Imagination, he summed up his primary thesis as In 1983, by defining corporate purpose as:

to create and keep a customer

Put that way, it is easy to follow Levitt’s argument that marketing needs to pervade a company’s strategy and provide a counterbalance to excessive focus on production and operations. He gave the often cited example of railways. In thinking about their purpose, they should stop considering themselves as providers of a railway and its services, and start to think of themselves as organisations whose role is to move people from where they are to where they want to be.

It is worth noting that Levitt was influenced (as are so many twentieth century management thinkers) by Peter Drucker. Drucker argued that, from a customer’s point of view, marketing isn’t a function: it is the business. Let’s just look at Apple!

Marketing Matrix

Theodore Levitt: Marketing Matrix
Theodore Levitt: Marketing Matrix

To underscore his idea, Levitt introduced the idea of a marketing matrix, that charts a company’s inward orientation against its outward orientation to its customer, with the top right cell representing the ideal.

His 1976 HBR article, The Industrialization of Service, argued that we need to apply the same rigour of repeatability, monitoring and quality control to customer services, as we do to production. He also introduced the now commonplace concept of ‘Relationship Marketing’ – the activity designed to keep customers and extend your relationship with them. This has, of course, spawned the whole discipline (and software market) of CRM: Customer Relationship Management.

The Globalization of Markets

For my third of Levitt’s big ideas, I have to come back to globalisation, which he addressed in his 1983 HBR article, The Globalization of Markets. Here, he argues that the two ‘vectors’ of technology and globalisation would shape the world. Now, in 2016, it is hard to argue with that conclusion. Indeed, he thought that it would be technological advances that would drive marketplace changes towards global uniformity. To survive and outcompete rivals, corporations would need to harness the efficiencies of standardisation. These would outweigh the desirability for customers of local customization in a competitive sense. Ladies and gentlemen, I give you Starbucks, Toyota, Amazon, and Samsung.

This position got Levitt into a debate that we describe in our article about the other towering figure in twentieth century marketing, Philip Kotler.

Theodore Levitt talking about Global Markets

You may also enjoy the Marketing Pocketbook and the CRM Pocketbook (CRM: Customer Relationship Management).


* Even the New York times got this wrong. Their obituary for Levitt was titled ‘Theodore Levitt, 81, Who Coined the Term ‘Globalization’, Is Dead’, but in a subsequent erratum, they noted, ‘and while he published a respected paper in 1983 popularizing the term, he did not coin the word. (It was in use at least as early as 1944 in other senses and was used by others in discussing economics at least as early as 1981.)

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Lynda Gratton: The Future of Work

What will work be like in the future, and how will we respond to it? These are big questions being asked by the influential and much respected Professor of Management Practice at the London Business School, Lynda Gratton. The answers she is uncovering are both obvious and important. We won’t know if her work is ‘right’ until the future arrives, but for now, we would be wise to understand the trends Gratton is uncovering, and respond to them.

Lynda Gratton

Short Biography

Lynda Gratton was born in 1955 and, grew up, and was educated in the north west of England, in Liverpool. She gained her BSc in Psychology from Liverpool University in 1976 and started work there on her PhD. In 1979, she started work with British Airways as Chief Psychologist, while continuing her doctoral studies into Maslow’s Hierarchy of Needs. She was awarded her PhD in 1981 and, in the following year moved to management consulting firm PA Consulting.

She stayed at PA until 1989, becoming their youngest Director at age 32. But Gratton valued the autonomy to create time to read, think, and be with her family above the high salary. So she took a post as an Assistant Professor at the London Business School in 1989.

Gratton’s academic career has resulted in praise and awards. She has authored 9 books to date (the ninth is due out in June 2016) and many influential papers, the most widely read being two Harvard Business Review Articles: Eight Ways to Build Collaborative Teams (Nov 2007) and End of the Middle Manager (Jan 2011).

Gratton’s best-selling books are Hot Spots: Why Some Companies Buzz with Energy and Innovation – And Others Don’t (2007) and The Shift: The Future of Work is already Here (2007), with her new work looking at one of the five forces she sees as shaping our world for the future: The 100-Year Life: Living and working in an age of longevity (2016)

The Five Forces Shaping our World

We need to start our summary of Gratton’s most important thinking with the forces she identifies as driving change in the world. I think each of us might add one or two of our own, but it is hard to dispute that each of these five will have a big impact. What gives her list credibility is the wide range of big name organisations that collaborated in her research.

Technological Developments

Some of the big developments she points out that will affect us (and some of the other forces, below) are:

  • Cognitive assistants (advanced knowledge systems moving towards artificial intelligence)
  • Cloud and distributed computing – especially linked to mobile devices
  • Advanced robotics
  • Digitisation of knowledge

At some point she projects (as do many computer scientists) connected computers will start to become capable  of creating knowledge without human help. (Note that this is not the same as the potential ‘singularity event’ of computers gaining consciousness, which is at another tier of speculation)

Globalisation

Here we can see trends like labour force mobility, especially in the direction of mega cities that are, increasingly, in the East. This is feeling and fuelled by the emergence of the new economies; the so called BRIC and MINT nations (Brazil, Russia, India, China, and Mexico, Indonesia, Nigeria, Turkey – along with other less acronymed nations like South Korea and Egypt). Many of the new dominant player will bring new cultural and societal norms to the world of work.

Demographic Changes (and increasing longevity)

The biggest changes will be shifts in life expectancy and the struggles of Western nations in particular to meet expectations around retirement. But as populations age and birth rates decline in the presently less developed nations, the same effect could have far greater implications.

Societal Trends

There are so many trends here – many linked intimately with technology, globalisation and demographics. Women’s social and economic power cannot (and should not) do anything but rise. Freelance work will increase to take advantage of technology and meet the caring needs of people with ageing relatives. Predictions of the demise of family life or the increase in attention given to families from home-based workers seem the most confused – but then the future may not yield neat categories.

Energy

The need to shift to a low Carbon economy to protect the world from rising atmospheric CO2 levels and the inevitable devastating consequences of the global climate changes it will drive will increasingly dominate our futures. This will have complex economic impacts – but nothing compared to what will happen if oceans rise substantially and crops fail around the world. I’d like to see Gratton give more attention to the consequences of water stress and the geopolitical impacts of large mismatches of water availability and need that we can readily predict.

The Three Shifts we can Expect to See in our Lives

These are big forces and Gratton envisages three big shifts in our lives.

Mastery

There are too many generalists, so the law of supply and demand will crush their economic value. This will drive a shift to in-depth mastery and narrow specialisation of workers.  We can easily see how she comes to this conclusion, as the five forces combine to drive and facilitate this shift.

Connectivity

Linked to this is the need and increasing ability for workers to connect with one another globally.  She thinks our work lives will become less competitive and more collaborative. Gratton coins two interesting concepts:

  • Your narrow group of close collaborators, whom she calls ‘the Posse’
  • Your wider group of loosely connected working relationships, which she refers to as ‘the Big Ideas Crowd’

Quality of Experience

From my point of view, her third shift is the most parochial: a move from focusing on standard of living to the quality of our experiences. In Gratton’s timeframe of now to 2025, I doubt this will be a major trend outside the wealthiest parts of the world (and, even here, it may only apply to the wealthy middle and affluent classes). The displacement of work by machines has been heralded for over 100 years and the rise of hedonistic society for many hundreds. I’d like to buy into this one, but it feels most like a consumer business driven rehash of an old trope (Sorry Lynda).

The Five Impacts this will have on Organisations

What I do one hundred per cent buy into is Gratton’s assessment of the big impacts these shifts and forces will have on global-scale organisations. Small, local organisations will lag behind, but even they will need eventually to bow to some of these changes.

Leadership

Connectivity will drive the need for more transparent leadership of our corporations (while many will fight it, fearing the impact of consumer reactions). This will need a more authentic style of leadership from individuals throughout those organisations.

Virtual Teams

Cross border, cross timezone working has grown up over the last 20 years, and will increase. From my perspective, real, empirical research in how to drive high performance from virtual teams is still lagging this trend. This is a hard question, because we evolved to co-operate in small, intimate, and geographically contained teams. We need to find ways to optimise our reactions to an alien environment.

Cross Business Networks

‘Social Capital’ is not just something we acquire as individuals, Gratton suggests. Corporations need connectivity to drive innovation and profitability. I predict that these wider eco-systems may yet morph into the dystopian mega-corporations and global cartels of science fiction.

Partnering with consumers and entrepreneurs

As more workers become independent freelancers, and consumers become more savvy about what they want, corporations will increasingly need to extend their relationships to more fully engage with them.

Flexible Working

You didn’t see this one coming, did you? (Joke) If social, demographic, and lifestyle preferences are shifting, then so too will work patterns. And this will require flexibility from employers.

Lynda Gratton at TEDx

Hear Lynda Gratton talking about how to be ready for the future now, at a TEDx event at the London business School in 2012.

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