The biggest global companies today barely have any assets and are labelled by a reputation rather than the quality of a certain product. With traditional businesses moving to hybrid business models and the concept of corporations drastically changing due to the acceleration of technology, it can become difficult for those Egyptian companies that remain static to integrate into the global economy.
To understand how business has changed and what really matters today, Business Forward sat down with Christopher Caine. Caine is president of the Center for Global Enterprise, a New York based non-profit organization dedicated to the study of the contemporary corporation in the era of global economic integration. For many years, he has worked at IBM, Coca-Cola Company and Eaton Corporation, and is currently president and CEO of professional services firm Mercator XXI.
How has the concept of a corporation changed today?
About 70-80 years ago, the concept of a corporation that was operating beyond its borders was considered a multinational corporation. And in order to have reach in another country, the business had to have a presence there. Today, this business can have reach without a presence because of the internet, mobile communication etc. So, the cost of reach is almost nothing. As long as people are connected to the internet, you can have reach without physical presence. This gives Egyptian companies tremendous capacity to participate in the global economy at a very low cost.
The world today is a demand side economy because people can “demand” what they want in a very customizable way any time they want. The gate to success is becoming the supplier that will meet the customer’s demand quickly, with integrity, at the price that they want. That is why Amazon is so phenomenal; they have grown their business on exactly that point – a wide selection with cheap, fast delivery.
How viable is the traditional business model today?
Business leaders need to be able to change their business in conjunction with society, more than ever before. In an integrated global economy in which data and information are highly valuable assets, business cannot separate itself from society anymore. Business leaders today have a hard time understanding how to grow their insights and knowledge of the very dynamic marketplace, and how to change fast in alignment with society.
Businesses are caught between a digital and physical reality, creating hybrid business model.
In the digital age, brand identity, health and competitiveness no longer come from solely the quality of a tangible product. It also comes from intangible assets, like data. Companies like Uber and AirBnB are asset-light because they do not have a lot of fixed costs to manage. Their liabilities today are those of reputation, information behavior and cyber security, and these things affect valuations. Hence, the behavior of these businesses are heavily affected by how to monetize light assets in today’s world.
The business model that made companies successful 25 or 40 years ago, in the industrial, linear age, is no longer viable.
How easy is it for Egyptian companies to engage in the global economy?
Egyptians are great with building relationships and they are very industrious, as in entrepreneurial in the sense that they like to do things. Getting global reach is definitely much easier today. But the lack of presence may affect how well this company knows its foreign customer. Without physical presence, it is hard to know what motivates and inspires the customer, not just what they are ordering. Chinese and Japanese companies have the same dilemma.
How did Asian companies – specifically China, Japan, Korea – successfully integrate into the global economy?
Chinese, Japanese and Korean companies are very good international businesses, but that does not make the global businesses. The Chinese, for instance, have a lot of money and a much bigger footprint being the second largest economy in the world. But they have yet to learn how to manage in that cultural spectrum. They have got the enterprise skills, operating skills, really good products; but they need the management skills. So, when push comes to shove, an overseas customer will go with a company that understands their needs, taste and culture better. This gets more difficult when you move from products to services.