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A new model for going global

Global economic integration presents enormous opportunity for the future of business and society. The fundamental question for companies — particularly those in developed markets — is not whether to compete globally, but rather how to compete globally.

Today, the evolving model is the globally integrated enterprise, which refers to companies that are truly "global" (as opposed to "multinational") in their management and their operations. In this model, work is organized in fundamentally different ways. It calls for different skills and behaviors, more collaboration, greater focus on a multiplicity of cultural differences, and less hierarchy. Human capital is thought of not in terms of countries and regions and business units, but rather how to manage and deploy it as one global asset.

Samuel J. Palmisano
Joshua Roberts | Bloomberg | Getty Images
Samuel J. Palmisano

The globally integrated enterprise is nimble — possessing the ability to quickly enter new markets and seize new business opportunities wherever they arise. In short, it operates seamlessly as a single organic entity by integrating internal operations horizontally and globally, collaborating with external partners, and operating at the best location in the world, to maximize value creation from a global point of view.

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Evolutions in technology, operations, and work patterns have enabled the globally integrated enterprise. Shared business and technology standards that let businesses plug into truly global systems of production are unlocking efficiencies throughout companies. Collaborative approaches to work are fostering innovation. And new skills and new governance systems are changing how people work and how they are managed. These dynamic forces are coming together to transform corporations and unleash progress.

My views about global business, and the globally integrated enterprise, are a byproduct of my 39 years at IBM. During my time leading IBM, and in the years leading up to it, my colleagues and I recognized the dramatic change unfolding across the global business landscape. And we knew that while we could respond to these changes, the bigger long-term opportunity was in driving change and setting a standard that would become a baseline for companies throughout the world.

Given our size, we knew that implementing such transformative change would not be easy. Indeed, it would be highly disruptive within the company, and there was no guarantee the changes would succeed. But we also knew that "business as usual" wasn't an option and if we didn't undergo a transformation and do more to distinguish ourselves from our competitors, we would not be positioned for success in the future.

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We decided to compete on the basis of expertise and openness, and we moved from a multinational to a globally integrated model as fast as we could. This wasn't easy. At IBM, as at other companies, people develop an emotional attachment to the sources of their prior successes — businesses and ways of doing business that are well established and very profitable. Proposing to overhaul these businesses — perhaps even sell them off — generates resistance from colleagues, from shareholders, and from the chattering classes.

But if companies want to differentiate themselves and compete in this globally integrated environment, they have to be willing to reinvent themselves. Indeed, that has been true as long as there have been businesses — as IBM's history vividly attests. And they have to be willing to tolerate the critics who tell them they're making a big mistake.

In "Re-Think," I list a number of principles that can serve as a guide for companies evolving into globally integrated enterprises. Three of these principles stand out:

You need to be globally consistent but locally relevant. Companies operating in multiple countries need to tailor their offerings — be they products or public policies — to local constituencies, all while ensuring that the brand's value proposition and the principles guiding the company are the same everywhere.

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Learn from below. Management misses out on valuable information by failing to tap into the knowledge that resides at all levels of the company. Leaders can't afford to be insulated by a protective inner circle that shields them from information they think will be unwelcome.

Create a common culture around common values. All companies — but particularly those with operations spread across the world — need connective tissue that will focus employees on the same set of values. And the values will be more meaningful if the entire workforce is consulted on what they should be.

I think leaders will come to see — as I did — that the globally integrated enterprise offers the ideal operating structure for meeting the challenges and seizing the moments of opportunity in the global era.

Samuel J. Palmisano is the former chairman, president, and chief executive officer of IBM. His new book, "Re-Think: A Path to the Future," is due out on April 2.

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