Enrique Rueda-Sabater

Enrique Rueda-Sabater is currently director of strategy and business development in emerging markets at Cisco Systems in San Jose, California. Before joining Cisco, Rueda-Sabater spent two decades at the World Bank. His last role was as director of strategy and integrated risk management, and his career also included policy roles, fund-raising activities and operational work with countries in Asia, Africa and the former Soviet Union. He is a Spanish national with degrees in business and economics. We talked with him about the future of globalization and about the human resources and environmental characteristics that will be essential for success in a realigning world.

PwC: Will globalization continue at its current pace?

ER-S : I think that we have only seen the first wave of productivity increases from globalization. This first wave of globalization has been, in large part, about getting people who were grossly underemployed in places like India and China to become productive. It’s running its course, particularly in China, but there is still potential in other parts of Asia and in Africa.

PwC: What’s the next wave?

ER-S : I believe even more strongly that we have only seen the beginning of productivity increases from technology. As this wave gathers momentum, you’ll have unexpected bases for all kinds of business activities, and importantly, you may see creativity coming from unexpected places. And these may well be different places than where you have other capacities.

PwC: Have business leaders embraced this new way of thinking about globalization?

ER-S : Not enough. I suspect people are still thinking in very ‘tangible’ ways. Everyone could understand easily what globalization meant when it was about moving your factory somewhere else and lowering your costs of labor. But now we are moving from what could be called a long era of the tangibles to an economy of the intangibles.

PwC: Where will the hotspots in this second, ICT-enabled (information and communications technologies), wave of globalization be?

ER-S : Right now, you see unexpected places like Estonia and Israel doing very well. They are enabling widespread technology adoption and creating a loop between adoption and new technology generation. Some decisive factors will be the ones you already think about: the regulatory framework, protection of property rights, the business environment, etc. But to have a chance to really anticipate new future hotspots, you’ll have to look not just at a snapshot but also at moving frames from the recent past and also at the willingness to take risks.

We’ve learned that there is a lag to success. It took Ireland a decade of persistence with conducive policies and a good, stable business environment—sending the right signals internationally. So you want to be looking at places that have had significant institutional stability for a good while—consolidating the rule of law, transparency, protection of property rights, etc. But also you want to look for institutional settings with risk tolerance. Most of Europe has the former, but not the latter.

PwC: So are the next Estonias where business leaders should be thinking about investing?

ER-S : Well, that will depend on what your business produces. You have to focus on those bridges between where you generate the product or service idea, and where you produce that product or service, and where you take it to market. Those bridges will become much more diverse. Outsourcing manufacturing is just the beginning of a massive redefinition of what it means to be a manufacturer or service provider. But I think there may be a bigger question than where to invest, and that’s how you manage your partnerships and alliances. That’s going to be crucial. For some corporations, the biggest handicap they have is that they just don’t know how to navigate relationships in complicated places. When you move out of Western Europe and the US, there are very different rules about how you relate to partners and allies.

PwC: So how do you get good at managing partners in complicated places?

ER-S : First, you have to have people who aside from having technical and managerial expertise can connect with other people across cultures. This isn’t just about speaking the language and being connected through the Internet. There are huge cultural factors involved in the ways team members and managers relate to each other across countries and cultures. So, first, you need people who have the ability to actually connect with others who are different than themselves on fundamental levels.

Second, you have to have breadth and depth of diversity internally. And I don’t just mean going through a checklist saying, “Do I have enough of these? Do I have enough of those?” I also mean a cultural diversity where challenges are welcomed and where people who are out in left field are not immediately ignored. People who bring in the “soft” issues relevant to cultural relationships need to be allowed into decision loops. I think there were a few Japanese firms twenty years ago who, in a different sphere, understood something about how to build the kind of capacities I’m talking about. They hired talented, bright young people, even if they didn’t have specific jobs for them. They were creating a stable of good brains. We could use more of that approach.

PwC: Are there other intangible skills that will be essential in the future?

ER-S : One of the things we’ve seen again and again is how hard it is for most of us to call out that “the emperor has no clothes.” In the dot-com boom, and again recently with the repackaging of mortgages and credit risks, it was easy to be scared that if you didn’t play along, you’d be the only one left out of this big boom. It was true for portfolio managers, and it was true for individual investors. Good risk management in the big strategic sense will require having around people who can see that the emperor has no clothes, and creating an environment in which they feel free to call that out.

You’ll also want people who understand the modern world and how ICT is changing it and people who have managed in messy environments. At a high level there is a cohort with much of that among Indian CEOs in their 40s: People who have experience in doing business in difficult environments, with social challenges, political uncertainties, rapidly changing technology, economic ups and downs. And at the same time, they have good educations and are young enough to have been exposed to global partnerships from the beginning.

PwC: What kind of environments will be most conducive to making the kinds of people you have described most successful?

ER-S : Some years ago I tried to understand what we could learn from Silicon Valley for developing countries. I remember asking a French scientist at a high tech company why he was working there, rather than at home. He said: “Very simple. I can do here in one year things that would take me several years and a lot of hassle back home.” He understood some of the most important obstacles to bringing an idea to fruition: too much regulation that closes doors to alternative business models, a lack of private and nimble venture capital, and tax systems that are more suspicious of business than supportive of entrepreneurial endeavors. You’ve got to have a system that enables people to take risks in a fairly stable, but flexible and unencumbered environment.