As we come to the end of September, 2016, there’s a lot of talk in this political silly season about the pros and cons of globalization, some of it regrettably uninformed, even while the underlying frustrations expressed by proponents of limiting globalization are both understandable and palpable. So in our last two posts of this month, we take a quick look at why today’s business must embrace the digital future.
The growth of globalization, that is, the growth in the exchange of goods, services, people, money and data across national borders, has slowed down in recent years (this, according to the June, 2016 issue of Trends eMagazine).
This is not surprising given that the world has a finite number of people, limiting the number that can move from one country another. And after all, we only need so many TVs, phones, t-shirts and pineapples. There’s a limit to the number of goods that can be produced in one country and sold in another, note Trends’ editors.
But there is one type of exchange that is not finite: data. According to Information Week, the amount of “online data exchanged across borders increased by a factor of 18 between 2005 and 2012.” By 2025, it’s expected to increase another 700%. And according to McKinsey all this data flow had a combined impact of over $2 trillion in value in 2014 – more than “global trade in products or foreign direct investment.” And that cross-border data flow barely even existed in 2000.
Driving this trend of course is the enormous increase in bandwidth across borders, an increase of nearly 50 times in the past decade, and predicted (by McKinsey) to increase by another 900% in 5 years. The benefits of these global data flows include:
- Lower transactions costs: a customer in Europe downloads an e-book on Amazon and eliminates paper, shipping and wait times.
- Global scope: The smallest company can now be an actor on the world stage, quickly and cheaply. There are 50 million companies with Facebook pages.
- Empowerment of individuals: Free online courses… job postings… connections worldwide, etc.
In fact, McKinsey finds, global trade in goods, long the traditional creator of world wealth, has actually flattened in recent years. That’s one reason companies are re-shoring their manufacturing — as higher labor costs in China, the need to respond more quickly to shifts in demand, and the opportunity to capture savings from shorter supply chains have all served to reduce cross-country trade lately.
Trends editors see all this as leading to four emerging developments that will be crucial to companies in the not so distant future. We’ll take a look at all four in our next and concluding post on the revolution in global data exchange. Stay tuned…