The emerging competitive landscape poses a challenge to the internal-governance capacity of large, established firms. Internal governance refers to the wealth-creation processes inside diversified multinational corporations (DMNCs). Three main processes constitute internal governance: cultivating strong corporate–business-unit relationships, fostering inter-unit linkages, and pursuing growth and innovation. First, it is easier to create wealth when frictions in the relationships between the corporate center and the business units (and the geographical units) are reduced. Eased frictions allow business units to be market oriented rather than embroiled in internal debates.
Second, enhancing the quality of inter-unit linkages (for example, global account management) creates value. Internal corporate leverage of resources requires business units to collaborate to address new, emerging opportunities. Finally, growth and innovation are an integral part of a corporation’s vitality.
The rate of change in the competitive environment exceeds the speed with which established DMNCs have been able to transform their internal-governance processes.1 Consider Kodak, Matsushita, Toshiba, and other firms with great traditions, global scope, and established technological capabilities. As the dominant paradigms in their businesses shift, their ability to lead is severely compromised. Although leaders recognize the need for rapid transformation of their firms’ internal governance, the problem lies in determining how to accomplish that transformation.
DMNCs are not constrained by a lack of knowledge about new technology;... To read the complete article, login or sign-up using the form below.
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