Beyond Business
Tomorrow’s global company
World Economic Forum
CEO Briefing: Unraveling the Flattening WorldBy Nandan Nilekani
Ever year we gather in Davos and are struck by the magnitude of changes we encounter, whether in the business environment, political climate or social milieu. We sometimes get caught up in this excitement and may miss the forest for the trees. Yet, surely but steadily, the playing field is becoming more level, in essence, “flattening.”
From a business perspective, the flattening of the world is being driven by four disruptive trends: the rapid rise of emerging economies, changing global demographics with aging populations in some areas and youthful workforces in others, the increasing role of technology in our daily lives, and widening scope of regulations with a global impact.
The competitive position of companies will be shaped by these forces. While different companies will adopt different strategies, they will emerge as the same kind of company - a leaner, flatter, faster, and more adaptable company for the flat world.
Consider some facts:
- Today, emerging economies contribute 51% of the growth of global GDP compared to just 39% in 1974
- The working population (ages 20-64) is declining in the west and rising in emerging countries. Last year, America graduated 70,000 engineers. India graduated 350,000 and China more than 600,000.
- Emerging nations are leaping past the 20th century and landing squarely in the 21st. India has more wireless connections than landline telephones.
- There is now a multitude of regulations surrounding manufacturing standards, environmental norms, and health and safety considerations. Global compliance represents a complex challenge to multinational firms.
Responding to these trends will separate the winners from the losers in this flattening world.
I envision that the successful company of the future will leverage these trends and have the following characteristics:
- It may be seen in one location and do most of its business in a completely different location
- Distance will finally die as it won’t matter where the company started, where the executive team sits, where the natural resources are from, or where the production lines run
- It will treat the whole world as a network of resources and find ways to reallocate work among that network in the most optimal fashion. The work will be taken to the workers, and because of this, the company will do everything faster, better and cheaper.
- It will manage operations in a new way using information on a real time basis. And the result is a sharper enterprise, working smarter.
- It is a company intensely focused on innovation. But it also knows it cannot innovate alone. It will reach beyond its boundaries to tap the ideas of customers and suppliers - bringing them into the lab as co-creators. More than half of its innovations will come from outside its walls.
Therefore, as we engage in debates on the impact of globalization and technology, let’s think hard about how we can shift our operational priorities to benefit from them. The excitement will continue but let that not blind our view of the significance of these changes.
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