The Impact of Digitization and Globalization

Scenario #1

A blue chip high school football player named George graduates from a high school in California, leaves his small community, and joins the football team at the University of Southern California. Unfortunately, he doesn't even make the travel team and only gets to sit on the bench during home games. George has four options:

Option #1: Fight the coaching staff at USC and say that it's unfair for him to have to compete with players from all over the country. He was a star in high school, and he should continue to be a star in college, especially since it's in his home state. Ultimately, he can quit trying to compete and spend the rest of his days bitter about the unknown competition he had to face during tryouts.

Option #2: He can work very hard over the summer, develop his skills and his strength and his speed, and compete again the next year for playing time.

Option #3: He can work at football during his college years, and take his experience back to his community after college graduation, and begin to coach high school players and give them a greater awareness of what they will have to do to be able to compete with the best players from anywhere.

Option #4: He can search for another activity in college that will allow him to invest his talents and passions in ways that help him to feel fulfilled in terms of making a difference and help to prepare him for other activities later in life.

Scenario #2

For the past four summers, you have paid a local kid named Tom $25 to cut your grass. One day a new kid in town named Anish offers to cut your grass for $1. You say that's impossible to do. He offers to do it once for free to demonstrate his skill level, and then says he will continue to do it for $1 each time after that. You give him a chance, and he does a great job. Now you have a choice. You can continue to pay Tom $25 for each time he cuts your grass, or you can pay Anish $1 each time.

Scenario #3

It's 1948 and Johnny Jones is a 40-year-old farmer who has worked on the farm all his life. His friend, Jimmy, says, "Johnny, it's time to sell the farm and get a job in a manufacturing plant." Johnny says, "Jimmy, I've worked on this farm all my life, I raise food that feeds my family, and I have enough left over to make a good living." Jimmy says, "Johnny, there are companies today that buy 20 farms, raise the crops at a fraction of your costs, and can sell the food at a price much lower than yours and still make more profit than you. You're not going to be able to compete with them on price, and you can get a job right now in a manufacturing plant where you can make enough money to buy food for your family and have enough left over to buy a house, a couple of cars, and send your kids on to college." Johnny doesn't know what to do: stay with the old "reliable" job or reach out and enter the Industrial Age.

Scenario #4

Two people are playing cards outside on a beautiful day. They have a bottle of wine and some snacks with them, and they are having a great time. However, the card table is over a set of railroad tracks. They know eventually a train is going to come and run over them, but since they can't see it coming and it's never run over them before, they aren't worried.

These four scenarios represent much of what is currently happening in the world's economy.

In many ways, Americans are like the blue chip high school football player. We're used to playing in our own community/country and being considered superstars. However, we now have to compete with India and China. A lot of people think that's unfair. I think we have a choice. We can complain about having to compete with people we didn't know were trying out for the same customers, we can work to improve our performance, we can work to develop the people in our community/country to compete on a new world scale, and/or we can search for new ways to add even greater value into the marketplace. For USC to be the best college football team in the country, they have to find the best players available, regardless of where they come from. Look at the San Antonio Spurs, the NBA champions. They had one starter from France and one starter from Argentina. They didn't say every player had to be from the U.S. They just said they had to put the best team on the court. The players can complain that it's not fair, but in sports and in business, the goal is to win the game, not exclude talent. Even though that sounds harsh, I don't think it is. I just think that's reality. Would you rather watch college football teams that consist entirely of players from their own state, or would you rather watch the highest level of college football possible?

In Scenario #2, you have a choice. You can continue to pay $25 or $1. Now you could argue that the new kid has a name you can't pronounce easily or that you should continue to pay Tom $25 because that's the only fair thing to do. If it was me, I would say, "Tom, since you've been loyal to me for all these summers, I'm going to pay you $25 a week for the next 20 weeks. I want you to stop cutting my grass right now, and I want you to take that $500 and the additional time you have now, and put it toward developing your skills to make money in a new way. You're not going to be able to compete with a person who cuts grass for $1, so you need to learn now how to make a living doing something else."

In Scenario #3, Johnny can continue to own his own farm, but he needs to realize that he will not be able to compete on price in the marketplace, and therefore he will only be feeding his own family. If you're job today consists primarily of using a phone, e-mail, and the internet, you need to realize that job can be done in India at a fraction of the cost of you doing it. So you can continue to do it, but realize your income will likely no longer be competitive in the marketplace and the work will be sent overseas. The same is true for manufacturing. If a clothes supplier can outsource the work of making clothes to a company in China and pass along the savings to customers in the American stores, then they will in many cases do that. If they don't, then the clothes will cost much more to the customer and ultimately the customer will stop buying clothes that cost more and are of the same quality as the cheaper clothes made in China. Again, you may be angry and think that is harsh, but it is reality.

In my opinion, the key to success in any economy is to first understand reality, and second to determine how to add value within that reality that will allow you to make a living. Unlike the card players in Scenario #4, I think we need to realize the train is on the tracks and is coming fast. Several card players have already been run over by this train, and we need to realize it's going to affect a huge number of Americans. Personally I think instead of complaining that it's unfair to have to compete with the whole world (except in the cases where the Chinese companies are using underage employees or brutal working conditions to drive the lower cost of doing business or more complicated scenarios involving unequal trade regulations) we should believe that this increased competition will ultimately help the American worker become even more of a value-adder. Like Johnny Jones we now have to consider where the economy is heading. If lower value-added work can be done overseas at much lower costs, then what is the higher value-added work that Americans can do for a higher salary? If Americans are being beaten out for jobs because doctors and engineers from India and China can deliver higher quality of work, then what do Americans need to do to develop themselves to deliver greater value?

I think employees, managers, and CEOs need to realize the train is coming fast, and everyone needs to step back and ask themselves the following questions and start to determine and act on their answers:

Questions for American Employees

My objective is that no one loses their income due to globalization. However, that doesn't mean every one will have their current job. I believe we need to prepare ourselves to do new types of work in order to generate our current income or better. Here are some questions that I think will help in determining where to go from here with your career:

If someone else can do your current job at a fraction of your cost, then what will you need to do to add greater value into the marketplace and be paid as much or more than what you're being paid right now? Can you do that new higher value-added activity at your current organization? If not, is there an organization where you can do that higher value-added activity? If not, can you start your own business to deliver that type of value?

Questions for Managers of Business Units in America

What skills do your employees need to develop as the economy moves from the Information Age to the Creativity Age? How can you help them develop those skills? Even though a manager can ship work overseas and thus help their company make more money, I think they will ruin their potential for much greater long-term success if they simply let their current employees fall into the unemployment lines. Understand that the train known as digitization and globalization is on the way, embrace the idea that increased competition always leads to greater performance and higher value-added activities, and focus some of your efforts on making sure your current employees are preparing themselves to compete in the new world economy.

Questions for CEOs of American Companies

This is a delicate time. Another inflection point is upon you. We have moved from the Agricultural Age to the Industrial Age to the Information Age to the Unknown Age. One recent article in BusinessWeek described the next era as the Creativity Age. As always, your key job is to create a customer, as Peter Drucker first wrote about more than 50 years ago. Customers want greater value at lower prices served as quickly as possible with as much variety and flexibility as possible. However, if you simply deliver value to customers and ruin the careers of American employees over and over again, then who exactly are those customers going to be? I encourage you to answer the same questions I mentioned for managers at American companies: What can your employees do to add greater value and compete successfully in the current economy? What skills do they need in order to add that type of value? How can you help them develop those skills? I'm not suggesting to CEOs that they should help save American jobs out of the kindness of their hearts. However, I am suggesting that CEOs of American companies should invest in developing employees to succeed in the new economic age for one very common sense reason: you need customers who can purchase the products/services sold by the corporations. Ultimately no American wins, not the corporations and not the citizens, if American jobs are sent oversees and Americans are sent into unemployment because they don't have a clue how to generate greater value in the world-wide economy.

This is a more complicated time than in the 1940s in some respects. In those days, an American could leave the farm and go to work at a manufacturing plant. Today, if an American's job in the digital world is removed and sent overseas along with several million other jobs from the digital world, the American may not have a clear answer as to what to do next. Therefore, the search to do something in order to replace the current income can go on for a very long time. If a person doesn't know what she is looking for, she will have a very hard time finding it.

I believe the answer to that search must answer the following question:

Based on my skills, passions, knowledge and experiences, what value can I create to help other people achieve what they want or what they need, and be paid what I consider to be a reasonable amount of money for delivering? After you develop your answer to that question, then determine where you can work, either for an established organization or for yourself, to deliver that value.

Searching for answers to this question will take some time, but I think it's time and energy that is a far better investment than waiting for the government to intervene and make the world "fair" again.

Peter Drucker told us 40 years ago that the Knowledge Worker would be the dominant player in the world's economy. I think today the Creative Worker will be the dominant player. The Creative Worker is the person who can step off the train, identify what will constitute greater value in the marketplace, determine how to deliver that greater value, find the means to deliver that value, and deliver the goods. I encourage all of us to get on with the job of being a Creative Worker, and not wait for the train to run over us.

(Recommended Resource: The World Is Flat by Thomas Friedman.)

New White Paper – Accelerate Your Strengths

On June 16th I gave a half-day seminar on “Accelerate Your Strengths: practical ideas to boost business momentum” for GE Capital. It was such an interesting project that I wrote a white paper for the group after the seminar based on what we talked about. In turn, that white paper was forwarded on to 7,000 GE employees. Consequently, I thought you might like to read the paper, except this version has all the references to GE taken out. Here is the link for the

Accelerate Your Strengths white paper: http://thecoughlincompany.com/accellerate_your_strengths.html

New Book, Find a Way to Win: Management Insights from Terry Michler, America's All-Time Winningest Soccer Coach

This book focuses on business lessons that can be learned from soccer. The foundation of the book is how Terry Michler used the powerful simplicity of Dutch soccer to win more games than any other U.S. coach in history.

On July 11th, the finals of the 2010 World Cup in South Africa between Holland and Spain was watched by more than 700 million people. While I was cheering for Holland at the beginning of the game, a major decision by their coach led me to learning a valuable lesson all over again.

Dutch soccer, which is highlighted in my book, is all based on extraordinary technical skill, efficiency, and precise attacking soccer. This is how a country with only 16 million people competes so extraordinarily well with the world's super powers in soccer including number-one ranked Brazil, whom they beat in the quarterfinals. However, in the World Cup finals Holland abandoned what made them great and instead focused on playing brutal, violent soccer. They wanted to intimidate Spain, and in the end they lost the game and the respect of so many people who love Dutch soccer. What happened and why did they do it?

They felt they couldn't compete with Spain if they allowed them to get into their normal passing game. So they consciously decided to physically attack the Spanish players with violent tackles all over the field. One Dutch player even shoved his metal cleats into the chest of a Spanish player. They received numerous yellow cards, a red card, and ridicule from the world-wide soccer press after the game.

What's the lesson to learn here for every business? Stay true to who you are. When the prize is close don't abandon what got you to be one of the best organizations in your industry. Too many companies in the past ten years have decided that what made them very, very good wasn't going to be enough to make them number one in their industry, and so they got away from their strengths. Big mistake.

I believe Holland will return to their traditional style of play, focus on precise, skillful, attacking soccer, and get away from their violent style of play. I think they learned a huge lesson. And hopefully every business that got away from its core strength in the pursuit of being bigger and more successful financially than anyone else in the industry will also return to its core and get back to winning again.

You can learn more about Find a Way to Win at http://thecoughlincompany.com/book_store.html

Republishing Articles

Each month my e-newsletter gets republished in approximately 20 blogs, on-line publications, and internal publications for businesses, universities, and not-for-profit organizations. If you would like to republish all or part of my monthly articles, please send me an e-mail at dan@thecoughlincompany.com with "Republishing Article" in the subject heading. I will send you the article in a word document. All I ask is that you include my name as the author of the article and a short paragraph at the end of the article about me with a link to my website.

Take care and have a great month!

Dan Coughlin

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