It is a sobering exercise to review the list of top global
corporations of the year 1900 and note how few still exist today. Global
leadership is a poor guarantee for survival, much less for continued
leadership in the long term. Yet, some corporations not only survive but
also thrive over the decades.
The others fall behind and die. While many may blame markets, technology
obsolescence, macroeconomic forces and even geography, almost always success
and failure rests with management. This was brought home during last week’s
University of Southern California’s Global Conference held in Tokyo.
While the event was open to USC’s alumnae, more than two-thirds of the
attendants graduated from the Marshall School of Business.
As such, most of the presentations and breakout sessions dealt with
management -- particularly global strategies. A particularly insightful
session dealt with whether Mitsubishi’s trading company could achieve a
truly global advantage, such as effectively working with its Indian
subsidiaries and by outsourcing work to a Japanese firm that specializes in
providing Indian outplacement.
The challenges faced by Japanese companies were, of course, very similar to
those found in Korean companies. But before we dive into this illustration,
it is important to appreciate the difference between going multinational
versus going global. Having subsidiaries and branch offices around the world
simply means the corporation is multinational. This phenomenon is common.
Being global means to almost seamlessly exploit a company’s resources no
matter where they may exist around the world so in fact the company is truly
borderless in its operations. This is rarer than most people may assume.
Consider the following: A truly globalized company effectively overcomes
international obstacles to leverage its optimum advantage in using the best
possible terms of financing, working with the most appropriate suppliers,
manufacturing in the ideal locations, employing the most creative people for
design/R&D -- regardless of where they may live, applying the right mix of
global and local marketing, moving its products via optimal sales and
distribution channels, while working with the best possible people --
regardless of location and nationality -- trained in a global corporate
culture with a single set of business processes.
Whew! That’s a lot. But consider what actually are the cases with most
multinational companies -- including Korean corporations. To move from the
theoretical to the actual, consider last week’s case study with the Japanese
trading company when it comes to its own quest to become globalized. The
company recognizes there are many inherent advantages to integrate its
Indian operations with the head office.
To bring the Indian operations up to Japanese standards, however, the
company recognizes that it needs to send some of its staff on long-term
assignments to India for cross training and development. Unfortunately, very
few Japanese are willing to take on longterm assignments in developing
countries. Beyond that, there is a very strong “not invented here” (NIH)
mentality at the company, so that all core, critical processes tend to be
centralized in Japan.
This NIH mentality is reinforced by the corporate standard for communication
being Japanese, a language mastered insufficiently by most non-Japanese
employees. The language barrier in turn makes it difficult for many Japanese
managers to trust their non-Japanese counterparts to adequately perform
their work at the same level as the Japanese.
While not the biggest issue, the time difference makes it difficult, even
with advanced electronic communications, for the various country teams to
work as one. All of which reinforces the Japanese head office business
culture to be risk adverse. In the end, this multinational giant works with
different business manuals, varying from country to country, with the head
office tending to do as much as possible within Japan.
For any multinational corporation to compete globally there may conceivably
be two strategies. One, a company may hope that most of its competition is
also unable to become globalized and as such the company will not suffer too
much in the face of its competitors. Or, two, the company may become a truly
globalized company, such as Coca-cola, Shell and IBM, etc., moving up to the
next level and achieving new efficiencies and advantages that its lesser
competition may not be able to enjoy.
The obvious question is whether a Korean, Japanese, American or whatever
corporation is willing to let go of its home country centricity and become
global in action as well as in word. That means, among other things,
establishing English as the corporate standard for communications and
allowing “foreigners” to assume some of the top executive positions of the
company with genuine responsibilities. This transformation to globalization
can be incredibly painful -- and that leads us to another challenge for
longterm survival: maintaining technological advantage.
Technologically competitive companies largely base their competitiveness on
radical innovation. That is, their products and services are substantially
superior in offering provider and/or user superior benefits based on
substantially different technologies. We should note that getting this right
is not easy and many companies trip up -- sometimes fatally -- before they
get it together.
But let’s compare two famous American companies to get a grasp of this
survival strategy. At the same time, please consider where some of Korea’s
leading technology corporations may be today.
Though today Xerox is a multinational technology company
delivering excellent products, it is nowhere it could have been had
management been able to properly leverage what its Palo Alto Research Center
(PARC) independent R&D center was creating back in the 1970s. PARC’s
director, Bob Taylor, and his team of incredibly creative engineers were
producing marvels that we take for granted today.
Envisioning what a paperless office of the future may be like, the PARC
wizards created arguably the first personal computer, complete with a
graphic user interface that inspired the Mac and Windows, the mouse, the
Ethernet to serve as a local area network, laser printing, both game and
practical business application software, etc. As history recounts, this
California think tank was unable to persuade its New York management to
adopt its inventions in time. Bob Taylor, the ultimate product champion,
died. Without his creative genius that gave complete intellectual freedom to
his developers, the brilliance of PARC dimmed and finally was absorbed into
Xerox proper.
In contrast, consider Gillette, the manual shaver company. Rather than
simply milking maximum profits from its early safety blades, it came up with
marketing innovation as being its cornerstone. Beyond its well-known
approach to more or less give away the shaver and to sell the blades, the
company for 100 years has been plowing its profits into R&D. But more
significantly, it has adopted a future orientation that allows for
cannibalization of its best selling products by new, upcoming products. In
other words, if one were to graph out Gillette’s products’ life cycles, one
would see new products’ upward lines intersecting prior products’ lines at
or near the peaks of the earlier products’ sales.
To summarize, Gillette is one of those perpetually competitive companies
that has the following attributes:
1. Product marketing being essentially future oriented.
2. Risk takers being accepted and often encouraged.
3. Management recognizing that the real devil is in the
details
and not somewhere outside of the company.
4. Not allowing fear of cannibalization to exist; in fact,
accepting cannibalization
by new products as being part of every successful, as well as
unsuccessful,
product’s lifecycle.
5. Product champions being recognized and rewarded.
6. Communication being genuinely encouraged among all levels.
7. Innovation for the future being part of the corporate
culture bedrock.
As one other corporation’s executive well put it: “Our
problem is not creating innovations. Our problem is getting them out the
door.”
Too often this underlining problem exists: too much greed in milking the
cash cow while overly fearing change caused by radial innovation. This
combination has brought too many good companies to their knees, even when
once a time they had their industry’s leading products.
We would do well to consider that venture capital is the most transferable
form of financing and it is being attracted to countries -- and companies --
with the most innovative cultures
So, I end this column with the following question: Will
today’s leading Korean companies be around 100 years from now; and if so,
how Korean and innovative may they be then?
