Leading up to World War I, it wasn’t uncommon for critical information to take hours if not days to reach its destination. Author Liaquat Ahamed cites in Lords of Finance that despite the advent of railroads, steamships and telephone, mail service was the norm for important dispatch, and it took a person five days to cross the Atlantic via ocean liner.

Oceans aren’t much of an obstruction anymore. With transoceanic internet cabling made possible through the birth and death of dot.com businesses, global markets are durably connected. Today, information flows at the speed of light across supply chains, and project work “follows the sun” shifting across various time zones. In addition, velocity is the new normal as the speed of decision making accelerates, and executives must analyze and act faster.

In a tightly connected world, there are the inter-dependencies we can see and document, and those not so transparent.

For example, Morgan Stanley Chief Economist, Stephen Roach, in his book The New Asia comments on how “this new connectivity (has) been amplified by increasingly complex financial instruments (such as derivatives).” Indeed, Roach cites Fed Chairman Alan Greenspan’s belief that the sub-prime contagion of 2005-2008 could be “walled off.” Unfortunately, as Roach points out, it’s only now that the global economy is picking up the pieces from this misconception and economists now understand the deep linkages between the U.S. consumer and the rest of the world.

In a tightly connected world, we live in a complex system that is composed of multiple sub systems. While some may argue the world isn’t quite “chaotic,” it is becoming clear that perturbations (even quite small) can cause quite a ripple in the global pond.

Take for instance, an event that happened nearly one hundred years ago: the powder keg eruption in Europe with the assassination of Arch Duke Ferdinand of the Austrian-Hungarian Empire. Indeed, this one event (momentous in the eyes of those in the Balkans) was thought to be “contained” by European and Asian powers. And it was—for a month. However the linkages and alliances among various countries sitting on the sidelines eventually brought major and minor global powers into the World War I.

Indeed, the world is more complex today than in the second decade of the 20th century. If it is to believed that one shot from Serbian nationalist Gavrilo Princip started a chain reaction leading to the loss of 37 million lives, it’s conceivable that in today’s more tightly coupled world, a single “spark” could have blinding consequences.

Author James Gleik reminds us, “(In complex systems) points of crisis are everywhere—small scales intertwine with the large.”

Today’s marketer is not immune to contagion. Events in the global market rarely happen in a vacuum anymore (much like this domino video). We must account and plan for the things we can control, and prepare for events we cannot.

Questions:

• What is the next global flashpoint that could choke your sales and marketing forecasts?
• What small event—seemingly innocuous—could give rise to massive global turbulence?

Rubin is the former CIBC World Markets’ chief strategist and chief economist until he suddenly resigned in late March after 20 years at the bank’s investment arm. According to the Toronto Star, “His conclusions were frequently controversial and certainly unconventional, particularly in a country [Canada] so dependent on the global trade of its oil and other natural resources.”
Rubin predicts that within 12 months of an economic recovery, we’ll encounter triple-digit oil prices. The fallout? The transportation costs of importing products from distant countries will erase other advantages, such as low-cost labor. This means denser communities, less driving, and dependency on what we produce locally. Economic growth will come to a crawl and inflation will rise.
So, where will that leave the marketers? What will we be marketing and how? How will this affect the way we do our jobs? How will this affect all our lives?

In the past, managers could take weeks or days to make important decisions, however to effectively compete globally, some companies are making critical decisions in hours, minutes or even seconds. With windows for decision making closing faster than ever–are your decision making processes setting you up for success–or failure?

While most would agree that strategic decisions require thoughtful consideration that should rightly stretch out months or weeks, the financial market turmoil of the past year plainly shows that decision making windows can open and close quite rapidly. In fact, as marketplaces grow more complex, and financial markets interconnect in ways analysts still struggle to understand, strategic decisions (even those involving M&A) sometimes need to be made in 24-48 hours.

The window for operational decisions is also shrinking. Companies now need the ability to detect and respond in real-time or near real time when fraud is occurring, products are out of stock, lines at store checkout are too long, online shopping carts are abandoned, or customers are calling with product/service quality issues.

There can be significant financial benefit to speeding operational decisions. Case in point is the financial services industry.

As early as the 1990s, trades were conducted on a system called SuperDot which still exists today. However, according to Richard Bookstaber, an equity fund manager and author of “Demon of Our Own Design“, there was nothing super about the system. “Orders were sent using primitive 386s communicating via Hayes micromodem,” he writes. “Between short sale restrictions and bottlenecks from excessive volume, there was no guarantee orders would get executed at all.”

Now let’s fast forward to the future. In Technology Review, an article titled, “The Blow Up” mentions that many high frequency financial services traders make 1,500 or more trades a day, whereas the computers at some brokerage firms execute “hundreds of thousands of trades everyday”–most of which are automated by computers following complex business rules and require no human intervention.

The same article details how the “science of event processing” allows computers to “read, interpret and act upon news” such as making a trade in response to an “FDA announcement–in milliseconds!”

The ability to act upon information faster than others–in this instance to execute a trade faster than other market participants–can make a huge difference in profits or loss. Creating business value via faster and better operational decision making extends to other industries as well.

In retail, analytical systems are enabling workforce and inventory optimization to ensure plenty of staffing and products, notifying managers of stock outs, and even helping speed up the checkout process.

According to an article in the Economist titled, “Watching While You Shop“, one very large British retailer is using a system to sense the number of shoppers that enter and leave the store, and then use that data to predict how many check-stands should be open. Systems predict, “up to an hour in advance and monitor average waiting times and queue lengths.” Since most of the point of sale systems at this retailer are self service, the system can detect when lines get too long and then open check-stands accordingly.

Faster and better decision making can infer a competitive advantage for companies, but those advantages don’t traditionally last very long. Competitors can invest in the same technologies and copy workflows. However, those companies that create a culture based on analytical decision making are hard to imitate as “thinking by the numbers” becomes a way of life.

Getting back to the original premise, I believe that in a complex and global economy, there is less room for error as economies, companies and even individual actions are more tightly coupled. Nothing happens in a vacuum anymore. This means there is less time to react as single events often start chain reactions.

To thrive in a global economy, companies must be able to make the best decisions based on accurate data sources that present as complete a picture as possible. Windows of opportunity are opening and closing faster than ever before. The ability or inability to capitalize on those open windows could be the difference between sustained competitive advantage and obsolescence.

Questions for DailyFix readers:
* Do you see the “windows for decision making” closing at a much faster pace?
* What other drivers besides technology, globalization and interlocking financial markets are driving a reduction in time between “event” and “action”?
* With decision making windows closing faster, will “gut decisioning” play a bigger role going forward?
* When decision making opportunities arise, how are you preparing yourself or your company to best act on those opportunities?
I’d love to hear your comments!

After reading their commentary, let me ask you this: Do you think Friedman’s vision of the globalized world is a deeply skewed account of globalization?
I wonder what Christopher Columbus would have thought of this whole debate? And what about the folks who produced Around the Flat World in Eighty Days and Love Makes The World Go Flat?”
Think they care?