In recent decades, the rise of multinational firms has seen inevitable. With apparently unlimited resources and expertise, they would sweep away local competitors as they continued their global spread.
A foundation for this world view was the belief that multinationals were greater than the sum of their parts. More than just a group of companies with a common brand, they could draw upon the best and brightest from their workforce to deliver products of unique value. They could also harness their data and expertise to outmanoeuvre their smaller competitors.
The position of multinationals at the top of the food chain, however, is now being called into question.
In The retreat of the global company, the Economist shares some surprising figures:
- For companies with headquarters in the OECD, foreign profits are down by 17% over five years.
- The return on equity (ROE) of the top 700 multinationals has dropped from a peak of 18% a decade ago to 11%.
- Multinationals’ share of global profits, 35% a decade ago, is now only 30%
(Read the full article for more insights and observations.)
Big is bulky
The truth is that while multinationals have clear advantages, their size is also an inherent challenge.
With so many layers of management, many far removed from customers, decision-making can be slow and uncertain. Drawing on the expertise of the whole organisation is good in theory, but tremendously hard when there’s 100,000 staff scattered across 200 countries. Coordinating all the arms of a global business is no easy task.
In our consulting work, we’ve seen all these challenges:
- A global insurance business whose products are entirely local to each country, run completely separately. Even the use of the brand wasn’t consistent across the whole company.
- A telecommunications company where head office wasn’t ever mentioned, let alone involved, in local decisions.
- A media company where staff were banned from talking to the global head office.
- A global non-profit where knowledge was stranded within geographic regions.
Beyond external market factors, it’s these internal challenges are starting to drag multinationals down.
Digital workplace to the rescue
Multinationals already have size and weight, so the opportunity is to work smarter, as a coordinated whole.
An effective digital workplace can help in five key ways:
- Bridging silos and geography, by taking a purposeful approach to collaboration. This involves identifying strategic priorities and needs, then deliberately shaping the use of collaboration and social tools to achieve those outcomes.
- Accelerating innovation, particularly so-called “reverse innovation” which uncovers solutions at the edges of the organisation, and brings them into the light.
- Creating truly global solutions that span the entire organisation, covering content, communication, culture, collaboration and activity (the five purposes of modern intranets).
- Strengthening global and local ways of working, recognising that a small set of activities are common across the whole organisation, while most are specific to corners of the business (but are no less important!).
- Creating a digital centre of excellence at the heart of the organisation, with a mandate the increase the maturity of digital solutions across the whole business.
Follow the leader
Leading multinationals have already grasped the importance of the digital workplace, alongside customer-facing digital experiences.
Merck has launched a digital workplace that truly understands global and local, McKesson leads with their mobile centre of excellence and HEINEKEN transforms internal staff engagement.
Many other global firms are launching digital workplaces that bring the organisation together as a powerful whole. With the challenges now facing multinational firms, this can’t come too soon.