A new spin on the globe

The world will be dominated not by corporations but networks of alliances
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The Independent Online
IF THERE is a central theme to modern business, it must be "globalisation". As Cyrus Friedman, vice-chairman of the management consultancy Booz.Allen & Hamilton, points out: "The word 'global' has become an integral part of the business vocabulary. In recent years, if a strategy or organisation or human resource plan didn't have a global perspective, it just wouldn't fly. Try to find an annual report that doesn't have the word 'global' in it or doesn't extol the company's global outlook."

We assume that the natural corollary of "international" or "multinational" being replaced by this grander term is that a huge range of organisations will be transformed - with the aid of the internet and wonderful strategic visions - into global corporations.

But although the continuing popularity of cross-border mergers suggests otherwise, Mr Friedman believes this is not necessarily the route to success. In his book The Trillion-Dollar Enterprise (Capstone, pounds 19.99), he acknowledges that globalisation is an unstoppable force. But he says we might be "a little too quick in declaring victory for a corporate form that we don't yet understand, that might not be the best, and that certainly is not the only solution for meeting the challenge of an integrating world economy".

His vision of the next two decades sees the world dominated not by a bunch of corporations as we currently understand them, but by networks of alliances. Membership of these groupings would be fluid, with new organisations joining as they came up with something the others needed.

Mr Friedman stresses that while he envisages a different kind of environment, he is largely extrapolating from what is already happening. Since alliances do not attract as much attention as mergers and acquisitions, they are not so well known. But he claims there has been a "quiet revolution".

In the 1970s, according to figures collated by his firm, there were about 100 to 200 alliances a year around the world. By 1990, that figure had risen to 2,000 and by 1995 it was up to 10,000. He and his colleagues are projecting that the number will be 20,000 a year by 2000.

The link-ups between Motorola, its rival mobile phone companies Ericsson and Nokia and the personal organiser maker Psion, and more recently between BT and Microsoft, are evidence that alliances are increasingly seen as the way ahead, Mr Friedman says. Indeed, he credits Motorola's chairman, Bob Calvin, as coining the phrase that forms the book's title.

But logical as such arrangements are, the arguments advanced by Mr Friedman for why they're the way ahead seem greatly flawed. He believes global corporations face four big constraints: a shortage of capital; the reluctance of the competition authorities to let a select few companies own more and more of the world's businesses; a need for bureaucracy to manage spraw- ling organisations; and the aversion of all companies to being run by foreigners.

The number of deals in recent months gives little credence to the capital argument, while the bureaucracy point is weakened by the fact that joint ventures can be just as prone to losing money as wholly owned subsidiaries. The idea that companies do not appoint foreign nationals to senior positions goes against all the "international manager" talk.

But where Mr Friedman appears most misguided is in the idea that competition authorities are only interested in who owns an enterprise, so that if it is a nebulous entity involving a variety of organisations, they will be unworried by its impact. That will be news to competition lawyers who often have greater difficulties persuading the authorities to allow strategic alliances than they do with straight mergers.

Mr Friedman is on much stronger ground in pointing out that such arrangements will require a different type of manager - one who will be able to build relationships, deal with all sorts of people and be more conciliatory than the typical command-and-control boss.