Globalization—a definition

According to Thomas Friedman, globalization is “the inexorable integration of markets, nation states and technologies”. In other words, everything is blurring together, and these structures are evolving and changing as a result.

There are two driving forces behind this. The first is free market capitalism: the last bastions among the planned economies are going through rapid and massive change, and the whole structure is in turmoil. The second driving force is technology: computerization, miniaturization, digitization, satellite communications, fiber optics and the Internet are changing everything. This applies even to political monoliths, such as China, which is having to adapt to the Internet whether it wants to or not.

Thus globalization is not just about politics, technology, finance, or economics, but about all of these things. According to Friedman, the process is resulting in a number of developments, among them the democratization of government, as authoritarian models fail, and the integration of capital markets. This last phenomenon has given rise to an “electronic herd” of investors who move capital from country to country instantly, with no single person in control. Cheap and pervasive telecommunications facilitate this, and the pace of change will accelerate even more in future.

At the same time, the Internet is proliferating and a new knowledge economy emerging. For example, only 2% of US citizens are now engaged in agriculture, despite the industry’s powerful lobby.

Finally, these processes go hand in hand with the empowerment of the individual, which means on the one hand that one person in charge can change a lot, but also that a single hacker can bring down the entire system.

A condensed version of the old and new paradigms typifying the Cold War and the globalized world described by Friedman is given in Figure 1.

Old World Order	New World Order
Missile throw weight	Speed of commerce, innovation and communication
E=mc2	Moore’s law (the computing power of silicon chips will double every eighteen months)
How big is your missile?	How fast is your modem?
Marx, Keynes	Andy Grove (“Only the Paranoid Survive”), Joseph Schumpeter
Sumo wrestling	A 100 meter dash (over and over again)
Fear of annihilation by the enemy you know all too well	Fear of rapid change by an enemy you cannot see, feel, or touch
The hot line between the White House and the Kremlin	The Internet

Figure 1: The old and the new world orders according to Thomas Friedman

The implications of globalization

The first implication of this process is that in the 21st century the majority of businesses will be globalized—not just big companies like Boeing and Microsoft. Even tiny companies in Nebraska, for example, will be able to transact business around the world. As the world moves to a knowledge economy, and hence to e-commerce, Internet access and a phone will make location unimportant. E-commerce and knowledge businesses will be highly mobile and easily transported, offering direct access to the customer and creating competition from everywhere. Entry barriers will fall fast, as they are irrelevant on the Internet. Equally, there will be global supply chains and pervasive outsourcing. Already today there is no such thing as a national car, and IT outsourcing is prevalent.

The second implication is that success requires the ability to integrate resources from anywhere and deliver services everywhere. In the localization industry, we are already living this: our business pays no regard to time zones or geography. This process is being driven by the persistent scarcity of human talent, and by a relentless drive for lower costs, meaning that companies will go elsewhere if necessary. In other words, the marketplace is not defined by geographies, borders, or treaties, but by the Web.

Reinventing your business

How can companies survive in this environment? One critical success factor is understanding the globalization phenomenon—and we are lucky in that the localization industry is miles ahead of the rest of the world here. In addition, you have to make a commitment to “creative destruction”—i.e., to continuously evolving your business, whatever it takes. The world is changing so fast you need to run hard just to stay current, and you need to focus on your competitive advantages since you can’t afford to be second best. You need to know your industry in depth and in detail, but you also need to understand politics and economics in a broad way, since these are driving globalization. In addition, you need to be totally candid about your own strengths and weaknesses, successes, and failures.

Another survival skill you need is the realization that only the paranoid survive. Microsoft may be one of the richest companies on the planet, but we are very worried about a whole range of things. We can’t afford to be complacent and accept the status quo—we ask ourselves why we are still doing business today the way we did it yesterday. As radical as it sounds, to survive you have to subvert the dominant paradigm, eat your young, and kill your cash cows.

What is more, you have to do all this at Internet speed. There is no way the people at the top can know as much as those at the cutting edge, and therefore the latter have to make the decisions. In turn, this means focusing on communicating your mission, so that the people on the front line know the context in which they are acting. You have to reward entrepreneurship and risk taking, since if people don’t fall down a couple of times they’re not pushing hard enough.

In terms of management organization, this means that hierarchies, topdown control, restricted access to information and middle management are all obsolete. Effective structures, in contrast, include virtual teams, individual empowerment, the pervasive distribution of information, and outsourcing. People love being responsible, and you have to give responsibility to them. You also have to let them access the information they need to do their job. In addition, you have to strive for partnerships with other businesses that you can leverage for your own success and with whom you can co-evolve. You need to create specialized solutions, integrate and interweave your operations, and leverage each other’s competitive advantages. Partnerships are symbioses, not parasitic relationships, and if you are not dependent, you are not coevolving. A precondition for this is, of course, that partners have congruent goals, and this cannot be the case in a relationship based on exploitation. When your partners succeed, you succeed.

The system is the business

Many years ago, when I was a consultant at KPMG, someone said to me “the system is the business”. In other words, the way your information technology is organized defines both what you can do and your business processes, and is the basis for competitive advantage. Examples of companies that are successful because of their systems are amazon.com and HP. Information technology is the digital nervous system of the company—it is the primary communications and life support mechanism for customers, suppliers and resources. If you don’t have a digital nervous system, you don’t know what’s going on.

The Microsoft way

At Microsoft, creative destruction is a key principle and subverting the dominant paradigm is essential to survival. For example, Windows subverted DOS, Internet Explorer is subverting Windows, and Windows CE is subverting PCs. Similarly, delivery of software via the Web is subverting shrinkwrap products, and online “phenomena” like Windows Update blur the line between products, services and marketing. As a company, you need to attack and destroy the status quo—if you don’t, someone else will.

There is a strong bias at Microsoft to “just do it”. When people are empowered and expected to take initiative, they don’t hesitate to take risks even if it may appear outrageous. We often say, “It’s easier to beg for forgiveness than to ask for permission”. Not all initiatives succeed, but we tolerate failure if people step up and admit them, learn from their mistakes and try again. What we don’t tolerate is excuses or B.S.—these are career-limiting behaviors.

Underpinning this approach is the need for information. We’ve invested heavily in building tools to empower and inform employees. One example is MSMarket, an online system which all employees in the company can use to buy equipment, make travel arrangements, order business cards, etc. Another application, HeadTrax, provides organizational information showing who works with whom, titles and job descriptions, and lots of other useful information. A third example is HRWeb, the homepage of the human resources department. There is no longer a need for printed employee manuals—all the information is available online. Some places may shudder at the type and amount of information that Microsoft makes available to its employees, but we are committed to providing people with the information they need to do their job.

Summing up, Microsoft lives a Web lifestyle running on Internet time. This is essential to survival because more change is coming. If the emergence of the Internet seemed a big change, the next one will be massive. We are preparing to completely reinvent ourselves. While today a big part of our business is selling operating systems and desktop applications like Excel and Word, we’re prepared to move beyond this if we have to. This is the mindset it takes to survive and prosper from globalization.