1995 Global Cultural Diversity Conference Proceedings, Sydney
Global Industry Networks
Mr W. Frank Blount
Chief Executive Officer, Telstra Corporation
It is my pleasant and challenging task this afternoon to discuss "global industry networks" in the context of this ambitious and impressive conference on "Global Cultural Diversity ".
My business is telecommunications, and increasingly information services, and the networks which carry and generate information (voice, data, and video) from one place to another. Global business uses modern telecommunications as a trading medium, and telecommunications is, therefore, a or rather, the key infrastructure for managing global business operations successfully.
The growth of global telecommunications networks is closely associated with the globalisation of business generally. Efficient, reliable, sophisticated information carriage is a crucial driver of business investment, with a clear influence on the location of that investment, and a visible impact on the way global business development is occurring.
At present the global telecommunications scene is marked by disparity rather than diversity, with a wide divergence between those with access to the means of distance communication and those without. At the same time mature markets are evolving different kinds of global networks the Internet is a good example as technology enables the provision of diverse and specialised new services.
But, in a conference such as today's, it would be too narrow an interpretation of my topic to restrict my discussion of "global industry networks" to the telecommunications industry alone though I will return to the issues of disparity and diversity in telecommunications a little later.
Other kinds new and more inclusive kinds, I believe of global industry networks are evolving in the 90s, and those networks will have a profound impact on the way the world develops into the 21st century.
"Networks" are not just systems of satellites and undersea optical fibre and underground copper cables. They are also, more importantly, groupings and alliances of businesses and of people, communicating with one another and working together to achieve mutually desired goals.
The creation and development of these networks is greatly facilitated by global communications networks, but the business networks I want to discuss today go well beyond the hardware and the technology of the telecommunications industry.
But my argument must start, I think, by confronting an old myth and laying some fears to rest. The myth I mean is the remnant of the conspiracy theories of the 60s and 70s which imply (but rarely argue) that the globalisation of business is, potentially, the death knell of diversity.
This myth starts from the belief that "big business" is autonomous, homogenous, powerful, and quite uninterested in anything but profit. It sees globalisation as exploitation the desire, by business, to find new sources of cheap labour and new and captive markets for its products.
One image that captures this view (however unfairly) is the presence of an American hamburger chain on the Champs Elysees in Paris: the colonisation by a foreign hamburger chain of the world's culinary capital.
According to this sinister interpretation of business and its motives, a process of domination and homogenisation lies at the basis of globalisation. Business international business, "big" business, the "military-industrial complex" is determined to remake the whole world in the image of itself, and to impose a bland, mediocre and conformist culture on the rich diversity of human life. According to this interpretation, global telecommunications companies are the thin end of the wedge, and the harbingers of a new and very unpleasant world order.
Ladies and gentlemen, this pernicious view of business, its motives and its actions, is wrong. More accurately, perhaps, it is out of date. It belongs to a time when the culture of dominance was central to business to a time when big was good, and biggest was best, and what was good for General Motors was good for America.
The culture of business is now, more and more, the culture of competition, and the culture of competition, I want to argue, is the best guarantee of diversity. Competition demands customer segmentation, and a highly sophisticated understanding of difference, whether it is national, ethnic, gender-based or cultural. (Customisation not massification)
Business success in the global markets of the present and the future will go to those who best understand and who best adapt to the diversity of the world's people and places, and failure to those who attempt to impose their own values and cultures on others.
The globalisation of business in the 1990s is not about imposing alien values and cultures, or about cloning success. It is about diversity, about adapting one's products and services to the different needs of different peoples and regions, and about gaining competitive advantage from effective differentiation. It is about knowledge and understanding and cultural sensitivity; it is about partnership and co-operation, as well as about competition.
1. -The implications of this globalisation shift are starting to be felt strongly in the way business operates, and in its recruitment and employment policies. The concept of a diverse workforce one where the staff profile matches the business's customer profile is, according to a recent article in the Economist (11March 95, p.37), increasingly central to successful business planning.
2. -In countries like Australia and the US, the domestic population is extremely diverse. It makes sense, then, that "firms with a good record of ... managing people from different backgrounds will enjoy a growing advantage in recruiting and motivating workers", as the Economist says. These firms are also likely to be "more attuned to an increasingly diverse population of customers."
3. -But it is the third advantage of diversity management identified by the Economist that I want to highlight today, because it leads me naturally into the next stage of my argument, concerning the globalising effect of telecommunications networks:
"Most intriguingly, ...diversity may help ... firms outperform their rivals abroad. In particular, it is becoming an article of faith in ... business schools that heterogeneous firms will be better placed to form global alliances and strike international deals..."
The key phrase in this analysis lies in the need for business to "form global alliances and strike international deals". Partnerships, joint ventures and strategic alliances between heterogeneous businesses (and, in some cases, semi-government authorities or even governments themselves) are the keys to establishing and sustaining "global industry networks" of all kinds in the future.
The global telecommunications business is, perforce, at the leading edge of negotiating the kind of partnerships and alliances by which global business will come to operate. The way alliances and partnerships are coming into being in the telecommunications industry are also, perhaps, a pointer to the future, and to a world where artificial and historical barriers to trade are much less evident than they are today.
The globalisation of telecommunications is occurring simultaneously at three levels.
1. Multinationals
At the top is the creation of telecommunications alliances designed specifically to provide seamless management of communications for the so-called Fortune 2000 companies the two thousand or so leading business conglomerates who clearly want to source their world-wide telecommunications from a single supplier.
This market is worth approximately $5 billion a year at present peanuts in a business whose revenues totalled $575 billion in 1993. But the first alliance to be able to offer world coverage will have a competitive edge on its rivals, and a heightened claim to attract or retain core business in the world's developed markets.
At present, four alliances are coming into being: WorldPartners, led by AT&T from the US and KDD from Japan, and including Telstra, Singapore Telecom and Telecom New Zealand International among others; Concert, a joint venture between British Telecom (BT) and MCI from the US; Atlas/Sprint, a combination of France Telecom, Deutsche Bundespost Telekom and Sprint; and Cable and Wireless from Britain, which is creating a patchwork of affiliates around the world.
The complexities involved with the formation of these global carriers are immense, and none of them seems to have a clear competitive edge over the others, partly because of the hurdles including technological standards, regulatory regimes and individual strengths and weaknesses which affect all of them to some degree.
2. Interactive Multimedia Services
Providing comprehensive, global services to the top end of the market is only part of the telecommunications agenda, however. Technological change especially the convergence of telecommunications, computing and content creation into multimedia services is driving another set of relationships, which range from mergers (such as the now abandoned $US21 billion liaison between Bell Atlantic and TCI) to joint ventures, such as Foxtel, Telstra's joint venture with News Limited to provide Pay TV in Australia, and our partnership with Microsoft to provide on-line services for business and residential customers.
In these markets, telephony or basic telecommunications is being commoditised, and networks are being developed to support an enormous range of new services whose multiplicity and diversity is almost unlimited, and driven by customer demand. The interactive multimedia services of the near future will be as diverse as the interests and requirements of their users, and provided by a rapidly growing base of niche market service providers.
3. Basic Infrastructure
At the same time, established carriers facing intense competition in their home markets are looking for investment opportunities in off-shore growth areas. There are a number of countries where telephone densities are low, but where economic growth is creating relatively affluent populations, and where governments are responding to the need for accelerated infrastructure development by exposing their previously protected national telecommunications monopolies to competition.
India is a good example of this trend. The Rao Government has identified telecommunications as a key to development, critical in attracting foreign investment to India, and has called for tenders to build and operate competitive networks in twenty so called "Telecom circles" across India.
Early access to a market with India's potential is proving magnetic to global carriers competition to participate is fierce, despite the fact that foreign investors are limited to a 49% share of the tendering vehicle, international and STD calls are excluded, and there is a requirement to provide 10% of all installed lines to India's villages.
This example is instructive, because the Indian Government has established a regime which simultaneously serves its social agenda access to basic services for more of its people at the same time as it increases the nation's competitiveness by improving India's industrial infrastructure, without transferring a key strategic resource to foreign ownership or control, or tying up scarce capital resources for a long period.
India is not an isolated case. It is typical in the policy direction it illustrates, and unique in its details; many developing countries are seeking similar outcomes, but all are pursuing them in different ways, and under various sets of rules.
The common goal an infrastructural platform to support economic growth, and access to telecommunications for larger sectors of the population is being pursued in diverse ways. That goal is also, by nature, pro-diversity because it multiplies the number of voices in the world which can be heard from a distance.
Communication is the natural ally of cultural diversity, not its enemy. Global telecommunications therefore is a facilitator of diversity
Meanwhile competition, by putting downward pressure on telecommunication prices and by making those areas of the world which are marked by high unmet demand for telecommunications services attractive to providers, is increasing overall access to communications networks.
The diversity of regulatory regimes and market conditions demands that global telecommunications carriers be flexible, adaptable and prepared to put in the time and the effort to establish long-term alliances with local partners in each distinct market. The competitive imperative is, as I argued at the start, compatible with cooperation, dependent on knowledge and understanding, and, ultimately, productive of increased not diminished diversity.
The transfer of capital and expertise involved in the provision of telecommunications infrastructure makes information more accessible on the one hand, and on the other, it sensitises the providers of that capital and expertise to the value of difference and diversity.
That heightened sensitivity, in international business generally rather than in the telecommunications industry specifically, is central to the formation of global business networks which enhance mutual understanding between different groups of people, without seeking to homogenise them or to diminish their individuality.
These issues were explored recently by Australia's retiring Chief Justice of the High Court, Sir Anthony Mason, in a speech to Griffith University graduates in Brisbane (quoted in the Australian 6 April 95, p.3) about Australia's changing cultural identity, of which I'd like to quote a couple of paragraphs.
"Our version [that is, Australia's version] of Western society, which is particularly assertive, confrontational and adversarial, contrasts rather sharply with the courteous and consensual approach to decision making that is characteristic of some parts of Asia and the Pacific. The dogmatic assertion of the superiority of our own values and of a belief that they should be adopted by civilisations much older than our own is a form of cultural nationalism least likely to promote our goals in the region."
These attitudes which are certainly not unique to Australia are the products of cultural isolation, in Australia's case closely linked to the colonists' perceived "tyranny of distance" from their roots in Europe.
But these attitudes are increasingly unsustainable, as transport and communications links, mutual trade, and immigration from the region impose the need for greater and deeper understanding between Asia and Australia.
Coming to understand our neighbours better, by communicating with them, does not jeopardise the uniqueness of our individual cultures. Rather, it removes the elements of ignorance and intolerance which might have contributed to forming the attitudes Sir Anthony describes. Communications, I believe, are a threat to ignorance, not to cultural diversity and we need to be very careful to differentiate between the two.
Global business networks are making it increasingly difficult for intolerance and misunderstanding to survive. The realities and necessities of doing business effectively and well in places which are fundamentally different from one's own have forced a total reevaluation of diversity. From being perceived as a structural weakness, diversity is now a source of strength and a competitive advantage for business.
As overall access to communications improves across the world, and as technology evolves new and richer forms of communication over distance in the future, cultural diversity will be enhanced, not threatened. Global business networks built on this enhanced ability to communicate will help to create a world where difference can flourish, because it is a sign of the variety and diversity of human life and culture, rather than the product of our historical failure to understand one another adequately.
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