Executive Insight

Directors lose elections, but not seats; staying power of board members raises questions about investor democracy

A record number of corporate directors snatched victory from the jaws of their defeat by shareholders this year.

In a sign of investor discontent, 93 board members at 50 companies have received fewer than 50% of votes cast during annual meetings so far in 2009, according to RiskMetrics Group Inc. That's more than twice as many as any other year since the proxy-advisory firm began tracking the trend in 2003.

But none of those directors lost a board seat. All serve companies with "plurality" voting, meaning they can win uncontested elections with a single vote. Re-elected directors at two companies offered to resign under those companies’ "plurality plus" policies, but were reappointed.

The staying power of these board members raises questions about the limits of shareholder democracy. But snubs of sitting directors can help unhappy shareholders achieve other corporate-governance goals.

Activist investors pressing for more accountability in director elections say they aren't dismayed by the survival of minority-vote directors. Edward J. Durkin, corporate-affairs director for the United Brotherhood of Carpenters and Joiners of America, has pushed for majority-vote rules. Mr. Durkin says the rules are working, because boards are more responsive to investors. "It doesn't require people getting thrown off boards," he says.

The ranks of directors without majority support are likely to swell further next year. Under New York Stock Exchange rules effective in January, brokers no longer can vote clients' shares during elections.

Brokers typically back incumbents. Eliminating broker votes "could tip the balance" against board members opposed by activist institutional investors, predicts David Drake, president of Georgeson Inc., a management proxy adviser.

Source: Wall Street Journal; 09/26/09

Why Organizational Strategy Matters

Why Organizational Strategy Matters

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Leadership Development - Why Experience is the Best Teacher

Leadership Development - Why Experience Is The Best Teacher

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Do you have leadership continuity plans in place?

Management succession is one of the most critical strategic risks a corporation faces, particularly as 46% of executive departures are unplanned and 50% of baby-booming senior managers will reach retirement age in the next five years.

Yet 51% of companies do not have a succession plan in place and only 6 percent claim a system in place to build top-flight executive teams.

Management literature shows that failing in leadership transition can be deadly to even the most successful of businesses. Indeed, since it can be a source of such business uncertainty, The Conference Board recommends that succession plans and leadership development strategies be developed and integrated into enterprise-wide risk management programs. It also recommends that corporate executives dedicate full attention to their succession planning duties and use the challenges posed by the economic crisis as an opportunity to improve their companies’ leadership development programs.

Contact Charlesmore Partners International for more information on how to build and implement effective succession strategies, manage change in organizational leadership and mitigate the risk of leadership discontinuity. You can read a synopsis here.

What is a transnational organization?

Think global, act local has long been the mantra of the transnational.

True transnational capability requires:

·         Exploiting the global integration

·         Assuring local acuity, responsiveness and flexibility

The transnational corporation simultaneously pursues global efficiency, national responsiveness and knowledge development and exploitation on a worldwide basis.

The most successful global corporations have found a way to manage these dynamics successfully, interdependently and interchangeably.

Absent this balance companies typically operate internationally either as multi-domestics – providing a high degree of strategic freedom and organizational autonomy to subsidiaries or as mega-nationals – retaining tight control of strategic decisions and information at the global hub (worldwide facilities typically centralized in the parent country, products standardized, and overseas operations considered delivery pipelines to access international markets).

The problems with these models are:

·         The mega-national may fail by blindly applying home country rules and practices to the new environment (under adaptation). Local entities increasingly act independently, redundancies and conflicts abound and the benefits of global reach erode.

·         The multi-domestic firm can fail by playing entirely by the local rules (over adaptation). Increasing this model becomes out of touch with customers and employees and fails under its own inflexible weight.

·         A hybrid that attempts to balance both dynamics – often called a matrix – works in concept more than reality - the matrix may fail due to complexity and procedural confusion (over-engineering).

New transnationals (and some incumbents) continue to experiment with alternative organizational forms and BCG highlights many that are at the cutting edge of architectural design. Often flexible networks replace more conventional designs. The challenge is that organizational performance doesn’t happen by osmosis and is planned and orchestrated and an adhocracy ultimately will prove problematic to sustainability. The balance of global and local will still be necessary.

Global Integration

Global integration means centralized control over key resources and operations that are strategic in the value chain; decisions are made from a global perspective

Global integration can provide a firm operating internationally with a number of important benefits derived from a worldwide optimization of resources:

Economies of scale. A company can lower its unit costs by centralizing critical value chain activities, such as manufacturing or logistics. This may involve hav­ing a small number of large facilities to make prod­ucts for export, or creating a network of specialized and focused operations spread around the world that are tightly controlled by the central hub.

Value chain linkages. Sometimes competitive advan­tage comes from tight linkages between value chain activities - between R&D, manufacturing, and marketing in the home country which is a techno­logical leader (for example Silicon Valley in the In­ternet equipment business); or between manufac­turing and logistics. Tight integration allows the firm to stay ahead of technological and competitive changes.

Serving global customers. To the extent that customers are integrated and operate on a global basis, their suppliers may be forced to adopt a similar structure. Subsidiaries do not have their own stand-alone cus­tomers; prices, quality standards and delivery terms are determined globally.

Global branding. Consumer product companies such as Coca Cola or Gillette promote a united brand image around the world. Coke standardizes its for­mula and advertising themes (its two critical success factors), gaining efficiencies in utilization of mar­keting tools such as advertising and merchandising.

Leveraging capabilities. Some companies expand globally by transferring capabilities developed in the home market. The international expansion of both IKEA and Wal-Mart depends on supply-chain management skills that allow these companies to pursue their traditional low price strategies around the World.

World-class standardization. Key processes are stan­dardized and centrally controlled so as to maintain competitive advantage. The pharmaceutical giant Merck manufactures locally to meet government requirements. Its manufacturing processes are complex, however, and these are standardized in order to maintain quality.

Competitive platforms. Tight control of local subsidiaries by central headquarters may allow rapid response to competitive conditions and redeploy­ment of resources so as to facilitate expansion worldwide. For example, tightly centralized Japan­ese multinationals penetrated new markets in the past through price subsidization funded by prof­itable operations elsewhere.

Information advantage. Prime examples of mega-national firms - Japanese trading companies (sogo shosha) - are located in every corner of the world. Through the network of local offices, staffed primarily by Japanese expatriates, they optimize global business opportunities by tapping into pric­ing and delivery information about thousands of products.

Global integration does not necessarily mean distributing the same product or service in the same way all over the world. What it does mean is that decisions on how to address local customer needs or market differentiation are made by managers who have an integrated global point of view.

Forward-looking firms are finding that no region or country has a monopoly on business-level component capabilities and firms that actively seek the latest resources and skills from around the world can build superior knowledge and performance capability.

The ability of multinational firms to access foreign-based clusters of excellence is a clear source of advantage in gaining component knowledge-based advantage.

Implementing Global Integration

Important considerations include:

·         The alignment of decision-making to ensure that local decisions reflect a global perspective

·         The standardization of processes to achieve desired efficiencies and uniform behavior, using formalized control

·         The socialization of key individuals in central and expatriate leadership positions to ensure global orientation

A Case in Point

By way of illustration, one particular client company that occupies a valuable niche position in the global medical device industry saw developing economies as significant growth markets over the next five – ten years. Its business was sound, but not particularly profitable. Years of doing business internationally had not translated into global mindset or practices. Product development was centered in two locations – North America and Europe; products were designed with a local orientation and an export mentality; leveraging local manufacturing capacity and legal entity financial results were blatant priorities; you could drive to most suppliers within a couple of hours; sales reps often competed against each other for international orders. Candidly, the organization was less an impediment to global growth than a foundational barrier.

Amongst the many clear realties facing a new CEO was that he couldn’t get from here to there without transformational change; espousing new values and expecting the organization to miraculously globalize was clearly not going to happen. In fact, what was required was a carefully constructed organizational strategy that – over time – built the practices, capabilities and mindsets of a global company. It is an ongoing journey that involves new leadership, extensive organization development activity, a new organizational architecture, new operating, information and communication systems and practices, a global P&L tied to a new reward system, the development of a global product portfolio, lean manufacturing centers of excellence and a global fulfillment and distribution process. The organizational transitions are immense as the company preserves institutional knowledge, while foundationally changing its modus operandi.

Coordination Mechanisms

Coordination mechanisms that help build and bond global integration include:

Face-To-Face Relationships

·         Things get done through relationships not hierarchy

·         Ties are built that span boundaries

·         Events, projects, work assignments, knowledge sharing protocols, problem-solving

·         Boundaries can be intra- or extra-organizational

·         Conflicts are worked out through relationships, not because somebody decides

·         Relationships deepen over time; they represent the social capital of the enterprise

Cross-Boundary Teams/Groups

·         Fundamental coordinating mechanism for the transnational

·         Be clear on purpose and deliverables; provide authorities and boundaries

·         Staff for diversity and capability, not representation

·         Mix face-to-face, synchronous and asynchronous where possible

·         Promote learning as well as results

Global Process Management

·         Horizontal standardization of sets of activities that are regularly repeated and focus on clearly identified deliverables

·         Foundational pillar of coordination

·         Global definition of process, local responsibility for execution

·         Little room for local adaptation

·         Improvements sought and shared

Know-How and Best Practice Sharing

·         Create organizational opportunities, structures and technology platforms

·         Set expectations for sharing and knowledge development and deployment

·         Provide investment, visibility, recognition and reward

·         Maintain, sustain and refresh

Knowledge Management

·         Provides and advances competitive position

·         Transfers corporate knowledge from individuals to the firm

·         Converts established learnings into shared, organizational platforms

·         Develops new sources of value

·         Reduces redundancies and wheel re-invention

·         Strengthens corporate “glue”; fosters global-local understanding

·         Deepens networked relationships; builds organizational competencies

Normative Integration

·         The socialization that leads to shared attitudes, values, and assumptions - the shared culture of an organization – and emphasizes the importance of a communal sense of identity

Without normative integration, communication across borders would be time consuming since people would have to figure out what terms and concepts meant to others and repeatedly establish new norms for social exchange (leadership expectations, how to surface and deal with conflict, the nature of reciprocity, and myriad other such norms)

Other coordinating mechanisms include global mindset development, transnational leadership development and organizational capability building. We’ll cover each of these in subsequent postings.

Local Responsiveness

Quando vai a Roma, fai come vedi?

(dipende)

·         It depends upon the specific situation – what is necessary and what is the context.

·         It depends upon the chosen (adaptive) strategy of the company.

Choices include:

·         Cultural accommodation (adapting practice to local norms)

·         Cultural compromise (deciding to find some middle ground)

·         Cultural synergy (finding a way to integrate practices)

·         Cultural relativism (practices are established relative to home country norms)

Differentiation of Subsidiary Roles and Responsibilities

Some companies have begun to differ­entiate the roles and responsibilities of their national subsidiaries.

The intersection of strategic and organiza­tional considerations defines four generic roles that country organiza­tions can play in fulfilling the global objectives of the transnational organization.

The principal strategic consideration is the overall importance of national environments to the firm’s global strategy. A very large market is obviously important, but so is a competitor’s home market, or a market that is highly sophisticated or technologically advanced. The major organizational consideration is the national subsidiary’s compe­tence - in technology, production, marketing, or another area. Depend­ing on its positions along these dimensions, a national organization may function as a strategic leader, contributor, implementer, or black hole.

Strategic Leader

National organizations with high internal competence located in strate­gically important markets must be legitimate partners with the head­quarters in developing and implementing broad strategic thrusts.

Contributors

Several companies we try to capture the benefits of certain local facilities or capabilities and apply them to the broader worldwide operations. This pattern was particularly characteristic of subsidiaries in which competence was high but the strategic impor­tance of the market was limited.

Implementer

Some national organizations have just enough competence to maintain their local operations in a nonstrategic market. Corporate resource com­mitments reflect the market’s limited potential. In most companies, the majority of national units play this role. It is characteristic of many subsidiaries in the developing countries of Latin America, Africa, and Asia as well as the national organizations in Canada and in the smaller European countries.

These national organizations cannot contribute much to the strate­gic knowledge of the firm. They do not have access to critical informa­tion; they do not control scarce resources.

Fundamentally, they are implementers - deliverers of the company’s value added. Their task is not unimportant, however. The implementers often maintain the com­mercial viability of the company and generate the resources that sup­port strategic and innovative processes. For this reason, their efficiency is as important as the creativity of the strategic leaders or contributors. The implementers make it possible to capture economies of scale and scope that are critical to most global strategies.

The Black Hole

There may be strategically important markets in which a worldwide company has minimal capabilities. This is true, for example, of Philips in Japan, of Ericsson in the United States, and of Matsushita in Europe. In each of these markets a strong local presence is essential for main­taining the global position of the firm. Yet these competitors have only token positions in these markets.

The black hole is not an acceptable strategic position. The task for management is to find a way out of this thankless role. In essence, the national organization in a black hole situation should be playing the role of a strategic leader but lacks the competence to do so. Remedies will not come cheap. Developing a significant local presence in a large, sophisticated, and competitive national environment is extremely difficult, expensive, and time-consuming.

One common response to this challenge has been to create a small sensory capability to exploit the learning potential of the environment, even if its business potential is beyond reach. Thus, many American and European companies have established small organizations in Japan to monitor technologies, market trends, and competitors. The assump­tion is that such monitoring will allow the companies to analyze the global implications of local developments and at least prevent erosion of their positions in other markets.

Why Localize?

Important reasons include:

·         National, regional and local market characteristics

·         Network development and leverage; connections

·         Customer needs, preferences and buying practices

·         Local regulations and infrastructure

·         Public opinion/political interests

·         Employment norms/workforce appeal

How To Localize?

There are many important imperatives that promote and reinforce a localization strategy:

·         Open-mindedness; tolerance for diversity and ambiguity; inclusion; reciprocity; sensory acuity

·         Investment and commitment; local presence, infrastructure and relationships; long-term orientation

·         Shared vision and goals; distributed authority; information transparency; mutual knowledge and learning

·         Product/service/business process adaptation; business, leadership and organization development

Governments must act fast on unemployment - OECD

Governments must act fast and decisively to prevent the recession turning into a long-term unemployment crisis, according to OECD Secretary-General Angel Gurría. “Employment is the bottom line of the current crisis. It is essential that governments focus on helping jobseekers in the months to come,” he said at the launch of the OECD’s Employment Outlook 2009. He also argued for a coordinated policy response to the crisis and urged policy makers not to forget the plight of those in the developing world that often can not benefit from well-designed social protection systems.

Despite early signs of economic recovery, in most countries unemployment will rise further next year and remain high for the immediate future. The unemployment rate has already reached a post-war record high at 8.5% in the OECD area, corresponding to an increase in more than 15 million in the ranks of the unemployed since the end of 2007. If the recovery fails to gain momentum, the OECD unemployment rate could even approach a new post-war high of 10%, with 57 million people out of work.

In light of this, the report argues, governments must urgently reassess and adapt their labor market and social policies in order to prevent people from falling into the trap of long-term unemployment.

Most OECD countries have introduced measures to support labor demand. These include temporary cuts in employers’ social security contributions and short-time working subsidies to compensate workers for working fewer hours or to encourage firms to hire. In the short-term, the OECD acknowledges that these measures are playing a positive role. 

The unemployment rate has already reached a post-war record high at 8.5% in the OECD area

But, the report warns, they must be temporary and well-targeted, otherwise they could become an obstacle to recovery by propping up declining firms and making it harder for expanding ones to hire new workers. As part of an overall strategy to tackle the jobs crisis, the OECD also recommends governments to:

Help young people who have been hardest hit by the crisis, especially those with few or no qualifications. Targeting this group will reduce the risk of a “lost generation” of young people falling into long-term unemployment and losing touch with the job market.

Reinforce social safety nets to avoid jobless people falling into poverty: on average in the OECD area, 37% of individuals living in jobless households are poor - five times higher than for individuals living in a household where at least one person has a job. 

Increase spending on active labor market policies, such as job search assistance, and training, to help the unemployed back to work. Spending on these policies has risen in many countries over the past year, but only modestly compared with the magnitude and pace of job losses. In Ireland, Spain and the United States, which have seen the fastest rise in unemployment in OECD countries, spending per unemployed person on active labor market policies has fallen by 40% or more over the past year.

Foster skill formation to ensure that workers are well-equipped with the appropriate skills for emerging jobs, including green jobs.

Source: OECD; September 16^th 2009

The importance of local culture in this era of Globality

"Culture is the means by which a people expresses itself, through language, traditional wisdom, politics, religion, architecture, music, tools, greetings, symbols, festivals, ethics, values and collective identity. Whether written or oral, the political, historical and spiritual heritage of a community forms its cultural record, passed from one generation to another, with each generation building upon the experience of a previous one.

Culture gives people self-identity and character. It allows them to be in harmony with their physical and spiritual environment, to form the basis for their sense of fulfillment and personal peace. It enhances their ability to guide themselves, make their own decisions, and protect their interests.

It is their reference point to the past and their antenna to the future.”

Wangari Maathai, The Challenge for Africa (2009)

Libya: the son also rises?

Since the end of international sanctions against Libya, leader Muammar Gaddafi’s son Saif al-Islam has symbolized hope in the West that a secretive, authoritarian oil and gas exporter can reform itself from within.

The sharp-suited, western-educated Islam has called for a new constitution, a freer press and an independent judiciary, music to the ears of the U.S. and of European governments all desperate to give a moral basis to their re-engagement with the oil-rich north African state.

Islam took the end of diplomatic isolation as the cue to press for a cautious public debate among ordinary Libyans about their future. Two newspapers and a TV station linked to Islam have been holding government officials to account for their failings. A new constitution that would bolster press freedom and an independent judiciary is ready for approval by Libya’s General People’s Congress, a newspaper editor and close ally of Islam told Reuters this month.

Optimism among advocates of liberal reform has turned to disquiet however, as attention shifts to Islam’s brother Mutassim, Libya’s head of national security who is viewed by some observers as a rival for power. Mutassim is reported to have built a strong support base in Libya’s conservative
Revolutionary Committees and he held talks with U.S. Secretary of State Hillary Clinton in Washington in April.

Analysts are divided over whether the showdown between the Gaddafi scions is genuine or merely window dressing to keep Western governments believing in the chances of peaceful reform.

Islam’s globe trotting helped secure the end of sanctions and Libya’s return from
diplomatic isolation, but his liberal message has also grabbed the spotlight from exiled Libyan dissidents, whose voice is now seldom heard in the debate about Libya’s future. “A scene has been set that portrays Saif al-Islam as the rebel successor to his father. But this scene is of course managed and controlled by the regime itself,” said Amel Boubekeur of the Carnegie Middle East Center in Beirut.

Source: Reuters, September 15^th, 2009

A helping hand for families trying to escape the poverty trap in India

Kancheepuram, some 80 kilometres south-west of Chennai, is well known for its 500-year-old heavyweight silk sari tradition. But chances were that its ornate, intricate pieces were woven by children between the age of five and 13, working 12 to 16 hours a day and bonded to a master weaver until their parents’ debt was paid in full.

Since 2002, however, a charitable trust called Hand in Hand (HiH) has been working in Tamil Nadu with the aim of eradicating the chronic problem of child labor. When Kalpana Sankar took over the reins of the organization as chief executive officer in 2004, she realized that the issue cannot be addressed in isolation.

“We need the support of the local government and community. So we trained youths and sent them to the villages to educate parents about child rights and persuade them that productivity would be enhanced if their children were allowed to go to school and complete their education; that they are only looking at short-term gains if they sent their child to work now,” Sankar said.

To date, 385 villages are no longer involved in child labor and some 35,000 children are going back to school.

Children who leave the factories initially attend a bridge school which prepares them to go to a government school. “Within 18 months, the children have caught up with their peers. They are intelligent and given the right environment, they are motivated to work hard into the night so that they have the privilege to go to school,” says Sankar.

Towards poverty reduction

Child labor is both a reason for, and consequence of, poverty. To help families escape the poverty trap, HiH also set up a self-help group and microfinance program.

The only way to tackle the problem of child labor is via an integrated approach to poverty reduction, argues Sankar. “The principle is that we don’t give people fish; we train them to use a fishing rod and then lend them money to buy one. We provide a combination of microfinance and structured business training to support and motivate them to create their own enterprises.”

HiH equips the women involved by giving them not only training in running small businesses, but also by teaching them how to read and write, as well as the principles of saving and borrowing, and bookkeeping.

Bakiyam, Gajalakshmi and Amudhavalli are housewives and cattle-herders. Their families earn about 3,000 rupees ($60) a month. Without much education or business experience, they decided to join a self-help group and were given some enterprise training. They took a 65,000 rupee ($1,340) loan and set up a canteen in an engineering college just outside Chennai. Today, the canteen’s turnover is more than 10,000 rupees ($210) a day. The women have grown in confidence as entrepreneurs and talk of expansion plans.

As is the case in microfinance organizations elsewhere, Sankar says they only lend to women to ensure that the loans are used for investment and not consumption.

To achieve its aim of eradicating child labor and reducing poverty through education, employment and income generation, and the empowerment of women, HiH has also implemented a community development program that has five interconnected pillars covering child labor and education, microfinance, citizens’ centers, health, and the environment. 

Scientist turned social entrepreneur

Armed with a doctorate in theoretical nuclear physics, Sankar found that she had to leave her family in Tamil Nadu for the big cities up north if she wanted to work in her field of education.

To be closer to her family, she took up an assignment in 1992 with the government of Tamil Nadu that concentrated on microfinance and poverty reduction through the International Fund for Agricultural Development. Her involvement in developmental issues resulted in her getting another doctorate – this time in gender studies.

She joined HiH in 2004 because she “was particularly interested in the advisor Dr Percy Barnevik’s vision of a well-run non-governmental organization with a focus on efficient delivery of services needed by the poor without bypassing government institutions.”

At that time, HiH had 10 full-time and 20 part-time employees. Sankar revamped the organization, put processes in place and “revisited strategies.” She is now preparing a five-year plan. Today HiH employs 3,000 full-time staff and has an entire new outlook. She credits the board of trustees and the advisor for HiH’s growth and transformation.

Budget and revenue

HiH has an annual budget of $5.5 million, with $1.1 million set aside for tackling child labor and education. Some 85 per cent of its grants come from overseas.

In order to meet the demand for microloans in the communities, HiH now has its own for-profit non-banking finance company.

“Our microfinance operations will break even by 2010.  We hope to implement a social investment model through our non-banking finance company where our investors will agree to give some part of the profits to the HiH Trust. This, along with grants and donations, will help us keep our projects running and also help us to expand in the coming years,” says Sankar.

Goals

HiH’s medium-term goal for 2013-14 is to create 1.3 million jobs in India. In the long term, it aims to play a significant role in eliminating poverty by creating 10 million jobs worldwide by 2020.

“Our model has been very successful so far,” says Sankar. “We have created more than 200,000 enterprises, brought more than 30,000 children into school, taken solid waste management processes to more than 80,000 households, and educated more than 40,000 people in e-literacy. We have been invited to take our model to various countries across the world. We now work in Afghanistan, South Africa and Brazil, and will shortly move to four other Latin American  countries.”

Challenges

“With the creation of the non-banking finance company, we are in a crucial phase in our operations,” says Sankar. “The organization’s biggest challenge is to develop the strategic framework of the non-banking finance company in such a way that, while ensuring the sustainability of the banking operations, it can continue to reach out to the millions of poor women who directly benefit from our lending. This new dimension to how we deliver our promises comes with administrative and marketing challenges.”

Funding has become a challenge during the recession, although the organization has had very supportive donors in the past. It also has a dedicated team working to tap possible resources. 

“In addition, being a woman at the helm increases the challenges, as we always have to fight to establish ourselves in a man's world,” says Sankar.

 Source: Knowledge at Insead, September 8, 2009.

Why Is Facebook Attempting to Patent the Idea of Crowdsourced Translations for Social Networks?

Facebook submitted a patent in December 2008 to the U.S. Patent & Trademark Office for its "Translations" application that allowed it to go from 0 localized versions to 16 in less than 6 months. It's now up to 60 and counting.

The efficiency of what the Facebook team created is obvious. And with a user population that is larger than some countries (over 250 million and still growing), and with 70% of that population coming from outside of the U.S., this capability will have a huge impact once they eventually really monetize what they have created.

It makes sense for Facebook to try to protect the capability that has allowed them to localize so quickly, but there are other social networking sites (Hi5 and Meebo, for example) that were already using crowdsourcing to produce their own localized sites as far back as 2006. Now it's up to the U.S. Patent & Trademark Office to decide whether the Facebook application has merit.

Over the past month, LISA has been researching the business and technical aspects of crowdsourcing and its impact on the globalization business. It has done in-depth interviews with about 30 high-tech companies that are either implementing crowdsourcing vis-a-vis their globalization function, or seriously researching how to do so.

Here is what is surprising in the preliminary findings:

1. Companies are definitely not implementing crowdsourcing to reduce their costs

Rather, they're doing it principally for one or more of the following 3 reasons:

• To reach totally new markets
• To better serve markets that are currently under-served
• To increase the value of their global brand by further engaging their users

2. What Facebook and Second Life have done are just one "flavor" of applying the power of the crowd to reach more international customers

... and probably just the tip of the iceberg, according to almost everyone interviewed.

3. Language service providers don't view crowdsourcing as competition at all

Language service providers are busily working in the background to help educate their customers on how to apply crowdsourcing, at the same time that they're trying to figure out a business model to support their own support of the crowd. In other words, the smart providers aren't viewing crowdsourcing as a competitor, but rather as just one more service they can provide to customers on down the line.

4. It's a moral imperative to free content from its linguistic prison

There is a moral imperative that is seen by some businesspeople in all of this. They believe that we are way overdue in freeing content from its linguistic prison. Not providing critical (however you define it) content to as many people as possible in their local language keeps people in poverty and denies them opportunities that other communities take for granted.

5. Building local language content through crowdsourcing may be more important in the long run than localization

Several of the companies interviewed also see crowdsourcing as a way to build more local language content, and that to them, is more important in the long run to engaging their customers, providing better support, etc. than applying crowdsourcing to the localization process.

6. The biggest challenge that everyone sees?

Engaging, recruiting, motivating and rewarding the crowd for the long haul.

Source: LISA (The Localization Industry Standards Association); September 2009