Small business exporters around the globe are amongst the biggest beneficiaries of the newly established international digital connectivity. The recent McKinsey Global Institute (MGI) report entitled “Digital Globalization: the new era of global flows” quantifies this for us as “used cross-border bandwidth has grown 45 times larger since 2005. It is projected to grow by another nine times in the next five years”. That’s worth reading twice. We enjoy the huge benefits of this every day, everywhere, unnoticed. That is until it stops functioning and then we get frustrated. Across the globe, wherever we are, we demand that every office and every home, café, car, train and now airplane is connected; even walking down the street we are all phoning, texting, buying, selling or just surfing the internet on smart phones and mobile devices. Global digital connectivity is becoming ubiquitous and is changing every aspect of how we do business, not just nationally but internationally.
So what exactly are these global flows of data that are growing so astronomically fast? Start by thinking about your own online life, both personal and business. Data traffic is information (in all its formats), driven by searches (all those country specific search engines around the world), communications (including voice and visual), transactions (valued at trillions of USD), video (think YouTube…), and intercompany traffic (from the huge multinational to the more than 125 million SMEs worldwide). Imagine this: in 1991 there was 1 registered website but just 15 years later in 2016, there are more than 1 billion registered websites (counted as a unique host name). The infrastructure is clearly in place; the early adopters have marked out their territory and now the masses of SMEs are piling on-board.
This is a truly global phenomenon, but nevertheless there is evident concentration of digital traffic flows which, when analysed can help us see where this will go. Looking at the table “Cross-border data flows are surging and connecting more countries”, the most digitally connected regions of the world, by far, are North America (US and Canada) and Europe. This mirrors the high volume and value of the transatlantic commercial relationship, the world’s largest trading and investment relationship. But beware, as this is fast changing!
The MGI chart shows how both Small Medium Enterprises (SMEs) and Start-ups are conducting business internationally in ways that were simply not possible even 5 years ago. Today’s international digital connections enable businesses to kick-start their export drive through websites that are fully localized, communicating and transacting around the globe, 24/7. Apple has done so on a giga-scale with over 105 localized websites worldwide. Customer and suppliers can connect online internationally. They find each other, communicate, verify, do their due diligence, validate, transact and do business. All this changes the go-to international market rule book.
Another hugely important transactional enabler are international digital platforms. SMEs, Start-Ups and individuals can all leverage the global digital connectivity of eBay, Amazon, Facebook, Alibaba and their cohorts. Described as a “plug and play” infrastructure, Amazon hosts more than 2 million third-party sellers; Facebook, in another league, claims to have doubled the number of trading SMEs, up from 25 million in 2013, to 50 million in 2016. So double in just 3 years. SMEs and international digital connectivity are changing the statistics of global trade. Way back in 1977, 84% of US exports were by large multinationals; by 2015 that had fallen below 50%. As the MGI report points out, “Among SMEs that export, the smallest (those with fewer than 50 employees) are gaining share the fastest”.
Savy SMEs that have grasped how different the online economics of international business are from their offline past, have seized export and international business opportunities previously not available. Vastly reduced business communication and transactional costs have at least two immediate effects i) driving new international business opportunities and perhaps most importantly ii) changing international business models. New markets and international user communities are created that deliver clients on a scale never seen before, as well as more cost-effective ways to reach them.
Exporting companies used to think in terms of in-market representation and offices, and all the complexities this entailed. The online presence provides a simplicity and rapidity that is still being worked through. Another example is the traditional value added of local distributors, connecting suppliers with their customers and providing after sales services. The online international business model is increasingly to go direct, cutting out the middle-man, to your end client. Today, it is all about ecommerce (and mcommerce), both B2B and B2C, which is now valued at 12% of the global goods trade! And arguably this is just the beginning.
