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Thu 7 Aug 2008 04:00 AM

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The rise of the global commons

The dismantling of trade barriers and waning of economic nationalism has seen the emergence of a global commons.

Over the past two decades, thanks to the dismantling of trade barriers and the waning of economic nationalism - we have seen the emergence of a global commons.

Some call it the "flat world," though we would all agree that it contains plenty of spikes and rolling hills.

But the key point is that it is truly global. The question is: who wins and loses on that playing field? In the early years of this shift, it was about low cost. But now, low cost is running its course.

Simply setting up a subsidiary in a high-growth market? Running its course. Relying on the belief that "a rising tide lifts all boats"? Running its course, too. In other words, there are no longer any shortcuts. Now comes the hard part.

Companies are making hard choices in order to optimise innovation.

What should leaders of companies and countries do? I believe there are four steps we can take to step up to this new challenge.

First, more enlightened and strategic thinkers are deciding how they're going to differentiate themselves, in order to get the world to invest in them, to buy from them, to hire them. Increasingly, success comes down to one word: innovation. Companies - and countries - are making hard choices in order to optimise themselves for innovation.

Second, the developed world must get its financial house in order. We may still be holding the strongest hand, but we are in a highly vulnerable position. Our economies have large deficits, with major dependences. And our demographics - namely, our aging populations - only exacerbate those tendencies.

We need to do what the developing world has done - engage with the global economy in order to recapitalise our countries and regions.

Third, we need to recognise that a global economy is not just an opportunity for large enterprises. Today, small businesses can be global players, too. Local entrepreneurs can reach the new middle classes that are arising around the world - hundreds of millions of people who are opening their first bank accounts, getting their first cell phones, using their first credit cards; tens of millions who are buying their first automobiles.

This is important, because, as we know, small businesses and entrepreneurs are the engines of job creation.

The fourth challenge is the toughest of all: winning hearts and minds. Not primarily of the CEOs and heads of state - they are not the problem. It's the other management layers, the people who make decisions at the regional and agency levels - and especially the public at large: communities, individuals and populations that do not yet see themselves as the beneficiaries of global integration.

To do that, we will need fact-based, reasonable, multilateral approaches. And one other thing: we must recognise that the opposition to global integration really does have a point, when it comes to the environmental, economic and societal impacts of globalisation; to job creation, education and skills; to access to connectivity and other resources; and to the inherently global problems of crippling energy costs, unsafe drinking water and pandemic-scale disease.

We may differ on the best solutions to these problems, but we can't keep arguing against a caricature of the anti-globalisation position. We can't just keep saying, "Free trade! Free trade!" and think that will carry the day. We can't rely on arguments from 1990 - or, for that matter, 1890.

The problems and the solutions of the global commons, the flattening world, by their very nature cross those old boundaries. We must, too. Over the past few years, a "third way" has emerged. It's often called "soft power" or, more recently, "smart power".

My own company, IBM, was once the paradigm of a business "superpower". We dominated our industry. But such dominance is always fleeting, and ours fled. Yet, unlike most empires that fall, we didn't disappear. Instead, we asked very hard questions, made very hard decisions and reinvented ourselves, becoming far more open, far more collaborative and far less hierarchical

Sam Palmisano is CEO of IBM.

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Reid 12 years ago

Sam makes several wonderful points in this column. The world is changing rapidly. Companies like IBM, which Lenovo shares a unique heritage dating from its acquisition of the IBM PC division, understand the new Global 2.0 era we're entering is changing they way we work and do business. We call the business model Lenovo has created in response, "worldsourcing." It's the idea that the sun never sets on good ideas, and to compete and drive innovation in an increasingly global world, companies need to spread out and engage brilliant thinkers everywhere. That means sourcing materials and innovation wherever they are best available, whether working with programmers in Italy or assembly workers in Taiwan. It also means understanding and respecting cultural diversity. To truly grow and succeed in this new Global 2.0 world, change is good and diversity is even better.