What’s common between Ford’s Model T and India’s IT service companies?

US - Henry Ford's 1908 Model T—the first mass-produced and affordable car—sparked the growth of highways, suburbs, and the middle class. Ripples from the Model T were enormous. With the cars came a nation that traveled more than ever before, that moved away from home that built an elaborate road system. The Model T also ended up spurring the growth of America's middle class. Since assembly line work was so tedious, Ford found it impossible to keep workers. So he boosted wages to at least $5 a day--significantly higher than what other manufacturing workers were making at the time.

India - IT services, outsourced by US companies, triggers development. The proliferation of IT and BPO companies empowered thousands of youngsters with substantial amount of disposable income. The burgeoning IT services industry simultaneous improved complementary sectors like travel and transport, real-estate, catering etc. With demand for job-ready technical professionals outstripping supply, wages of Indian IT professionals goes up significantly. It's hard to find any other piece of technology that had a greater impact than Model T Fords did in the 20th century. In their own way, they helped promote the growth of suburbs, distant shopping centers, freeways. It's hard to imagine now how they changed people's lives. It's quite common to hear parents of software engineers in India state something similar.

The Model T, which had only been made in black (suited for a speedy assembly line) since 1914, was eventually offered in other colors, but it was too late. In 1927, Ford stopped producing them. Late 2007 witnessed watershed events in IT outsourcing with US subprime. Continued focus and reliance on US companies for outsourcing projects has dented IT companies in India with several layoffs and conservative forecast of revenue guidance.

Ford may have dreamed up the first car for the masses, but he didn't realize that he had also created a new, more demanding consumer who would soon be searching for the next model and the newest look. Ford's biggest competitors, General Motors and Chrysler, adapted his revolutionary production methods, but they went a step further and began offering new styles, colors, and features. American companies like Accenture, IBM, HP etc are replicating India's outsourcing model but at a scale that's beyond cost arbitrage and relying more on intellectual arbitrage being leveraged across the world.

The Bridge that connects globalization and localization

The IT-led globalization, which has been propelling India's growth, has certainly taken a beating owing to recession in US. Did we see it coming? Of course we did. How do we get out of the rut then? Well, before we actually delve into possible solutions for future course, let's see how we benefited from the onset of IT-led globalization? At the outset, the low-wage workers entered the global economy -- initially through their involvement in export production and eventually evolving as a new class of consumers.  Secondly, the proposition benefited rich nations of the developed world -- where consumers expanded their standard of living by buying low-cost, high-quality goods from poor countries and where workers were to gain from being involved in the production of more sophisticated products exported to increasingly prosperous developing economies. 

The first benefit is hard to dispute. India's standard of living, for example, has more than doubled during the past 15 years. The problem is with the second benefit. A sense of economic insecurity is creeping rapidly up the occupational hierarchy -- from software programmers and engineers to medical and legal professionals -- a palpable sense of shock is spreading rapidly into the knowledge-worker occupations that have long been shielded from economic adversity. This loss of confidence in the second benefit of globalization has led countries to swing from the theoretical promises of globalization to the self-interest of individual countries -- in essence, "localization."

What India is witnessing today is perhaps a result of the onslaught of localization. Wages could go up and corporate profits could come under pressure.  Moreover, localization could also spell heightened risks of protectionism -- especially if the global economy slows and unemployment starts to rise. In this scenario, localization could ultimately give rise to accelerating inflation, higher interest rates, greater volatility in financial market etc.  And, of course, the protectionist ramifications of localization could prove equally challenging for the beneficiaries of globalization's first win -- dynamic new companies in the developing world and the employment growth they generate.

No wonder then that we see companies making local announcements on the lines of investing in India for India. With a huge population of youth, India is a promising market and global companies don't want India to slip into a protectionist mode. Consider this, Generic Electric announced its focus on localized medical equipment for India; Philips stressed on localized products for India; IBM said it will lower center of gravity in India. An increasing number of companies are focusing on responding to local needs, languages and cultures to deliver variety of high quality goods and services, thus offering consumers more choices and better quality. For these companies, localization is not an option, it is an imperative. An examination of the revenues of just 2006 Global Fortune 500 companies that is known to be actively localizing their products or services yields annual total revenues of approximately $5.9 trillion (with profits of $365 billion).

Huh! So, what is in store for us? For starters, the phenomenon opens a window of opportunity for India as a country. As a leading CEO of a global PR consultancy puts it, transnationals need to make their brands relevant in ways that are faithful to the core attributes of the brand, yet flexible enough to accommodate diverse trading patterns, differing consumer tastes and behavior, and a variety of businesses, media and political cultures. The real challenge for PR is to help organizations bridge that which is global and that which is local. Unfortunately, there is no magic template for doing this. What there is, instead, is a steadily growing body of wisdom that comes from doing it, day in and day out, in numerous markets around the world.

People like us have been involved in doing such things day in and day out and the potential for us is enormous. Let's work towards building more bridges…

Digitization and globalization

When I see the world from a technology perspective - am tempted to ask - is globalization a result of digitization? Well, that's not really what I would want to write about though as am sure several management luminaries would have shed enough light on the same. Not many organizations have an innovation DNA and not many of us have the adaptability DNA. And, this has become an imperative in today's digitized, globalized world. An increasing number of organizations are focusing on faster-innovation-to-market so as to generate competitive advantage. And, as these organizations propel themselves forward, employees unable to adapt to the changing landscape are left behind. What's also true is that in most cases it's the key resources that would be left behind leading to what management experts call reverse salient. It's upon the employees and more importantly the organizations to seamlessly move together. If any one fails, the growth of the organization would be at the expense of losing key resources that provide ammunition at regular intervals – like a rocket launch.