Editor's note: John Seely Brown sits on the technical advisory board of one of the author's client companies, Groxis. That connection to his subject should have been disclosed in the article. The author brought this to our attention this morning, and asked for an update to address any concerns about transparency or perceived conflicts of interest.
At a time when Americans continue to be jittery about the near-term effects of global outsourcing, two Silicon Valley thinkers are making a case for globalization as a business imperative.
In The Only Sustainable Edge, John Hagel III and John Seely Brown argue that businesses can no longer depend on the traditional advantages that they have long enjoyed, including geographic and regulatory barriers, and economies of scale. Instead, the rapid development of the global IT network and market-liberalizing public-policy shifts have leveled the global playing field like no other time before.
Hagel (top) and Brown
Why globalize? According to the authors, companies must be quick, flexible, and collaborative in order to maintain their position in the global marketplace. It's a principle that logically supports global outsourcing where the firm's ability to innovate and differentiate would depend on it. This matter-of-fact position is certain to stir up debate in public-policy circles; the book does not approach globalization as an "if" or "when," but as a "how" (which is fitting for this advanced how-to book). Already the authors have met with some resistance, as they told Gelf in a recent email interview.
But they have defended their work as one based on the long view of globalization, one that sees offshoring not just as a short-term solution for costs-savings, but as an engine for innovation and competitive advantage. The authors cite numerous examples, from well-known names such as Nike and Cisco, which have strongly differentiated themselves by managing vast global networks of partners, to relatively unknown companies such as Li & Fung, a textile-industry "orchestrator" that enables businesses to tap into their own 7,500-partner global network of vendors. Innovative outsourcing models have also penetrated the thinking of Silicon Valley venture capitalists. Some of the top firmsKleiner Perkins, Sequoia, and Mayfieldnow require their start-ups to outsource technology development and support in Bangalore. Yogen Dalal, a partner at Mayfield, "will not consider funding a company without an offshoring strategy," Brown and Hagel write.
But outsourcing/offshoring is only one tool in the new business arsenal. This is really a book about collaboration, and a close look at how businesses are employing cooperation for competitive advantage. It explores concepts such as "loose coupling," which covers techniques for managing and motivating distributed networks of specialized companies; and "productive friction," which looks at ways to resolve difficult problems by bringing together diverging perspectives. Hagel and Brown are urging their readersbusiness leaders, policymakers, and career-bending individualsto become more group-savvy, and to learn the processes and technologies that the smartest of their peers have mastered.
The Only Sustainable Edge may disappoint readers hooked on the easy, cheery style of feel-good business books. Still, I expect this title to become a hit in the business community as readers begin to see it as the intellectual foundation for the future of global commerce.
Here's an edited transcript of Gelf's email interview with the authors:
Gelf Magazine: Who is your audience for this book? Who should read it, who should care?
Hagel: Our primary audience is business executives of companies of all sizes around the world. They are on the front line of understanding how to compete and to collaborate in a rapidly globalizing economy. More broadly, our audience includes decision-makers of any institution, including governments, educational institutions and various kinds of nongovernmental institutions, seeking to amplify their impact on a global stage. Even more broadly, we believe our book speaks to anyone concerned about the implications of globalization.
GM: What led to this collaboration?
Hagel: While we both have very different experiences and skill sets, we value and respect each other's perspectives and find that we learn faster when we engage on challenging topics together. Esther Dyson has commented that we embody the concept of "productive friction" in our collaboration.
GM: One of the most striking features of your book is its styleshorter and dryer than other things you have written. Was this deliberate?
Brown: Perhaps. It is a complex message, a message that at first goes against so much of the strategic orthodoxy and current wisdom. Thus the need to "see clearly" and say what we see in as plain and compelling way as possible.
Hagel: We targeted our message to pragmatic and busy readers who are looking for help in understanding their environment and crafting appropriate actionsif it can be said quickly and dryly, that is, from their perspective, an advantage.
GM: You make a powerful case for global outsourcing. Has there been any negative feedback from early readers?
Hagel: We typically encounter resistance from two kinds of readers. First, we get criticism from those who focus exclusively on the near-term employment disruptions caused by global outsourcing. As Brown suggests, though, we are focused on processes that will help employees, as well as companies, to get better faster. That means we are focused on processes that unfold over time rather than snapshots of conditions at any single point of time. The second source of criticism is from executives who are largely in denial about the longer-term consequences of global outsourcing. They are generally complacent about the need for change and consider us to be "alarmists." They don't yet see the need for fundamental changes in the way they operate.
Brown: Yes we make a powerful case for global outsourcing but we make an even bigger case for transforming process networks into distributed sources of innovation and talent development. To us, the game is one of how to accelerate capability-buildingboth yours and your partners. The key is how you build distinctive capability faster than your competitor. Thinking this through requires a serious revamping of the normal corporate mindset.
GM: Several companies featured in your book appear to be very collaboration-savvy. How did they get that way without the benefit of instruction from books like yours?
Brown: Note that we talk a great deal about bootstrappinglearning from and with each other. Thus, it is not surprising that the companies that have originated some of these practices didn't need us. Most of these companies haven't thought that much about what they could now do with the new IT architectures such as service-oriented architectures complimented by social software. Indeed, there are virtually no companies that have thought this one through very well.
Hagel: Many of the companies we discuss developed collaborative practices when they were still very small. In this case, collaboration is much more of a necessityexecutives are painfully aware of how limited their own resources are and much more alert to opportunities to leverage the resources of others. As Brown indicates, this is a key attribute of bootstrapping. As companies get larger, it is easier for the "not invented here" syndrome and other pathologies to take hold. It is also not accidental that many of the companies we feature are in Asia where social relationships are a much more central feature of their business culture. So, large and successful companies in the U.S. are especially challenged in moving to more collaborative practices.
GM: For us, the most interesting chapter of your book was the lastthe one about strategy. Seems like this could be the subject of an entire book. Any plans in that direction?
Hagel: The FAST strategy approach, highlighting four management imperatives (Focus, Accelerate, Strengthen and Tie Together), is a powerful tool for making sense of rapidly changing environments and for moving forward in these environments. It is useful for all kinds of institutions, not just business enterprises. By focusing on two very different time horizons (5-10 years and 6-12 months), it provides a powerful learning tool that can help leadership teams to learn quickly about a rapidly changing environment and about the actions required to have impact in these environments. We will definitely be writing more about this.
GM: What is the biggest challenge facing American companies today?
Hagel: The biggest challenge facing American (and all other) companies today is how to innovate more rapidly when customers are becoming more powerful and when competition for the attention of customers is intensifying on all fronts. For the past couple of decades, the primary focus of competition has been on increasing efficiency by cutting costs. That strategy yields diminishing returns. To continue to create value, companies are going to have find ways to get better faster. The most powerful way to do this is by working more closely with other world-class companiesthe management techniques of dynamic specialization, loosely coupled process management and productive friction that we describe in our book are key to addressing this challenge.
Brown: We are also addressing some of the biggest challenges of America, not just American companies today. And on the business front, this book could be of equal interest to companies in India and China. After all we are trying to lay out the landscape of business architectures for the 21st century.
Giovanni Rodriguez is an executive vice president at Eastwick Communications, a Silicon Valley PR agency, and an occasional contributor to Gelf Magazine. He advises technology companies on media relations, executive leadership, and collaboration. You can read his opinions on the Eastwick group blog and at thegoodseed.
Related on the Web
•Hagel and Brown's collaborative website.
•Edge Perspectives is John Hagel's blog about globalization and business.
•A Q&A with Hagel and Brown from the Harvard Business School.