Global business beyond the disruption
The disruption of the last decade, including the washup from the Global Financial Crisis, a pandemic and military conflict have challenged globalisation. At the same time, navigating COVID-19 has meant dramatically accelerating the technology needed for business to collaborate across borders. It is up to all of us to use the latter to offset the former.
To enable business across borders we need commercial, political and personal alignment. The partnership, whether it is between airlines, or the supply of accounting services needs to make good commercial sense. The environment in which the relationship occurs should have a supportive regulatory and political environment. And relationships between individuals in leadership protects the partnership during inevitable turbulence.
If the commercial differentiation is weak, the other two enablers can compensate. Similarly, an unfavourable political environment can be compensated by a compelling commercial offer combined with strong relationships. And if there is a lack of connection between the decision makers, the commercial and political enablers can be a counterbalance.
Whether it is telecommunications or soft toys, simply having the right product and price is seldom sustainable long-term. Early traders forged new routes and sustained them by building trusted relationships letting them move goods and, just as importantly, ideas. From silk to spices and culture to currency, trade has always been about more than wealth, enabling much that we value in our lives today.
By the turn of the twentieth century, threats to global trade were well and truly emerging as a result of economic disruption and an era of free movement was ended with the first world war. It took many decades for a new enthusiasm for globalisation to emerge through the 1970s and beyond. Although today it may feel like we are at the end of another era, there are still many reasons to be optimistic.
The current wave of globalisation was started with courageous decisions by politicians to open markets and create free trade agreements. These incentives have often been combined with bilateral investments in infrastructure which in turn creates opportunities for businesses that lack personal relationships to combine their business offer with the support of the bilateral political relationship.
As global trade becomes more complex and political support less certain, interpersonal relationships have emerged as being more important than ever, particularly between the boards of companies seeking to do business. Despite learning to work virtually through the pandemic, including a worldwide move to virtual board meetings, there has barely been an increase in cross-border board membership. Now is the time to correct that oversight.
It is not only way that we collaborate that has been extended by virtual working technology, but also the way that organisations operate across borders that is set to change even further by the emergence of so-called “Web3” technologies. Although yet to be properly defined, Web3 brings together aspects of distributed and blockchain-based services with immersive navigation through forms of a metaverse (see Metaverse or multiverse).
While many see cryptocurrencies as a digital equivalent of traditional money and non-fungible tokens (NFTs) as a digital asset this is classic example of the metaphor-driven strategy trap oversimplifying the future of business. We can expect companies to move from billing for goods and services delivered to a world where the goods and services are inseparably integrated with the exchange of value. This could almost be a form of digital bartering!
Although these highly integrated relationships are complicated, the same three enablers of commercial, political and personal alignment apply. As with business today, if any of these three are weaker they can be supported by strengthening the other two.
However, understanding the strength of the commercial alignment is harder with agreements embedded in code rather than contracts. Governing and regulating business that is digitally distributed is going to be even more challenging that tracking today’s digital platforms. But, unlike the added complexity of Web3-enabled business for the first two enablers, personal alignment should become more easily achieved across vast distances and more easily measured much like social networks can be today.
Perhaps over the next couple of decades we will achieve a new globalisation enabled by these technologies. But, for this to happen, we need a mature approach to technology collaboration and to understand the role of regulators, professions and companies in optimising them for the future.
The sum of national digital regulation will not add up to a consistent global approach. The current political challenges mean that we don’t have the decade or more that standards could take to agree. The answer, it seems, is to encourage compelling implementations of cross-border business so that de facto standards emerge quickly.
Increasingly, the move to shorten supply chains and move to additive, advanced or automated manufacturing techniques means that the flow of intellectual property and services is more important than supporting the movement of physical goods and trade. As services and intellectual property become an ever larger part of global trade, it makes sense to focus there first.
Emerging approaches to global business are complex but the possibilities and benefits to everyone if they are done right are enormous. Far from bypassing governments and today’s business community, as some would advocate, we will do better to encourage both to invest in these innovations through the necessity of the challenging times in which we live.