Braving The New World Is the world getting smaller, or are our horizons getting bigger? Esteemed economics expert and author Rosabeth Moss Kanter reflects on the phenomenon of growing globalization in an exclusive interview.

Economics is often called the "dismal science," and aHarvard professor of business administration who holds 19 honorarydoctorates might not sound like someone you'd want to haveexplain it to you. But when it comes to the new global economy, noone is clearer, more down to (the whole planet) earth, and has moreto say about your business than Rosabeth Moss Kanter, whose bookWorld Class: Thriving Locally in the Global Economy (Simon& Schuster) has received critical acclaim since it came out in1995.

Kanter grew up in Cleveland, which she cites as an example of acity that has had a renaissance, in part because it's learnedto adapt to the new global market. In the book, she also analyzesthe strengths and weaknesses of other cities worldwide that havegrappled with how to help local business meet increased competitionfrom abroad while exploiting export opportunities. And she says youneed to be "world class" even if you have no interest indoing business outside U.S. borders.

Kanter has written or edited a dozen other books. Her first,Commitment and Community (Harvard University Press), cameout in 1972, and her most recent work, Rosabeth Moss Kanter onthe Frontiers of Management (Harvard Business School Press),was published in 1997. She is also co-founder of Goodmeasure Inc.,a consulting firm that specializes in the management of change,and, in 1980, produced one of the world's bestselling videos onworkplace diversity, "A Tale of `O': On BeingDifferent." Kanter agreed to share some of her insights on howsmall businesses can not only survive but thrive in this brave newsmaller world.

Entrepreneur:Big companies are used to doing businessoutside the United States, but small firms may not know where tostart. Where can they turn for resources?

Rosabeth Moss Kanter: First of all, the U.S. Departmentof Commerce is very eager to help small companies because it knowssmall businesses are the backbone of the economy. Many states haveone-stop shops where the services of the Commerce Department arecombined with whatever assistance the state offers. They'llhelp you find a distributor or put you in contact with othercompanies that offer similar products or services that you canbundle with your products to offer to foreign markets. Also, tradeassociations and business development groups in major cities canhelp small firms make connections with larger companies that canmentor them in this area.

A company should also think about what contacts it already haswith its own suppliers or customers and whether [those companies]have international contacts that may be helpful.

Trade shows can also be a way to network directly. Recently, Iwas talking to an entrepreneur who makes a product which is used inthe renovation of old buildings, and there is a big market for thatin Europe. He started going to U.S. building and construction tradeshows and found there were people there representing foreignoutfits. Then he started going to trade shows in other countriesand hooked up with contractors.

Companies can also collaborate to promote the products of aregion as a brand. For example, in Vermont, small producers ofcrafts, cheeses and other products have banded together to promotetheir products jointly with a Vermont label that has a natural,country image. The state trade mission is representing them now. Asmall business could not do this alone.

Entrepreneur:Are the same resources helpful incontracting for manufacturing outside the United States?

Kanter: Yes, but it's much trickier than peoplethink. You can't look only at direct labor costs because thereare lots of hidden costs and cultural issues [to consider].Business owners have to make a personal commitment to be involvedin managing this and may have to travel [to the country they'reconsidering] to be sure this works right. You can't just relyon assistants or intermediaries because the information you getback is filtered.

I once worked with a small apparel company in England, whoseactual manufacturing was done by contract with a company inIndonesia. The owners not only traveled a lot but also used theInternet and had an employee onsite to provide the quality theircustomers demanded.

Entrepreneur:How do you work with internationalpartners closely enough to make alliances successful while stillprotecting your trade secrets?

Kanter: You have to build the relationship slowly.Don't plunge into full-fledged collaboration. Create a projectto test it. Initially, do whatever it takes to feel realcompatibility of values and philosophy. Spend time with yourpotential partner's key people, get to know them as people andmeet their families; otherwise, you can have serious problems downthe line. Americans tend to want to get to the bottom line rightaway and don't schmooze enough, especially when dealing withforeign companies. There may be very different ways of makingdecisions there. And be prepared with an exit strategy in casethings don't work out.

Entrepreneur:Is there a reason to learn anotherlanguage, if English is the international language ofcommerce?

Kanter: It's always helpful to be able to saysomething in the other person's language because it's agesture of respect. And respect, honor and face are very importantin some cultures that are important to our future, such as Asia andLatin America. China is a huge supply source and a giant market,and these are important cultural traits for the Chinese.

Learn another language if you expect to do a lot of business ina particular country, but a few words will do for the others. Youcan also hire someone from another country, perhaps someoneattending a local university, to help. As a competitive advantage,let your customers know which languages your staff speaks. Takepeople from other countries out to dinner, and learn everything youcan about the culture. The elite in other countries may speakEnglish, but not perfectly, and you may need to talk to theiremployees. Counting on translators for delicate negotiations can betricky, and it's helpful to know what people are saying whenthey think you don't know the language!

Entrepreneur:The flip side of the foreign opportunityis that companies in other countries can more easily come into ourdomestic market. How can small companies protect themselves fromincreased foreign competition in the United States?

Kanter: The same resources for any international issueapply here. Even if you don't care about selling your productsbeyond your typical customers in the United States, you have to askyour customers who else they're hearing from.

Being incredibly close to customers and giving them extraservices are keys to learning about potential competitors and howto counter [their efforts] with innovations. A lot of foreign and,of course, national companies are looking at profitable nichemarkets they can get into. It's happened with ambulancecompanies, funeral homes, dry cleaners, cleaning services andtemporary help agencies.

As for competitive products that are being imported, look fortheir weaknesses, such as inferior glue, zippers that don'twork after a few months or, as I recently found, buttons that cameapart after a major label's suit was cleaned a few times. Themore you can provide quality and superior service, the greaterappeal you'll have in the long run for sophisticated customers.No business that appeals simply on price is sustainable. Youshouldn't worry about competitors copying your old ideas--youshould be telling customers you have the next big thing, andit's better made with more support after the purchase.

Entrepreneur:You studied what Seattle; Boston; Miami;Cleveland; and Spartanburg and Greenville, South Carolina, weredoing to help their business communities stay internationallycompetitive. What lessons can entrepreneurs learn to help create aworld-class climate in their own areas?

Kanter: Whatever their main industry, localities facefive challenges: nurturing their primary capabilities, increasingbusiness collaboration, creating a climate that attracts outsideinvestment, helping employees maintain needed skills, and improvingthe overall community so it's a place where top-caliber peoplewant to live.

Let me give you my favorite example, since I grew up there. In1978, Cleveland was the first city to default on a loan since theGreat Depression. It had a decaying social infrastructure,deteriorating education, dying industries and a river that wasdeclared a fire hazard!

The next year, a strategic study was done, which led to theformation of Cleveland Tomorrow in 1982. [Through thisorganization,] the heads of 56 large companies worked together torevive community spirit, build new tourist attractions, contacttheir fellow CEOs in other cities to recruit them to relocate,provide mentoring for small businesses, and encourage collaborationacross industries. In the following years, a number oforganizations were created to achieve these goals. The Council ofSmall Enterprises involves small and midsized firms; LeadershipCleveland has 800 multiracial graduates in a network that infusesnearly every major organization in the area; law firms have joinedLex-Net, an international referral network; and the BusinessVolunteerism Council links companies to community service. TheCleveland Advanced Manufacturing Program was created to bring innew technological concepts with the input of local universityresearchers, while community colleges help workers learn new skillsat a "teaching factory."

Recognizing that one in three of its jobs depended on exports,compared with the national average of one in four, the GreaterCleveland Trade Alliance was formed by the city, county, portauthority and the Greater Cleveland Growth Association, thearea's largest business membership association. That resultedin the opening of a World Trade Center in 1993.

Entrepreneur:You say big companies are tending to buylow-value-added products and services locally, even though theyhave suppliers from all over the world available to them. Is therean advantage to being a local supplier?

Kanter: Soon, everyone will be able to buy most thingsanywhere through the Internet. You can get almost any book you wantthat way, and everyone thought that between that and the chains,independent bookstores would disappear. But they're stillaround. You go there for the experience of being able to look atthe books, sit there, and have a cup of coffee and read. The ownerknows you by name, tells you about newly published books you mightbe interested in. Even the chains are competing against theInternet this way.

The face-to-face part requires knowledge. The Internet will getmore sophisticated, so local bookstores have to sell an experiencethat is convenient and fast. I still shop for groceries in a localneighborhood store owned by a family. There is a large supermarketa few blocks away, but this little store knows me, and they stockthe hot new Southwestern products that people in my neighborhoodlike. They'll get whatever you want and will even deliver in apinch. And you can call in advance and reserve an item. They'realso part of a buying network with other stores, which allows themto keep prices down. There's a loyalty that builds up whenthere is a level of service.

Entrepreneur:How can companies working in thisenvironment, which requires them to train employees with skillsthat make them attractive to other firms, keep goodworkers?

Kanter: You can't promise a future, but you can makeemployees feel they have growth opportunities with you. Make themfeel like they're part of the family. Share with them theupside of the company. You don't want them to take aninsider's knowledge of your company and go to a competitor. Butif they leave, part on good terms and stay in touch because theymight come back or send you business later.

Another way to keep employees committed is to let them select acause to which the company will make a contribution. Businessowners are often active in their church or synagogue or a serviceclub, but they don't think of doing what larger companies do,which is to make a small investment in the community that providesdividends for their public image. Employees who feel good aboutwhat the firm is doing beyond its business can form incrediblyintense loyalty.

Scott S. Smith writes about business issues for a variety ofpublications, including Investor's Business Dailyand Nation's Business.