Reprint: R1110J
The organizational structures of many multinational corporations are inadequate to the task of capitalizing on opportunities in emerging markets. Locating customer-facing processes in each country—and even using transnational structures that exploit location-specific advantages—just doesn’t cut it anymore. So argue Kumar and Puranam, of London Business School. The authors show how the growth of China and India as lead markets and as talent pools, coupled with advances in technology, enable companies to optimize their organizations by segmenting R&D both vertically and horizontally, thereby creating T-shaped structures.
The greatest challenge of the T-shaped structure is managing integration across countries. The solution is to allow your corporation’s center of gravity to shift eastward. That means globalizing the top management team, moving headquarters outside the home country, and genuinely valuing the cultural shifts that those two changes require. Companies such as GE, Intel, and AstraZeneca have had some success in these endeavors, and all multinationals have the potential to secure the advantages of deploying a T-shaped structure.
Two summers ago, Frits van Paasschen, the CEO of Starwood Hotels, was talking to his wife, Laura, about China. With 70 properties in operation there and 80 more being built, the People’s Republic had just become Starwood’s second-largest market, after the United States. Van Paasschen jokingly said, “It’s almost like we should move our headquarters there.” Laura’s response, in a nutshell: Perhaps you should.
