How do we get to understand each other?

Professor Macbeth is also Deputy Director (with a focus on Enterprise) in the Southampton Marine and Maritime Institute set up by the University in 2012. It is a......

Throughout human history, difference has been seen as a source of concern, often the cause of conflict and overwhelmingly something to worry about, to protect against and to see as something to minimize or exclude in one way or another. However the logic of industrial supply chain practice and the decision to outsource some of the business activities to external suppliers is an example where difference is of real value. When focal companies are considering the Make or Buy decision (ie are they going to do an activity inside their own boundaries or go to the market place to buy the goods or services) they are in fact welcoming difference. They will choose suppliers that are different in that they have chosen to specialize in activities that the focal company has decided is not their core competence.

Sometimes the core competence is stated to be around cost and too often low labor cost (not often significant in high technology activities), however these issues are never very definite and their benefits are often relatively short lived at least in one particular geographical region. This search for short term competitive advantage through low manufacturing cost has also been a feature of the growing globalization of world trade and the creation of China as the current Factory of the World, so that companies arrive as Foreign Direct Investors, stay for a while and then move on for more short term advantage somewhere else. Perhaps this is already happening as for example some companies in the UK and in America are bringing home some of these formerly outsourced activities. If this trend accelerates it clearly has great significance, both for the companies of the West and of China.

One of the problems of the English language is its range of words with somewhat similar meanings but which are actually describing different things. Price and Cost are two examples. However when we really examine them we realize they are describing completely different concepts. Price is what a customer is prepared to pay for an item or service in a market transaction. As a supplier we cannot control Price. Cost is the catchall term we use to describe the use of all kinds of resources used to create something of value, which we then take to the market. The complexity is hidden by applying a financial number to it and label it as the cost. This is more in our control since it represents what we have done and used in preparation for the exchange process in the market place.

In the West we need to move away from statements about 'The China Price' as the simple reason to try and source from Chinese producers and recognize the real role of difference through complementary skills, knowledge and increasingly, market access. We need a more holistic view of both competitive advantage, longer term competitiveness and a more integrated view of what our companies can do together to satisfy a world in which more and more of the population are enabled to make choices about what they want to buy and how they want to live their lives. We have to embrace and celebrate difference but work to understand the real value of difference and how to use it to mutual advantage, not see it as a threat or a complicating factor that is not worth the effort.

In the articles to follow we will look at difference as an opportunity not a threat but deal with the factors which help and hinder the growth and spread of our mutual understanding.

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