During the last decades, successful multinationals have milked two key competitive advantages in order to remain competitive: the capacity to disseminate and proliferate a successful business model throughout the world and the capacity to efficiently access labor and raw materials in distant places of the planet. Like an octopus whose head resides at the home office and whose tentacles reach out to the world, multinationals have captured the world markets thanks to their mastery of a single concept: projection. They have been successful given their capacity to domesticate the world with the wisdom of “home-office” and their ability to leverage their economies of scale by reproducing their business model left and right.
However, in the new knowledge economy, the octopus metaphor is useless. Global presence, in as of itself, is no longer a competitive advantage. Vanguard customers – those ready for the next-generation products and services – are to be found in the strangest corners of the planet. The knowledge required to create new products and services is fragmented and dispersed in pockets around the world, as well. The projection premise has to yield to the search and discovery premise. Successful companies will be more interested in learning from the world rather than trying to force-feed a predetermined recipe.
While information technology will play a role in this process, establishing information networks between subsidiaries will not be enough. In a recent study titled Global Best Practices Meet Local Realities, researchers Robert Galliers and Sue Newell establish that although ERP (Enterprise Resource Planning) and KM (Knowledge Management) systems are excellent instruments for capturing process information and knowledge, they rarely capture the rich value obtained through dialogue, debate, discussion and human interpretation. In the face of tacit, complex, and subtle knowledge, hidden in remote and unfamiliar contexts, information systems loose effectiveness. Hence, more than just IS, we are talking about new corporate models that permit us to access hidden knowledge and thus, create the next generation of products, services, and total solutions for the world market.
Jorge H. Forteza and Gary L. Neilson try to address this issue in their article titled Multinationals in the Next Decade: Blueprint, Flow and Soul (Strategy and Business, Vol. 16, 1999). The authors correctly criticize bureaucratic central and regional offices and suggest an autonomous model where the subsidiaries of the corporation play a prominent role. Unfortunately, Forteza and Neilson miss the key issue here: how to change the underlying premise of corporate success from projection to discovery. Although they suggest some ideas about corporate structure, they loose sight of three key processes that will determine competitive advantage in the future.
The first key process is related to research and discovery. Businesses determined to lead in the future will need to rapidly identify new technologies and new knowledge areas dispersed around the globe. To do so, they will need to expand their radar screen and include subsidiaries, customers, suppliers, associations, universities, and other entities inside and outside their industry. Success in this area will require a curious, imaginative and discovery-oriented culture, as well as structures that promote dialogue, discussion, and intellectual debate.
Transforming this knowledge into new products and services is the second key process. Companies that can rapidly transform knowledge into invention will have a competitive advantage. Expertise in this area includes mastering experimentation, creativity, and innovation.
The third key process covers all the activities related with the company’s value chain. Companies will need to constantly reassess their purchasing, manufacturing, sales, distribution, and marketing processes. Great products are useless if they can not be brought to market at a profit.
Researchers Yves L. Doz, José Santos y Peter Williamson offer an interesting and highly relevant framework of competencies in their book From Global to Metanational. The authors identify three core competencies necessary for success in the knowledge economy: (1) research and discovery, (2) mobilization and entrepreneurship, and (3) efficiency, flexibility, and financial discipline. The authors call those multinationals capable of harnessing these three core competencies “metanationals”.
In many multinationals, the projection premise is so ingrained that change will be extremely difficult, if not impossible. However, sooner or later, they will have to face the challenges of the knowledge economy and discover that the projection premise and the octopus model are no longer relevant.
Copyright 2002 QBS, Inc.