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Flat world gives rise to innovative companies

How CIOs can help their companies make the shift from an old world mentality to a flat world strategy.

SCOTTSDALE, Ariz. -- The world economy is changing, it's globalized and flat -- and forcing even the most successful companies to rethink their business models.

Deal with a changing world or disappear, said Nandan Nilekani, CEO and president of Indian outsourcing giant Infosys Technologies Ltd.

"Is a flat world good or bad? That's like asking if gravity is good or bad," said Nilekani, who spoke at this week's Forrester Technology Leadership Conference.

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Every company will eventually be affected by the opening of emerging economies, structural shifts in global demographics, the ubiquity of IT and increasing regulation, said Nilekani, who refers to these factors as the four global forces.

Indeed, what companies make, to whom they sell, where they sell, at what price and where they produce their goods are all subject to these four forces, Nilekani said. "Everything in your business in some sense is up for grabs."

Up until 1978, more than half of the world's population was not part of the global economy, Nilekani said. Today, emerging economies, with their large markets and large labor pools, not only gave rise to companies like Infosys, but also turned India and China into one of the largest consumers of mobile phones -- 10 million a month. Shifts in global demographics -- an aging, affluent Europe, a youthful and relatively poor Asia -- will also affect how those phones are priced.

He outlined several ways CIOs can help their companies make the shift from an old world mentality to a flat world strategy.

First, instead of dreading the "China price" -- worrying what happens if somebody comes along who can make a product cheaper -- companies need to "be the China price. This is a reality which will not go away," Nilekani said. IT departments should be asking themselves if the IT is architected to take advantage of the global production and consumer markets.

Second, the concept of winning customer loyalty through customer service is par for the course. In the new flat world, customer loyalty will be won through faster innovation. Repeat business will hinge on what's new. "The pace at which we generate ideas from concept to product has to increase," Nilekani said.

Third, if CIOs want a seat at the head table, they need to show their organizations how to capitalize on, not just pay for, IT. "The question to ask is how can we go from being people who spend money on information to helping our business partners make money from information?" Nilekani said. The challenge is considerable, given the multitude and diversity of IT systems at many companies. The cost of streamlining or implementing a single business change becomes very expensive. Still, the "great companies will figure out how to make money from information," he said.

The great companies will also be able to "win in the turns," not just the "straightaway." Companies that can't respond to and take advantage of change are in jeopardy, Nilekani said, citing his own company's ability to adapt after the tech bust of 2001. In the past six years the company grew from 2,000 to 58,000 employees.

"More people need to hear this," said Sudi Bindiganavile, director of information services at Primavera Systems Inc., a software company in Bala Cynwyd, Pa.

He said he particularly liked Nilekani's comparison of the flat world economy to gravity. "It is what you make of it. You can design an airplane that can fly despite gravity or crash," Bindiganavile said. The company has an IT staff of 17 to serve Primavera's 425 employees, including a new sales office in the U.K., and has looked to IT to help it adapt. "But then, we are a technology company. There is a huge appetite for technology."

Let us know what you think about the story; email: Linda Tucci, Senior News Writer

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