Global operating models: Lessons from (and for) emerging-market mulinationals
Narendra Mulani -- Logistics Management, 3/1/2009
A recent Accenture survey found that 95 percent of senior executives doubt their companies have a global operating model that is fully capable of supporting their international strategy. Ninety five percent! That's astonishing close to complete consensus. But what exactly is a global operating model, and why is such a thing so attractive yet so hard to perfect?
First a definition: Accenture views global operating models as integrated sets of capabilities that allow multinational enterprises (MNEs) to coordinate relationships between their headquarters and geographic business units. This is a significant departure from how companies used to approach globalization.
Rather than a loose confederation of far-shore material sources, low-cost-country factories, and remote call centers, companies bent on high performance now seek holistic approaches—global operating models—that allow them to rationalize supply chain processes across the multi-polar world. Given the complexity of this undertaking, maybe it isn't surprising that 95 percent of executives question the efficacy of their global operating models.
One way to increase that confidence level might be for developed-market companies to study the business approaches of emerging-market multinationals—and vice versa. Using the five core components of a global operating model (illustrated below), here are some examples.
1. Leadership. Global operating models of developed-market and emerging-market MNEs rely on strong leadership. Yet among emerging-market companies, leadership tends to be more personalized and centralized. Leadership is also more entrepreneurial, with top executives generally making faster, bolder decisions.
Emerging market MNEs are introducing more formalized and structured (Western) leadership styles. This can be both good and bad: Overly centralized decision making can slow newer companies' ability to penetrate developed markets. But under-emphasis of entrepreneurial leadership by developed-market MNEs can also hinder their assimilation into emerging economies. Re-emphasizing entrepreneurialism is a lesson that developed-market MNEs can learn from their emerging-market counterparts.
2. People. Research suggests that the global operating models of emerging-market MNEs focus heavily on the development of interpersonal and interorganizational networks. For developed-market MNEs, a focus on people means extensive, formalized HR-management processes. Some emerging-market MNEs have started to emulate these processes, including career development training, annual reviews, performance-based rewards, and so forth.
But developed-market MNEs seeking to penetrate emerging economies also have something to learn from their emerging-market counterparts: How to perfect internal and external networking capabilities. For example, interpersonal relations are not a prerequisite for inter-firm networking in the West; but in China, personal networks are the very basis of institutional networks.
3. Organizational architecture. Think of organizational architecture as how activities are grouped and regrouped (e.g., around geography, customers, products, functions); the extent to which power and authority are centralized or distributed; and the existence (or lack) of written policies, job descriptions and standard procedures.
At emerging-market MNEs (where authority is more top-heavy), an organizational architecture is less-fully incorporated into the global operating model. Developed-market MNEs are further ahead with network-based organizational structures (horizontal and inter-dependent relationships) that create cross-border synergies and respond to local market specificities. In today's multi-polar world, this approach is clearly preferable.
4. Processes and technology. These are the tools and activities needed to manage and improve the global supply chain: ERP, strategic planning, sourcing/procurement, resource allocation, customer relationship management, etc. In the global operating model configurations of emerging-market MNEs processes and technology tend to be less important than leadership and people.
However, a more modern balance is being sought. For example, Korea's Samsung was an early adopter of Japanese quality circles, while Mexico's Cemex was the first cement company in the world to use GPS technologies. Still, adoption of "enlightened ways" should not be so aggressive that emerging-market MNEs lose their distinctive strengths.
5. Metrics. Metrics tell companies how their global operating model is performing. For example, measuring the direction and intensity of trade between geographic business units can help gauge inter-unit cooperation. Metrics may also show a company that it is (or is not) generating sufficient economies of scale across boundaries (the ratio of central purchases versus local purchases for each geographic unit).
Not surprisingly, emerging-market MNEs don't use metrics as much as developed-market organizations. Emerging-market MNEs must emulate the West by putting clearly-defined metrics at the center of their global operating models. Global Operating Models and Supply Chain Mastery
Accenture's research on high performance speaks directly to the need for sophisticated, global operating models and the role played by supply chain management. For example, a recognized tenet of high performance is developing global operations "footprints" that incorporate product development, sourcing, manufacturing, transportation, storage, sales & operations planning, and after-sale services—all key focal points of the modern-day supply chain.
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