Globalization is one of the key forces of our times, whether we are talking about living in an increasingly integrated, flat world or transitioning from multinational corporations to globally integrated enterprises. I think most would agree that one of the key reasons globalization is now so prominent is a result of the wide adoption of the Internet and World Wide Web starting around the mid-1990s. As has been widely discussed, the Web makes it almost as easy to reach out to people, information and processes across the world as across the office, and thus enables the global integration of business and other institutions to an unprecedented degree.
But this is still all so new that I think it is worthwhile every now and then to take a step back and reflect on what we mean by global integration. Is there such a thing as bad integration? Does it depend on what is being helped by the integration, and what is being hurt? What about the impact of integration on people? How can we make it a positive force for as many as possible, while ameliorating the pain on those that are hurt by it?
These are questions I have been thinking a lot about, and they can be approached from various different angles. I’d like to start by discussing how global integration applies to enterprises, and follow up with other dimensions in future posts. To begin with, what are some of the major pitfalls that enterprises should be sensitive to so they implement the good kind of integration and avoid the bad? How should a business best start on the path to becoming a globally integrated enterprise?
Personally, I strongly associate global integration with the rise of the Internet and advances in information technologies, and in particular, with our new-found ability to apply systems and engineering thinking to a whole new class of complex problems - including globally integrated economies, industries and enterprises.
One way of looking at the Internet is simply as a very fast network with a very global reach. So, however a company is organized, you now have a way for everyone and everything to communicate much faster and more cheaply, with global reach. In such a view, one can imagine taking a classic, centralized, top-down hierarchical enterprise, and allowing it to scale globally, given the much better communications that the Internet now provides. If your traditional organization runs a very tight ship, you can - in principle - now run a much larger and tighter ship.
There are some processes in a business where such a tightly controlled approach works well. Examples include finance and legal processes, marketing and branding as well as organizing the response to a public business crisis or a physical disaster. But for the most part, centralized systems do not scale very well beyond a certain size and complexity. Generally, as the organization gets bigger, and especially as it becomes more global and is now operating in a wider range of environments, it becomes harder and harder to run the kind of tight ship the business was able to run when it was operating in a more homogeneous, slower changing world. Beyond a certain point, the business - which is now operating in a global, volatile marketplace - will become more and more unpredictable or emergent. In such an environment, the same kinds of centralized controls that worked well in the past will render the company increasingly fragile.
But the Internet has other very important qualities beyond speed and reach - qualities that are becoming particularly prominent with the rise of social networks and Web 2.0. The Internet is in fact becoming a kind of societal central nervous system that enables complex systems and organizations to become more distributed and flexible, and to respond and adapt to changes quickly. That is, when a business leverages the Internet as a real-time, open and global integration platform, the organization and its people become better able to collaborate, share real-time information and make quick decisions, regardless of the organization’s size or the location of its people. Moreover, because of the rise of standards, including standardized business processes, not only can an individual business react and respond to changes, but so can a well-functioning industry ecosystem, such as an integrated supply chain.
None of this is easy; in fact it is very, very hard. To leverage the Internet effectively as a platform on which to build such a flexible, adaptive, globally integrated enterprise requires a high degree of technical expertise. Even more important, it requires a commitment to transform the culture of the enterprise, so it can work in a more collaborative, open and distributed style. For example, one has to think of information not as something to be hoarded within each department, but as something to be shared across the organization. The key to effective distributed decision making is for everyone involved to have access to the best possible information.
Add to this the fact that business decisions involve not just the employees of the organization, but all its key ecosystem partners, including customers, supply chain partners, service providers and dealers. This requires a culture of collaboration, including the adoption of open standards, which are a prerequisite for sharing processes and information beyond the boundaries of the company.
Perhaps the key requirement for effective global integration is the way the company perceives the role of its people. In a centralized, hierarchical and relatively static organization, information and decision making are usually concentrated at the top of the company, and the people further down the hierarchy are viewed as parts of the company’s processes, performing the kinds of standardized tasks that cannot be properly automated with technology, e.g., the assembly line.
The role of people in a complex, distributed organization that is constantly evaluating and responding to new information and making real-time decisions is very different. These people have to understand the overall objectives of the business and their individual role in achieving them. They have to be able to collaborate and share information and expertise with colleagues within and outside the organization, and they must be able to respond to unanticipated situations and make good decisions that are consistent with the objectives and values of the organization.
I really believe that a company can only become a properly functioning globally integrated enterprise if, along with embracing globalization and the technologies that enable it, it also commits to transform the very essence of the organization and embrace a culture of talent and collaboration.