Organizing for Worldwide Effectiveness

Organizing for Worldwide Effectiveness - An Article Summary per Bartlett and Ghoshal

Written for Thunderbird School of Global Management, Spring 2012

Summary

Like analyzing the differences, advantages, and disadvantages of centralized and decentralized governments of the world, Bartlett and Ghoshal have outlined their thoughts on companies utilizing “centralized hubs” and “decentralized federations” for their corporate global strategy.  The dichotomy is well-illustrated with the comparison of Matsushita, a Japanese company that has been successful with a central-control structure to its global business, and Philips, a Dutch company whose success is characterized by strong, independent subsidiaries for a global strategy.  In a short analogy, Matsushita is to Global Strategy as Philips is to Multinational Strategy.

The article explains reasons for Matsushita’s success through these points: a) Gaining the input of subsidiaries into management processes by creating strong linkages to and from home office, b) Ensuring that development efforts were linked to market needs through “market mechanisms” that spur innovation, and c) Properly managing responsibility transfers from development to manufacturing to marketing by, for example, graduating engineers through departments along with the products they have been developing.  On the other hand, Philips successfully managed locally by: a) Employing exceptionally talented, entrepreneurial expatriates who thrived with autonomy, b) Forcing tight functional integration within subsidiaries by incorporating people at technical, commercial, and financial levels in decision-making processes, and c) Dispersing responsibility along with decentralized assets creating nearly-autonomous business unit-subsidiaries.

The authors offer that these two strategies have pitfalls and argue that the most successful global corporations will maintain a Transnational Strategy, characterized by three traits: a) Interdependence of resources and responsibilities among organizational units, b) A set of strong cross-unit integrating devices, and c) A strong corporate identity and well-developed worldwide management perspective.

Extend

The Social Revolution has been the only one of its kinds to topple entire governments (Arab Spring), build an encyclopedia 50 times the size of the largest print version (Wikipedia), and created a user base that would be the 3^rd largest country in the world, today, if it were a country (Facebook).  In these three cases, technology has been the enabler that has created such movements and corporations that are following suit in how they collaborate are paving the way of the future in business as well.

The Transnational Strategy is successful due to its flexibility and characterized by companies that are well connected.  Specifically, the article authors note that this strategies second trait’s pillars include tightly controlled operating systems, people linking processes, and decision forums.  This is all collaboration that the social web has been predicated on.  Companies who adopt tools that connect their “global people” have already seen strides – Dell Computers utilizes salesforce.com, a cloud-based, customer relationship manager (CRM) tool that they use internally to manage global sales and support inside one “org”.  Dell also utilizes this tool for communication between these groups, collaboration with R&D, and communicating/controlling corporate global strategies.

The pressures that decentralized companies like Philips (e.g. poor communication tools, protectionism, and “frozen assets”) are no longer an excuse for companies to become more collaborative and implement transnational strategies.  Today, businesses have no excuse to remain either centrally-controlled or completely federated.  Ten years from now those that do not make the adjustment to the Transnational Strategy will be kicking themselves much like Arabian deposed rulers and Encyclopedia Britannica are today.  They ignored the capabilities available to even small businesses today through the cloud that will transcend their administrative heritage more cost-effectively through connecting their people, processes, and systems.