Dear Friends,
Someone forwarded an interesting article written by Sam Palmisano, chairman and chief executive of IBM. Below I've pasted in what I received below. The question I was asked was, "Could this be new leadership thinking emerging?"
Here are my thoughts:
Mr. Palmisano's observations are astute -- even, one might say, enlightened. I agree with his analysis of the way the old multinationals are transforming themselves. However, whether this works to the advantage or disadvantage of everyone -- other than the corporatocracy -- is up to us. You and me. The consumer.
This is the time to pressure these organizations to commit to setting new goals, ones that serve the betterment of workers, consumers, those who pick and mine the resources, future generations, and the environment, instead of the current goals of making a few rich people even richer. We must send out the word that we will only buy from companies that are dedicated to community, to making this a sustainable, peaceful, and stable world for all sentient beings.
The fact that Mr. Palmisano says that globally integrated enterprises "can deliver enormous economic benefits to developed and developing nations" does not mean that they will. It is up to us -- you and me -- to make sure they do.
What do you think? See the article below.
John
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How multinationals have been superseded
By Samuel Palmisano, chairman and chief executive of IBM
Financial Times
Everyone, it seems, has a strongly felt position on globalisation. But there has been a lot less in-depth thought about the institution many see as globalisation’s primary driver, the multinational corporation. The very word we use 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 organisation – at IBM we call it “the globally integrated enterprise” – is very different in its structure and operations. Many parties to the globalisation debate mistakenly project the twentieth-century multinational on to 21st century global reality. This happens as often among free-market advocates as among those opposed to globalisation.
Let me describe this new creature. In a multinational model, companies built local production capacity within key markets, while performing other tasks on a global basis. They did this in response to the rise of protectionism and nationalism that began with the first world war and carried on late into the twentieth century. As an example, American multinationals such as General Motors, Ford and IBM built plants and established local workforce policies in Europe and Asia, but kept research and development and product design principally in the “home country”.
The globally integrated enterprise, in contrast, fashions its strategy, management and operations to integrate production – and deliver value to clients – worldwide. That has been made possible by shared technologies and shared business standards, built on top of a global information technology and communications infrastructure. Be-cause new technology and business models are allowing companies to treat their functions and operations as component pieces, companies can pull those pieces apart and put them back together in new combinations, based on judgments about which operations the company wants to excel at and which are best suited to its partners.
These decisions are not simply a matter of offloading non-core activities, nor are they mere labour arbitrage – that is, shifting work to low-wage regions. Rather, they are about actively managing different operations, expertise and capabilities to open the enterprise up in multiple ways, allowing it to connect more intimately with partners, suppliers and customers and, most importantly, enabling it to engage in multifaceted, collaborative innovation.
This kind of innovation is much more than the creation of new products. It is also how services are delivered: three-quarters of most employment is in services. This kind of innovation changes how business processes are integrated, how companies and institutions are managed, how knowledge is transferred, how public policies are formulated – and how enterprises, communities and societies participate in and benefit from it all. Leaders in public and private sectors recognise that innovation is key to our future. Today, innovation is inherently global.
I believe the globally integrated enterprise is a better and more profitable way to organise business activities – and it can deliver enormous economic benefits to developed and developing nations. For example, integration of the workforce in developing countries into global production systems is already raising living standards, improving working conditions and creating more jobs in those countries.
But shifting to the model of globally integrated enterprises also presents big challenges for leaders in every sector of society. Let me mention two.
First, skills. Obviously, competition will heat up even more – simply from so many more people all over the world gaining equal access to the production process and the market place. The single most important arena for that competition – and the consideration driving most business decisions – will be securing a supply of high-value skills. At a minimum, nations and companies must invest in educational and training programmes, if they hope to keep up.
Second, trust. A company’s standards of governance, transparency, privacy, security and quality need to be maintained even when products and operations are handled by a dozen organisations in as many countries. We need new ways of establishing trust based on shared values that cross borders and formal organisations. This will mean significant changes in organisational culture, new forms of partnership among multiple enterprises and segments of society and new standards for managing a complex market place.
These changes will take time. But the alternative to global integration is not appealing: left unaddressed, the issues surrounding globalisation will only grow. People may ultimately elect governments that impose strict regulations on trade or labour, perhaps of a highly protectionist sort. Worse, they might gravitate toward more extreme forms of nationalism, xenophobia and anti-modernism.
These issues are too big and interconnected for business or government alone to solve. Indeed, organisations of all types must come together. I believe public sector leaders will find in business a willing partner to reform healthcare and education, secure trade lanes and electronic commerce, advance innovation, train and enable the displaced and dispossessed, grapple with environmental problems and infectious diseases and tackle the myriad other challenges that globalisation raises.
I also believe that, properly understood, the globally integrated enterprise can be an enormous help. A promising new actor has walked on to the world stage. I am hopeful that leaders in all spheres can join in realising its potential to open new possibilities for business growth and social progress.
The writer is chairman and chief executive of IBM. An essay by Mr Palmisano on this subject appears in the May/June issue of Foreign Affairs.
