How Google’s decision to abandon China is another indication that the world isn’t flat

Triggered by a recent travel to India, I have started to look at the world in a slightly different manner. Of course, we all know about emerging economies, and about the India – China rivalry in particular. But the truth is that daily life normally brings us to focus on our most immediate reality, in which considerations about the “countries that are trying to reach us” are at most spontaneous and sporadical. A recent trip to India with our Global Executive MBA was not only an awesome experience -it was the first time that a IESE graduate program has visited this country- in which we learned a lot about many things (and in particular about IT and BPO outsourcing), it was also an eye-opener in a dimensions that I had not fully thought through. And this is why this blogpost, triggered by Google’s announcement to reroute is searches from China to Hong-Kong, will be of a slightly different nature.

You may think, what is the connection between this piece of Google news and a visit to India? It’s actually very simple: In our visit, we had a number of Indian guest speakers, from highly known University professors to executives such as the member of Infosys’ executive council Mr. Subhash Dhar or the managing director of Novo Nordisk,a scandinavic pharmaceutical multinational with a strong footprint in India. Most of them obviously anchored their talks in the Indian realities. Each of them tended to highlight a particular aspect, but there were two  facts everybody highlighted: (1) India has a very large population, and (2) India is the only emerging economy that has a long tradition of a decently functioning democracy. What does this mean? That India is the most populous democracy of the world.

This may be obvious, but we in developed countries probably don’t devote enough attention to this latter fact, when we make our business decisions of moving abroad or establishing commercial relationships. Cost matters, and very often cost matters probably too much. In traditional business, it may be enough to offer some guarantees that “general rights” of our new partner country are not being bluntly violated, and the existence of some “restricting rules” may be tolerated, since they normally don’t target our core activities. But what happens if your core activity is information? Then “restrictions” become censorship. And that seems to be of a completely different category. How much censorship can we support? How do we feel about information asymmetries, about information hiding? In an Information Economy, it seem fairly obvious that any intromission or attempt to control information may have huge repercussions.

Some years ago, when Google decided to enter China, it did so saying it was probably “the hardest decision ever taken”. Certainly, it was a decision of accepting -to a certain extent- an external force with very concrete interests to influence the previously completely unbiased outcomes of a search result. It was opening a door that Google had hold firmly closed until that day. Once a door is open, more open doors could follow, and reactions of “the world” were mostly of mixed feelings. Everybody saw that not doing business in China was leaving out an enormous group of people, but Today, the door has been closed again. This is a good sign, but there are some learnings that we should extract. To begin with, the initial decision was probably wrong to start with. Second, unanticipated consequences have probably not been taken into account enough. Third, for some years, a non-democratic regime has been able to impose its rules, profiting from the presence of a “clean image”, which allowed to position the government in a more moderate way than it probably should be. And finally, the probably unnoticed, indirect effect of the initial decision on other emerging economies, who try to benefit from technological advances within a completely different general environment, following the rules of democracy, something that they perceive as being more complex, but simply much better than any other alternative.

We in the developed world should learn from Google’s experience in China, and give it another thought every time we decide what type of country we want to work with. The massive population of China, Russia, Brazil or India should not be the main driving force of our wishes to make business in those countries. In this more and more complex world, we should broaden our mindset, and take more seriously into consideration facts such as the current political regime.

This is especially true in information industries, since our decisions to outsource or offshore information processing or storing activities today may have highly undesired consequences in the future if don’t choose our partner (and hence the country in which he resides) carefully. Hence, we should probably turn our heads more towards those countries that are trying to grow in a way that we would like to grow.

Just months ago, at the Gartner Symposium/ITxpo Orlando 2009 Eric Schmidt considered that five years from now the Internet will be dominated by Chinese content. And Google did not want to miss that, saw China as part of the “global” Interent world. Today, this looks differently. What happens if the content is there, but not everybody indexes it? My colleague Pankaj Ghemawat has been claiming for decades that “the world isn’t flat”, and that global strategies should be redefined in order to properly take into account “differences that still matter”.

Google’s announcement of leaving China is just one more evidence to this fact. It demonstrates that even the Internet (and implicitly the indexing power of Google), which has widely claimed to be a driving force for a “flat world” is subject to differences. From now on, the Information world probably won’t be seen as “flat” any longer.

 

About Sandra Sieber

Sandra Sieber is an Associate Professor and Head of the IS Department at IESE Business School in Barcelona. Her studies center around the impact of new technologies on organizations and business models, and she especially enjoys looking into the world of recent developments in the Web 2.0 sphere.

2 thoughts on “How Google’s decision to abandon China is another indication that the world isn’t flat

  1. I think and I hope that companies behavior, like Google is demonstrating, could pressure non democratical countries as China is. Maybe chinesse development will need an opening attitude in a certain moment, that one which it doesn´t need right now just for the very good results they have day by day being a Dictatorship.

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