NO. 01

Can We Keep Up with Globalization?
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Is There Opportunity in Global Complexity?

Global corporations are faced with the sometimes confounding challenge of operating in a multitude of markets and cultures, and keeping stakeholders with diametrically opposed points of view happy. But David Bach says that building an organization that can handle such potential conflicts can be a source of competitive advantage.

by Ted O’Callahan

At one time, people thought globalization would make for a world that was in some respects simpler and easier to navigate.

In 1989, Francis Fukuyama suggested that the world could be approaching the “end of history” as the it converged on the winning political-economic system. “The triumph of the West, of the Western idea, is evident first of all in the total exhaustion of viable systematic alternatives to Western liberalism,” he wrote. He also saw “the ineluctable spread of consumerist Western culture.”

We can see a similar assumption in a foreign policy paper written by Condoleezza Rice in the midst of the 2000 presidential campaign. “Powerful secular trends are moving the world toward economic openness and—more unevenly—democracy and individual liberty,” she wrote. And she expected that the result of these changes would be to make other nations more like the United States, “the prototype of this ‘new economy.’” The word “prototype” evokes the image of a string of countries coming off the assembly line, each molded into a liberal market-based democracy modeled after the U.S.

A recent article in the Atlantic traced what has happened to this idea over the last decade and a half. Its title, “The Disintegration of the World,” gives a clear hint of the outcome. The author, Chrystia Freeland, concludes: “The stable world order many of us assumed this thesis foretold has not come to pass.” An assessment of Fukuyama 25 years after publication, taking into account populist responses to the Great Recession and the economic rise of Chinese state capitalism, finds that “[l]iberal capitalist democracy hasn’t triumphed. Instead, the failures of capitalism have turned democracy against liberalism.”

One might compare the progress of globalization to the patterns in a kaleidoscope—shapes seem to converge, but then new complexity and variation emerges. David Bach, senior associate dean for executive MBA and global programs at Yale SOM, explains, “We're seeing the market being embraced in many parts of the world, but the way market systems work in the U.S., and Scandinavia, in Southern Europe, and East Asia, for example, is completely different. I think the same is true for organizations. It's an interesting development where we have more connectivity, more transparency, against the backdrop of continued diversity or continued divergence.”

This creates a complex environment for companies with global operations. Bach points to one example of the challenge—stakeholder conflict. For example, when Ikea removed images of women from catalogs in the Arab world to be sensitive to local norms, customers back home in Scandinavia became outraged. “It has become so difficult to navigate stakeholder conflict. You're satisfying stakeholder demands in one market, but you're creating stakeholder conflict in other markets because political systems haven't converged, cultural expectations continue to be very different.”

This isn’t a challenge he sees going away any time soon. “But I don't want to be negative about it, because it creates all kinds of new opportunities for value creation,” Bach said. Each effort to adapt is a chance to solve a problem. More and different efforts to solve the same problem can be a source of innovation. “If we had convergence, we might be losing out on some of the opportunities to see experimentation and new ideas.”

How do companies succeed in these circumstances? “Diversity in your top management team becomes more important,” Bach said. And that diversity needs to filter out through the organizational structure. “You can't sit in one country and try to manage all of these issues around the world,” he said. “Having diverse teams, having diverse voices, really opening yourself up, connecting—those things, I think, are going to be incredibly important as you navigate this challenging terrain. And the companies that do it well are going to thrive.”

Senior Associate Dean for the Executive MBA and Global Programs & Professor in the Practice of Management