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Not all of you will have seen the commentary
by John Roth, head of Nortel, in the Globe and Mail a couple of days ago, so I'm
reproducing it below.
Roth is probably right. Big will become
bigger and bigger because transnationally there are few rules about size,
combinations, monopolization, location, etc. In the markets that
really count, there will only be a very few big players, and probably many
thousands of small ones dependent on crumbs from the big ones.
The other point Roth makes is that
intelligence has become a valuable and highly marketable commodity.
Increasingly, the brightest people are not in our universities or government
institutions, but working for Nortel or Microsoft or JDS Somethingorother.
Having the most intelligent people working for you would undoubtedly give you a
large competitive advantage. Given that the talent pool is limited
relative to demand, how do you get the most intelligence for your buck?
Well, perhaps you can find ways of creating it. We are mapping the human
genome. We have already cloned sheep. In some countries, it is no
longer considered immoral to experiment on the human foetus, and gene therapy
could become for profit genetic manipulation. Genetic modification has
become a big business, now mainly focused on plants, but why not animals and why
not us? Right now there are restrictions on what is permissible, but ten years
from now, who knows, especially in countries where life is cheap and everything
is for sale. I doubt very much that our politicians will be able to hold
the line, given the power that the Nortels of this world are likely to
acquire. Nor do I think that we will put the international safeguards in
place in time. Consider Kyoto. And anytime anyone tries to establish
international rules, the kids dress up as turtles and riot.
I'm probably quite wrong. We should
trust Roth. After all, isn't he a good Canadian boy, the very image of
Captain Beavo, out to show the world we too can play?
Ed Weick
Visit my rebuilt website at:
http://members.eisa.com/~ec086636/ A new world's coming National companies are going to disappear, says Nortel's JOHN ROTH. In the future, there will be only small local companies and global corporations. Canada better be ready JOHN ROTH Tuesday, December 19, 2000 Big changes are coming with the new millennium, and I see two that will dominate and determine Canada's future. The first involves global free trade. The North American free-trade agreement (NAFTA), the European market, and the actions taken by the World Trade Organization (WTO) have launched us well down the path toward open global markets. Now technology, particularly that unstoppable force called the Internet, is taking over as the main driving force accelerating globalization. The Net enables all companies to become global companies. Businesses of all kinds are discovering how they have a powerful new distribution channel at their disposal; it puts any customer, no matter where they're located, effectively across the street. This turns traditional business models upside down, whether they're the models of a specialty auto parts shop or a multinational corporation like G.E. The second trend of particular importance to Canada is the steady decline in the value of natural resources compared to human resources. Conservation and the worldwide recycling movement mean that demand for natural resources is growing at a slower rate than the world economy. At the same time, developing countries are starting to export more of their natural resources. So for Canada, a continual decline in the relative value of our natural resources seems inevitable. Meanwhile, the value of human resources is increasing dramatically. Knowledge-based industries are fast becoming the economic engines of countries, and human talent is the fuel that runs those engines. However, top talent is already becoming scarce on a global basis. As the boomer generation starts to retire, human assets will become even more precious. These global mega-trends cannot be ignored. They signify the emergence of a new era -- and if Canada is to prosper we will need to think strategically. First, we must come to grips with the reality of free trade. Like many countries, we still have foreign ownership restrictions in several areas, including finance, telecom, transportation, and publishing. We also have other well-developed protectionist policies such as mineral rights, stumpage fees, and marketing boards. In total, 42 per cent of the member companies of the Business Council on National Issues (BCNI) are still protected by some form of government regulation. As the world moves toward open global markets, these protectionist measures will prove unworkable. As they disappear, we'll be left with a serious problem. We have lots of great companies, but protectionism has insulated them from full exposure to market pressures. Without protection, our companies will be exposed for what they really are -- domestic enterprises operating in a relatively small market. And with a correspondingly small market capitalization, they're attractively priced for takeover by a global company. In fact, I believe national companies are going to disappear throughout the world. In the future, there will be only very focussed local companies serving customers in their city or town, and global companies who will seek out customers worldwide. Canada cannot hide from this. We're going to see the end of domestic-based oligarchies and anti-competitive duopolies -- but we still have time to save our leading Canadian companies by turning them into global corporations. Nortel Networks is an example of what Canadian companies can achieve on the world stage. Indirectly, we also operated under foreign ownership restrictions by virtue of BCE's 52-per-cent ownership of our company. However, that ownership structure proved unworkable and a spin-off this spring resulted in Nortel now operating on an equal footing with any other global corporation. Our global approach to business has rewarded us very well. Our market capitalization, even at today's bargain-basement prices, puts us in the top two or three global telecom companies, ahead of others including Motorola, Lucent, Ericsson, and Alcatel -- not too shabby for a Canadian upstart. When the books close at the end of this year we expect to reach $45-billion in revenues. More than 95 per cent of that will have come from customers outside Canada. Had we contented ourselves with the Canadian market, we simply would't exist. As in football, if a team with a big lead goes into a defensive shell waiting for the clock to run out it's guaranteed to lose. You have to play offensively. We saw the Internet as a major discontinuity and huge opportunity, so we aggressively pursued customers worldwide and became one of the Net's few global leaders. One of the lessons we've learned is that, in the Internet era, being big is much less important than being agile. Very big companies tend to be inflexible and are often stuck playing defence, while the small and agile tend to play offense because they have less to lose and way more to gain. Canada needs to see itself as an agile competitor playing offense. We're in a global game that has our future prosperity at stake. I believe the quality of our social programs defines Canada as much as the maple leaf does, but it takes a robust economy and strong taxation base to pay for those programs. Today, much of our wealth is still generated by our natural resources and the high-income jobs of our domestically focused corporations. And, if I read the mega-trends correctly, Canada's wealth will continue to decline. Ottawa has taken some positive steps. It has recognized the Internet will be the future distribution channel to world markets, and established the goal of making Canada the most connected nation on the planet over the next few years. But we need to move much further and much faster; we need to reverse and then close the growing gap between Canada's standard of living and that of the U.S. Specifically, we need to plan the transition of Canadian companies into viable global competitors. Clearly, the responsibility for this transition rests on the shoulders of our CEOs -- but they'll need government to implement a co-ordinated strategy to remove both protection and obstacles to global growth. Canada will not succeed in the new economy unless we embrace a more can-do kind of mindset that showcases, rewards, and encourages Canadians to become winners across all sectors of the economy and society. We also need a plan that deals with the second global mega-trend in which future wealth will come from human assets instead of natural resource assets. Canada has always presumed we would have wealth -- but because our minerals, oil, trees, and protected industries were not mobile, the task has been how to distribute it. But people and global corporations are very mobile. And now too many of our critical, highly mobile wealth-producing assets are already moving out of Canada. Over the past year I have spoken out over the "brain drain," and the debate has prompted huge counting activities studying the flow of "brains" in and out of Canada. As brains came to be viewed as a commodity, I started expecting to see "brains" listed along with hog bellies and feed corn. Part of the reason we're experiencing a huge drain is because so many Canadians and our government still tend to view talent as a commodity. We need to see skills and talent as our most precious resource and treat them accordingly. When people don't feel valued they leave and go to a country where they are better appreciated -- where there's a culture of winning, and the sense of opportunity that winning creates. We need a strategy for training, retaining, and attracting talent. Global companies are in a war for talent. And so is every nation. Whenever Canada loses one of its talented people there should be an exit interview. We should find out why our talent leaves and what needs to be done. If exit interviews work for industry, they can also work for a country. I don't think Ottawa fully realizes the extent to which Canada's talent is under attack. The fact is we have already lost too many of Canada's brightest across many industry sectors, especially high-tech. We have suffered the loss of almost an entire generation. We'll miss their creativity, their leadership, the job opportunities their triumphs would have created for countless other Canadians, and the wealth they could have created for other Canadians. Our goal must be not just to curb the flow, but also to bring back home the talent we lost. The pre-election budget proposed by Paul Martin starts to address the issue, but more remains to be done -- and fast. If we lose this war, future generations of Canadians will view our inaction as an unforgivable mistake. John Roth is president and CEO of Nortel Networks Corp. This week, he was named Time magazine's Canadian Newsmaker of the Year. |
