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Thursday, May 30, 2024

Becoming Global-Proof in a Flat World

Author Thomas Friedman tells us the world is flat , one big 200 million-square-mile level playing field where billions of Chinese, Indian and East European workers are snatching up the jobs and development opportunities that America keeps fumbling away.

He says this is inevitable due to a global, digital economy. During the next 10 years, 14 million U.S. jobs will hitchhike eastward. Folks in the business press tell us, “Oh well.” In the grand sweep of history, change always creates casualties. Grow up. Adapt.

But the speed and viciousness of global competition is not inevitable, it’s a choice, a choice we make every day out of shortsighted greed, foolishness, tax and trade policy. China is feasting on the technologies we developed and selling us the results cheaper than we can make them.

And who is fueling this fire sale of American productivity? American companies.

In their frenzy to access vast, cheap, lightly regulated labor pools, they allow the capitalist pirates of the East to pick our technological pockets as just part of doing business. We are just giving bullets to the outlaws who are holding us up with undervalued currency and predatory pricing.

Most businesses are competing by playing the wrong game. A business model based on exploiting worldwide labor pools for short-term profit is a dead-end street.

It’s doomed to run out of gas. The future of the world will not rest on bargain basement labor but rather on unique ideas.

Cheap labor is not a strategy. It’s like morphine for a cancer patient. It kills the pain but doesn’t cure anything.

I believe there’s a better path for America. The companies that are blossoming in the United States today are embracing a new model. Rather than making employees expendable, they are putting employees first and relying on them for innovations to reduce cost and increase value. Companies such as Qualcomm Inc., Southwest Airlines, Starbucks, NetFlix, eBay, and SAS Institute are not just great places to work, they are great beachheads of a new wave , human capitalism.

Take Matt Lehrer, the chief executive officer of thriving Teamwork Apparel of San Marcos. His company is the only domestic manufacturer of uniforms for amateur sports teams.

He supplies thousands of teams. Teamwork employs more than 300 people, making $12 to $14 an hour, while Asian labor earns 12 to 14 cents.

Yet it is growing at 27 percent annually and often enjoys margins three times greater than its Asian-sourcing competitors. How? By doing things differently.

Teamwork doesn’t have a sales force; it deals with customers directly. And it offers something astonishing: same-day shipping. By stocking a huge uniform inventory, it can ship within hours and charge a reasonable premium.

Turns out parents will pay to have their children in proper fitting, great looking uniforms right away, rather than be back ordered by an importer. In an age of “Dell-style” zero inventory, Teamwork has made inventory a competitive advantage. And by developing customer relationships, it nourishes a constant flow of new ideas.

Teamwork makes itself a great place to work; flexible scheduling, weekly contests, generous benefits and a waiting list of applicants.

The downside? None. It’s growing faster with a higher profit margin than any of its competitors.

Lehrer and others like him have discovered that human capitalism is not just a nice way to treat employees, it’s a better model. Industrial capitalism was based on the concept of extracting value. From raw materials, suppliers, labor.

Human capitalism is based on creating value. It sees employees and customers as the engine of innovation. It results in products and services that are so right, so in demand, that people willingly pay a premium for them. It creates companies that are “categories of one,” such as eBay, Google and Patagonia.

Human capitalism works by generating powerful networks of collaboration among employees, customers and suppliers. This is where the big new ideas come from.

It creates growth cultures rather than performance cultures.

No more carrot and stick. Employees are productive out of a sense of responsibility, not accountability.

If you want to become global-proof, have the courage to jettison the old model. Rather than consider employees generic cogs in a giant machine, ask yourself, “What if people were your prime source of innovative, value-creating ideas?

What if a recent MIT study is true and 80 percent of innovation comes from customers and suppliers? What if the only way these ideas filter up to management is through employees who feel like true collaborators, not costly headcount? Wow. Imagine that.

If you want to become global-proof, flip your business model upside down. Don’t join the fire sale crowd.

Put people first in a way that makes a difference. Make your company a leader, not a lemming. A flagship in America’s great rebirth.

William Marre is the CEO of Realeadership Alliance and founder of the American Dream Project.


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