Global Operating Models in

a Multi-Polar World
Stéphane J.G. Girod, Joshua B. Bellin and Robert J. Thomas

May 2009

Research Report
Global Operating Models in a Multi-Polar World
Emerging economies are increasingly shaping what
we call a multi-polar world.1 A decade ago, only
20 companies from those economies appeared on
the list of Fortune’s Global 500; today that number
is 70. And those companies have achieved in 20
years what some of their “triad-based competitors”
(those in Japan, the European Union and North
America) took a century to accomplish.2
Many experts believe that these
challengers represent a new breed of
competitor characterized by radically
new business models. Ming Zeng and
Peter Williamson, for example, explain
how many Chinese companies are now
thriving on the difficult-to-imitate
“cost innovation” strategy—the ability
to offer customers high levels of variety
or specialization, or high-tech products
themselves at low cost.3 Few triad
competitors seem to be able to master
the skills needed to implement this
strategy, which requires different
operating models or organizational
configurations than are usually found
in developed-economy multinationals.
How have companies like América
Móvil, China Mobile, Lukoil and
Reliance Industries — companies that
we will profile in future research
notes — organized to sustain their
now impressive competitive positions?
What is special or new about these
global operating models, if anything?
Are they really more innovative than
their triad-based competitors’ models?
If so, what are the implications for
multinationals based in the developed
world? If not, on the other hand, how
can they be improved, and what are
the implications for the next generation
of developing-world businesses?
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These questions are all particularly
pertinent for companies in both
developing and developed regions that
are seeking to achieve or maintain
high performance. The right global
operating model can give companies
a distinctive capability that helps it
outperform competitors over time
and across economic disruptions and
changes in leadership.4
The literature on emerging-market
multinationals is scarce and contra-
dictory. Some researchers contend that
the operating models of emerging-
market champions are significantly
distinct or even superior.5 Some argue
that emerging-market champions are
still followers lacking organizational
strengths other than those related
to low-cost manufacturing.6 Yet for
others, the operating models are
converging toward Western practices
under the influence of business
schools, global consultants and merger
and acquisitions.7 Given this lack of
agreement, substantive differences in
models may emerge, quite apart from
those simply created by cultural and
institutional differences. Besides,
relevant studies do not relate their
findings to a set of prescriptive
configurations in which the synergies
between the operating elements are
clearly explained.
The Accenture Institute for High
Performance Business has begun a
research project to explore the global
operating models of emerging-market
leaders in the wireless telecom and
energy industries. Understanding how
the models in these companies compare
with those of their US-, EU- and
Japan-based competitors should help
all companies compete in the next
phase of globalization — one marked
by a competitive landscape with many
centers of economic power.
In this research note, the first in a
series, we lay out the questions that
will be taking up over the course of
the project and set out a course of
research. We define the concept of
global operating model, present a
short overview of the recent literature
about emerging-market companies’
global operating models, discuss some
of our methodological choices and detail
the contributions we expect to make.
What is a global
operating model?
At the core of business today are two
high-level challenges: strategy and
execution. Encapsulated within any
strategy is a business model or value
proposition which, in its simplest
form, answers the question, How do
we make money? And situated within
the sphere of execution is an operating
model, which answers, Are we properly
organized and aligned to execute that
strategy? To succeed in the multi-polar
world, a company’s global operating
model must be as robust as its
business model is sound.
In our definition, two aspects charac-
terize an operating model. The first
aspect is the five organizational
Global Operating Models in a Multi-Polar World
Operating Model Characteristics
External
Environment
Processes and
Technology
dimensions—leadership, people, organi-
zational architecture and infrastructure,
processes and technology, and metrics
of business success—that interact
with company culture.8 (See “Operating
Model Characteristics.”) The second
aspect, on which the success of an
operating model depends, is the
capability to align these five elements
and integrate them with one another
so that they are correctly configured
to fit the internal culture, the external
environment and, of course, the
company strategy.9
Operating in a multi-polar world means
that high-performance businesses
need to anticipate intense competition
from new players from all around the
world and to support their business
models in both triad and emerging
markets. This task entails managing
the different levels of complexity
found in local, regional and global
operations. And this is the crux of a
3 | Accenture Institute for High Performance | Copyright © 2009 Accenture. All rights reserved.
Strategy and Value Proposition
Alignment
Operating Model – Components
Leadership
Business Success
Metrics
People
Execution
Superior Business Results
global operating model: when properly
configured, the five organizational
dimensions just discussed allow multi-
national companies to manage that
complexity with agility and flexibility.
Uncertainty about
emerging-market leaders’
global operating models
Here we summarize our preliminary
review of the relevant literature using
the figure presented nearby. As it is
easy to observe, little is explained about
how emerging-market leaders configure
their global operating model to support
their rapid internationalization.
People and leadership. Some studies
show that emerging-market champions
value multicultural and local leadership
more than developed-market multina-
tionals, which tend to rely more on
expatriates.10 Yet, this point is
disputed as some studies also show
Culture
Organization Architecture
and Infrasturcture
that, for example, in regionally or
religiously fragmented China and India,
corporations struggle to be inclusive
and culturally diverse.11
People and talent. Academics are
divided about whether emerging chal-
lengers and triad incumbents have
comparable internal training programs
and corporate universities; innovative
recruitment methods; job-rotation
practices; and internal innovation
competitions.
Organizational architecture and
leadership. It’s not clear from the
literature whether emerging-market
champions are more entrepreneurial
or more bureaucratic than their
competitors. Many studies report that
Chinese state-owned companies are
very bureaucratic and their senior
managers motivated more by politics
than performance.12
Global Operating Models in a Multi-Polar World
Processes. Emerging-market leaders
may have a superior ability to satisfy
bottom-of-the-pyramid customers in
their own or other emerging economies.13
These companies may have an advantage
because they have the right learning
skills and knowledge management
processes in place to serve such markets.
Yet it is not clear whether these
processes are so effective that they
could result in a worldwide operating-
model advantage. Emerging-market
multinationals may still lack the skills
to develop a sophisticated marketing
strategy in which demand is highly
complex; global branding, for example,
might prove difficult. Furthermore,
none of the studies explain what
makes such learning possible, or how
it is organized and flows within
these organizations.
The emerging-market literature also
highlights two important operating
model variations that get little atten-
tion in the organization literature
on models that has been developed
through triad-based research lenses.
Hybrid global operating models
Chinese and Indian companies, notably,
may develop “hybrid” operating models
in which they seek to reconcile local
and triad-invented practices. Fang Lee
Cooke observes, for instance, that
many leading Chinese companies use
a combination of Western, Japanese
and Chinese operating practices,
particularly in the areas of human
resources and culture.14 For example,
they combine Western performance-
based incentives that reward Japanese-
4 | Accenture Institute for High Performance | Copyright © 2009 Accenture. All rights reserved.
style just-in-time and quality-teams
excellence but leave a much stronger
role to collective agreement and
trade unions, a necessity in a socialist
economy. Similarly, Signe Spencer
and colleagues note that many Indian
CEOs exhibit individualistic, capitalist
and socialist leadership styles.15 For
example, in their decision-making
processes, Indian CEOs will value
company performance but also and
at least equally, the collective good,
both social and national. So what
makes hybrid operating models work?
Are these models temporary or here
to stay? How do emerging-market
champions choose which capabilities
to import and which to do away with?
We will address these and other
questions in our study.
The role of governance
Some studies indicate that an essential
governance feature of many emerging-
market leaders both in Asia and in
Latin America is the business group
(conglomerate), which is often
family-owned. This type of governance
structure may allow emerging-market
companies to compensate better for
the lack of venture capitalists, financial
institutions, business schools, market
research firms, and law and accounting
firms than their triad-based competitors
that often depend on such resources
to operate successfully.16 But as many
scholars recognize, there are potential
weaknesses with conglomerates. They
can show less transparency and more
complacency with less than optimal
results and performance metrics.
Furthermore, this structure may ham-
per effective internationalization by
dispersing resources and distracting
leadership. Thus, it may have detrimental
implications for metrics, leadership and
other operating model dimensions.
While the literature on emerging-market
champions highlights the various
strengths and weaknesses of their
operating models, it does not convinc-
ingly and abundantly explain 1) how
these operating models work and
support multi-polar operations and
international expansion; 2) how the
different elements help or hinder one
another; 3) how and when an operating
model, corporate strategy and business
environment combine to create the
best performance outcomes; 4) which
global operating-model capabilities
and configurations are the most
important for emerging-market
champions and which are the most
important for triad-based firms; and
5) what the characteristics of IT-based
processes, metrics and organizational
structure are. Clearly, more research
is needed. A comparative approach
should help to close those gaps.
Focusing on multi-polar,
transnational companies
We plan to develop several case studies,
choosing companies that are both
multinational enterprises and high
performers. We will limit our compar-
ative research to two industries—the
wireless telecom and energy industries—
in order to explore them in-depth and
to cover more countries. The case-
study design of our research will also
allow us to examine some of the
cultural and institutional differences
that may explain similarities or differ-
ences in global operating models.17
These are important elements to con-
trol to properly fix the boundaries of
our recommendations. We selected
these two industries because they are
both multi-polar and transnational.
Global Operating Models in a Multi-Polar World
The wireless telecom and energy
industries are among the few industries
with a number of significant players
that are already widely internationalized
in the triad and emerging markets,
directly comparable in terms of size,
and not solely concentrated in Europe,
the United States, Japan, China and
India. In these industries, the rules
of the game can be changed by any
champion from anywhere in the world,
which requires particular agility.
Managers in these industries must also
accommodate local, regional and global
pressures simultaneously — that is, they
must operate among transnational
forces. This type of environment is the
most difficult to navigate. It is the one
that may require the most sophisticat-
ed global operating models.18
Implications for managers
Our expected contributions aim to
serve both triad-based and emerging-
market multinationals.
At the corporate level, managers may
need to understand, anticipate and
implement new practices to modify a
global operating model. For example,
some triad multinationals may consider
giving their Chinese subsidiaries a global
mandate.19 This means that their
Chinese subsidiary receives the global
responsibility for the development,
manufacturing or distribution of a
particular line of business. Such transfer
may entail corporate-wide reconfigu-
rations of management processes,
leadership approaches, degrees of
centralization and formalization, and
organizational cultures. For example,
a right balance of autonomy and
5 | Accenture Institute for High Performance | Copyright © 2009 Accenture. All rights reserved.
centralization should be found, which
could allow leadership in China to be
free to make decisions about product
mix that would normally require
approval from the corporate center.
The global operating model may also
need to be reconfigured to support
better local operations. Many triad
companies need to confront increasingly
powerful challengers in their domestic
markets. The opportunities are enor-
mous. Research suggests that in China,
for example, half of all households will
be part of the middle and affluent
classes by 2017.20 According to C.K.
Prahalad, it is dangerous for Western
competitors’ long-term survival to
let emerging-market multinationals
completely dominate the large markets
at the bottom of the pyramid — the
place now occupied by billions of
consumers who will rapidly increase
their purchasing power in the next
decade or two.21 But the customization
and cultural flexibility required to
succeed in these markets is not second
nature to triad-based multinationals
since, for example, they tend to over-
rely on standard processes when more
interpersonal relationships need to
be built to succeed. These companies
may need new global operating models
at the local level.
If our study does not uncover any
new global operating models among
emerging-world champions (a hypoth-
esis that cannot be ruled out) — that is,
if the emerging-world leaders are
merely catching up with triad-based
companies, this would suggest that
triad managers need to create the
next generation of global operating
models to maintain their lead.
For managers from emerging-market
companies, many of the issues are
similar. Succeeding in the triad may
require very different global operating
model configurations than those needed
to succeed in emerging-markets. A
review of global operating models will
uncover where they need to change,
what’s working, and how to discern
and implement best practices.
Conclusion
Research comparing the global oper-
ating models of emerging-market
and triad-based companies is needed,
because there’s persistent uncertainty
about whether emerging-market
companies have developed innovative
global operating models that give them
a competitive advantage in a multi-
polar world. We need to understand
better under what contingencies certain
configurations of global operating
models deliver superior performance. To
do so, inverting the lens and focusing on
emerging-market leaders is important.
In this note, we have identified a few
research opportunities and proposed
some preliminary questions. Subsequent
notes will follow as our work progresses.
About the authors
Stéphane J.G. Girod is a research
fellow with the Accenture Institute
for High Performance Business; he is
based in London. Joshua B. Bellin is a
research associate with the Accenture
Institute for High Performance
Business in Boston. Robert J. Thomas
is the executive director of the
Institute for High Performance.
Acknowledgements: We also appreciate
the insights of Professor Marjorie Lyles
of Indiana University and those of
Andrew Hill, Masud Arjmand, Paul Nunes
and Philippe Roussiere, all of Accenture.
Global Operating Models in a Multi-Polar World
About Accenture
Accenture is a global management
consulting, technology services and
outsourcing company. Combining
unparalleled experience, comprehensive
capabilities across all industries and
business functions, and extensive
research on the world’s most successful
companies, Accenture collaborates
with clients to help them become
high-performance businesses and
governments. With more than 181,000
people serving clients in over 120
countries, the company generated net
revenues of US$23.39 billion for the
fiscal year ended Aug. 31, 2008. Its
home page is www.accenture.com.
About the Accenture Institute
for High Performance
The Accenture Institute for High
Performance develops and publishes
practical insights into critical manage-
ment issues and global economic
trends. Its worldwide team of researchers
connects with Accenture’s consulting,
technology and outsourcing leaders to
demonstrate, through original, rigorous
research and analysis, how organizations
become and remain high performers.
6 | Accenture Institute for High Performance | Copyright © 2009 Accenture. All rights reserved.
Notes
1 Accenture defines “multi-polar world” as “a
world characterized by multiple centers of
economic power and activity” in contrast to
the one dominated for decades by the US,
European and Japanese economies. See The
Rise of the Multi-Polar World, Accenture
Policy and Corporate Affairs, 2007.
2 Fang Lee Cooke, Competition, Strategy
and Management in China (UK: Palgrave
McMillan, 2008).
3 Ming Zeng and Peter J. Williamson, Dragons
at Your Door (Boston: Harvard Business School
Press, 2007); Peter Engardio, ed., Chindia: How
China and India Are Revolutionizing Global
Business (New York: McGraw-Hill, 2007).
4 David A. Nadler and Michael A. Tushman,
Competing by design: The power of
organizational architecture (New York:
Oxford University Press, 1997).
5 Zeng and Williamson, Dragons at Your Door;
Engardio, Chindia; Accenture, Multi-Polar
World 2; Boston Consulting Group, The 2008
BCG 100: New Global Challengers, 2007.
6 Cooke, Competition, Strategy and
Management in China.
7 Gili Drori, John Meyer and Hokyu Wang,
Globalization and Organization (New York:
Oxford University Press, 2006).
8 Richard Daft, Essentials of Organization
Theory & Design (2nd ed.) (Cincinnati, Ohio:
South Western College Publications, 2001);
Sumantra Ghoshal and Christopher A.Bartlett,
The Individualized Corporation- A
Fundamentally New Approach to
Management (London: Heinemann, 1998);
Michael Treacy and Fred Wiersema, The
Discipline of Market Leaders (New York:
Perseus Books, 1995).
9 Accenture, The Right Set-Up for Going Global,
http://www.accenture.com/Strategy, 2007;
Danny Miller, Peter H. Friesen and Henry
Mintzberg, Organizations: A Quantum View
(Englewood Cliffs, NJ: Prentice-Hall, 1984).
10 Accenture, Multi-Polar World 2.
11 Kate Hutchings and Kavoos Mohannak,
Knowledge Management in Developing
Economies: A Cross-Cultural and
Institutional Approach (Cheltenham:
Edward Elgar, 2007).
12 Cooke, Competition, Strategy and
Management in China; Accenture, Multi-Polar
World 2; Alan M. Rugman and Jing Li, “Will
China’s Multinationals Succeed Globally or
Regionally?” European Management Journal
25(5): 2006.
13 Accenture, Multi-Polar World 2; Boston
Consulting Group, The 2008 BCG 100: New
Global Challengers; Niraj Dawar and Tony
Frost, “Competing with Giants: Survival
Strategies for Local Companies in Emerging
Markets,” Harvard Business Review, March–April
1999; Tarun Khanna and Krishna G. Palepu,
“Emerging Giants: Building World-Class
Companies in Developing Countries,”
Harvard Business Review, October 2006.
14 Cooke, Competition, Strategy and
Management in China.
15 Signe M. Spencer et al., The Indian CEO: A
Portrait of Excellence (New Delhi: Response
Books from Sage, 2007).
16 Khanna and Palepu, “Emerging Giants”;
Khanna and Palepu, “The Right Way to
Restructure Conglomerates in Emerging
Markets,” Harvard Business Review, July—
August 1999.
17 Peter A. Hall and David Soskice, Varieties of
Capitalism: The Institutional Foundations
of Comparative Advantage (Oxford: Oxford
University Press, 2001).
18 Christopher A. Bartlett and Sumantra Ghoshal,
Managing Across Borders: The Transnational
Solution (Boston: Harvard Business School
Press, 1989).
19 Zeng and Williamson, Dragons at Your Door.
20 Accenture, Multi-Polar World 2: The Rise
of the Emerging-Market Multinational,
https://publishing.accenture.com/PCA/Our_
Programs/Global_Trends/Multi_Polar_World_
2.htm, (London, 2008).
21 C.K. Prahalad, The Fortune at the Bottom of
the Pyramid: Eradicating Poverty Through
Profits (Philadelphia: Wharton School
Publishing, 2004).
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