In 1994, The Economist selected him as one of five management gurus in the world. As an author he has published over 140 books, many of which are devoted to business and socio-political analyses.
Ohmae, who was a keynote speaker at the ICSID Design Congress held in Hannover this year gives Curve readers an insight into new global business strategies.
The new strategy in the invisible continent
Business strategies, corporate structure and business mindsets are only a few factors that need to be re-designed for survival in the 21st century. The events and traditions of the 21st century will fundamentally change familiar market mechanics of the 20th century. Those that do not make efforts to work with these changes will be left behind. In particular I would like to highlight the two specific phenomena that affect the shape of the nation and global industries:
1. The Emergence of Prosperous Regional Economies
2. The Emergence of Godzilla Companies – surviving in the 21st Century
The emergence of prosperous regional economies
It is essential to understand the phenomenon of the emergence of regions as a characteristic of the 21st century economic environment. It is a significant divergence from the ‘nation state based’ economy that prevailed throughout the 19th and 20th centuries.
The US economy for instance has enjoyed a sustained period of economic vitality. Although they experience booms and busts, market fundamentals are quite sound. They have fresh new industries and have changed the fundamental way they manage business.
US national growth however, is not four to six percent across the board. The underlying growth pattern of the US is more likened to a zebra. Some regions are growing at twenty percent, like Denver, Austin, Seattle and Silicon Valley, while other areas are in decline. So a closer look at the zebra’s stripes reveals that the official four to six percent growth rate is a result of averaging severely depolarized regional growth patterns.
Surprisingly, the growth areas tend to be mountainous – far away from congested urban and city areas. People are seeking a better quality of life – one that avoids jam-packed commuter trains. Technological solutions provide alternatives to living in New York, Los Angeles or Chicago. That is why it is not central LA that is experiencing phenomenal growth, it is the outskirts, centered around San Jose that is enjoying phenomenal growth. From a distance growth appears grey. A closer examination however, unveils zebra like growth – bright stripes and very dark stripes where the brighter stripes represent industries trained to survive the next ten to fifteen years. The dark stripes represent industries in downturn requiring either government support or radical strategic reform.
Another example of this regionally based phenomenon is in India. India is one of the poorest nations on earth. The per capita GDP hovers around $500. Yet again, technological solutions now allow an engineer in Bangalore, Hyderabad and Pune, to earn the equivalent of a good engineer anywhere else in the world. For the first time, engineers in India may avoid the country’s poor communications infrastructure and use satellite communications to access and trade with the rest of the world. Traditionally, India exported their engineers to the rest of the world. Today these well-educated Indians may choose a new working environment made possible by leased direct lines, satellite communications and the Internet. A salary paid by a company in a developed country combined with India’s low cost of living provides an opportunity to live in luxury... in Bangalore!
Penang is another example of a prosperous economic region. A small island off the shores of the Malaysian peninsula, Penang is nicknamed ‘Silicon Island’ due to the outstanding competitive success it has achieved in the export of electronic products. As the nation’s currency depreciates, exporting opportunities escalate. Despite the economic situation of Malaysia, this island thrives and is in fact desperately short of labour supply.
So it is not Malaysia – per se – prospering. It is Penang, Selangor and Johore – the regions – prospering. Likewise, it is not India’s victory in the Internet industry; it is the victory of specific regions like Bangalore and Hyderabad. It is not the entire US riding a wave of economic hightimes – it is the success of specific US regions dramatically skewing average growth rates.
The traditional nation state or concept of an entire country moving up and down economically is no longer the case. A phenomenon of the 21st century is already evidenced by the emergence of regional economies within a nation or across the national borders (as in the Pacific North-West of North America), operating and trading in a borderless world. These successful regions may even group together to form larger more powerful strategic regions as we move further into the 21st century. Irrefutably however, it will be the regions that interact successfully with the rest of the world that will prosper. Regions that fail to do so will fail.
The emergence of Godzilla companies – surviving in the 21st century
The most important turning point away from 19th and 20th century traditions and into the digital revolution was in 1985 when Bill Gates introduced the first version of Windows. I highlight this critical moment by referring to it as AG 1 “the first year after Gates”. Anything before this time was BG “before Gates”.
One of the most prominent features of the digital revolution and the AG period is the emergence of Godzilla companies. They seem to have completely different chromosomes from ‘human’ companies. Many of them grow to a billion dollars in sales in a few years, and some to be ten billion dollars in ten years. The aforementioned regional growth economies serve as nutritious feeding grounds nurturing the Godzillas. Godzillas are prepared for the next paradigm, trained in 21st century market mechanics and quick to prosper from the digital revolution.
Some Godzilla companies include Microsoft, Oracle, Dell, CNN, Sun Microsystems, Cisco Systems and FedEx – large American companies that have taken advantage of the zone between the real world and the cyber world. The cyber world is a world where global consumers shop, reserve travel seats and accommodation and transact business without being physically present. The business transacted and the products and services purchased via the cyber world, however, are real and delivered to us in the real world. The digital economy is therefore neither 100% cyber nor 100% real. It is a triumphant medium between the two.
You may recognise a Godzilla company by the way it grows to unbelievable heights within a very short timespan. They hatch fast and immediately start to consume all available resources to promote fast yet healthy growth – just as in the Hollywood Godzilla movie. Godzilla, in the movie, ate raw fish, but the Godzilla companies of the 21st century consume ‘cyber food’ or ‘leverage food’ which has more nutrition than any other food available in the world. Godzillas have web-shaped organisations that are flexible, productive and decisive. They leave only scraps for the traditionally inflexible and indecisive pyramid-shaped organisations to scramble over.
In the US there are thousands of Godzilla eggs. Many of them have already hatched and are experiencing phenomenal growth. One of the major factors promoting the emergence of these Godzillas is the deregulation of the marketplace in which they are born. Former President Ronald Reagan first promoted deregulation in the US and the regions that grasped deregulation first are those economic wonder regions experiencing twenty per cent growth.
Japan’s regulated marketplace and workplace traditions are not currently nutritious and flexible enough to allow an emergence of Japanese-bred Godzillas.
Given the characteristics shaping the 21st century marketplace, it is no wonder that nation states are on the decline. The traditional model that wealth is created within national borders or otherwise by exploiting another country by conquering or colonising them has come to an end. Countries with large geographical mass and rich resources will not necessarily prosper. The digital economy and consumer acceptance of cyber space transactions will quickly remove red tape traditionally over indulged by governments. Money and information will continue to cross national borders and individual regions will prosper.