It’s called commoditization, and in the wake of the triple convergence, it is happening faster and faster across a whole range of industries. As more and more analog processes become digital, virtual, mobile, and personal, more and more jobs and functions are being standardized, digitized, and made both easy to manipulate and available to more players.
When everything is the same and supply is plentiful, said Greer, clients have too many choices and no basis on which to make the right choice. And when that happens, you’re a commodity. You are vanilla.
Fortunately, Greer responded to commoditization by opting for the only survival strategy that works: a shovel, not a wall. He and his associates dug inside themselves to locate the company’s real core competency, and this has become the primary energy source propelling their business forward in the flat world. “What we sell now,” said Greer, “is strategic insight, creative instinct, and artistic flair. We sell inspired, creative solutions, we sell personality. Our core competence and focus is now on all those things that cannot be digitized. I know our clients today and our clients in the future will only come to us and stick with us for those things . . . So we hired more thinkers and outsourced more technology pieces.”
In the old days, said Greer, many companies “hid behind technology. You could be very good, but you didn’t have to be the world’s best, because you never thought you were competing with the world. There was a horizon out there and no one could see beyond that horizon. But just in the space of a few years we went from competing with firms down the street to competing with firms across the globe. Three years ago it was inconceivable that Greer & Associates would lose a contract to a company in England, and now we have. Everyone can see what everyone else is doing now, and everyone has the same tools, so you have to be the very best, the most creative thinker.”
Vanilla just won’t put food on the table anymore. “You have to offer something totally unique,” said Greer. “You need be able to make p. 345 Chocolate Chip Cookie Dough, or Cherry (Jerry) Garcia, or Chunky Monkey”—three of the more exotic brands of Ben & Jerry’s ice cream that are very nonvanilla. “It used to be about what you were able to do,” said Greer. “Clients would say, ‘Can you do this? Can you do that?’ Now it’s much more about the creative flair and personality you can bring to [the assignment] . . . It’s all about imagination.”
Rule #2: And the small shall act big . . . One way small companies flourish in the flat world is by learning to act really big. And the key to being small and acting big is being quick to take advantage of all the new tools for collaboration to reach farther, faster, wider, and deeper.
I can think of no better way to illustrate this rule than to tell the story of another friend, Fadi Ghandour, the cofounder and CEO of Aramex, the first home-grown package delivery service in the Arab world and the first and only Arab company to be listed on the Nasdaq. Originally from Lebanon, Ghandour’s family moved to Jordan in the 1960s, where his father, Ali, founded Royal Jordanian Airlines. So Ghandour always had the airline business in his genes. Shortly after graduating from George Washington University in Washington, D.C., Ghandour returned home and saw a niche business he thought he could develop: He and a friend raised some money and in 1982 started a mini-Federal Express for the Middle East to do parcel delivery. At the time, there was only one global parcel delivery service operating in the Arab world: DHL, today owned by the German postal service. Ghandour’s idea was to approach American companies, like Federal Express and Airborne Express, that did not have a Middle East presence and offer to become their local delivery service, playing on the fact that an Arab company would know the region and how to get around unpleasantries like the Israeli invasion of Lebanon, the Iran-Iraq war, and the American invasion of Iraq.
“We said to them, ‘Look, we don’t compete with you locally in your home market, but we understand the Middle East market, so why not give your packages to us to deliver out here?” said Ghandour. “We will be your Middle East delivery arm. Why give them to your global competitor, like DHL?” Airborne responded positively, and Ghandour used p. 346 that to build his own business and then buy up or partner with small delivery firms from Egypt to Turkey to Saudi Arabia and later all the way over to India, Pakistan, and Iran—creating his own regional network. Airborne did not have the money that Federal Express was investing in setting up its own operations in every region of the globe, so it created an alliance, bringing together some forty regional delivery companies, like Aramex, into a virtual global network. What Airborne’s partners got was something none of them could individually afford to build at the time—a global geographic presence and a computerized package tracking and tracing system to compete with that of a FedEx or DHL.
Airborne “made their online computerized tracking and tracing system available to all its partners, so there was a unified language and set of quality standards for how everyone in the Airborne alliance would deliver and track and trace packages,” explained Ghandour. With his company headquartered in Amman, Jordan, Ghandour tapped into the Airborne system by leasing a data line that was connected from Amman all the way to Airborne’s big mainframe computer in its headquarters in Seattle. Through dumb terminals back in the Middle East, Aramex tracked and traced its packages using Airborne’s back room. Aramex, in fact, was the earliest adopter of the Airborne system. Once Ghandour’s Jordanian employees got up to speed on it, Airborne hired them to go around the world to install systems and train the other alliance partners. So these Jordanians, all of whom spoke English, went off to places like Sweden and the Far East and taught the Airborne methods of tracking and tracing. Eventually, Airborne bought 9 percent of Aramex to cement the relationship.
The arrangement worked well for everyone, and Aramex came to dominate the parcel delivery market in the Arab world, so well that in 1997, Ghandour decided to take the company public on Broadway, also known as the Nasdaq. Aramex continued to grow into a nearly $200-million-a-year company, with thirty-two hundred employees—and without any big government contracts. Its business was built for and with the private sector, highly unusual in the Arab world. Because of the dot-com boom, which deflected interest from brick-and-mortar companies like Aramex, and then the dot-com bust, which knocked out the Nasdaq, p. 347 Aramex’s stock price never really took off. Thinking that the market simply did not appreciate its value, Ghandour, along with a private equity firm from Dubai, bought the company back from its shareholders in early 2002.
Unbeknownst to Ghandour, this move coincided with the flattening of the world. He suddenly discovered that he not only could do new things, but he had to do new things he had never imagined doing before. He first felt the world going flat in 2003, when Airborne got bought out by DHL. Airborne announced that as of January 1, 2004, its tracking and tracing system would no longer be available to its former alliance partners. See you later. Good luck on your own.
While the flattening of the world enabled Airborne, the big guy, to get flatter, it allowed Ghandour, the little guy, to step up and replace it. “The minute Airborne announced that it was being bought and dissolving the alliance,” said Ghandour, “I called a meeting in London of all the major partners in the group, and the first thing we did was found a new alliance.” But Ghandour also came with a proposal: “I told them that Aramex was developing the software in Jordan to replace the Airborne tracking and tracing system, and I promised everyone there that our system would be up and running before Airborne switched theirs off.”
Ghandour in effect told them that the mouse would replace the elephant. Not only would his relatively small company provide the same backroom support out of Amman that Airborne had provided out of Seattle with its big mainframe, but he would also find more global partners to fill in the holes in the alliance left by Airborne’s departure. To do this, he told the prospective partners that he would hire Jordanian professionals to manage all the alliance’s back-office needs at a fraction of the cost they were paying to have it all done from Europe or America. �
�I am not the largest company in the group,” said Ghandour, who is now in his mid-forties and still full of energy, “but I took leadership. My German partners were a $1.2 billion company, but they could not react as fast.”
How could he move so quickly? The triple convergence.
First of all, a young generation of Jordanian software and industrial engineers had just come of age and walked out onto the level playing field. They found that all the collaborative tools they needed to act big p. 348 were as available to them as to Airborne’s employees in Seattle. It was just a question of having the energy and imagination to adopt these tools and put them to good use.
“The key for us,” said Ghandour, “was to come up with the technology and immediately replace the Airborne technology, because without online, real-time tracking and tracing, you can’t compete with the big boys. With our own software engineers, we produced a Web-based tracking and tracing and shipment management system.”
Managing the back room for all the alliance partners through the Internet was actually much more efficient than plugging everyone into Airborne’s mainframe back in Seattle, which was very centralized and had already been struggling to adapt to the new Web architecture. With the Web, said Ghandour, every employee in every alliance company could access the Aramex tracking and tracing system through smart PC terminals or handheld devices, using the Internet and wireless. A couple of months after making his proposal in London, Ghandour brought all the would-be partners together in Amman to show them the proprietary system that Aramex was developing and to meet some of his Jordanian software professionals and industrial engineers. (Some of the programming was being done in-house at Aramex and some was outsourced. Outsourcing meant Aramex too could tap the best brains.) The partners liked it, and thus the Global Distribution Alliance was born—with Aramex providing the back room from the backwater of Amman, where Lawrence of Arabia once prowled, replacing Airborne, which was located just down the highway from Microsoft and Bill Gates.
Another reason Ghandour could replace Airborne so quickly, he explained, was that he was not stuck with any “legacy” system that he had to adapt. “I could go right to the Internet and use the latest technologies,” he said. “The Web enabled me to act big and replicate a massive technology that the big guys had invested millions in, at a fraction of the cost . . . From a cost perspective, for me as a small guy, it was ideal . . . I knew the world was flat. All my preaching to our employees as the CEO was that we can compete, we can have a niche, the rules of the game are changing, you don’t need to be a giant, you can find a niche, and technology will enable us to compete with the big boys.”
p. 349 When January 2004 rolled around and Airborne began switching off its system, Aramex was up and running for a seamless handoff. And because Aramex was able to run its new system off an Internet platform, with software designed primarily by lower-cost Jordanian programmers, installation of the new system took place virtually, without Aramex having to send its engineers to train any of the alliance partners. Each partner company could build its own client base over the Internet through the Aramex system, do its own tracking and tracing, and be part of the new virtual global air freight network.
“So now we are managing this global network, with forty alliance partners, and we cover every geographic area in the world,” said Ghandour. “We saved so much money . . . With our Web-based system all you needed was a browser and a password to get into the Aramex network, and suddenly you’re inside a global shipment management system.” Aramex trained many of the employees of the other alliance companies how to use its system by using various online channels, including voice over the Internet, online chatting, and other virtual training tools available on Aramex’s intranet—making the training incredibly cheap.
Like UPS, Aramex has quickly moved into insourcing. Arab and foreign banks in the Middle East have outsourced the delivery of their credit cards to Aramex; mobile phone companies are using Aramex delivery men to collect bills on their behalf, with the delivery men just scanning the customer’s credit card and then issuing a receipt. (Aramex may be high-tech, but it has not shrunk from using donkeys to cross military roadblocks to deliver packages in the West Bank when Israeli-Palestinian clashes have closed roads.)
“We are a very flat organization,” Ghandour explained. “This is not traditional, because Arab institutions in the private sector tend to look like the governments—very hierarchal and patriarchal. That is not how Aramex works. There are no more than two to three layers between me and anyone in the company. Every single knowledge worker in this organization has a computer with e-mail and Internet access. Right here from your computer I can access my intranet and see exactly what is happening in the organization without my senior people having to report to me.”
p. 350 In sum, Fadi Ghandour took advantage of several new forms of collaboration—supply-chaining, outsourcing, insourcing, and all the steroids—to make his little $200-million-a-year company very big. Or, as he put it with a smile, “I was big locally and small internationally—and I reversed that.”
Rule #3: And the big shall act small . . . One way that big companies learn to flourish in the flat world is by learning how to act really small by enabling their customers to act really big.
Howard Schultz, the founder and chairman of Starbucks, says that Starbucks estimates that it is possible to make nineteen thousand variations of coffee on the basis of the menus posted at any Starbucks outlet. What Starbucks did, in other words, was make its customers its drink designers and allow them to customize their drinks to their exact specifications. Starbucks never thought of offering soy milk, Schultz told me, until store managers started to get bombarded with demands for it from customers, to the point where they were going to the grocery store across the street in the middle of the day to buy cartons of soy milk. Starbucks learned from its customers, and today some 8 percent of all the drinks that Starbucks sells include soy milk. “We didn’t dream up the different concoctions with soy milk,” said Schultz, “the customers did.” Starbucks just collaborated with them. The smartest big companies clearly understand that the triple convergence allows them to collaborate with their customers in a totally new fashion—and, by doing so, to act really small. The way that big companies act small is not by targeting each individual consumer and trying to serve that customer individually. That would be impossible and impossibly expensive. They do it by making their business, as much as possible, into a buffet. These companies create a platform that allows individual customers to serve themselves in their own way, at their own pace, in their own time, according to their own tastes. They are actually making their customers their employees and having them pay the company for that pleasure at the same time!
One of those big companies that have learned to act small in this way is E*Trade, the online bank and brokerage house. It did so, explained p. 351 Mitchell H. Caplan, the CEO of E*Trade as well as a friend and neighbor, by recognizing that behind all the hoopla around the dot-com boom and bust, something very important was happening. “Some people thought the Internet was going to revolutionize everything in the world with no limits—it was going to cure the common cold,” said Caplan. Sure, it was hype, and it led to crazy valuations and expectations, which eventually came crashing down. But meanwhile, with much less fanfare, the Internet was creating “a whole new distribution platform for companies to reach consumers in a whole new way and for consumers to reach your company in a whole new way,” Caplan said. “While we were sleeping, my mom figured out how to use e-mail and connect with the kids. My kids were instant-messaging all their friends. My mom figured out how to go online and check her E*Trade balances.”
Companies that were paying attention understood they were witnessing the birth of the “self-directed consumer,” because the Internet and all the other tools of the flat world had created a means for every consumer to customize exactly the price, experience, and service he or she wanted. Big companies that could adapt their technology and bu
siness processes to empower this self-directed consumer could act very small by enabling their customers to act very big. They could make the consumer feel that every product or service was being tailored for his or her specific needs and desires, when in fact all that the company was doing was creating a digital buffet for them to serve themselves.
In the financial services industry, this constituted a profound change in approach. Historically, financial services was dominated by large banks, large brokerage houses, and large insurance companies that told you what you were getting, how you were getting it, when and where you were getting it, and the price you had to pay for it. Customers reacted to these big companies with emotions ranging from apathy to distaste. But if I didn’t like the way my bank was treating me, I didn’t have any real choice. Then the world was flattened and the Internet came along. Consumers started to feel that they could have more control, and the more they adapted their buying habits to the Internet, the more companies—from booksellers to financial services—had to adapt and offer them the tools to be in control.
p. 352 “Sure, the Internet stocks blew up when the bubble burst,” said Caplan, whose own company’s stock price took a big dip in that market storm, “but underneath, consumers were getting a taste of power, and once they tasted it, things went from companies being in control of consumers’ behavior to consumers being in control of companies’ behavior. The rules of engagement changed, and if you did not respond and offer customers what they wanted, someone else would, and you would be dead.” Where once the financial services companies acted big, now they strove to act small and to enable the consumer to act big. “Companies who prosper today,” argued Caplan, “are the ones who understand the self-directed consumer.” For E*Trade, that meant thinking of the company not as a collection of individual financial services—a bank, a brokerage, and a lending business—but as an integrated financial experience that could serve the most self-directed financial consumers. “The self-directed consumer wanted one-stop financial shopping,” said Caplan. “When they came to our site they wanted everything integrated, with them in control. Only recently, though, did we have the technology to really integrate all our three businesses—banking, lending, and brokerage—and pull them together in a way that didn’t just deliver the price, not just the service, but the total experience they wanted.”
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