Globalization and industrial revolutions

Several years ago, I gave a presentation on company stakeholder relations. In that presentation, I presented all the ways a company impacts on the parties it interacts with. I first defined who I thought the "stakeholders" in a company were. A stakeholder is a group that is affected by the company in some way, and that relationship must be respected and managed. After that, I presented the concerns of each stakeholder group, so each can be interacted with appropriately. I discussed how to interact with shareholders, lenders, employees, customers, suppliers, the neighboring community, local environmental groups, the government and even the families of employees. That presentation was only from the perspective of a small local company. I gave no global perspective.

Recently, I have been exploring how to attack global issues and how they can be addressed using Open Organization Principles. In that pursuit, I learned that the World Economic Forum looks at global issues in detail and has had discussions on these subjects between global corporations, government officials and educators since 1971. The founder, Klaus Schwab, and Peter Vanham co-authored the book Stakeholder Capitalism: A Global Economy that Works for Progress, People and Planet (2021) that presents how corporations confront global environmental and humanitarian issues, and the roles multinational corporations should play.

Open Organization Principles through history

Schwab's book reminds us that we have been using Open Organization Principles throughout history. In earlier civilizations, it was very primitive. Then, through the centuries, it has gradually improved. Our job is to keep that improvement moving forward. Schwab thinks that global governance is required to address worldwide issues. Let me review his thoughts through history.

Schwab's First Wave of Globalization (up until around 1914)

Schwab believes the first wave of globalization was during the dominance of the British Empire. Refrigerated cargo ships, introduced in the 1870s, allowed for long-distance meat exports. Open Organization Principles were just starting to be applied globally, although there were regional empires before that time.

Schwab's Second Wave of Globalization (starting after World War 2 with United States and Soviet expansion)

What Schwab considers the first wave of globalization ended with World War 2, and the second wave started after the war. This is when the real global economy began, with exports of up to 14% of global GDP by 1987 and an increase in middle-class incomes in the West. This was when the United States and the Soviet Union became the two superpowers, and there was expansion in manufacturing, as well as both car travel and air travel. In this period, these two groupings evolved.

Schwab's Third Wave of Globalization (global supply chains and the United States all alone)

Schwab's third wave of globalization saw the collapse of the Soviet Union and the United States was all alone as a superpower. Trade was no longer a luxury, but a necessity. The world of the Internet had arrived and was just starting globally. This is when digital globalization started and became a major part of the world's GDP. You could develop a product in one country, source components in another, produce the product in a third country and distribute it all over the globe. One of the two groupings from the Second Wave declined (Soviet Union) while the other (United States) pulled ahead and collaborated more globally on its own.

Schwab's Fourth Wave of Globalization (where the United States and China dominate)

Schwab's fourth wave of globalization is where we are today with two superpowers: the United States and China. Now, we face completely different global issues, like cybersecurity, climate change, and global disease. Therefore, we need even greater global collaboration, transparency and all the Open Organization Principles. These must be improved on and put to greater use.

Technological development through history

The Waves of Globalization came about through technical development. We have experienced four technical industrial disruptive revolutions, according to Schwab. These all were times in history when innovation made major disruption of the workforce, changing the nature of not just what we do, but how we think and interact with each other:

Schwab's First Industrial Revolution: Animal power to steam engine around 1800

Schwab's First Industrial Revolution was around the invention of the steam engine and how it was put to use in the 1800s. The industrialized world moved from animal power to machine power run mainly on oil and coal. In general, the benefits of this innovation were in advanced nations in North America and Europe. During this period, industrialists replaced kings and priests at the top of society, and factory workers with no bargaining power replaced serfs and small farmers at the bottom. There was very little worker representation and weak antitrust laws. Industrialization brought a further extension of great inequality, as opposed to just everyone being poor except royal family members and rulers.

The developing countries of the world felt little reward from these innovations. They pretty much were excluded from the global economy. The Open Organization Principle of inclusivity was not developed fully, particularly in non-industrialized nations. 

Schwab's Second Industrial Revolution: The internal combustion engine, electricity in homes, mass automobile use and radio broadly available around 1900

Around the beginning of World War 1 (1914), automobiles (mass-produced passenger cars), electricity in homes (bringing washing machines, air conditioners, and refrigerators), the telephone, airplanes and radio came into use. The car replaced the horse. The plane replaced much passenger travel by ship, and electric household devices replaced domestic workers.

Monopolies increased, so companies were broken up, became state owned or fully regulated. Those methods kept prices and services at reasonable levels, but monopolies did not serve the greater good of the general population. Unfortunately, with little competition, new ideas, innovation and progress suffered. So, while things did not worsen, they did not improve either.

The developing countries of the world in this period felt little of this progress as well. Again, there was little inclusivity of the poor in the global economy.

Schwab's Third Industrial Revolution: Information technology and the computers of the 1970s and 1980s

This period saw the introduction of global information exchange through the development of the Internet. This was the information age and brought communication globally between individuals and within industries to a level never seen before. It greatly enhanced the productivity of white-collar workers. In manufacturing, global supply chains were formed which disconnected them from their company back-offices and headquarters. With these advances, community development, inclusivity, collaboration and transparency exploded.

The developing countries of the world first felt rewards for these innovations, particularly in China and India, where a large amount of the population was lifted out of poverty. Finally, major parts of the global population were finally included in the worldwide economy. You could say that this is the point in history when Open Organization Principles could be applied more broadly on a global scale.

Within some countries, particularly industrial countries, a certain amount of the population has not benefited as much from these innovations while others benefited greatly.

Schwab's Fourth Industrial Revolution: Robots and AI came on the scene since 2016

This is the era when not only machines are more broadly replacing physical labor, but mental work as well. The machines are starting to do the thinking for us in many disciplines. Schwab writes, "Engineers, designers, and architects are working with computational design, additive manufacturing, materials engineering, and synthetic biology to pioneer a symbiosis between microorganisms, our bodies, the products we consume, and even the buildings we live in." This might lead to even greater inequality. 

Furthermore, cyberwarfare could become a major issue. Therefore, according to Schwab, ever greater global governance will have to be introduced to shape behavioral policies and business best practices. The World Economic Forum's Centre for the Fourth Industrial Revolution is trying to address this concern. While not adversely influencing innovation, governments around the world have to play a more active coordinated role addressing global issues. They cannot be controlled on an individual country basis. With those concerns, we must apply Open Organization Principles globally.

World Economic Forum

The World Economic Forum's Centre for the Fourth Industrial Revolution (C4IR) is a hub for global, multi stakeholder co-operation to accelerate the benefits of science and technology. With centers in 13 countries around the world including Japan, the C4IR Network is working with governments, businesses, academia and civil societies to develop prototypes and test pioneering collaborations and governance models to ensure the benefits of technology are maximized, and the risks widely distributed. This is where real global Open Organization communities are being promoted.

Considering all of these points above, no single company can plan on getting ahead by using old technology or methods. Some thought leaders are afraid of new technology, as it would destroy what is familiar to them. New technology that is not familiar to us is scary. But we should not be afraid of new technology and hold on to old technology too long.

Also, these massive multinational corporations have to play a more sustainable, ecological and humanitarian role. They have to adapt and collaborate to both survive and contribute in the future. Using Open Organization Principles, I'll present how corporations can attack these global issues in a follow-up article.