Economics is often called the "dismal science," and a
Harvard professor of business administration who holds 19 honorary
doctorates might not sound like someone you'd want to have
explain it to you. But when it comes to the new global economy, no
one is clearer, more down to (the whole planet) earth, and has more
to say about your business than Rosabeth Moss Kanter, whose book
World Class: Thriving Locally in the Global Economy (Simon
& Schuster) has received critical acclaim since it came out in
1995.
Kanter grew up in Cleveland, which she cites as an example of a
city that has had a renaissance, in part because it's learned
to adapt to the new global market. In the book, she also analyzes
the strengths and weaknesses of other cities worldwide that have
grappled with how to help local business meet increased competition
from abroad while exploiting export opportunities. And she says you
need to be "world class" even if you have no interest in
doing business outside U.S. borders.
Kanter has written or edited a dozen other books. Her first,
Commitment and Community (Harvard University Press), came
out in 1972, and her most recent work, Rosabeth Moss Kanter on
the Frontiers of Management (Harvard Business School Press),
was published in 1997. She is also co-founder of Goodmeasure Inc.,
a consulting firm that specializes in the management of change,
and, in 1980, produced one of the world's bestselling videos on
workplace diversity, "A Tale of `O': On Being
Different." Kanter agreed to share some of her insights on how
small businesses can not only survive but thrive in this brave new
smaller world.
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Entrepreneur:Big companies are used to doing business
outside the United States, but small firms may not know where to
start. Where can they turn for resources?
Rosabeth Moss Kanter: First of all, the U.S. Department
of Commerce is very eager to help small companies because it knows
small businesses are the backbone of the economy. Many states have
one-stop shops where the services of the Commerce Department are
combined with whatever assistance the state offers. They'll
help you find a distributor or put you in contact with other
companies that offer similar products or services that you can
bundle with your products to offer to foreign markets. Also, trade
associations and business development groups in major cities can
help small firms make connections with larger companies that can
mentor them in this area.
A company should also think about what contacts it already has
with its own suppliers or customers and whether [those companies]
have international contacts that may be helpful.
Trade shows can also be a way to network directly. Recently, I
was talking to an entrepreneur who makes a product which is used in
the renovation of old buildings, and there is a big market for that
in Europe. He started going to U.S. building and construction trade
shows and found there were people there representing foreign
outfits. Then he started going to trade shows in other countries
and hooked up with contractors.
Companies can also collaborate to promote the products of a
region as a brand. For example, in Vermont, small producers of
crafts, cheeses and other products have banded together to promote
their products jointly with a Vermont label that has a natural,
country image. The state trade mission is representing them now. A
small business could not do this alone.
Entrepreneur:Are the same resources helpful in
contracting for manufacturing outside the United States?
Kanter: Yes, but it's much trickier than people
think. You can't look only at direct labor costs because there
are lots of hidden costs and cultural issues [to consider].
Business owners have to make a personal commitment to be involved
in managing this and may have to travel [to the country they're
considering] to be sure this works right. You can't just rely
on assistants or intermediaries because the information you get
back is filtered.
I once worked with a small apparel company in England, whose
actual manufacturing was done by contract with a company in
Indonesia. The owners not only traveled a lot but also used the
Internet and had an employee onsite to provide the quality their
customers demanded.
Entrepreneur:How do you work with international
partners closely enough to make alliances successful while still
protecting your trade secrets?
Kanter: You have to build the relationship slowly.
Don't plunge into full-fledged collaboration. Create a project
to test it. Initially, do whatever it takes to feel real
compatibility of values and philosophy. Spend time with your
potential partner's key people, get to know them as people and
meet their families; otherwise, you can have serious problems down
the line. Americans tend to want to get to the bottom line right
away and don't schmooze enough, especially when dealing with
foreign companies. There may be very different ways of making
decisions there. And be prepared with an exit strategy in case
things don't work out.
Entrepreneur:Is there a reason to learn another
language, if English is the international language of
commerce?
Kanter: It's always helpful to be able to say
something in the other person's language because it's a
gesture of respect. And respect, honor and face are very important
in some cultures that are important to our future, such as Asia and
Latin America. China is a huge supply source and a giant market,
and these are important cultural traits for the Chinese.
Learn another language if you expect to do a lot of business in
a particular country, but a few words will do for the others. You
can also hire someone from another country, perhaps someone
attending a local university, to help. As a competitive advantage,
let your customers know which languages your staff speaks. Take
people from other countries out to dinner, and learn everything you
can about the culture. The elite in other countries may speak
English, but not perfectly, and you may need to talk to their
employees. Counting on translators for delicate negotiations can be
tricky, and it's helpful to know what people are saying when
they think you don't know the language!
Entrepreneur:The flip side of the foreign opportunity
is that companies in other countries can more easily come into our
domestic market. How can small companies protect themselves from
increased foreign competition in the United States?
Kanter: The same resources for any international issue
apply here. Even if you don't care about selling your products
beyond your typical customers in the United States, you have to ask
your customers who else they're hearing from.
Being incredibly close to customers and giving them extra
services are keys to learning about potential competitors and how
to counter [their efforts] with innovations. A lot of foreign and,
of course, national companies are looking at profitable niche
markets they can get into. It's happened with ambulance
companies, funeral homes, dry cleaners, cleaning services and
temporary help agencies.
As for competitive products that are being imported, look for
their weaknesses, such as inferior glue, zippers that don't
work after a few months or, as I recently found, buttons that came
apart after a major label's suit was cleaned a few times. The
more you can provide quality and superior service, the greater
appeal you'll have in the long run for sophisticated customers.
No business that appeals simply on price is sustainable. You
shouldn't worry about competitors copying your old ideas--you
should be telling customers you have the next big thing, and
it's better made with more support after the purchase.
Entrepreneur:You studied what Seattle; Boston; Miami;
Cleveland; and Spartanburg and Greenville, South Carolina, were
doing to help their business communities stay internationally
competitive. What lessons can entrepreneurs learn to help create a
world-class climate in their own areas?
Kanter: Whatever their main industry, localities face
five challenges: nurturing their primary capabilities, increasing
business collaboration, creating a climate that attracts outside
investment, helping employees maintain needed skills, and improving
the overall community so it's a place where top-caliber people
want to live.
Let me give you my favorite example, since I grew up there. In
1978, Cleveland was the first city to default on a loan since the
Great Depression. It had a decaying social infrastructure,
deteriorating education, dying industries and a river that was
declared a fire hazard!
The next year, a strategic study was done, which led to the
formation of Cleveland Tomorrow in 1982. [Through this
organization,] the heads of 56 large companies worked together to
revive community spirit, build new tourist attractions, contact
their fellow CEOs in other cities to recruit them to relocate,
provide mentoring for small businesses, and encourage collaboration
across industries. In the following years, a number of
organizations were created to achieve these goals. The Council of
Small Enterprises involves small and midsized firms; Leadership
Cleveland has 800 multiracial graduates in a network that infuses
nearly every major organization in the area; law firms have joined
Lex-Net, an international referral network; and the Business
Volunteerism Council links companies to community service. The
Cleveland Advanced Manufacturing Program was created to bring in
new technological concepts with the input of local university
researchers, while community colleges help workers learn new skills
at a "teaching factory."
Recognizing that one in three of its jobs depended on exports,
compared with the national average of one in four, the Greater
Cleveland Trade Alliance was formed by the city, county, port
authority and the Greater Cleveland Growth Association, the
area's largest business membership association. That resulted
in the opening of a World Trade Center in 1993.
Entrepreneur:You say big companies are tending to buy
low-value-added products and services locally, even though they
have suppliers from all over the world available to them. Is there
an advantage to being a local supplier?
Kanter: Soon, everyone will be able to buy most things
anywhere through the Internet. You can get almost any book you want
that way, and everyone thought that between that and the chains,
independent bookstores would disappear. But they're still
around. You go there for the experience of being able to look at
the books, sit there, and have a cup of coffee and read. The owner
knows you by name, tells you about newly published books you might
be interested in. Even the chains are competing against the
Internet this way.
The face-to-face part requires knowledge. The Internet will get
more sophisticated, so local bookstores have to sell an experience
that is convenient and fast. I still shop for groceries in a local
neighborhood store owned by a family. There is a large supermarket
a few blocks away, but this little store knows me, and they stock
the hot new Southwestern products that people in my neighborhood
like. They'll get whatever you want and will even deliver in a
pinch. And you can call in advance and reserve an item. They're
also part of a buying network with other stores, which allows them
to keep prices down. There's a loyalty that builds up when
there is a level of service.
Entrepreneur:How can companies working in this
environment, which requires them to train employees with skills
that make them attractive to other firms, keep good
workers?
Kanter: You can't promise a future, but you can make
employees feel they have growth opportunities with you. Make them
feel like they're part of the family. Share with them the
upside of the company. You don't want them to take an
insider's knowledge of your company and go to a competitor. But
if they leave, part on good terms and stay in touch because they
might come back or send you business later.
Another way to keep employees committed is to let them select a
cause to which the company will make a contribution. Business
owners are often active in their church or synagogue or a service
club, but they don't think of doing what larger companies do,
which is to make a small investment in the community that provides
dividends for their public image. Employees who feel good about
what the firm is doing beyond its business can form incredibly
intense loyalty.
Scott S. Smith writes about business issues for a variety of
publications, including Investor's Business Daily
and Nation's Business.