Transforming internal governance: The challenge for multinationals

Competitive discontinuities demand changes in how diversified multinational corporations create wealth. While executives agree that changes in the las t decade are qualitatively different from those in the past, many fail to t ake action or they apply old solutions, such as cost cutting, to new proble ms. The challenge for companies is to move from the zone of comfort - the f amiliar - to the zone of opportunity - the unfamiliar. Sources of discontinuity include more powerful better informed consumers; t he breakup of traditional channel structures; deregulation, privatization, and globalization; the convergence of traditional and new technologies; cha nging competitive boundaries; the evolution to new standards; shorter produ ct life cycles, and the greater involvement of business in ecological and s ocial issues. In this environment, managers must develop new capabilities. They need to t hink and act globally regionally and locally, adapt to a different pace and rhythm in all aspects of a firm's activities; integrate new technological knowledge with old and reconfigure that knowledge into new business opportu nities; develop consensus-building skills, form alliances; and allocate res ources under conditions of ambiguity. At the same lime, they must ensure th e profitability of current business. The obstacles to transformation are formidable. Many senior managers have l ittle knowledge of, or experience with, alternate models of managing and re sponding to new customer expectations. They seek administrative clarity at the expense of strategic clarity and sometimes lack the stamina needed to s ustain high performance. Transformation requires interrelated systemwide changes. The effort must be driven by a new concept of opportunity and involve the entire organization . The first step is to create a transformation agenda to mobilize the organ ization. Managers must then fight inertia, align the organization with the new direction, undertake projects that provide the basis for experimenting and learning, and evaluate failure and success. Innovations in how firms ma nage must precede innovations in how they compete and create wealth.