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.
- Globalization offers virtually limitless growth opportunities.
- 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.