Thomas P.M. Barnett :: Weblog

OP-ED: "Multinationals have been superseded," by Samuel Palmisano, Financial Times, 12 June 2006, p. 15.

Wanted to blog this one for a while, so carried it around.

Met a fascinating thinker a while back who noted that it took building architecture quite some time to adjust to the new capabilities forged by the advances in internal skeleton design that kicked off the era of skyscrapers. For centuries (thousands of years, really), architecture was limited by the reality of stacking blocks on top of one another, buttressing here and there, adding the arch, but overall, pretty limited, so buildings all looked basically the same.

Then came the capacity for internal skeletons made of metal, and yet, quite a few years pass before any new movement arises in architecture to account for this new capacity. Buildings were being built in largely the same way, just taller.

But eventually, architects break that mold and new buildings arise with the new building forms. But naturally, there was a lag, or a lack of imagination that had to be overcome.

This guy's point was that the same was true for the rise of information technology: we had all this new capacity but kept using it in all the same old corporate structures. This was basically Art Cebrowski's point about the military: "you're still thinking largely in terms of platforms instead of the possible net."

Steve DeAngelis has maintained this perspective for years, making his own personal business explorations of new forms through the various companies he's run, to include Enterra, whose own structure starts to become quite federated in terms of its personnel spread across the country (not unlike the rather extreme version of this model pursued globally by Accenture, which basically has no HQ, just the global net of execs and work sites).

[editor's note: Steve linked to this same piece recently]

Steve's point has been for a while that the new architecture allows news forms of enterprises, but that execs can't imagine that new form unless they rethink the nexus of compliance, security, systems integration and performance management/process reengineering, four venues that have historically been tackled separately within organizations, with each venue requiring its own dedicated suite of outside contractors (accountants & lawyers, security firms, SI firms, consultants). In Enterra's mindset, only when you see the organic overlap, even coincidence, of all those approaches, do you begin to see how your enterprise can be redefined.

Not surprisingly, one company probably furthest along in this evolution is IBM, and the writer here is chairman and CEO. In the IT world, IBM is the only true world-class, business-spanning package out there than combines high-end consulting, naked technology, and system integration. Other players have pieces, and are now seeking to roll themselves up and others in new and bigger packages to challenge IBM (hence, all the suitors for Enterra), but IBM remains the gold standard, as it were.

Palmisano's explanation of how IBM views this new reality is worth quoting. It's not a great explanation, but it definitely moves the pile a good bit, and it helps us think about better ones:

The emerging business model of the 21st century is not, in fact, "multinational." This new kind of organisation--at IBM we call it "the globally integrated enterprise"--is very different in its structure and operations. Many parties to the globalisation debate mistakenly project the twentieth-century multinational onto 21st century global reality. This happens as often among free-market advocates as among those opposed to globalisation.

Let me describe this new creature. In a multinational model, companies built local production capacity within key markets, while performing other tasks on a global basis. They did this in response to the rise of protectionism and nationalism that began with the first world war and carried on late into the twentieth century. As an example, American multinationals such as General Motors, Ford and IBM built plants and established local workforce policies in Europe and Asia, but kept research and development and product design principally in the "home country."

The globally integrated enterprise, in contrast, fashions its strategy, management and operations to integrate production--and deliver value to clients--worldwide. This has been made possible by shared technologies and shared business standards, built on top of a global information technology and communications infrastructure. Because new technology and business models are allowing companies to treat their functions and operations as component pieces, companies can pull those pieces apart and put them back together again in new combinations, based on judgments about which operations the company wants to excel at and which are best suited to its partners.

These decisions are not simply a matter of offloading non-core activities, nor are they mere labour arbitrage--that is, shifting work to low-wage regions. Rather, they are about actively managing different operations, expertise and capabilities to open the enterprise up in multiple ways, allowing it to connect more intimately with partners, suppliers and customers and, most importantly, enabling it to engage in multifaceted, collaborative innovation.

This kind of innovation is much more than the creation of new products. It is also how services are delivered: three-quarters of most employment is in services. This kind of innovation changes how business processes are integrated, how companies and institutions are managed, how knowledge is transferred, how public policies are formulated--and how enterprises, communities and societies participate in and benefit from it all. Leaders in public and private sectors recognise that innovation is key to our future. Today, innovation is inherently global.

Like that Don Rippert (CTO, Accenture) piece a while back on Service Oriented Architecture, reading this op-ed really helps me understand what a comperehensively radical re-thinker Steve is, and why it's so perfect that I joined Enterra.

Like I complained in PNM, I grew up feeling like I'd never be "present at the creation" like Kennan and others were at the dawn of the Cold War, but in reality, I've been fortunately enough placed by history and good contacts like Art Cebrowski and Steve DeAngelis, to be present at the creation of what I like to call a new Military-Market Nexus that signifies the new strengths, new resiliency, and new forms of security that arise in response to the IT revolution--not just in the national security realm, but first and foremost in the business realm.

So my response is to say, "Of course we rethink alliances! Of course, we rethink official developmental aid! Of course, we rethink multinationals!"

All this flows naturally from the dialectics of the new, emerging synthesis represented by globalization. Politics and military needs to catch up to economics and technology, because the models we're offering in the former just don't sync up well with the capacities of the latter.

When Steve and I come together in Enterra, we pursue the insanely ambitious goal of trying to redefine that military-market nexus from both sides, with our first cut at new synthesis being Development-in-a-Box.

The answer? Of course not. It's just the best question for now.

Real answers are yet to be found...

God I love congee with pork for breakfast!