Innovation

The pancake principle

Written by Jeff Dennis

If you’re going to tackle only one book over the holidays, then make sure it’s The World is Flat: A Brief History of the Twenty-First Century by Thomas L. Friedman, a Pulitzer Prize winner and foreign-affairs reporter for The New York Times. The book’s premise is that technology and free trade have lowered barriers to business among countries, making the global economy interconnected and fully integrated. The result is that it’s possible for small (and not so small) businesses from places like China and India to compete with North American businesses, even in our own backyard. Friedman warns that companies in these locales enjoy the advantage of low-cost labour coupled with highly trained engineers, and urges North American business to respond now or risk relegation to the sidelines of the global economy. (Depending on the study you believe, India and China are collectively producing between five and 14 times more engineers each year than we are in North America.)

But Friedman tells only half the story. Driving these foreign businesses are entrepreneurs who are as smart and knowledgeable of North American markets as we are — and they just might be better financed.

Shortly after my own book, Lessons from the Edge, was published in 2003, I had the good fortune to be invited to speak to Entrepreneurs’ Organization (EO) chapters in a number of Asian countries. Over three weeks, I spoke to EO chapters in Katmandu, Delhi, Mumbai, Bangalore, Kuala Lumpur and Bangkok. During this fascinating trip, I learned not only about these beautiful countries, but also about the state of entrepreneurship around the world. And I also saw the offshoring trend developing, first-hand.

When I visited Mumbai, I met a radiologist whose business interprets X-rays and ultrasounds for U.S. doctors and their patients. An American doctor would send the scans over the Internet to India, where Western-trained radiologists would read the scans, prepare a report and send the results back over the Internet. By the time the American doctor arrived at work the next morning, he would have the results in his e-mail — and the bill would amount to much less than a domestic radiologist would charge. The Indian doctor’s biggest challenge was finding enough qualified doctors to keep up with the demand. In fact, knowing about the limits on what Ontario radiologists earn in our public health-care system, he asked me whether I knew any doctors who’d work for him.

Perhaps the most interesting stop was in Bangalore, the outsourcing capital of India, if not the world. There, I toured an EO member’s business-process outsourcing operation, at which well-educated Indian workers collected on NSF cheques for a large U.S. grocer, transcribed dictation by American doctors and managed documents for large law firms, at significantly lower cost than their North American counterparts. The company’s owner spends much of his time commuting among India, the U.S. and Europe, drumming up more business while North American workers and politicians complain about the loss of jobs.

Before my trip, I’d been advised that entrepreneurs from these countries are very different from North American entrepreneurs. Yes, there are cultural and religious differences. But from a purely business standpoint, I found few differences — none of which guarantee we’ll win the battle for our own backyard. Many of the business owners I met had been educated at top universities in North America or Europe, then cut their teeth by working in London or New York. They were also very well financed. Because the middle class has yet to fully develop in emerging Asian economies, most entrepreneurs there are the children of very wealthy parents, including some of the richest people in the world. These entrepreneurs are true citizens of the world. They know us way better than we know them. And they have lots of capital to boot. Scary, huh?

So, what’s a Canadian entrepreneur to do? Don’t take it lying down. Read Friedman’s book for some immediate perspective, then get on a plane to China or India and see the competition for yourself. My best advice for the longer term would be not to fight Asia’s überpreneurs head-on, but rather to embrace the change and use technology to link up with the rest of the world. And as Jim Collins advises in Good to Great, figure out what your “hedgehog” is; that is, focus on what you can be the best in the world at and outsource everything else. So, if you own a call-centre business, you might want to stick to marketing and sales and find an Indian partner or supplier to whom you can outsource the call-centre service itself. Your value-add will be in developing programs that target your customers’ needs rather than being the lowest-cost (and, potentially, the lowest-margin) provider.

Just because the world is flat doesn’t mean you have to be flattened. And if worse comes to worst, at least make sure you can say you took it standing up.

Originally appeared on PROFITguide.com