DHL recently released its 2011 Global Connectedness Index Report, an ambitious attempt to quantify the "breadth and depth" of connectedness a country has with the rest of the world. The report ranked 125 countries using a set of 10 cross-border "flows" in four broad categories: capital, products and services, information, and people.
The Netherlands had the highest overall connectedness index, followed by Singapore and Ireland. Tiny Malta came in 10th, Germany 13th, the United States 25th, and China 63rd. One of the takeaways from the 238-page report was that increasing global connectedness -- specifically the depth of connectedness -- tends to be associated with faster economic growth. Depth is a measure of a country's international flow relative to the size of its economy. It reflects how important interactions with the rest of the world are to the country's overall welfare. Smaller countries such as Singapore and Luxembourg have the most depth. That makes sense, since none of these places are rich in natural resources, and yet they enjoy high standards of living.
The US ranked 84th in terms of depth, but it made up for its poor showing in terms of breadth, where it ranked third.
Interesting stuff, but the big surprise in the study was the observation that public perception of global connectedness is often much higher than the data suggests. In a 2007 Harvard Business Review online survey cited by DHL, the average perception of connectedness was nearly three times the actual. What's more, CEO respondents overestimated the level of connectedness by a larger proportion than other respondents. The DHL study authors call this overinflated perception "globaloney." (Rhymes with baloney, implying you're full of it.)
They contend that executives suffering from globaloney tend to believe that…
Competing the same way everywhere is the purest form of global strategy.
The truly global company has no home base.
The truly global company should aim to compete in all major markets.
Global expansion is an imperative, rather than an option to be evaluated.
Any one of these misconceptions can lead to problems. Basing business strategy on a combination can be disastrous. "The mirage of a borderless world promotes business strategies that overlook the reality of distances and differences," opine the authors of the DHL study.
Just think back to the China gold rush days of the early 2000s, when every Western electronics company had expectations of world domination. Some plans worked out, but many failed. Cultural differences and distance were certainly among the reasons. In the post-2008 Great Recession era, companies can't afford to make similar mistakes.
So if your company has enjoyed success domestically and is looking to replicate that success overseas, you'd benefit from reviewing the DHL connectedness index for the countries you're interested in. Be cautious, be selective, and don't believe in your own globaloney.
Based on the five listed characterisics of the CEO types beliefs, it seems to be clear that as a group they are so in love with "the big picture" that they are also a bit detached from reality. One size seldom fits all, and if it does, it fits none very well. Amazingly enough, while all of humankind may be endowed with certain in alienable rights, we are not all the same. Different regions do have different priorities and attitudes, after you get past eating and breathing. And even within a region, there are those who differ from the common (majority).
Worse, though, is the CEO's assumption that they are superior to all others. (A conclusion deduced from the 5 assertions).
@TaimoorZ, I actually agree nearly completely with what you said... as a general rule. However, I do believe there are exceptions where "one size fits all" does generally work, however, they are certainly rare exceptions and like you say, the more regionalized a strategy is -- in general -- the better.
Good question @tirlapur. Global connectedness leads to economic growth for small nations like Singapore Ireland, or even Malta where they don't have a big domestic market or natural resources. They are essentially trading nations. They rely disproportionately on trade to fuel their domestic economies. For large countries like the US and China, the need to be connected is not as great as they have large domestic markets and natural resources. It's a good thing to be 'connected' but its not as important for large countries as small countries.
"Competing the same way everywhere is the purest form of global strategy"
I think this is the worst mistake companies make when they step into the global arena. Given the highly diverse economical, political and social factors, there's no way one strategy can fit across all the countries. In fact the more regionalized a strategy is, I feel the higher are it's chances of success.
It is amazing to think that any CEO or business that believes in any one of the five misconceptions still has a job or is in business. This report seems to point out some issues companies are faced with, but also leaves a few lingering questions unanswered.
One of the takeaways from the 238-page report was that increasing global connectedness -- specifically the depth of connectedness -- tends to be associated with faster economic growth.
@Bruce, thanks for the post. If global connectedness directly reflects into faster economic growth, then how is it possible that China which is placed 63rd in the list has faster economic growth compared to other nations?
Looking at the "Globaloney" checklist, it makes me think that the appeal of globalism is about exploiting economic gradients more than common ground. Companies in areas saturated with industry can extend their capital to emerging markets where infrastructure and operating costs are relatively low. It's been pointed out, too, that the diversity involved in making friends around the globe can bring added skill sets to the table.
In theory, the concepts outlined on the above list should apply: a truly global company is seamless. In reality, though, almost all companies I know still manage their P&Ls regionally. Part of the reason is accounting: current conventions make it impossible to do otherwise. Then there's the bigger question as you point out: do you really need to be a global company? It doesn't work for everyone, and it probably shouldn't. Not all markets are created equal, no matter what CEOs say.
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