The many pathways to globalization

    "Merchants have no country.  The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains."
                                Thomas Jefferson

If one looks to the globalization of the corporate world as giving hints as to possible futures of higher education (I am certainly one of those), then How We Compete: What Companies Around The World Are Doing To Make It In Today’s Global Economy by Suzanne Berger is not to be missed. Professor Berger and her colleagues at the MIT Industrial Performance Center set out to study how individual corporations are actually responding to the pressures of globalization.   Over a five year period, they conducted interviews at over 500 companies of varying size worldwide.  They focused on sectors where underlying technologies are rapidly and on those where the underlying technologies are slowly changing. In the former, they looked at electronics and software, and in the latter, auto and auto parts and textile and apparel.  Their goal was to let data, rather than theory, drive conclusions about the impacts of globalization on corporations.  That is to say, this book is neither impressionistic nor evangelical, as are many of the other books looking at the effects of globalization, but rather is data driven.

Many contend that the forces of globalization are so huge and monolithic that all corporations will be forced to respond in a more-or-less uniform fashion. The results of this study argue strongly against that view. Indeed, the research team found an enormous divergence of strategies being used - apparently successfully - to respond to globalization. Over and over, they found multiple corporations in the same industry and generally the same geographic location using radically different routes to success. While they don’t claim to show that this divergence will be maintained into the future, they find no evidence that suggests that it cannot.

Berger describes one of the major changes of the past twenty years in many industries as being a “modularization” of production from R&D through after-sales services.  The explosion in new digital technologies then opened up a vast array of new ways in which the various modules of production can be carried out. Managers now can look the world over for the best solutions (in terms of e.g. quality, cost, convenience) for producing each module in the production chain. Thus each company is faced with a very rich set of options regarding production of their product.  In fact, according to Berger, the technological and organizational changes that have enabled modularization have contributed to a multiplication of successful models.

As Berger points out, defining “success” or “best approach” in this fast evolving world is quite tricky, since companies that are booming today may literally be out of business next year. However, based on what the team learned, they believe that, “How well the firm mobilizes and reorganizes its legacy in an open economy is what we believe will separate the winners and the losers.” (p.45)  The company’s legacy “– the resources it inherits from its previous experiences – is the product of having grown up in a particular country at a particular point in history. And these resources are also shaped by the unique story of each company as it has defined its goals and overcome hurdles over it lifetime.” (p. 239) The legacy is, of course, not a static resource. Each day, the firm is shaping the legacy it will need to call on in the future. 

Despite the lack of a “silver bullet” that defines how a company should decide about outsourcing and offshoring, Berger does suggest an approach that should be followed in thinking about strategies to be used. First, the company needs to fully understand its legacy and the competitive advantages that it provides. Then, the firm needs to look closely at each module in its production cycle, and decide whether it can produce that module in-house in a way that can be favorably tested against best-in-class competitors.  If not, it should question seriously whether the module should be outsourced. The book gives many examples of considerations that might be important in that evaluation. Berger does feel, however, that there is benefit to keeping a wide range of functions in-house, as this helps a company to advance swiftly into new areas as new opportunities are identified. In particular, she feels that there is a case to be made that most American firms need to keep more functions in-house than they currently do in order to remain competitive in the future. She also believes that companies must invest in “excess capacity” in many domains in order to be able to move rapidly in the future into areas now on the margins of current operations.

As opposed to many writers, Berger does find that national government matters in forming the evolving legacy of a company even in this era of globalization. In particular, only government can implement policies to sustain openness, to improve education, and to support innovation across the economy. Berger finds these three areas to be critical for ongoing renewal of the legacy. In this, and in her description of how different countries are handling these areas, there are many parallels with the work of Bobbitt (post Welcome to the Market State, 2/20/06). 

Berger describes a number of areas in which she fears that the US is not implementing appropriate policies. She believes that policies are needed to cushion the individual’s risk due to changes that occur with the rise and fall of companies and the emergence of new activity. She finds that there is a serious neglect of lifetime learning for broad classes of people, leading to skill levels that are often not sufficient to provide reason to keep activities in the US. She also finds that “Fragmentation of production seems to discourage wide-ranging research by any one company, with no compensating mechanism kicking in to build public support for the activities that firms are shedding.” (p.294)

So what do I carry away from this? First, some comfort that even in the corporate world, globalization is not forcing a single model. The higher education world, with its wide variations in approach, hopefully will be even more able to resist being pushed into a single model by the forces of globalization. This hope also is supported by a relatively recent report by Daniel C. Levy looking at the very wide range of diversity in the rapidly growing global private higher education sector. Second, understanding the legacy of an institution in all its dimensions and being able to build on that legacy is likely to be critical in moving that institution forward in increasingly more challenging times. Third, seeking excellence on a comparative basis (against best in class) is critical as we evolve and shape our missions in the future. And finally, two of the areas Berger notes as potentially causing difficulties for the US in the future are things we in higher education know something about and can contribute to – lifelong learning, and research that will enable the creation of future products. Understanding what we as institutions of higher education can do to begin to fill in the types of gaps Berger identifies will not be easy, but her concerns deserve our attention.