The Leader - November/December 2008 - (Page 15)

LE VE RAG I NG BUSI NE S S GE O G RAP HY: AN E NTE RP RI SE V AL UE D RIV E N AP P RO AC H VE BUS I S E A LUE RIVE A P FI G U RE 1 FUNCTION HEADQUARTERS OPERATIONS RESEARCH AND DEVELOPMENT FINANCIAL Proximity to capital markets KNOWLEDGE Access to regulatory influence Appropriate work skills R&D talent clusters, Quality of life PROCESSES Access to major global transportation hub for executive mobility Technology infrastructure and connections Streamline links to marketing and manufacturing CUSTOMERS Seek partners to access markets Cultural awareness of customer markets Input from market and customer feedback Distribution to key markets Low cost labor Productivity of work environment Labor costs, tax MANUFACTURING environment, supply Improve the R&D to manufacturing Rationalize supply chain chain network costs product cycle like Ireland in the 1990s or India post Y2K. Figure 1 illustrates how place attributes map against typical corporate functions along cultural and geographic lines. So the traditional speciﬁcity of a ‘physical geography’ will continue to be obviously essential for a capital and site intensive manufacturing plant, where geographic elements are critical drivers for achieving desired results. But, for many other companies in knowledge oriented businesses, competitive advantage isn’t so clearly tied to the factors of physical geography. Some may be thinking that the rise of the ‘virtual workplace’ will make such perspectives seem outdated, but these networked communities of knowledge workers exist somewhere, and the cultural geography remains critical, even if technology helps reduce the restrictions of physical geography. For example, work at home environments for call center representatives may appear placeless within the traditional deﬁnition of the ‘ofﬁce’, but regional language and culture nuances, cost of living driven talent clustering, and other geographic factors remain key to such customer-facing business operations. Labor supply and demand dynamics, driven by demographics and skills, further add speciﬁcity of place. The virtual workplace is best deﬁned as a network of physical places. The importance of cultural vs. physical geography attributes that deﬁne these ranges from a very high for cultural importance for low infrastructure (e.g., work at home or anywhere), to satel- lite drop, to increasing importance of physical factors for larger (high infrastructure) corporate ofﬁces, with hoteling and collaborative spaces that have a speciﬁc corporate identity and also rely somewhat more on the traditional attributes of easy accessibility and proximity to industry clusters. Summary Point One: Place does matter, though the importance of the different attributes of geography ranges across a broad spectrum of cultural and physical factors that can be very different for each type of corporate activity. The map of a 21st century global enterprise is a complex physical and virtual network of places representing the geographic footprint of the corporation. Different Lenses / Same Vision? It is easy to go off track in making effective geographic decisions about the corporate footprint. In addition to increased complexity and changing importance of different geographic attributes, the nature of the corporate organization — complex, and politically charged, can further feed less effective decision making. Vision and competing priorities are often sorted out against a backdrop of short term ﬁnancials and shareholder value. Operating performance needs to be balanced against customer/market demands, employees and stakeholders. Risk and opportunity trade-off with each other in an environment of uncertainty. On top of these factors is a real estate and workplace portfolio to plan and manage, which brings out the often very personal emotions people hold for their work environment. It is no surprise then, that the location footprint of a typical global enterprise is far from leveraged effectively. More often than not, location decisions are only at a business unit or functional level…rather than coordinated within a broader framework of corporate imperatives. Often, business geography decisions are made by default… “we had space in our existing operation in Buckleberry Junction, so let's move payroll administration and accounting there”… never mind if the labor market is not scalable there or its logistical ﬁt into the broader supply chain is tenuous. And, way too often, managers of different functions and businesses go along their merry, uncoordinated way in picking sites (e.g. IT is off picking sites for software development, whilst HR is looking at locations for shared services… both with apparent blinders to the broader needs and plan. Not to pick on IT and HR (it could be any entity), but this lone ranger mentality not only drives corporate real estate leaders crazy, but is not a sound approach to corporate decision-making. In many companies, there is no coordinated view on process, people, place and property… individual managers and their teams are concentrating on the needs of their own operations and silo thinking is common. Does this sound familiar: ‡ HR leadership is focused, rightly, on the war for talent and where to source sustainable talent in the next 10 years… They want to tap into hot markets in Asia and South America… but hold on, because… ‡ The director of IT insists on a combination of outsourcing and captive technology centers and has heard that Eastern Europe has some incredible skills in this regard… but wait a minute… ‡ The CFO runs a tight ship over CRE and asset optimization is a key priority…CRE leadership will not authorize any new lease signings until existing surplus space in its core markets (NY and London) are fully occupied… plus why not tap into China, because ‘costs 2 0 0 8 TH E LE ADE R 15 NOVEMBER / DECEMBER

Table of Contents Feed for the Digital Edition of The Leader - November/December 2008

The Leader - November/December 2008 Leadership Contents Message from the CEO Real Estate in the News Leveraging Business Geography My Work @ Bank of America Blending the Old with the New A Tool for Growth Creating Real Estate Value Nokia-Siemens Networks’ Peter Doran DTZ’s James Maddock Annual Economic Development Directory The Georgia Report Location Profile: Magdeburg, Germany Linking Corporate Real Estate to the Enterprise 3rd Quarter 2008 Adding Value in Challenging Times Australia and New York Shell’s Paul Huston Economic Development in the News A Look Ahead In our Next Issue Calendar of Seminars Index of Advertisers Chapter Learning: The Global Perspective

The Leader - November/December 2008

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