Chapter 30 Chapter 11 How Companies Can Cope with Flattening (2)

Joel, head of IBM Strategic Initiatives.Cowley said, "We are seeing in more and more fields that the next stage of technological innovation requires the participation of many members with expertise at a more granular level. The frontiers of technological innovation in each field will become increasingly Specialization. The Honey divisions of your company will play less and less of a role in any one business endeavor or social issue. So, in order to make any breakthrough of value, you must be able to combine more and more details. That’s why collaborations are so important.” So you might find a pharmaceutical company that invents a new vascular stent, which in turn leads to a bioscience company developing a whole class of new stents to go with it. Drugs, and the real breakthrough lies in their cooperation, and the profits generated in the technological breakthrough are shared by the two fields.

An even more interesting example could be given: video games.Background music for video games has long been outsourced.Manufacturers later discovered that if the background music was well matched, not only could they sell more video games, but they could also sell more background music on CD or as a download.So some big video game companies started to set up their own music department.Some artists also feel that singing the theme songs for video games is a better way to promote themselves than broadcasting them on the radio. As I mentioned earlier, many new jobs increasingly require workers with more comprehensive abilities.

This is because the more knowledge bases connected in an increasingly flat world, the more detailed specialization will result, and the more innovation will be produced by combining different specialties in new ways, so in your company , better management requires a higher ability to cooperate across industries. The cover of Time magazine on October 24, 2005 was a story about Steve.The story of Steve Jobs and the Apple Ipod.There is a passage that impressed me deeply. It says: "Apple employees constantly discuss what they call deep collaboration, interleaving, and concurrent engineering.

Essentially, this means that the production process of a product is not going from one group to another, there are no discrete and sequential stages of development, but a simultaneous organic process.The production of a product requires the simultaneous response of all departments—including design, hardware and software—to constantly evaluate the design from different perspectives. While executives at other companies were bragging about how much time they were wasting less time in meetings, Apple was already a big step ahead and dominated the pack. 'If you're as ambitious as we are, you'll find that the way you've grown your product just doesn't work anymore. ' Design director Jonathan pointed out, 'When competition becomes more complex, you have to develop products in a collaborative and integrated way'. "

Perhaps the best way to explain this paradigm shift is to look at a traditional manufacturer, say, Rolls-Royce.When you hear the name "Rolls-Royce," what immediately pops into your mind is a gleaming hand-built car with a livery driver in the cab and a rear seat. Above is a well-dressed couple on their way to Royal Ascot or Wimbledon. Rolls-Royce is a typical dull British company, isn't it?However, if I tell you some facts, what will you think: Rolls-Royce no longer produces cars, because the business of producing cars was acquired by BMW in 1972. The brand was also licensed to BMW in 1990; now 50% of Rolls-Royce’s revenue comes from maintenance services, and in 1999 the proportion of local workers in the company reached 100%, and now this figure has dropped to 60%; now the company Global business activities involve China, Singapore, India, Italy, Spain, Germany, Japan and Scandinavia.

Yes, this is no longer the Rolls Royce of your parents' days. "We realized a long time ago: 'We can't just be a British company,'" Mr. John Ross, chief executive of Rolls-Royce, who happened to be with me in China, said in an interview with me. : "The UK market is too small.In the late 1980s, 60% of our business came from defense orders, particularly jet engines, and our main customer was the Margaret Thatcher government.But we need a place in the world market.If we're going to go out into the world, we have to recognize that the largest customer in any one line of business is in the United States, and we have to be successful in non-defense areas.So we transformed into a technology company specializing in powertrains. "Today, Rolls-Royce mainly produces gas turbines for military and civilian aircraft, helicopters, ships and for companies involved in the production of energy such as gasoline.

Today, Rolls-Royce has customers in 120 countries and a total of 35,000 employees, but only 21,000 work in the UK, and the rest of the workers are mainly distributed in the company's global network in R&D, service and manufacturing. Half of the company's revenue is now generated by operations outside the UK."In the UK we are a British company, but in Germany we are a German company and in the US we are an American company," Ross said. In Singapore we are a Singapore company.You have to do this, because only in this way can you be close to customers, close to suppliers, close to employees and integrate into the business environment in which you live. “Today, Rolls-Royce employs 50 nationalities, spreads across 50 countries, and speaks 50 languages. Rolls-Royce outsources 75 percent of its manufacturing to overseas companies.” The 25 percent we manufacture ourselves Contains our unique technology," Ross said, "including the high-potential side of the engine, turbine, compressor, fan and alloy and the aerodynamics of these components. The turbine blades are formed from a single crystal in a vacuum alloy furnace. And with a very sophisticated cooling system.

This high value-added manufacturing process is one of our core competencies. We still have key technologies. We have the ability to identify and determine what products our consumers need, and we have the ability to integrate the latest science and technology. We control With the marketing network of these products, we have the ability to collect and process relevant data of consumers using our products, so that we can provide relevant service support for our products. “But outside of these core areas, Rolls-Royce outsources non-core parts to suppliers elsewhere in the world. The British Empire may no longer be a country where the sun never sets, and the Rolls-Royce of the past has declined, but the new The Rolls-Royce of Rolls-Royce will never decline. To produce breakthroughs in powertrains, the company has brought together experts from all over the world. Ross explained: "In order to commercialize the cutting-edge energy technology fuel cell technology, it needs Do more. "

"The core competitiveness of business today also includes the ability to form alliances," Ross said. "We form alliances in the field of production and services, and we form alliances with universities and other partners in the same industry. Companies must have corresponding rules and disciplines in order to be clear about allies. What can be contributed, and what should we contribute... R&D, suppliers and products all have an alliance market, and the company must have a structure that can deal with it." He added, "10 years ago 98% of the company's technical research work was done in the UK, now it's less than 40% and a lot of the work is in the US, Germany, India, Scandinavia, Japan, Singapore , Spain and Italy. We are now recruiting elites from foreign universities to achieve the integration of technology and personnel we need, and we are no longer a company that sticks to the UK.”

While Rolls-Royce was a British-centric company, he added, the organization was vertical. "But we have to flatten ourselves," Ross said, adding that as more and more markets open up globally, Rolls-Royce can gain market experience while selling its own wares. What will the future hold? The way Rolls-Royce is good at dealing with the flat world will become the norm for more and more start-ups.If you go to Silicon Valley today to find venture capitalists to start a business and say that you plan to start a new company, but you don't consider outsourcing or offshoring production, they will send you off immediately.Today's venture capitalist needs to know that from day one of your business, you are ready to leverage the triple convergence and seek out the brightest and most effective talents in the world to cooperate.

Therefore, in a flattened world, more and more companies are born as global companies. Vivek, President of WIPRO India.Paul said: "In the past, when people started their business, they might say to themselves, 'My company is going to be a multinational company in the next 20 years'. Today people think that they will become a multinational company the next day. Now , many 30-person companies start with 20 employees in Silicon Valley and 10 employees in India. If the company has more than one product, some products may be manufactured in Malaysia or China, some designs are in Taiwan, and customers Support is in India or the Philippines, engineering may be in Russia and the United States." This is the so-called micro-multinational corporation, and it will be the wave of the future. Today, your first management job after leaving business school may be to integrate such a professional team: 1/3 of the employees are in India, 1/3 are in China, and the rest may be in San Francisco or Boston. Everyone takes on very specialized technical work, which is becoming more and more necessary in a flattened world. Rule #5: In a flat world, the best companies get their foothold in the market by taking frequent X-rays and letting customers know about their results. In a flat world, new products are more quickly imitated, copied, and turned into mediocre vanilla ice cream. In order to keep innovating, excellent companies will often do X-ray perspectives, discover new areas early and occupy them as soon as possible, and at the same time transfer those vanilla ice cream products. What does X-ray mean?First let me introduce Lori.Tropiano, she's the IBM vice president of business consulting services, and I call her the company's radiologist.Tropiano and her team's job at IBM is to x-ray the company, breaking down every aspect of the business and displaying it on a big screen.This way you can study the "architecture" of the company.Every department and every function will be singled out for analysis: whether it increases the cost or profit for the company, or both; whether it is the core competitiveness of the company or a task that anyone can do Work, whether others are doing this work at a lower cost and with better quality than yourself. "A typical company has 40 to 50 parts," Tropiano explained to me, showing me a diagram of the company's structure on her big screen, "so our job is to break those parts down. Open, and ask the company: How much do you spend on each component? Which parts do it best? Which parts work like vanilla ice cream? More money than you expected?" When you've done that, you basically do an X-ray of the company and it turns out you find 4 or 5 "hot spots." One or two of them may be the company's core competitiveness, and some may be the company's unaware competitiveness, so it needs to be strengthened.Other hotspots may be inefficient parts, maybe 5 different departments are doing the same job repeatedly, and this kind of work may be better and cheaper if other companies do it, so some work should be transferred Move out—provided the company still has a net gain after accounting for the costs and pain of outsourcing. "Maybe you could say that my ability in certain business areas will also become my core competency," Tropiano said, "and then I can move all other businesses away and save money to invest in these areas." Potential areas. However, for the average company, if 25% of the business is core competency, strategic and different, it is quite good. The rest of the business, you can continue to do it and try to improve or transfer go out." The first time I got interested in this aspect was when I read an Internet business news. "On February 25, 2004, HP announced that it had won a 10-year outsourcing contract worth US$150 million from a bank in Mumbai, India. Natarajan Sundaram, head of HP's marketing department serving the Indian market, pointed out that 1.5 The US$100 million outsourcing contract is the largest order HP has won in the Asia-Pacific region, and it is mainly responsible for the installation and management of core computer systems for 750 branches of Indian banks. "This is the first time that HP seeks outsourcing of core banking functions in the Asia-Pacific region," Sundaram said. Many multinational companies, including IBM, participated in the competition for the contract.Under the contract, HP will be responsible for the bank's data storage, document imaging technology, electronic visual banking, Internet banking and the automatic response design of the entire banking system. Indian banks are facing increasing competition from state-owned banks, private banks and multinational corporations. It recognized the need to upgrade and standardize its existing computer systems with web-based banking services. So it did what all multinational companies do—it took X-rays for itself, outsourced functions that were not its core competitiveness, and outsourced functions that it could not do best. It's just strange that an Indian bank outsourced this to an American company.What I want to know further is how did HP, the company that I call him when my printer breaks down, win the business outsourcing of 750 branches of the Indian state-owned bank?How much does HP know about the core system of Indian banks? Out of curiosity, I decided to visit the head of HP's Palo Alto headquarters in San Francisco.There I met Maureen, vice president of emerging market solutions.Conway, asked her directly about the above question. "How do we leverage our internal strengths and allow others to benefit from it?" She explained that HP wasn't entertaining visiting customers who came to corporate headquarters to see HP's innovations in information systems management first-hand.Many customers have shown great interest in HP's ability to deal with a flattening world. They will ask, how did HP reduce the previous as many as 87 vertical and independently managed supply chains, each with its own management level and logistics support, to only 5, and let these 5 manage 500 Billion-dollar business, but the accounting, finance, human resources and other functions are handled by the company in a unified way?Customers are interested in how HP integrates its computing and business systems effectively.Hewlett-Packard, a large company with operations in 178 countries, used to process its own accounts receivable and accounts payable in each country, and the business was completely separated.Until recent years, HP has set up three transaction processing centers in Bangalore, Barcelona, ​​and Guadalajara respectively. The three centers implement unified standards, so that HP's accounting work in 178 countries can pass through these three centers. to proceed. Seeing so much interest from customers in its internal systems, HP finally asked itself one day, "Hey, why not make this a commodity and sell it?" Conway said, "That's the core of HP's outsourcing process... …We take an X-ray of ourselves and find that there is an asset in it that someone else wants, and that is a business opportunity. " In other words, the flattening of the world has both sickened and cured India's banks. Clearly, in India's increasingly flat banking environment, it couldn't keep up with its competitors, but at the same time it did X-rays and then outsourced to HP the things it couldn't do well on its own.At the same time, after HP did X-ray vision for itself, it found that it could undertake a new kind of consulting activity.What is certain is that most of the work for Indian banks will be done by HP's employees in India, or employees of Indian banks that have actually joined HP, and some of the profits will be sent back to HP's headquarters in Palato, Used to support the normal operation of the global knowledge supply chain. Currently most of HP's revenue comes from outside the United States.But the core knowledge and infrastructure team at HP that integrated the entire process to win the contract—as did the corresponding Indian bank outsourcing contract—remains in the US. "The ability to dream is better developed here than anywhere else in the world," Conway said. "The core of creativity is here, not because people are smarter, but because the environment and freer minds are here. The robot that created the dream is still here. " Rule Six: Good companies move business to grow, not shrink.They can speed up the progress of reform, reduce the cost of reform, gain a larger market share and hire more people with different expertise by transferring business, rather than saving costs by laying off people. Dove.LRN, run by Seidman, mainly provides online law-abiding and moral education for employees of multinational companies, and also helps corporate executives and directors to consult on corporate responsibility. I was having lunch with Seidman one day in the fall of 2004, and Seidman casually mentioned to me that he had recently signed an outsourcing contract with the Indian consulting firm Mindtree. "Why are you cutting costs?" I asked. "I moved to win the market, not to save money," Seidman countered. "Look at our website, we have over 30 openings right now, all of them knowledge jobs. We're expanding the company." scale, we're hiring more people, we're breaking new ground." Seidman's experience aptly explains the nature of outsourcing business - the company's purpose of transferring business out is to obtain newer technologies and grow faster, not simply to cut costs and reduce production scale.Seidman's firm is a leader in a new field that has grown in a flat world, helping multinational corporations instill a sense of corporate culture among their employees around the world.Although LRN has been in business for 10 years, the real big growth of the company started in recent years, mainly in the wake of a series of corporate scandals such as Enron. In the wake of Enron and several corporate scandals, many companies have become interested in LRN's online service programs that will help all employees of multinational corporations (from management to factory workers) understand their basic legal and ethical responsibilities .When companies sign up with LRN, their employees will be trained online. This online education includes mastery of the company's code of conduct, when it is acceptable to accept gifts from customers, questions to think about before sending an E-mail, what will Constitutes a test for bribery of foreign officials and other issues. When the need for corporate governance exploded in the early 2000s, Seidman realized that, like the e-trading firm, its clients needed a more integrated platform.Although there is one set of software for online training for employees, and another set for ethical consultation for the board of directors, he knows that what the company's managers need is an electronic interface that meets all requirements at one time, so that they can solve all the problems they face in the management process. Issues related to governance and ethics can be resolved: including employee education, notification of any violations, maintenance of corporate reputation, and education on government regulations. Managers need to learn about the company's policies in a timely and visual manner through this interface. situation. Seidman thus faced a twofold challenge.He needed to do two things immediately: continue to grow the market share of LRN's online regulatory education, and design a new integrated platform for existing corporate customers, which required a real leap in technology.Facing this kind of challenge, he decided to cooperate with Mindtree, an Indian consulting company, and the two signed an outsourcing contract. The latter provided Seidman with 5 senior software engineers, and the price was only equivalent to the price of one engineer in the United States. . Seidman said, "Mindtree is not selling out-of-season clearance products, but the top software engineers I have been trying to find. I need to spend a lot of money to maintain and expand my core business and continue to take care of me. Those customers. At the same time I have to take a huge technological leap to meet the next step of the customer's needs, so that I can better solve all the ethical, management and compliance issues online. If I can't meet their needs, other companies will take advantage of it Working with Mindtree has allowed me to have two teams, one primarily in the US and the other including LRN's Indian consultants, to focus on our next strategic leap to grow our business. "Since corporate ethics have been at the heart of Seidman's Los Angeles-based business, how it is outsourced has become as important as the end result of the partnership. Seidman did not declare Mindtree as his partner, but organized an A meeting of more than 170 employees to discuss the outsourcing plan he envisioned. He laid out all the discussion points, asked the employees to weigh up, and showed everyone the jobs that will be required in the future and how they can prepare for them. He said , "I need to show my company that we are going to be successful". There is no doubt that some companies do move business out simply to save costs and send the rest of the money to shareholders or management.It would be childish to deny the existence of such a fact.But what I want to point out is that business outsourcing that is not aimed at accelerating innovation and promoting corporate growth is only adopted by a few companies, most companies will not do this, and I will not do those few companies for the sake of a small share shareholders.Just like not all business is suitable for American companies, the idea that all business can be transferred to India is also ridiculous. Good companies should be able to properly weigh which operations should be in India and which should stay in the United States. With the right decisions, these companies will eventually have more employees and grow stronger. "It's about trying to get our company to scale faster, about how we can make the next leap forward in a shorter period of time with guaranteed success," Seidman said of his move to the new company. Key areas of the platform's platform package to Mindtree's decision, said, "This is not a shortcut, we now have 200 customers in the world. If I can grow this company the way I want, I will hire more employees, promote More people, more opportunities and better career paths for my current employees - because LRN aims to be wider, more complex and more global.. We are now in a very competitive space. Going on The decision to outsource was for offense, not defense. I'm trying to improve my score before someone else catches up to me." Rule #7: Moving jobs overseas isn't just Benedict Arnold's defection, it's an idealist's choice. In recent years, some new figures have appeared in the world, known as social entrepreneurs.They want to have some positive impact on society through what they do.At the same time, they believe that the best way to achieve the above goals is as the saying goes: "It is better to teach him to fish than to teach him to fish." Over the past few years, I have had contact with some social entrepreneurs, they Most of them are not only good at business but also care about society. The innovation and dissemination of technology in the process of world flattening provides them with opportunities to realize their ideals.Social entrepreneurs who understand this are getting their hands dirty with their plans. One of my favorites is Hremi.Hockenstein, the young man studied at Harvard, after graduation, he came to McKinsey consulting firm to work.Soon, he and another colleague who worked at McKinsey decided to completely change their development direction and start a non-profit data entry company, which specializes in outsourcing data entry work from American companies.Heckenstein set the company's location in one of the worst business environments in the world-Cambodia. Only in a flat world can such ideals be realized. In February 2001, Heckenstein and his colleagues decided to go to Phnom Penh, on the one hand for tourism, and on the other hand to investigate whether they could do some socially beneficial work there.They were surprised to find that there are many Internet cafes in the city and schools that teach English, but the students who graduate from the schools cannot find jobs because the jobs are very limited. "We decided to use some of our network in North America to fill the gap and provide employment opportunities for people there," Hückensteen said.That summer, after another trip at his own expense, Hückensteen and his colleagues established a company called Digital Divide Data in the United States, along with a workshop in Phnom Penh for data entry.They hired locals to type printed materials into computers.These materials are all needed by American companies. After digital processing, the materials can be stored in the database and retrieved and consulted through computers.All materials were first scanned in the United States, and relevant documents were sent to Phnom Penh via the Internet.They initially hired two local Cambodian managers, followed by Heckensteen's colleague Jason.Rosenfeld came to New Delhi to ask if a local data entry company could train the two Cambodians. Nine companies successively rejected his request because they did not want to see competitors from Cambodia, which has a low-cost advantage.In the end, a generous Hindu agreed with Jason.Rosenfeld's request to train two of his managers.Since then, they've hired 20 data-entry clerks, many of them refugees from Cambodia's civil war, bought 20 computers, and installed an Internet line that cost them $100 a month in rent.The entire project cost $50,000, half of which was paid by themselves, and the other half came from the Silicon Valley Fund.The company opened in July 2001, and their first order came from Red Harvard, the student newspaper of Harvard University. “Red Harvard is digitizing its issues so that they can be accessed online. Because we are Harvard graduates, the paper has given us some work,” says Herkenstine. “At first, we had Cambodian staff Entered into the computer news from 1873 to 1899, and those news happened to be reports about the Harvard-Yale rowing race." Then, when we entered from 1969 to 1971, the Cambodian War broke out, and these guys started Tapping their own stories... All the contents of "Red Harvard" on the microfilm were converted into digital images by a professional company in Oklahoma, USA, and then the digital images were transmitted to Cambodia according to the FTP file transfer agreement, and then the staff text entry.Now, you can log on to download these past reports.Typists in Cambodia don’t have to know English, they just need to learn how to input English letters; they work in pairs, and each group enters the same content, and then the computer compares the content entered by the two people through a program to see if they are consistent. Make sure there are no errors. Heckensteen said the average annual income per person in Cambodia is a little over $300, and the typists he employs work six hours a day for $75 a month, double Cambodia's minimum wage.In addition, every typist can get a scholarship so that he can go to school to study after work.For most, that means finishing high school, and for some, the chance to go to college. “Our goal is to break the vicious circle there, where young people drop out of school to provide for their families, but not getting a good education makes it harder for them to earn a living, so they get poorer,” says Herkenstine. Colleagues in developing countries fulfill their responsibilities to society and be a leader in this regard. Those American companies that we work with are not just there to save costs, they can invest elsewhere in the world.In reality, these companies want to create a better life for some of the world's poorest people. " Four years later, Digital Divide Data's offices expanded to Battambang, Cambodia's second largest city, and Vientiane, Laos, with employees growing to 170.“Initially, we sent two managers from Phnom Penh to India for data entry training, and when we expanded our work to Laos, the hired Lao managers could be trained in Phnom Penh,” Hückensteen said. " Once things start, they will develop in every possible direction along its inherent trend.Besides Red Harvard, the company's other biggest clients are the many NGOs that need to digitize data from surveys they do about health, family or work conditions.So some of the first Cambodian typists hired left Digital Divide Data to start their own company, designing databases for NGOs doing research.Why?Because when these workers work for Digital Divide Data, they constantly receive requests from NGOs to digitize data.However, because these organizations did not make sufficient preparations in advance and did not standardize their data, workers could not complete the entry tasks efficiently.Workers then realized that they could be paid more if they moved upstream of this work, designing a standardized format for the data collected by NGOs.The standardized format makes it easier for the survey data to be digitized, the cost of entry is reduced accordingly, and it is also convenient for proofreading and operation during entry.These workers started their own companies and took their business outside of Cambodia. None of the work done in Cambodia came from the United States, Hückensteen said.This basic data entry job was long ago moved to India and the Caribbean, and maybe others, but certainly not Cambodia.The work currently being done in Cambodia is retransferred from the aforementioned areas.For Cambodia, all these changes have only happened in the past two years, which would have been a fantasy 10 years ago. “My partner was a Cambodian,” Hückensteen said. “He was Sopi, and he lived in a refugee camp on the Thai-Cambodian border until 1992, when I was a student at Harvard. It took Sopi 10 days to walk back to his village after the Cambodian peace agreement was brokered. Now, he lives in Phnom Penh and manages the Digital Divide Data workshop.” Heckenstein said that they communicated through online instant messaging tools every night. Make connections and collaborate in serving companies and people around the world. "Under this cooperation model, we are equal. There is no one who dominates the other. Our cooperation is to create a better future for people living in all walks of life. Only one to two The creation of real survival opportunities for poor people in dollars has made my life more meaningful... As these people gradually integrate into the healthy development of the global economic system, the self-esteem and self-confidence that they should have as a human being that they did not have before gradually came to them. take root in my heart.” So Heckensteen and his partners kept getting calls from people in Mongolia, Pakistan, Iran, and Jordan who wanted to do the same job, but didn’t know how to get started. In mid-2004, a client approached Digital Divide Data to convert an English-Arabic dictionary (English-Arabic) into digital form.At the same time, Herkenstine's office received an email from an Iranian company engaged in data entry, offering to do business with him."They found us through Google looking for ways to expand their business outside of Iran," said Hückensteen, who asked if Iran could be involved in the work on the Anglo-Arabic dictionary.However, Iran uses Persian, and only some letters are the same as the Arabic alphabet. "The Iranians said yes, so we worked together." The part of the story that interests me the most is precisely why this story is the best illustration of a flat world—Herkenstine said: "Me and that guy in Iran Never met. We did all the transactions on Yahoo; we used online instant messengers and emails; and sent him money from Cambodia via electronic accounts... I invited him to my wedding, but he didn't can come." The World Is Flat Geopolitics and the Flat World