China and India

China recently passed the United States to become the world's largest economy defined in terms of gross domestic product (GDP) purchasing power parity. Although this news created only a small blip in the Western business press, it represented a historic milestone that is likely to be followed soon by other landmark events. Calculations based on market exchange rates—a more common yardstick of GDP—indicate that China will surpass the United States to become the world's undisputed economic leader by 2030.

India is also expanding rapidly; current estimates indicate that by 2050, China, the United States, and India will be the top three economies in the world.¹ While China and India still have many rural and comparatively unaltered areas within their borders, their growing industrial and technological prowess as well as their higher ranking among the world's economies signify that they have officially graduated from “emerging” to “emerged.”

Europe's relative economic position is changing simultaneously. Membership in the Group of Seven (G7), an economic forum originally founded in the 1970s by the world's most industrialized countries, provides a symbolic example. Original G7 members from Europe included France, West Germany, Italy, and the United Kingdom. If the same organization were to be recreated in 2050, it would probably include no European member nations. According to current projections, there will not be a single European country whose economy is among the world's top seven by that time.² In order to offer Europe G7 entry, it would be necessary to combine two or three countries, or perhaps all of Europe.

Humanity has witnessed these kinds of changes before. China and India previously dominated the global economy for centuries. China, for example, created revolutionary innovations such as gunpowder and printing that were later exported to Europe while supplying the Silk Road and far-reaching maritime trade routes with precious goods. Each country has approximately four times the population of the United States and more than double the number of people in Europe as a whole. Nonetheless, the ongoing recasting of global positions represents a tectonic shift in the modern economic order and is in part a transition back to the future (see Sidebar 1.1).

Personal Consequences

The world's shifting economic center has vast implications for almost everyone, particularly those who have been at the top and at the bottom of the global economic order. During the past century, U.S. and European leadership and business models largely dominated multinational corporate cultures. The economic shift toward markets such as China and India means that these countries and their leaders will increasingly shape the way business is conducted.

New leaders from Asia and elsewhere will need to consider their own core values and vision for the future and how they can inspire their global colleagues. Beyond material success, what will make their careers fulfilling and worthwhile? If current or aspiring leaders from Europe and North America go on with business as usual—assuming that their privileged position will last forever—they risk looking like human ostriches, heads buried in the sand to avoid the speeding freight train of globalization. Rather, they must embrace the planet's inexorable tilt toward rising economies and learn how to succeed together with employees from around the world who want to be treated as full partners. Sometimes the consequences are very personal, and one's career can take an unexpected turn.

More Countries on the Way

Change is occurring in other places that could affect the careers of Ingrid and her colleagues. Although China and India are the biggest players in the shifting global economy, a number of locations in Asia, the Middle East, South America, and Africa continue to grow rapidly. Countries like Turkey, Malaysia, and Poland are already or soon will be among the ranks of the emerged nations.

Trend lines seldom remain constant over time, and unpredictable events occur: natural disasters, civil unrest, war, disease, economic crises. The BRIC (Brazil, Russia, India, China) countries were once touted as the growth economies of the future, but Brazil and Russia have both since experienced economic turmoil and stagnation. Even China's once torrid double-digit growth has slowed to single digits and what its government is calling the “new normal,” although this is still double or triple the growth rates in the United States and Europe. And, as many companies that invested in Russia have discovered, geopolitics can scuttle once-promising trends. Investing in Russia seemed like a fine idea based on its size and market potential when the BRIC acronym was coined, but the country has turned out to be a far riskier place for investors than many predicted.¹⁶ Corrupt governments, poor infrastructure, and limited educational opportunities also hold back development in many locations.

Such caveats notwithstanding, the general trajectory from west to east and north to south has been in place for decades. Projected global population growth of at least two billion more people, almost all outside of the developed world, suggests that this trend will continue. One calculation places the global economy's center of gravity in 2050 between India and China, or more than 5,000 miles east of where it was in 1980.¹⁷ Carlos Ghosn, renowned CEO of automaker Renault-Nissan, remarks, “Growth is going to come from new markets—we all know China, India, the Middle East, South America —but also from the countries of the future, which are going to be the next wave coming.”¹⁸ In particular, projections based on population and/or natural resources often point to countries such as Mexico, Indonesia, Nigeria, Turkey, Vietnam, Iran, Egypt, Colombia, and the Philippines. Acronym lovers undeterred by the mixed performance of the BRIC nations now refer to the first four of these as the MINT countries.¹⁹ Their continued growth will require further investments in infrastructure along with ongoing social and political reform, and some will be more successful at harnessing their potential than others.

While the future will undoubtedly bring surprises as well as further developments based on existing trends, Ingrid and others are beginning to experience a new world with many centers and a fracturing of previous lines of power, investment, technology transfer, and political authority. Dozens of regional economic hubs are bursting with activity and rapid development. The largest cities on the planet now include Beijing, Mumbai, Lagos, Chongqing, Jakarta, São Paulo, Karachi, and Mexico City, with more on the way. Two-thirds of global economic growth is being driven by cities in the developing world; there will be approximately 370 new cities of over half a million people by 2030.²⁰ Asian consumers are also increasingly shaping demand, and within 15 years will account for a significant majority of both the global middle class population and of worldwide consumption.²¹

Cutting-edge technological advances are as likely to be visible in newly emerged locations as in renowned centers of innovation. Infrastructure in many Chinese cities, for example, is often more advanced than in Silicon Valley—skyscrapers, bullet trains, subways, and cell phone connections are all more modern and efficient. It has become common in many locations, including parts of Africa, to leapfrog whole generations of technology, for example, by skipping the installation of landlines for telephones and the build-out of a nationwide retail banking infrastructure, and instead moving straight to e-commerce via cell phone. Top talent, too, can come from previously untapped sources, as Ingrid's bank is learning. Workers in an ever greater number of professions must both collaborate and compete with colleagues from other continents.

Under New Ownership

Western firms have been scrambling to augment their presence in global markets, where they are anticipating further growth. They encounter rival enterprises that were once primarily local, but which have now expanded beyond their home markets to compete with fellow multinationals worldwide. Huawei competes fiercely with Cisco, Lenovo with Hewlett-Packard, Hyundai with Ford, Emirates with British Airways, SABIC (Saudi Arabian Basic Industries) with Germany's chemical giant BASF, and Tata Consultancy Services with Accenture.

This trend is gathering momentum: McKinsey estimates that whereas 95 percent of the Fortune Global 500 was headquartered in the developed world in the year 2000, by 2025 almost half of the world's companies with a billion dollars or more in revenue will be headquartered in other markets.²² Due to rapid growth, along with mergers and acquisitions, leading global enterprises in economic sectors once integral to Western technological prowess now have owners based in Asia, the Middle East, and South America (see Sidebar 1.3).

Fast-Growth versus Slow-Growth

Instead of the outdated contrast between developed versus emerging economies, it is now more relevant to compare markets growing at different rates. Leaders and organizations that aren't aware of rapidly shifting customer tastes and preferences in fast-growth markets such as India will be left behind as other firms grow more quickly. On the other hand, those who fail to make careful strategic choices in slow-growth markets such as Italy or France are likely to wither in the face of high costs and fierce competition. Global organizations must make decisions and develop strategies for different regions, and encourage meaningful participation by people from those locations who possess the deepest market knowledge. Some common differences between the two types of markets are listed in Table 1.1.

Successfully navigating today's global business environment requires that companies straddle the inherently competing demands of both fast- and slow-growth markets. Here is an example of the cross-border business challenges this global contrast can produce.

Global Agility

The shifting global economy has several other implications for people in almost any country. Many companies are expecting more than half of their growth to occur outside of their familiar strongholds in the coming years, which underlines the constant requirement to be agile. Present or future leaders will likely need to traverse new borders in several ways: crossing unfamiliar geographical boundaries, adapting to a changing home environment, and challenging artificial boundaries imposed by outdated mental models.

• Crossing unfamiliar boundaries. Many people will be asked to go to places they have never visited or perhaps never even heard about previously. Europeans can expect to do business in China, Chinese in India, Indians in Africa, and Africans in Europe. And beyond the usual capital locations, leaders may find themselves drawn to expanding second-tier cities such as Surabaya in Indonesia's province of East Java, Chongqing in southwestern China, or Belo Horizante in Minas Gerais, the Brazilian state north of São Paulo.
• Adapting to a globalized home. Once-familiar places are also changing rapidly. Urbanization, migration from abroad or within the same country, economic growth, and other forces are all altering what is “known”—whether that is in Los Angeles, London, Beijing, or Kolkata. Old physical boundaries that once provided clearer demarcations between different national cultures have grown more porous and flexible. Meanwhile, new kinds of borders—socioeconomic, religious, ethnic, linguistic—have arisen in places we thought we knew. As China's economy has grown and previous restrictions on individual movement have been relaxed, Tier 1 such as Beijing and Shanghai each have attracted millions of poor migrant workers from other parts of the country; these internal immigrants speak different dialects and have set up their own community networks for mutual support. Europe's Islamic population is already 6 percent and increasing quickly relative to other groups; there are 9 million immigrants or children of immigrants from Turkey alone. Demographers also predict that white citizens of the United States will no longer be the majority by 2050, while the country's Hispanic population will comprise almost 30 percent of the total.²³

  This massive flow of people across former boundaries within and between countries has numerous practical consequences. For example, immigration has markedly impacted the domestic health care industry in the United States, which some might think would be slow to transform:

  • Some 27 percent of U.S. physicians are foreign-born.
  • Up to 15 percent of U.S. nurses are foreign-born.
  • Between one-fifth and one-quarter of U.S. direct care workers (nursing aides and home health aides) are foreign-born.²⁴
• Challenging mental models. Experienced leaders may still be relying on mental models that no longer reflect reality, and which create artificial boundaries among past, present, and future. If one's mental map of the world still highlighted the biggest cities of 100 years ago, it would be seriously flawed today. Countries and their markets change, which alters our map of the world's economy. For instance, Japan's star has fallen rapidly as its once-booming economy has stalled and other countries have grown. South Korea followed Japan's ascent, becoming one of the next wave of Asian tigers; however, the achievements of this relatively small country now seem to pale next to those of its Chinese neighbors. And while the Chinese economy is still growing at breakneck speed by current Western standards, it is starting to cool off as its population ages, with some industries experiencing more severe slowdowns or boom and bust cycles. Regional disparities in the level of development and economic growth between China's east coast and interior make the real picture quite complex.

  We must also reexamine models for how to lead and to best cultivate new leaders as global markets shift. In addition to boundaries between or even within nations, there are new borders to be crossed at the edge of every outmoded concept, and these may be as important as lines on a map that are enforced with guard posts and customs officials. Global talent may object to outsourcing; global mindset means more than culture there are global teams that cannot be rescued by facilitation; there is more to diversity than race and gender acquisitions can fail in spite of proper diligence; successful innovations require more than great products; and global ethics means going beyond the immediate interests of shareholders to create a broader definition of integrity.

  Global leaders need to approach familiar tasks in novel ways and lead across geographical, cultural, and mental borders. Current leadership development methods might not be adequate to address the fast-growth/slow-growth dichotomy or to meet the urgent need for a vastly larger talent pool of people who can take an agile approach to global business opportunities.