Multinationals 2.0
IBM chief sets off a debate about the global role of corporations
In his satirical new book Rome, Inc.: The Rise and Fall of the First Multinational Corporation, Stanley Bing humorously makes the case that the proto-capitalistic Imperium Romanum--with its bold takeovers, power-mad CEOs, and compelling brand--was the beta version of the globe-spanning Microsofts, General Electrics, and IBMs of today. Or perhaps more accurately, the Enrons and WorldComs of yesterday. While Rome Inc. had a great multicentury run, eventually it went out of business. One wonders if the feckless Emperor Honorius, watching the Visigoths coming over the seventh hill in A.D. 410, truly realized that the Roman Empire was about to fall.
Granted, IBM CEO Samuel Palmisano doesn't have to contend with Visigoths, Vandals, and other pesky barbarians. But like any modern CEO, he does have to deal with flash mob protests by antiglobalization advocates, company-bashing websites, protectionist legislation, and a high-velocity, Internet-connected world where the burgeoning Chinese and Indian economies spawn both profitable market opportunities and lethal competitors.
To succeed in this challenging global environment, Palmisano contends, IBM should be the last multinational corporation. Don't panic, Big Blue shareholders: He's talking evolution here, not extinction. In recent essays for the Financial Times newspaper and Foreign Affairs magazine, Palmisano went public with his big-think idea: The era of the multinational corporation is coming to a close. The very word "multinational," writes Palmisano, "suggests how antiquated our thinking about it is. The emerging business model of the 21st century is not, in fact, 'multinational.' This new kind of organization--at IBM we call it 'the globally integrated enterprise'--is very different in its structure and operations." Its many components, from back office to manufacturing to product development, will be dispersed around the planet in a vast network. Failure to adopt this model, he concludes, is not only bad for the immediate bottom line but in the long term will also exacerbate the many conflicts surrounding globalization. "People may ultimately elect governments that impose strict regulations on trade or labor," he warns, "perhaps of a highly protectionist sort. Worse, they might gravitate toward more extreme forms of nationalism, xenophobia, and antimodernism."
Local talent. Here is the essence of what Palmisano, who declined to be interviewed, seems to be talking about: Unlike multinationals, whose business in developing markets involves selling goods and services and using the local population for low-skill production and call centers, the globally integrated entity would set up more-sophisticated operations--such as research and development and product design--using local talent whenever possible. Last month, speaking before some 10,000 employees in Bangalore, India, Palmisano said IBM was tripling its investment in the country to the tune of $6 billion and opening a telecommunications research and innovation center there. IBM also recently announced it would spend $40 million over the next three years and hire 200 staffers for a new development lab in Russia. "We are in a global economy, and that doesn't just mean low-cost labor arbitrage," says Gartner Group analyst David Cearley. "What it also means is that you look for the best talent no matter where it exists around the world."
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