I Knew the World Is Not Flat. Now, It's Proven

Management guru, Pankaj Ghemawat

Pankaj Ghemawat is an economist who is the Anselmo Rubiralta professor of Global Strategy at IESE Business School, Barcelona. In 1991, he became the youngest professor at Harvard Business School. Ghemawat’s books include Commitment, Games Businesses Play, Strategy and the Business Landscape, Redefining Global Strategy and, more recently, World 3.0.

Your stand on globalisation means that the belief that the world is flat is going against all available evidence. Now we see protectionist tendencies against foreign companies even in developed markets, which harped on globalisation in the first place. Where is this leading?
I am genuinely very worried about that. I have, of course, been against the exaggerations of people like Thomas Friedman, but current protectionist pressures can take us back from existing markets that Indian companies are in. Data in the US shows that even with a lakh of jobs created each month, it will take six years for the country to get to where it was in December 2007, in terms of jobs. In Europe, in a place like Spain it will take 10 years at today’s rates to be where they were in 2007. Today, even large companies like Microsoft or Intel are finding it difficult to say lets go to new territories where work can be done at a lower cost. That was not the case, say, a year ago.

How can Indian companies deal with the situation?
Well, I know for a fact, being an advisor with TCS, that they have somewhat ramped down on their onsite operations. Some other Indian companies, particularly in IT, have not helped matters by getting involved with, or having the perception of being involved with, visa fraud and all that. They need to spruce up their communication right away.

Communicating about the value they bring?
Yes, and avoid the goof-ups we have seen recently. You are fighting such protectionist tendencies and then you are caught doing stuff you should not be doing. That just makes it that much harder to say, ‘Hey, we are helping you’. This is the worst time to make mistakes in that respect. You should always have a good public opinion, particularly right now. Also, they need to get better at entering non-English speaking countries in wealthy Europe. That has proved to be a persistent problem.  

Are current crises a threat to globalisation?
Firstly, the extent of globalisation and the flat world was exaggerated, as evidence shows. I mean, look at the overall investment in countries worldwide — only 10 percent is FDI. The number of students studying outside their home country is just 2 percent. 90 percent of friendships on Facebook are local, and we are talking of the young, more connected generation. I can reel off more stats, but the world was never really globalised in that sense. Google thought search would be a winning proposition everywhere, but in two big and fast growing markets, Russia and China, they didn’t make it. They are No. 3 in Russia and no where in China. So, geopolitics still rules the roost. National borders, geographies and politics still matter and make for a global hierarchy. You can see now that the US government, through more protectionism, can hurt Indian IT the most.

And the same would hold true for US businesses in India?
They need to make sure they have the market presence. If you are in the market and understand the various granular elements, well, then maybe you can have a really good popular perception. Treating India like the next market to be conquered will not really make a difference in their fortunes.

Your views sound more relevant now as borders seem relevant. But earlier, where did you find yourself?
Well, I was seen as this old fashioned guy who doesn’t get globalisation. I was sure of course, based on my research, but there was a lot of peer pressure to fall ‘in line’, so to speak. Globalisation was taken for granted and everyone was sure it was here to stay. I was even asked by a TV reporter sometime back “Do you still believe the world is not flat?” in a tone that smacked of pity, like talking to a poor guy who is slow to get things. And look where we are now. People are now realising that geography and world politics matter a lot in business.