Understanding the power of one

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Wanted: CEOs from India

: The magnitude and size of the changes we face and will face are Everest in nature. For example, who could have imagined in early 2004 that later that year a company virtually unknown outside of China (Lenovo) would buy the PC business of IBM? In capital terms (at $1.25 billion), it may not have been the biggest acquisition for the year, but in terms of the news splash it was enormous in size. In the same vein, but on an even bigger scale, who in early 2005 would have predicted that NCOOC (Chinese National Offshore Oil Company) would have launched but then lost an $18.5 billion bid for Unocal?

We draw the Lenovo and CNOOC examples from China not because China is the only big change in recent times, but because it is a great example of the size of changes we are experiencing. For example, from 2000 to 2006, not only did foreign direct investment in China more than double to more than $65 billion, but China sucked in nearly 9 out of every 10 foreign dollars, euro, or yen that were invested in all of Asia. In late 2006, the largest IPO ever occurred when Industrial and Commercial Bank of China (ICBC) simultaneously listed its shares on the Shanghai and Hong Kong stock exchanges and pulled in $20 billion! In fact, in 2006, it was the largest IPO market in the world.

As we said, while China is not the only big change out there, it does illustrate the size of changes that have happened recently and will likely happen in the future. China’s rise has rippled through all sorts of sectors, including ones that may not get the press that ICBC’s IPO did. For example, the large shipment of goods from China to the U S but the relatively smaller amounts shipped from the U S to China has spawned a new business in California—container storage. There are so many empty containers piling up in California that real estate agents and landowners are making good money simply storing the empty containers on vacant land. In fact, in some cases, the containers are stacked so high that they block the views of homeowners living next to these “temporary” storage facilities.

India may be next in line to send change tectonic tremors throughout the world. While FDI in India in 2006 was only a bit larger than $4 billion compared to more than $65 billion for China, one need look no further than companies such as Infosys, Wipro, Tata, or Reliance for future (some would say current) global competitors. In terms of opportunities, India’s middle class, estimated at 250 million people, may offer the foundation upon which to build homegrown multinationals as well as a significant opportunity for growth for foreign multinationals. What will happen in India or how India might affect the global business landscape is nearly impossible to predict, but the magnitude of the potential impact should not be underestimated. Summarised simply, Nandan Nileknani, the CEO of Infosys, recently stated, “We changed the rules of the game...(and) you cannot wish away this new era of globalisation.” Wen Jiabo, the Chinese prime minister, framed the point even more powerfully: “India and China can together reshape the world order.”

Rate of change

If these and other changes would just come at us at a slow enough rate, like eating an elephant over a long enough period of time, we could digest them one large bit at a time. Unfortunately, the gods of the change universe are not so kind or considerate. Instead, both the rate of change within sectors, as well as across sectors, seems to be accelerating.

Consider that the first significant mention of VOIP (Voice Over Internet Protocol) in Fortune magazine was in 2000. Just three years later in 2003, a small company called Skype was started. One year later in 2004, Fortune magazine told us not to believe all the hype about VOIP. One year after that in 2005 (just two years after its founding), Skype had 53 million customers, and at any given moment Skype had more than 2 million customers using the service and calling friends, family, and loved ones all across the globe at 2 to 7 cents a minute. Later that year in September 2005, eBay bought Skype in a deal that could bring $4 billion in two years! From just about any perspective, that is fast. Arguably, it is this fast pace of change that was just too much for AT&T, the “mother of all bells,” and contributed to its being bought out in 2005 for $16.9 billion by SBC, one of the “baby bells” it gave birth to in 1984. Imagine, the 25-year-old child bought out the 135-year-old parent!

Unpredictability of change

If the best business journalists talking with the best business minds can’t get the future right, it reinforces how unpredictable future is.

As a last example of the unpredictability of change, consider the rise and fall of Encyclopedia Britannica. Arguably, Encyclopedia Britannica invented the category in which it competes. The first edition was published progressively from 1768 to 1771 as Encyclopedia Britannica. When it was completed, it contained 2,391 pages and 160 engraved illustrations in 3 volumes. For more than 200 years, it dominated the category it created. It was considered the most authoritative encyclopedia in the market. By the third edition, published 1788-97, it contained 18 volumes plus a 2-volume supplement of more than 16,000 pages.After the 11th edition (often called the 1911 edition), the trademark and publication rights were sold to Sears Roebuck of Chicago, Illinois. 30 years later, Sears Roebuck offered the rights to the University of Chicago. From then until his death in 1973, William Benton served as the publisher.

For the next decade, Britannica continued to dominate the market. A full set was priced at between $1,500 to $2,000. Then in the mid-1980s a little known company called Microsoft (only 10 years of age) approached Britannica Inc to discuss a potential collaboration.

Britannica turned them down flat. Why would a company with such a stellar brand and reputation team up with an unknown company? Rebuffed, Microsoft used content from Funk & Wagnalls Standard Encyclopedia to create what is now known as Encarta. Executives at Britannica could only smile as desperation drove one of its more lowly esteemed competitors into the arms of such a strange bedfellow as Microsoft. This view was only reinforced by the growing sales at Britannica during the next five years, hitting $650 million in 1990.