Avoiding globalisation traps

M.S. Krishnan, a professor at the University of Michigan Business School, has studied globalisation for many years and consults for a wide range of multinational businesses.

Q: What's causing businesses to fall into the "globalization trap"?
A: Three things would lead to companies falling into a trap. First, some companies look at globalization as cost minimization—as a timely objective for going global. That may not be sustainable over time. The second thing is that some companies look at globalisation for access to resources, not access to markets. There's a subtle linkage between the two, and companies that play the two together well will succeed.
The last thing is the right kind of attention or focus to mix the different cultures. A lot of times, companies try to start a captive or third-party unit in another country, and there's an arm's-length relationship with that unit in the United States. You have to be more proactive in training employees and management in the West to understand the culture in the East.

Q: What should companies and CIOs do to avoid these pitfalls?
A: Go beyond the cost issue. Also, we're already seeing some companies empowering employees in the outsourced geography to be innovative. Cost is the first step, but then automatically, quality will follow. That will then lead to innovation. There are already 3,000 to 4,000 software companies in India, and many are doing [outsourcing] the right way ... as a steppingstone to compete better in these markets. They get the full perspective of what the company and the culture are all about.

Q: What's going on from a geopolitical standpoint that might be causing obstacles to global growth?
A: Restrictions in US immigration laws still exist. I see the point of protecting US jobs, but the assumption is that if you regulate visas of high-tech workers, you'll create jobs internally. The reality is that in the short term, it may not do this. If you don't have those people, the positions will be left unfilled and companies will have no choice but to move those jobs outside the country. At the same time, if you want to keep innovation here, then the regulations on the entry of high-tech workers have to be looked into. The second issue I see is security and privacy. We have to be much more proactive in raising these concerns. And protection of intellectual property will continue to be a huge issue.

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