Much has been noted about friction being removed from global business operations. Supply chains have expanded: a product is designed in one place, its component parts are produced in many places, it is assembled in yet other places. A hallmark of the new Pacific trade agreement (the Trans-Pacific Partnership) is to reduce barriers (i.e., take out the friction) to enable a similar expansion in delivery of business services.
A little over 14 years ago, at midnight, I sat at a Cape Cod, Massachusetts kitchen table and delivered a presentation via telephone to a gathering in Australia. My colleagues in Melbourne were happy to advance the slides, but they were also insistent that I give the talk and handle the question-and-answer section. Flights were cancelled in the aftermath of the 9/11 attacks, so we needed to work around this friction. Obviously, others were confronted by far more severe outcomes, but all were affected and still are.
In addition to what others do to us, friction also stems from what we do to ourselves. Consider corporate tax regimes and their impact on strategic and tactical business decisions, including FDI. Remarkably, we should have it within our power to rework these to advantage. Sadly, we seldom do.
And, when programmes are developed to create competitive advantage, things don’t always work out. To overcome the 'friction' of skilled labour shortages, the US enacted the H-1B Visa programme. It seemed a great idea. The US can brain drain the world to win the war for talent, and assure that our most innovative companies are able to get the staff they need but cannot find. However, the reality is that most of the visa recipients are headed to just a handful of global outsourcing firms, and, with a political backlash developing, a thoroughly positive redesign is not assured. Frictions addressed can lead to frictions created; friction is not quite removed.
Daniel Malachuk works with business and government leaders on global direct investment strategies. He has advised many of the world’s leading companies and served in the public sector as director of White House operations. Email: email@example.com