Globalization Globalization is the most spoken word in today’s business context due to the impact it has caused in operations and operations management. This is the integration of multiple societies and economies which is driven by factors such as new technology, national & international policies and new economic relationships (Bernhard G Gunter, 2004).
However, the context of globalization is addressed in two major conceptual view, where the first concerns the factors such as technology, investment, trade, information flow, communication and cross-border manufacturing whereas the second focuses on homogenization of policies and institutions across the globe (Bernhard G Gunter, 2004).
It is no doubt that globalization has contributed in bringing economies, societies and cultures together. Most industries are dominated by multinational companies whereas only a very few highly specialized markets are led by medium scale companies (Büchler, 2018). This indicates the strength multinational organizations have gained through globalization.
Digital Enterprise
“Globalization” & “Technology change” have become two major topics discussed in today’s business environment which have also made a noticeable impact on business operations.
Traditional production and service business environments have been transformed into more physically distributed business environments, which include virtual enterprise existence and e-commerce business. “Change management” and “effective responsiveness” play a critical role within organizations whereas managers concerns are shifted from managing physical assets and human resources to knowledge assets in digital enterprise environment (Angappa Gunasekaran, 2007).
With the reconfiguration of infrastructure and operations in enterprises through information technology, adaption of technology has brought competitive advantages to organizations (Linda, 2011). Hence, an organization which makes use of technology to gain competitive advantages both in its internal & external operations is know as a Digital Enterprise.
However, an organization converting to a digital enterprise would not happen overnight. Instead, it would require proper planning, implementation & change management.
The transformation starts from understanding where the value of digital falls, which then needs to be prioritized and look into an end to end approach where all functions operates together. Finally, a detailed analysis can be done to understand the impact of digital on valuations (Paul Willmott,2013).
As digital transformation creates many business opportunities, factors such as big data and artificial intelligence have an immense influence in business models (Wodecki, 2019).
Global Economy
Global economy - Interconnected global economic activities between multiple countries, has resulted in both positively and negatively to a country’s economic stability and development.
A drastic change in the manner the global economy behaves is seen over the past decade while direct influence is caused in movements of assets across countries and people.
With its own changes, global economy has emphasized few key characteristics – Globalization, International trade, International finance and Global investment, which are inter-related.
Globalization & global economy has led to an improvement in performance of local economies whereas international trade is a positive result of globalization if utilized effectively. When a country can manufacture products and services at a comparatively lower opportunity cost than the trading partners, it creates an opportunity to enter and facilitate new markets around the globe. Moreover, global economy has featured the fast and efficient movement of money between countries to facilitate the finance requirements. However, there will be areas such as exchange rates and monetary policy of a country to be discussed with related to international financing. Opening up economies and trade have created opportunities to expand investments to multiple countries irrespective of the geographical boundaries where competitive advantages can be gained. Foreign direct investments are the main source of global investments (Edology, 2021).
In an environment of rapidly changing business approaches, leaders play a major role in sustainability and growth of an organization globally. Leaders should ensure that unique and new ideas are developed for economic success (Mintzberg et al., 1998).
Value of Customers in Digital Economy
Majority of the organizations that have succeeded so far in modern business environment are customer-centric and treat customers as assets which are worthy of innovative investments (Michael Schrage, 2016).
Hence, as a result of digital networks, organizations creatively invest in its customers and clients. The network effect of organizations such as Google, Apple, Facebook, Uber, Amazon and LinkedIn have taken over the global market while being established and generating immense profits around the globe. Innovativeness, value creation and growth in digital markets have assisted these organizations to obtain global standard and take part in the global economic activities.
The Triple-S framework – Segment, Socialize & Skill has impacted organizations enormously to be innovative and create value to people while capturing benefits from network effect (Michael Schrage, 2016).
Cultural Intelligence
Enhancing the abilities such as understanding, adapting and adjusting to various or different cultural settings is what cultural intelligence is all about (Dogra & Dixit, 2017). The knowledge on the cultural differences would assist an individual to out-perform competition and capitalize on the opportunities existing around the global market and economies.
Cultural intelligence is also seen as the skills required overcome cross cultural challenges and make a positive impression (Thomas, 2006).
However, globalization and volatility of business environment have forced to look into cultural intelligence in different views and perspectives. Awareness of the realistic influences by globalization and being neutral on intercultural settings is a key characteristic of cultural intelligence in modern business environment (Earley & Ang, 2003). Earley & Ang (2003) developed and introduced four critical components in Cultural intelligence – Metacognitive, Cognitive, Motivational and Behavioral.
It is mandatory for an individual to focus on shaping and sharpening the skills required to perform in a global platform (Peterson, 2004).
It has statistically proven that cultural intelligence framework assist beyond predicting the intercultural success where an understanding on the decisive abilities by which individuals feel at ease in intercultural situations is provided (Ng et al., 2012).
Culture and Leadership
Leadership is different to management. While leaders mainly focus on the human resources, managers are more interested in numbers (Kotter, 1990). However, leadership highly depends on the cultural issues (René Rüth & Torsten Netzer, 2020).
The difference between leadership and management can also be described considering time. Managers are focused on present while leaders focus on future (Kotter, 1990).
Majority of tasks in nowadays businesses related to digital transformation can be dealt with intercultural leadership (Levy et al., 2016).
As per above and more empirical findings have proven that higher cultural intelligence would result in better and effective leadership (Groves and Feyerherm, 2011).
In the global context and inter-connected world, cultural intelligence or rather CQ has become the key for effective leadership (Dan Paiuc, 2021).
Cultural intelligence has a direct link to various other traits and factors such as efficient leadership, globalization, digital revolution and circular economy (Dan Paiuc, 2021). These will be discussed in detail in the latter part of the article.
Digital Enterprise & Global Economy
Despite of the flow of international trade, globalization is moving forward with a rapid growth. Digital flow has shown an immense growth throughout with transmission of ideas, information and innovation across geographical boundaries and expanding the participation in the global economy.
Unlike past, businesses cannot survive without moving forward with technology. Hence why digital competencies are essential for an organization as well as for a country for its growth, sustainability and economic resilience (Bhaskar Chakravorti, Ajay Bhalla, and Ravi Shankar Chaturvedi, 2020).
Economists have studied the scientific progress and technical change call a general-purpose technology. This results in the digital transformation which would influence in boosting productivity across all industries and sectors (Martin Mühleisen, 2018).
As the global economy and digital enterprise concept grew rapidly with time, the organizations had to shift their strategies – both competitive & marketing strategies, and business models to fit in and remain strong (Sarah Green Carmichael, 2016).
Surveys have shown that in 2016 the digital economy has accounted for US$ 11.5 trillion to global market. This is 15.5% of global GDP in 2016. Moreover, over the past 15 years, digital economy has grown 2.5 times more than the global GDP.
Digital enterprise landscape has been influenced by the digital economy at a large scale leading to a development and growth of new organizations and industries, re-structuring the business models of traditional industries and reporting as a key factor in global value chain. Moreover, digital economy has been able to re-shape the enterprises of the global economy while creating new opportunities and challenges in international market (Gestrin, Michael V. and Julia Staudt, 2018).
Even though there is no clear definition for “Digital Economy”, it can be summarized as the broader economy as the economy undergoes the process of becoming more digital. The concept of digitalization plays a significant role in multinational enterprises in all sectors of the economy. Considering the ways multinational enterprises organize their international operations, digitalization has become a key factor making digital policy a major factor grooming and shaping internationalization.
Due to the power of scaling, digital business models have gone beyond national boundaries. The said power lies in the practicality of applying to unlimited customers once the core services have been established successfully (Meyer, 2016). This assist a digital enterprise to grow in global economy effectively. However, the design and application of the model should be carefully done in order to implement the best fit to a particular market and optimize profitability from a market.
The New Era of Global Enterprises
World’s flow of trade analysis has indicated that emerging economies accounts to more than fifty percent of global trade flow. This signifies the how strongly the world is interconnected compared to past.
As the digital flow of information, communication, commerce and intracompany traffic trends to increase rapidly, it is predicted that cross border bandwidth will increase by nine times of what it was in 2005. Moreover, comparatively, international transactions and network have become cheaper with the use of digital platforms which changed the economics of doing business across country boundaries. This has given the opportunity to an enterprise to open up for a larger base of customers and reach out to them in an effective manner. With the development and adaption of digital technology to enterprises, even the small-scale businesses have become “micro-multinational”. Surveys have proved that over 900 million people around the world have connections to international availabilities through social media while over 360 million people actively participate in cross border e-commerce (McKinsey & Company, 2016).
In 2014, US$ 7.8 trillion worth value increase has happened to world’s Gross Domestic Production (GDP) through global flow. Hence, global enterprise has influenced in global economy growth through an increase in productivity.
Development of digital enterprises through the use of emerging new digital business models proves that internationalization is a key factor in modern globalized and digitalized economy (René Rüth, 2020).
As stated above digital technologies have changed how business is done across borders. Below diagram is an extraction from a report published related to global flow.
(Source: McKinsey & Company (2016) Digital Globalization: The new era of global flows)
Despite all, digital economy uses 10% of the world’s electricity (Bryan Walsh, 2013). Moreover, movement to cloud has increased the carbon emission by the digital economy.
Building Block of Digital Economy
There are three building blocks discussed under digital economy – digital data, digital technology & digital infrastructure. With digitalization, things would be converted to digital data which would then be used as the base for new business models. Digitalization has also led to the birth of various new digital technologies – ICT, information & communication technologies. These new technologies have influenced in development of new products & services. However, the most important building block for both digital data and digital technology-based economies is the development of digital infrastructure. This creates the foundation for digital applications, services and business models (Gestrin, Michael V. and Julia Staudt, 2018).
Digital Enterprise & Cultural Intelligence
As discussed above digital transformation is the base to a creation of a digital enterprise. Along with new business models and improved business processes, companies would change the way they work with real time information. A conversion to a digital enterprise would only be effective if the organization drive the change in culture (Guido Wokurka. Yvonne Banschbach, Dominic Houlder, Richard Jolly, 2017).
The organizational designs are built over digital technologies and agile structures via digital transformation to adapt to frequently changing opportunities and threats. Contemporary organizations take up a common approach to configure the organization to enable and support data driven operations, swift transformation & instant releases (André Hanelta, René Bohnsackb, David Marzc and Cláudia Antunes Marante, 2021).
A recent survey done with participation of 340 organizations has stated that the largest hurdle in a digital transformation would be the cultural issues. The survey figures records 62% of responds in favorable of the finding (Rashmi Dalai, 2017). However, a successful digital transformation to create a digital enterprise is built upon two major pillars – Transparency and vision. In the process of creating a transparent culture with a clearly stated vision, cultural intelligence would play a critical role.
Leadership in Digital Enterprise
Without internationalization paying a major role, resounding the success in a market is a challenge. Hence, more diverse digital leadership should be looked as more inter-cultural leadership. The mix or the intermingle of culture and expertise or the proficiency in multiple cultures which is the ability of an individual to across cultural borders is crucial for a leader who engage with customers and employees from multiple cultural backgrounds (Kreutzer et al., 2017).
As the digital transformation is a discoverable characteristic of almost all companies, there is revolutionary changes in the means an organization is run, goals and the social business environment the business is functioning (René Rüth & Torsten Netzer, 2020).
Even though Big Data and artificial intelligence assist in optimizing every step in a process, artificial intelligence have not yet been able to tackle many not countable aspects that leaders are to ponder on where human minds of a leader can address (Davenport, 2018).
Digital enterprises will be subjected to frequent changes in the way it operates and challenges which would have to be overcome daily basis. Effective and good leadership would gather information and distribute among the employees to understand each individual’s responsibility of the changing process. Eventually, overall must be combined to understand what future would be for the company in terms of securing or improving the market position in the global market place.
As digitalization has influenced and relates at a high degree with the concept of intercultural, leadership or rather digital leadership would require tools to operate and succeed in intercultural environments. Following are some of the existing tasks leadership will have to manage due to the intercultural embedding (Pfeifer and Jackson, 2008).
Communicating successfully and efficiently with employees from various cultures.
Understanding needs and requirements from culturally different customers.
Creating leadership ideas that are appealing to stakeholders from many countries.
Training employees to better deal with cultural heterogeneity.
Choosing managers that will successfully set up new branches in foreign cultures.
Cultural intelligence which is spoken above is the best and the most powerful tool that can be used to address the above intercultural situations.
Importance of Cultural Intelligence for a Digital Enterprise
Cultural intelligence which will be referred to as “CQ” allows an organization to discover its own flaws, current level in CQ, train the employee to close the CQ gap and adjust organization’s processes to facilitate to any multinational and digitized company which is interconnected to thrive (René Rüth & Torsten Netzer, 2020).
Empirical findings have shown that cultural intelligence or CQ would make emotional exhaustion less likely to occur during working in different geographical locations (Tay et al. ,2008). Since different geographical locations leads to working in different work cultures, methods, techniques, people and processes, it can be linked to a situation of an operational cultural change. Being a digital enterprise is such an example of a change in operation culture. Hence, having a solid cultural intelligence would assist an individual to adapt and accept the changes positively which would lead to improved performances. Moreover, having high cultural intelligence level would avoid or rather minimize the cultural shock (Chen et al., 2011) and reduce the tendency of switching jobs (Huff, 2013).
As specified in multiple locations in the article, digital transformation requires high level of commitment, investment and concentration while having an effective change management process implemented by the leadership. Individuals with high cultural intelligence are able to establish and maintain trust to people within different cultures easily than with lower cultural intelligence level (Rockstuhl and Ng, 2008). This signifies the importance of cultural intelligence in the process of transforming to a digital enterprise.
Moreover, leaders with high level of cultural intelligence or rather CQ would be aware of the techniques and approaches to choose the right people to the right position at the right time while utilizing these “right” resources in the process of improving and sustaining the organization in globalized and digitalized environment on all levels. Cultural intelligent individuals tend to negotiate more comparatively (Imai and Gelfand, 2010). These traits of a culturally intelligent individuals would assist a smooth transition of a digital enterprise.
Purindu B Jayatilake
DBA (Reading), MSc Eng, MBA, BSc (Hons) Eng, ACMA (UK), CGMA
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