Multinationals 2.0
IBM chief sets off a debate about the global role of corporations
And that is what IBM and some other global companies, such as General Electric, are doing. In the past five years, GE has opened R&D centers in Bangalore in 2000 and Shanghai in 2002. "We see developing countries as a huge growth opportunity for us," says Michael Idelchick, GE's vice president of advanced technology. "And to be a global player there, you need to speak the language and understand the culture. You can't just be moving technical experts back and forth from the United States ... and there is a big enough talent pool out there." This global distribution of key assets represents a big change from the classic multinational structure, with the company headquarters as the hub and subsidiaries as the spokes. In that model, a company often tries to replicate all its business processes, such as marketing and sales, in each subsidiary. "In the 1980s, Procter & Gamble was famous for saying that its approach to globalization was to create little replicas of Cincinnati all over the world," says Mohanbir Sawhney, a technology professor at Northwestern University's Kellogg School of Management. That's not the case with networked companies. Instead of subsidiaries looking like so many Mini Me units, Sawhney says, "you end up with centers of excellence distributed around the world."
And not just in the Group of Eight nations. For instance, IBM may specialize its Indian units in R&D and software engineering, its Philippine and Irish units in customer-care operations, its Chinese units in manufacturing, and so on. "Decoupling" different capabilities and then "recoupling" them through the network is a fundamental shift in global organization design. "Hub and spoke is very good for physical things but perhaps not so stimulating of creativity in human and knowledge organizations," writes Carlota PÃÂÃÂÃÂérez, a Venezuelan researcher specializing in technology and economics, in an E-mail. (Palmisano is a big fan.) "Information technology does not work like hub and spoke. The freer the linkages, the richer the exchanges, the greater the feedback loops, and the better the atmosphere for sharing experience and attempting innovation."
Good for society? "The shift from MNCs to globally integrated enterprises provides an opportunity to advance both business growth and societal progress," Palmisano writes.
Antiglobalization activist Kalle Lasn doesn't believe for a moment, though, that the head of Big Blue is somehow turning into a big red. Lasn, founder of Vancouver-based Adbusters magazine, just thinks that his movement is finally making some headway. "I've been doing some consulting with some large companies, and I can tell you that they are worried," he says. "They feel that global sentiment is inexorably turning against them."
Earlier this month, for instance, some 70,000 South Korean activists staged anti-U.S. rallies to denounce their government's free-trade agreement negotiations with Washington as "U.S. economic colonialism." Also worrisome has been the nationalization of energy assets in Russia, Venezuela, and, more recently, Bolivia. In response, many companies are trying to spiff up their public images by adopting "green" approaches to marketing. British Petroleum spins itself as Beyond Petroleum, for instance. Even Wal-Mart has begun talking about climate change and its commitment to sustainable growth. Good corporate citizenship in action? Perhaps. But Julie Gorte, chief social investment strategist at Calvert Group mutual funds, says it's also savvy business. "You don't want consumers mad at you, obviously, and [being seen as socially aware] is especially important to European consumers," she says.
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