Way back in the 1990s, I published a book called The Global Leader: Critical Factors for Creating the World-Class Organization (McGraw-Hill, 1997). In the book, I identified four operating principles for global organizations. And based on the reactions of clients, those principles seem to have held up rather well.
The principles can serve as a global guidance system to support the decisions and actions of organizations, teams, and individual leaders.
1. Integration
Integration doesn’t mean the global standardization of everything. It means pursuing global standardization (to achieve global economies of scale) whenever it is feasible and desirable. This must be accompanied with an effort to localize whenever it is necessary to meet local needs. There might be local laws and regulations that need to be respected, or cultural differences that demand a degree of customization.
Sam Palmisano coined the term globally integrated enterprise (GIE) in 2006 when he was CEO of IBM. IBM had created smaller versions of itself in multiple countries which resulted in massive duplication and redundancy. Instead of this multinational approach, IBM shifted to a GIE in which functions could be located anywhere in the world depending on cost, talent and the environment.
The successful global leader must recognize the critical importance of economies of scale to a global business, but must always keep in mind the general rule – be as global as you can, as local as you must.
2. Flow
The whole purpose of a global approach is to minimize the impact of geographic, business, functional, and other boundaries so that work can be performed anywhere in the world where skilled people can be found. What this requires is the capability to create fast flows of resources like information, knowledge, and conceptual tools – to where they can add the most value at any point in time. ‘Fast’ is a relative term, and the desirable speed can depend on the nature of the problem to be solved.
Existing know-how is useful for solving definable, complicated problems; these can be managed by the application of an existing algorithm or procedure, and these can be distributed quickly.
A challenge for global leaders is that many problems cannot be solved with existing know-how. These are complex problems – often dilemmas – that require collaboration across the business and the creation of new knowledge. Collaborative and social networking technologies are enabling not just the fast transfer of information and knowledge, but also the online creation of knowledge in small groups, teams, and communities.
The successful global leader understands the nature of the problems to be solved and utilizes the best tools for fast knowledge transfer, or creates opportunities for speedy knowledge creation and application.
3. Leverage
Leverage is about making the very best use of differences in the organization – differences in worldviews, cultural expectations, and approaches. From its beginnings after the civil rights movement, the diversity area has gone through several transformations. Companies recognized that there was great diversity in the markets they were serving, and that they needed to adapt. Later they recognized that there were diverse groups within their businesses that could not only connect to different markets, but could bring different perspectives and ideas. Today, many companies are taking it further into ‘diversity by design’ initiatives in which individuals are selected for teams not on any racial, gender, class, or cultural differences, but on their cognitive diversity – differences in the way they think and approach problems.
The successful global leader leverages inner and outer differences from here, there, and everywhere.
4. Optimization
What happened in multinationals was that a geography looked to maximize its results, even at the expense of other geographies. A global company looks to create optimal results for the entire organization. A concept in photography is depth of field. A shallow depth of field means that only a narrow zone in the picture appears sharp. When there is a deep depth of field much more of the picture appears sharp. Global leaders need to switch between global (deep) and shallow (local). When making decisions, for example, the local leader must ask, “What are the implications of my local decision on global efficiency and effectiveness?” I might increase my local results by putting more sales people in the north of Sweden, but would that investment make sense at the global level? Could that investment return better results in the urban areas of China? Likewise the leader with global responsibilities must ask, “What are the implications of my global decision on local operations?” Will my globally standardized sales process make sense in every local market?
The successful global leader recognizes there is no formula for creating optimal results; it is a continuous negotiation and balancing act.
Ask those with global responsibilities, to what extent do your decisions and actions enable achieving:
- Appropriate levels of global integration (and localization) in the business?
- Rapid application of existing and created knowledge?
- Leveraging of differences that are often the source of hidden value?
- Optimizing of results for the whole organization, not just the parts?
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