Authors: Thomas L. Friedman
Dom: (At his desk) Hey, I need that chart. Ted: (At the bizhub) I'm e-mailing it now.
Dom: You're e-mailing from the copy machine?
Ted: No, I'm e-mailing from bizhub.
Dom: Bizhub? Wait, did you make my copies yet?
Ted: Right after I scan this.
Dom: You're scanning at an e-mail machine?
Ted: E-mail machine? I'm at the bizhub machine.
Dom: (Bewildered) Copying?
Ted: (Trying to be patient) E-mailing, then scanning, then copying.
Dom: (Long pause) Bizhub?
VO: (Over an animated graphic of bizhub illustrating its multiple functions) Amazing versatility and affordable color. That's bizhub, from Konica Minolta.
(Cut to Dom alone at the bizhub machine, trying to see if it will also dispense coffee into his mug.)
Southwest was able to offer its at-home ticketing, and Konica Minolta could offer bizhub, because of what I call the triple convergence. What are the components of this triple convergence? The short answer is this: First, right around the year 2000, all ten of the flatteners discussed in the previous chapter started to converge and work together in ways that created a new, flatter, global playing field. As this new playing field became established, both businesses and individuals began to adopt new habits, skills, and processes to get the most out of it. They moved from largely vertical means of creating value to more horizontal ones. The merger of this new playing field for doing business with the new ways of doing business was the second convergence, and it actually helped to flatten the world even further. Finally, just when all of this flattening was happening, a whole new group of people, several billion, in fact, walked out onto the playing field from China, India, and the former Soviet Empire. Thanks to the new flat world, and its new tools, some of them were quickly able to collaborate and compete directly with everyone else. This was the third convergence. Now let's look at each in detail.
Convergence I
All ten flatteners discussed in the previous chapter have been around, we know, since the 1990s, if not earlier. But they had to spread and take root and connect with one another to work their magic on the world. For instance, at some point around 2003, Southwest Airlines realized that there were enough PCs around, enough bandwidth, enough computer storage, enough Internet-comfortable customers, and enough software know-how for Southwest to create a work flow system that empowered its customers to download and print out their own boarding passes at home, as easily as downloading a piece of e-mail. Southwest could collaborate with its customers and they with Southwest in a new way. And somewhere around the same time, the work flow software and hardware converged in a way that enabled Konica Minolta to offer scanning, e-mailing, printing, faxing, and copying all from the same machine. This is the first convergence.
As Stanford University economist Paul Romer pointed out, economists have known for a long time that “there are goods that are complementary-whereby good A is a lot more valuable if you also have good B. It was good to have paper and then it was good to have pencils, and soon as you got more of one you got more of the other, and as you got a better quality of one and better quality of the other, your productivity improved. This is known as the simultaneous improvement of complementary goods.”
It is my contention that the opening of the Berlin Wall, Netscape, work flow, outsourcing, offshoring, open-sourcing, insourcing, supply-chaining, in-forming, and the steroids amplifying them all reinforced one another, like complementary goods. They just needed time to converge and start to work together in a complementary, mutually enhancing fashion. That tipping point arrived sometime around the year 2000.
The net result of this convergence was the creation of a global, Web-enabled playing field that allows for multiple forms of collaboration-the sharing of knowledge and work-in real time, without regard to geography, distance, or, in the near future, even language. No, not everyone has access yet to this platform, this playing field, but it is open today to more people in more places on more days in more ways than anything like it ever before in the history of the world. This is what I mean when I say the world has been flattened. It is the complementary convergence of the ten flatteners, creating this new global playing field for multiple forms of collaboration.
Convergence II
Great, you say, but why is it only in the past few years that we started to see in the United States the big surges in productivity that should be associated with such a technological leap? Answer: Because it always takes time for all the flanking technologies, and the business processes and habits needed to get the most out of them, to converge and create that next productivity breakthrough.
Introducing new technology alone is never enough. The big spurts in productivity come when a new technology is combined with new ways of doing business. Wal-Mart got big productivity boosts when it combined big box stores-where people could buy soap supplies for six months-with new, horizontal supply-chain management systems that allowed Wal-Mart instantly to connect what a consumer took off the shelf from a Wal-Mart in Kansas City with what a Wal-Mart supplier in coastal China would produce.
When computers were first introduced into offices, everyone expected a big boost in productivity. But that did not happen right away, and it sparked both disappointment and a little confusion. The noted economist Robert Solow quipped that computers are everywhere- except “in the productivity statistics.”
In a pathbreaking 1989 essay, “Computer and Dynamo: The Modern Productivity Paradox in a Not-Too Distant Mirror,” the economic historian Paul A. David explained such a lag by pointing to a historical precedent. He noted that while the lightbulb was invented in 1879, it took several decades for electrification to kick in and have a big economic and productivity impact. Why? Because it was not enough just to install electric motors and scrap the old technology-steam engines. The whole way of doing manufacturing had to be reconfigured. In the case of electricity, David pointed out, the key breakthrough was in how buildings, and assembly lines, were redesigned and managed. Factories in the steam age tended to be heavy, costly multistory buildings designed to brace the weighty belts and other big transmission devices needed to drive steam-powered systems. Once small, powerful electric motors were introduced, everyone hoped for a quick productivity boost. It took time, though. To get all the savings, you needed to redesign enough buildings. You needed to have long, low, cheaper-to-build single-story factories, with small electric motors powering machines of all sizes. Only when there was a critical mass of experienced factory architects and electrical engineers and managers, who understood the complementarities among the electric motor, the redesign of the factory, and the redesign of the production line, did electrification really deliver the productivity breakthrough in manufacturing, David wrote.
The same thing is happening today with the flattening of the world. Many of the ten flatteners have been around for years. But for the full flattening effects to be felt, we needed not only the ten flatteners to converge but also something else. We needed the emergence of a large cadre of managers, innovators, business consultants, business schools, designers, IT specialists, CEOs, and workers to get comfortable with, and develop, the sorts of horizontal collaboration and value-creation processes and habits that could take advantage of this new, flatter playing field. In short, the convergence of the ten flatteners begat the convergence of a set of business practices and skills that would get the most out of the flat world. And then the two began to mutually reinforce each other.
“When people asked, 'Why didn't the IT revolution lead to more productivity right away?' it was because you needed more than just new computers,” said Romer. “You needed new business processes and new types of skills to go with them. The new way of doing things makes the information technologies more valuable, and the new and better information technologies make the new ways of doing things more possible.”
Globalization 2.0 was really the era of mainframe computing, which was very vertical-command-and-control oriented, with companies and their individual departments tending to be organized in vertical silos. Globalization 3.0, which is built around the convergence of the ten flatteners, and particularly the combination of the PC, the microprocessor, the Internet, and fiber optics, flipped the playing field from largely top-down to more side to side. And this naturally fostered and demanded new business practices, which were less about command and control and more about connecting and collaborating horizontally.
“We have gone from a vertical chain of command for value creation to a much more horizontal chain of command for value creation,” explained Carly Fiorina. Innovations in companies like HP, she said, now come more and more often from horizontal collaboration among different departments and teams spread all across the globe. For instance, HP, Cisco, and Nokia recently collaborated on the development of a camera/ cell phone that beams its digitized pictures to an HP printer, which quickly prints them out. Each company had developed a very sophisticated technological specialty, but it could add value only when its specialty was horizontally combined with the specialties of the other two companies.
“How you collaborate horizontally and manage horizontally requires a totally different set of skills” from traditional top-down approaches, Fiorina added.
Let me offer just a few examples. In the past five years, HP has gone from a company that had eighty-seven different supply chains-each managed vertically and independently, with its own hierarchy of managers and back-office support-to a company with just five supply chains that manage $50 billion in business, and where functions like accounting, billing, and human resources are handled through a companywide system.
Southwest Airlines took advantage of the convergence of the ten flat-teners to create a system where its customers can download their boarding passes at home. But until I personally altered my ticket-buying habits and reengineered myself to collaborate horizontally with Southwest, this technological breakthrough didn't produce a productivity breakthrough for me or Southwest. What the bizhub commercial is about is the difference between the employee who understands the convergent technologies in the new bizhub machine (and how to get the most out of them) and the employee in the very same office who does not. Not until the latter changes his work habits will productivity in that fictional office go up, even though the office has this amazing new machine.
Finally, consider the example of WPP-the second-largest advertising-marketing-communications consortium in the world. WPP, which is based in England, did not exist as we now know it twenty years ago. It is a product of the consolidation of some of the biggest names in the business-from Young & Rubicam to Ogilvy & Mather to Hill & Knowlton. The alliance was put together to capture more and more of big clients' marketing needs, such as advertising, direct mail, media buying, and branding.
“For years the big challenge for WPP was how to get its own companies to collaborate,” said Allen Adamson, managing director of WPP's branding firm, Landor Associates. “Now, though, it is often no longer enough just to get the companies in WPP to work together per se. Increasingly, we find ourselves pulling together individuals from within each of these companies to form a customized collaborative team just for one client. The solution that will create value for that client did not exist in any one company or even in the traditional integration of the companies. It had to be much more specifically tailored. So we had to go down inside the whole group and pluck the individual who is the right ad person, to work with the right branding person, to work with the right media person for this particular client.”
When GE decided in 2003 to spin off its insurance businesses into a separate company, WPP assembled a customized team to handle everything from the naming of the new company-Genworth-all the way down to its first advertising campaign and direct-marketing program. “As a leader within this organization,” said Adamson, “what you have to do is figure out the value proposition that is needed for each client and then identify and assemble the individual talents within WPP's workforce that will in effect form a virtual company just for that client. In the case of GE, we even gave a name to the virtual collaborative team we formed: Klamath Communications.”
When the world went flat, WPP adapted itself to get the most out of itself. It changed its office architecture and practices, just like those companies that adjusted their steam-run factories to the electric motor. But WPP not only got rid of all its walls, it got rid of all its floors. It looked at all its employees from all its companies as a vast pool of individual specialists who could be assembled horizontally into collaborative teams, depending on the unique demands of any given project. And that team would then become a de facto new company with its own name.
It will take time for this new playing field and the new business practices to be fully aligned. It's a work in progress. But here's a little warning. It is happening much faster than you think, and it is happening globally.
Remember, this was a triple convergence!
Convergence III
How so? Just as we finished creating this new, more horizontal playing field, and companies and individuals primarily in the West started quickly adapting to it, 3 billion people who had been frozen out of the field suddenly found themselves liberated to plug and play with everybody else.
Save for a tiny minority, these 3 billion people had never been allowed to compete and collaborate before, because they lived in largely closed economies with very vertical, hierarchical political and economic structures. I am talking about the people of China, India, Russia, Eastern Europe, Latin America, and Central Asia. Their economies and political systems all opened up during the course of the 1990s, so that their people were increasingly free to join the free-market game. And when did these 3 billion people converge with the new playing field and the new processes? Right when the field was being flattened, right when millions of them could compete and collaborate more equally, more horizontally, and with cheaper and more readily available tools than ever before. Indeed, thanks to the flattening of the world, many of these new entrants didn't even have to leave home to participate. Thanks to the ten flatten-ers, the playing field came to them!