After my last three posts on globalization, I had planned to move on from the topic. But after finishing Jeff Rubin’s “Why Your World Is About To Get a Whole Lot Smaller”, I am inspired to write one more post!
Rubin’s thesis is that globalization has been built on cheap oil, which has allowed western businesses to outsource to low cost labour around the world and then transport goods back to the west. According to Rubin, this will soon change as the supply of oil dwindles and reliance on much more expensive sources, like Canada’s oil sands, makes the cost of transportation prohibitive. Outsourced manufacturing and agriculture will relocate closer to home, bringing an end to the era of low inflation and globalization.
While Rubin does not tell us what the tipping point of oil prices will be, one thing is for sure: Mother Nature is not creating enough new oil to keep up with demand.
Rubin’s thesis is food for thought as we think through the implication for our own business. In this economy, PR would need to make fewer adjustments than most businesses. Ours is already a largely local business driven by local networks and familiarity with local business and government networks.
The promise of globalization has led many in our industry to envision firms that are driven by the growth of forty or fifty (largely US-based) clients, all managed centrally from a global communications platform. The theory is that clients would be able to take advantage of high-quality talent and best practices on a borderless basis. The objective would be to improve service to our clients and ensure greater cost efficiencies. If Rubin is right, and the era of globalization is ending, this objective would become a whole lot more difficult.
Because most of PR is about “boots on the ground”, the rise in energy prices will only reinforce the tendency to rely on local labour. So what are we likely to see if energy prices go up as Rubin is predicting? Well I can see:
- A more direct relationship between global HQ & individual offices and countries
- More local offices as global firms get closer to local customers
- Less consultant travel and more reliance on local generalists, and global support for technology and training
- More variety in the pricing of our services as local markets drive our business model
- Considerable diversity in HR and legal practices as an increasingly localized company adapts to the variety and cultural national standards around the world.
As we think through how we capitalize on our international network, the counter currents that I have been discussing in my last few posts could conspire to reinforce the local nature of our business. The lesson for H+K may well be that we should place our emphasis on local offices so that they are well equipped to be the very best they can be in their own market.
At the end of the day, whether Rubin is right or not – strengthening our local operations will be more important than anything else we can do to establish the type of consistent quality that an international network needs to compete globally.
Authored by: Mike Coates