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From global to metanational
how companies win in the knowledge economy

Ubiquity, Volume 2001 Issue December, December 1 - December 31, 2001 | BY Yves Doz , Jose Santos , Peter Williamson 

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Metanational Pioneers: The Benefits of Being Born in the "Wrong" Place.


Chapter 3

Would you pick Finland as your home base from which to storm the international market for mobile telephones? Would you select Switzerland as your launching pad to break into the international market for guided missile systems? Would you choose Japan as the location from which to compete with Steinway in the global market for pianos? Would you rather try to build a global leader in the personal computer business from a base in Silicon Valley or from Taiwan? Would you dream of China as the best place to start a global insurance company? If you wanted to dominate the global market for integrated business software, would you locate your headquarters in Germany?

Chances are you wouldn't do any of the above. Yet Nokia became the world leader in mobile telephony from a base in Finland. Oerlikon broke into the international market for missile systems from Switzerland. Acer of Taiwan grew to be the number three personal computer company in the world. Yamaha of Japan has become the world's largest supplier of pianos. AIG, one of the most successful international insurance companies, got its start in China. SAP of Germany became the world's largest supplier of integrated business software.

All of these companies were born in the "wrong" place, in the sense that they were outside the traditional capitals of their industries. A large part of the knowledge they needed to compete globally was not available in their home country. At first glance, they may seem an unlikely place to look for the keys to future competition in the global knowledge economy. But in fact, it is these global leaders born in the wrong place that are most advanced in the game of unlocking the potential of knowledge imprisoned in local pockets scattered around the world. Because the knowledge they needed was not available at home, they had to develop the skills of sensing, mobilizing, and operationalizing technologies and market knowledge drawn from abroad. They learned these metanational capabilities because they had to. Necessity was the mother of invention.

Apart from the incentive to search the world for new technologies and market knowledge, all of these companies shared another characteristic: top management with a deeply cosmopolitan mindset. Their CEOs and senior executives not only had international experience; they shared a deep interest in and appreciation of the strengths of local cultures in different parts of the world.

In this chapter we begin to learn from these unlikely global winners how to unlock the potential of globally dispersed knowledge. We identify six core capabilities that these companies have begun to develop. We then show how these capabilities can be shaped into a metanational corporation that builds competitive advantage from unexpected places. The Metanational Alternative

In the past, few companies achieved global leadership starting from a home base located on the periphery of their industry. Those that did were seen by most managers in established companies as little more than interesting curiosities. But in a world where the relevant knowledge is now globally dispersed, the special skills of companies born in the wrong place are of great relevance to mainstream corporations and to startups aspiring to become global. Their success is testimony to the fact that geography is no longer destiny; a company does not have to be headquartered in the "capital" of its industry to succeed. They demonstrate that the strategy of global projection -- spreading advantages created at home around the world -- is not the only path to success.

These global winners who were born in the "wrong" place point the way on a new metanational path to success. None of these companies could yet be described as a full-fledged metanational. But we believe they are the forerunners of tomorrow's winners in the global knowledge economy.

The key differences between the traditional projection strategy and the metanational alternative are well illustrated if we compare and contrast the stories of Intel and STMicroelectronics -- two successful, global players in the semiconductor industry.

STMicroelectronics versus Intel: Distinct Paths to Success

Intel and STMicroelectronics share a number of common characteristics. Among the top ten semiconductor manufacturers that have led the industry's growth over the past decade, only Intel and ST did not rely largely or solely on sales to captive customers within a corporate group. Both companies were founded at roughly the same time. Intel is widely admired for its domination of processor chips for personal computers. While ST is less well known, its growth in market share of value-added chips has been second only to Intel. It has become a world leader in the customized chips we find inside cars, televisions and TV set-top boxes, mobile phones, hard disk drives, and the heads for Hewlett-Packard inkjet printers, or on smart cards.

Intel and ST have several other things in common. Most of their top managers and technologists were trained as electronic engineers and were by and large from a very small number of American companies, tracing their lineage back to Fairchild Semiconductor. Very charismatic leaders drove both: Andy Grove, a Hungarian-American, at Intel, and Pasquale Pistorio, a cosmopolitan Sicilian, at ST.

There is, however, at least one dramatic difference between Intel and ST. Intel was born in Silicon Valley, the world capital of semiconductors. ST has its roots in Milan and Paris -- locations that are more readily associated with high-fashion clothing than with high-tech semiconductors. If Intel was born with a silicon spoon in its mouth, ST's cradle was in the "wrong" place.

To build their businesses, both companies had to access, mobilize, and leverage a complex set of technologies and market knowledge. Intel, however, had practically all of the knowledge it needed to build a powerful position right on its doorstep in Silicon Valley. Intel accessed knowledge from Stanford University and such firms as Applied Materials, Cadence, Hewlett-Packard, Seagate, AMD, and MIPS, just to name a few, all within close proximity to Intel's Santa Clara headquarters.

Intel has also had joint development projects or marketing partnerships with customers. Examples include IBM, VLSI, DARPA (a U.S. government agency), AT&T, and Pacific Bell. But they are all American. Intel's long-term strategic partner has been Microsoft, another U.S.-based corporation. Intel was, therefore, largely able to sidestep the problems associated with the international dispersion of critical knowledge.

Intel's Global Projection Strategy

Because the main technologies and market knowledge it needed to sense and mobilize were available locally, Intel was also able to minimize its exposure to challenges of managing sophisticated and sticky knowledge across vast distances and different contexts. With the bulk of the knowledge it needed located in Silicon Valley, Intel found that the process of using that knowledge was facilitated by proximity. Frequent and informal interactions between the various parties were relatively straightforward -- a matter of half an hour's drive to a meeting. The necessary knowledge was mostly available in the heads of people who shared the same language and understood the local context of chip development -- everything from implicit roles and responsibilities to accepted development cycles.

Despite its Silicon Valley base, Intel did have to access a certain amount of technology and knowledge from overseas. Some of the wafer lithography technology Intel used, for example, came from Japan. In sheer technical terms, this technology is obviously highly complicated. But it is relatively simple to move across distances with precisely articulated operating manuals and vendor training programs. And part of the knowledge about wafer lithography that Intel needed was actually embodied in the equipment that was shipped from Japan to Santa Clara and other Intel fabricating plants (or "fabs").

Intel has been careful to minimize its exposure to the problems of sensing, mobilizing, and exploiting complex knowledge at a distance. It does so by creating most of its intellectual property assets in its home-base facilities using the wealth of complex knowledge available locally. Where it has had to augment this knowledge base from remote sources, it has made sure that the knowledge it transfers is available in well-articulated forms such as data, equipment, or procedures -- knowledge that can be simply "slotted in" to its operations.

This strategy has been supported by Intel's focus on developing and manufacturing standard digital products, memories first and then microprocessors, for personal computers and workstations -- a focus that minimizes complexity and largely eliminates the need to customize the final product to subtle differences in user needs around the world.

Intel's strategy, then, is that of the classic global projector: It accesses and mobilizes a complex set of knowledge largely from its immediate backyard to create world-beating products, systems, and processes within facilities at its home base. It then projects this powerful formula around the globe, exporting its products and know-how and replicating its systems and processes across a global manufacturing and service network.*

ST's Metanational Strategy

The situation at ST could hardly be more different. Lacking the depth of local technologies and market understanding around its birthplaces in France and Italy, ST had to source a great deal of specialist, often tacit, knowledge from outside its "home" countries.

One obvious way to fill this knowledge deficit might have been to simply source all the technology and market understanding it needed from Silicon Valley. ST could have tried, for example, to acquire one of Intel's American competitors. At best, however, that approach might have allowed it to match its U.S. competitors. Fishing in the same pool as local competitors who were born in the Valley would almost certainly have relegated ST to a game of catch-up, forever a second-rank player.

Imagine, on the other hand, if ST could unlock the potential of knowledge imprisoned in pockets of local expertise scattered around the world. Then it could exploit knowledge that its Silicon Valley competitors were either unaware of or had chosen to ignore because of the perceived difficulties in accessing it. If ST could successfully extend its knowledge net to scoop up promising technologies and new applications needs from anywhere in the world, it would be able to innovate in ways that Intel or other rivals had not even thought of. ST would be in position itself to build fundamentally new types of competitive advantage.

In practice ST's strategy wasn't quite this deterministic. Serendipity played a role. The lack of customers near its major facilities in France and Italy forced ST to search for customers in distant locations and with very different semiconductor applications. As ST combed the world for new customers, it was confronted with the limitations of standard semiconductors in satisfying these different user needs. From there came an awareness of the opportunity to go beyond producing standard semiconductors, sold as components, to create integrated, customized chips that could perform a set of functions for specific applications. This would allow, for example, the hard disk drive (HDD) controller boards of a customer like Seagate to be shrunk onto a couple of chips. Thus emerged the idea of putting a complete "system on a chip."

But if ST were to produce integrated system chips, it would need to overcome two further challenges. First, it would need to augment its current stock of technologies with knowledge that lay outside its organization and that was, in fact, scattered around the world. Second, it would need to achieve a massively complex integration between all of these pockets of knowledge about technologies, processes, and the customer's application needs in order to design and produce a system chip. To produce a motherboard the old way, components from diverse sources had to be brought together and integrated. To design and produce a system chip, ST would have to mobilize and integrate knowledge from diverse sources instead of components.

We often assume that knowledge is easily mobile. But as ST discovered, the difficulties of mobilizing and integrating the specialist and sticky knowledge it needed to create a system chip made moving and integrating components look like child's play.

First, ST had to understand the customer, the customer's product application, and the overall "system know-how." Most of this knowledge is deeply embedded within the customer and its people, in the form of engineering and design principles, intelligence about end-user needs, industry norms, and competitive practices. There is a quantum leap from the technical specifications for a chip -- one that is designed separately to be a modular part of a larger system -- to the functionality of ST's system-on-a-chip that is heavily dependent on the specific context of the application it has to serve. In the former case, the product specification is all quite explicit. It may designate, for example, a certain voltage in a particular pin of the chip when a certain voltage is applied to another pin. By contrast, the potential supplier of a system chip is informed, for example, that the platters of the HDD must accelerate in a particular way or that the battery of the mobile phone must last for at least a given number of hours.

The maker of a system-on-a-chip must learn how to interpret these specifications and designs with its customer. But ST has customers in several industries, and each industry has its own language, its own logic. And the challenges of accessing this diverse knowledge only increase when the customers are in countries physically and culturally distant from the home of ST.

Some of ST's "lead" customers were located relatively close by. Thomson Multimedia and Gemplus, for example, are both headquartered in France. Thomson Multimedia is a leader in video applications (televisions and TV set-top boxes), and Gemplus is the number one company in the world for smart cards. But more often than not, ST looked afar to find demanding, lead customers that forced it to become an "insider" in world-class clusters. In many of these customers (such as Seagate and HP in California, Pioneer in Japan, Bosch in Germany, Nokia in Finland, and Nortel in Canada), knowledge about a particular application was spread across specialized sites in different locations, regions, or countries.

ST also needed to come to grips with the fact that the leading semiconductor process technologies and product innovations do not come out of France and Italy. There are certain exceptions, such as the world-class digital engineering in the high-tech cluster of Grenoble, France, and the leading analog technologists in Castelletto, Italy. Both confer unique advantage to ST. But ST needed to anticipate the advances in its own industry in order to keep its silicon know-how at least on par with its rivals in the United States and Japan.

So how did ST sense, mobilize, and operationalize the kinds of knowledge that it required to become a winner in the global semiconductor game? To begin with, ST reversed the mindset of global projection and instead put worldwide learning at the center of its activities.

Sensing Dispersed Knowledge

ST extended its search area far beyond its original locations. A top priority was to begin gathering knowledge from Silicon Valley. There is nothing surprising about that: Multinational corporations often establish subsidiaries with fully functional capabilities in a promising market, projecting the corporation's advantages by replicating its home-base organization and business model abroad. In many multinationals, however, these successful, well-located subsidiaries become almost autonomous businesses -- local fiefdoms inside the company.

The picture is quite different with ST's foothold in the Silicon Valley. While ST operates design centers, prototype labs, business units, and sales offices in the Valley, a key role of the staff there is to keep in close contact with nearby research institutions and universities. This structure ensures that ST has several functions and professions anchored in the hotbed of silicon know-how: scientists, technologists, application engineers, designers, customer engineers, operations managers, production workers, sales reps, and marketing staff.

These individuals are not part of any single product group, division, or business unit; nor do they constitute ST's American subsidiary. The nodes of ST's network in the Valley are linked more strongly with the local community and with other distant parts of ST in Europe or in Asia than they are among themselves. They are not in Silicon Valley to replicate what ST does in its home base. Their strategic role is to learn. As Francesco Carobolante, an "ST emigrant" in the United States who set up the San Jose design center in the early 1990s, explained it: "We are an ST design center. But we are also the eyes and ears of ST."

ST also had co-development projects with competitors: Siemens (Germany) and Philips (Holland), and more recently with Hitachi (Japan). But one of ST's major guidelines for sensing necessary knowledge has long been that of learning with leading customers. For that purpose, ST established strategic alliances in the late 1980s and early 1990s with half a dozen lead global customers in key industries or for particular applications. Examples include Seagate (United States) for disk drives, Nortel (Canada) for telecommunications, Bosch (Germany) for automotive electronics, Thomson Multimedia (France) for video applications, and Pioneer (Japan) for consumer electronics. All these strategic accounts themselves have dispersed R&D activities, dispersed manufacturing operations, and a penchant for a global strategy. These alliances continue to be the principal learning tool about industries, applications, system know-how, and product development driven by the global market, not by the home market.

Over time, what ST had put in place was a world-beating "sensing network" that allowed it to prospect for and access a wide range of technological expertise and in-depth knowledge about customer needs and emerging applications.

Mobilizing Dispersed Knowledge

Once ST had accessed a rich portfolio of technology and knowledge about user needs, it faced the problem of how to mobilize this knowledge from dispersed sources and different contexts into innovative products and services. In the case of its HDD chip projects, for example, the silicon know-how had been drawn from across ST's international network, while the system knowledge that would need to be designed into the new product had come from a fragmented set of customer sites also dispersed around the world.

To mobilize these specialized pieces of knowledge, ST created a purpose-built structure of strategic global account units.(1) Each of these units was designed to create a link between the specialist knowledge within particular customer sites and the people in ST that could use this knowledge in the design or production processes used to create a system chip. Importantly, these special business units were not part of the normal matrix: They formed a separate organization with a direct link to the world headquarters in Geneva. This organization was not subject to the tyranny of P&L accounts, and it was effectively ring-fenced from the other measurement tools and mechanisms that ST used to manage the efficiency of its operations. The purpose of those global account teams was to share and mobilize complex knowledge between ST and the customer.

What ST had created, then, was a dedicated organization whose task was to sense specialist knowledge from around the world and integrate it with technology and know-how dispersed in pockets within ST, in order to fashion an innovative solution for a major customer.* Once ST was able to use this organization to integrate its silicon know-how from several sites around the world with the system know-how from Seagate, other HDD customers, and even competitors, it succeeded in replacing the traditional HDD motherboard with designs involving just a few system-level chips. Because these new system chips were customized to the needs of the HDD industry, they reduced manufacturing costs and improved HDD performance: They were more valuable than an assembly of standard chips.

Lacking this organization and its access to the unique bundle of knowledge that ST had drawn from around the globe, a competitor would find it very difficult to match this innovation. By sensing and then mobilizing underexploited pockets of knowledge, therefore, ST had created a potentially powerful source of competitive advantage that was difficult for its rivals to imitate.

Operationalizing Metanational Innovations

By sensing and mobilizing global knowledge, ST designed an innovative product that could be used to leverage its existing fabrication sites in France, Italy, the United States, Morocco, and Singapore for competitive advantage. To fully leverage this innovation, however, ST's operating network would need to market and produce system chips for other major customers with slightly different applications around the world.

Encouraged by the flow of orders won at Seagate and later with Western Digital, ST's operational network accepted the challenge of building on this experience. The next goal was to design and produce system chips as a set of application-specific standard products that could be adapted and used by any customers for a wide variety of data storage device applications. These devices were sold to customers such as IBM, Quantum, Samsung, and other major HDD manufacturers, and also for related applications such as ZIP drives and CD-ROM drives. By 1996, ST's sales of chips to the HDD industry surpassed $500 million.

A global projector like Intel would have designed an improved chip to meet the needs of its domestic market. It would then "project" this chip design from its home base into different national markets across the world, adapting it where necessary. By contrast, ST developed a design based on knowledge from around the world for a leading global customer. It subsequently leveraged this design across an ever-expanding set of global customers and user applications, adapting the product to different customer and applications needs.

ST's experience suggests another key difference between the projection strategy and its metanational alternative: the sequence by which an innovation is exploited. In the case of projection, expansion proceeds across countries. In a metanational strategy, the innovation is global from Day 1. Expansion takes place across new customers, new global market segments, or new applications.

. . .

Summary: Six Key Lessons

Let us review the six key lessons we extracted from our detailed study of companies that are beginning to unlock metanational potential from the global knowledge economy. These companies have, to varying degrees, taken initiatives in six different areas. These initiatives are summarized in table 3-1.

Table 3-1: Six Lessons from the Periphery

Initiative: Become a global knowledge prospector

Examples: Acer prospecting the world for new technologies and untapped market needs that could be used to create new PC products; PolyGram searching for new artists and repertoire who might have global potential in small markets.

Initiative: Find ways to access or "plug in" to pockets of new knowledge

Examples: Shiseido set up an operation to design and manufacture perfumes in Gien, a center of the French perfume industry, and acquired two prestigious beauty salons in France to access complex knowledge required to develop, launch, and market new perfumes; ST created specific units designed to access information from lead customers like Seagate and from hotbeds of technology and know-how dispersed from Silicon Valley to Singapore.

Initiative: Create a magnet to bring together specialist knowledge accessed around the globe

Examples: ARM used a magnet in the form of global platform projects, like its "Bluetooth Core," to bring together a wide variety of technologies from around the world, creating a global standard semiconductor design that would underpin the widest possible range of end-use applications; ST used its system-on-a-chip projects for the same purpose; PolyGram used its IRCs as a magnet for globally dispersed knowledge.

Initiative: Meld knowledge from dispersed sources to create innovative products and services

Examples: PolyGram created global hits from local repertoire by melding its understanding of the style, appeal, and potential of local artists with its understanding of consumer tastes in particular markets and its knowledge about promotional, marketing, and sales techniques; ST brought together knowledge of customer applications like HDDs with digital and analog processing technologies and process know-how to create its innovative HDD controller system chips.

Initiative: Transfer an understanding of the innovation and its potential to staff responsible for day-to-day operations

Examples: PolyGram's IRC staff visit local subsidiaries, train local staff, participate in the preparation of local sales and marketing plans, and create concert tours in order to transfer an understanding of what it will take to make unfamiliar repertoire a local and global hit.

Initiative: Leverage the innovation across a world market for increased sales or profits

Examples: Through its international network of sales, marketing, R&D, and manufacturing operations, ST took its customized system chips developed for Seagate and turned them into a product range that was sold to most of the major manufacturers of HDD and other data storage appliances. What started as specific products for a global customer were rolled out as a standard for new customers and similar applications. PixTech leveraged its new FED flat-panel display technology by in-sourcing manufacturing and distribution from partners in Asia.

Applying These Lessons to Build Advantage: The Metanational Ideal

Our winners from the periphery offer important lessons for unlocking the potential of the global knowledge economy. But many questions remain: How can these kinds of initiatives be shaped into a coherent strategy? What capabilities, structures, and processes do I need to create value from specialist knowledge scattered around the world? How can I make sure our innovations are fully leveraged by our operating network?

Today, no single company is a perfect example of a full-fledged metanational. Rather than focusing on one emerging winner or trying to impute the ideal from a handful of case studies, we now set out a blueprint to help managers create metanational companies in the future.

The metanational ideal is an organization finely tuned to sense, mobilize, and leverage pockets of specialist knowledge dispersed around the world. These capabilities will open the door to new and powerful sources of value creation and competitive advantage that traditional multinationals are not able to harness. The metanational will be able to innovate in unique ways, to leverage this innovation for higher sales revenues and greater profits, and thus to create more shareholder value than its rivals.

So what kinds of organization structures and processes must be put in place to build metanational advantage? What would a coherent metanational look like?

The Three Organizational Planes in the Metanational

In chapter 1, we identified three levels of competition in the global knowledge economy:

-- The race to identify and access new competencies, innovative technologies, and market knowledge that are scattered around the world.

-- The race to innovate by mobilizing and integrating this globally dispersed knowledge.

-- The race to leverage this innovation through an efficient and flexible network of operations.

Tomorrow's metanationals will need to build organizations that can win in all three of these competitive arenas. Each arena requires different units, locations, roles and responsibilities, processes, performance measures and incentive systems, and skill sets. Therefore the metanational organization must be designed around three distinct planes (or suborganizations), each focused on one of these competitive arenas. We term these the sensing plane, the mobilizing plane, and the operating plane. This set of "planes" provides a way of visualizing the basic framework around which a metanational can be built.

An Organization Charged with Sensing New Knowledge from around the World

The sensing plane is composed of a set of probes into the pockets of specialist knowledge that the metanational corporation needs for innovation. These probes allow the metanational to plug into hotbeds of emerging technology or bellwether customers that foreshadow future trends. These probes could take many forms, including customer, supplier, or distributor partnerships; links with local universities; targeted acquisitions; and so on. The driving forces of the sensing plane are exploration and discovery. Its key role is to access new and uncommon knowledge that the metanational can use for discontinuous innovation.

An Organization Charged with Leveraging Innovation

The operating plane is composed of the set of operational units that produce, distribute, market, sell, and service the metanational's global offering. This plane also includes R&D centers involved in local adaptation of the global product, service or process, and units responsible for continuous improvement in operational processes. It also encompasses supplier and distributor relationships and other partnerships that have been set up in the name of operational efficiency (part of "make versus buy" decisions) rather than primarily for the purpose of innovation and learning. The driving force of the leveraging plane is the maximization of revenues and operating efficiencies. Its role is to extract maximum value from the knowledge the organization has gathered.

The Missing Link: An Organization Charged with Innovating by Mobilizing Knowledge Scattered around the World

The sensing plane amasses a rich stock of knowledge that the day-to-day operations can use to create competitive advantage. For example, an alliance with a university in China may reveal a technology with the potential to create a new production process. At the same time, the organization may notice an emerging need among customers in California that could be served using the Chinese technology -- if we could create an appropriate offering. To achieve this, we would have to draw on product design expertise in Milan. But all of this knowledge is virtually impossible for operations people to use due to any of the following impediments:

-- It is scattered around different locations.

-- It will create value only if it can be brought together and melded into an innovative solution, product, or service offering.

-- It is in a form that would be misinterpreted or misused if it were to be communicated directly to the operational people -- either because it is highly dependent on its original context or because it is seen as an unwanted disruption to existing operations.

Before the metanational corporation can create competitive advantage from the knowledge it has accessed around the globe, therefore, it must find a way to bridge the gap between the world of the sensing plane and the world of operations. It must find a bridge between the world of the "explorers" (whose role is to access) and the world of the "farmers" (whose role is to harvest) within its own organization.

The gulf between these different planes is not just an information gap. The gulf reflects fundamentally different mindsets, roles and responsibilities, and measures of success between the planes. It cannot be bridged simply by setting up a common internal database, by distributing a global telephone directory, or by connecting everybody into some Intranet. The gap can only be bridged by putting in place a set of structures and processes that are capable of turning new knowledge into innovative products or services that the operating people can appreciate and use. In other words, it requires a set of processes for moving, melding, and relaying complex knowledge from different places around the world.

Bridging the Gap between Sensing and Leveraging

As we have seen, the first stage of bridging the gap between the sensing and leveraging planes is to create a magnet that can draw together the dispersed technologies, skills, and market understanding that are captured through the sensing network. A magnet usually takes the form of an innovation project with a focused objective and clear deliverables. It could be a project designed to create an innovative solution for a lead customer (as in the case of ST). Or it might be a project designed to create an innovative, global product platform (as used by ARM). Or it might be an activity, such as the one PolyGram uses to turn promising local acts into global hit records.

Just like any physical magnet, it needs a source of energy to pull together dispersed knowledge relevant to its cause. The energy source in a lead customer magnet will be some mix of customer pressure, the desire to maintain reputation, and the promise of economic reward. If the magnet is a product platform, its energy will be drawn from excitement about the opportunity to do something bigger and better, from peer pressure, or from senior management commitment. When the magnet is a global activity, the energy may come from the desire to prove the global excellence of the function to internal or external constituents, the enthusiasm for future potential, the commitment from senior management, or the discipline of performance.

Magnets may be set up by senior management for a particular purpose. Alternatively, they may emerge given certain preconditions that motivate a set of individuals within the company to create the magnet. Magnets are sometimes permanent structures that support a continuous flow of innovation. Others are temporary structures that are disbanded when an innovation is successfully handed off to the operating network. Sometimes the magnet has a physical locus -- its own site or a customer's site. In other cases, it is a virtual structure, and sometimes it includes elements of both. Sometimes magnets are designated as separate profit centers. In other cases, their performance is judged by the quality of innovations that result.

The missing link between the sensing and operational planes, then, is the set of structures that act as magnets to collect and meld dispersed pieces of knowledge into innovative business models, product and service designs, or processes and systems. We term this the mobilizing plane. Projects and "virtual" teams reside in the mobilizing plane and are built around selected lead customers, global platforms, or global activities. The driving forces of the mobilizing plane are entrepreneurship and innovation. Its role is to promote the identification, moving, and melding of technological and market knowledge drawn from around the world to create innovative solutions that the metanational can leverage globally.

Knowledge Flows in a Metanational

Each of the three planes in the metanational organization has a specific role in creating advantage. But to be effective, knowledge clearly needs to flow between the planes.

The sensing plane must be fueled by information about emerging hotbeds of new technologies and market trends. This requires a process by which the metanational can prospect for new sources of knowledge, as we saw in Acer.

Specialist knowledge from each of these locales needs to flow into the mobilizing plane. This requires a process by which that metanational can identify and move the requisite technologies and market knowledge so that they can be focused on an innovation problem, as we saw in ARM.

The resulting innovations need to be handed over into the operating plane, where they can be turned into sales, profits, and shareholder value. This requires a process by which the metanational can relay the innovation and the bundle of knowledge about what makes it unique and how it might be exploited to those responsible for leveraging it.

In light of these three distinct planes of activity, therefore, the successful metanational will need three specific processes to manage these flows of knowledge within the organization. Six Capabilities the Metanational Will Need to Build

We began this chapter by exploring the lessons to be learned from unlikely global winners who were born in the wrong place. We extended those lessons and started to draw the implications together into a coherent strategy for exploiting the untapped potential of specialist knowledge scattered around the world. We then asked what kinds of structures and knowledge flows might be required to implement that strategy in a systematic way. A picture of tomorrow's metanational corporation began to emerge: an organization with three distinct planes of activity and three key processes for managing the flow of knowledge among these activities.

To put it all together, metanationals will need to develop six capabilities that correspond to these core activities and knowledge flows. Table 3-2 details the six capabilities required.

Table 3-2 Six Capabilities the Metanational Will Need to Build

Goal: Sensing new knowledge faster and more effectively than competitors

Prospecting Capabilities: The predisposition to prospecting for emerging pockets of innovative technology and new market needs. This prospecting capability allows companies to anticipate emerging hotbeds of relevant knowledge ahead of competitors.

Accessing Capabilities: The ability to "plug in" to innovative technology and new market needs through an established network of relationships with foreign customers, suppliers, distributors, universities, and technical institutes. This provides access to emerging pockets of relevant knowledge.

Goal: Mobilizing dispersed knowledge to innovate morecreatively than competitors

Moving Capabilities: An effective process for setting up "magnets" (such as projects undertaken to serve global customers or to build global product or service platforms) that can identify and move globally dispersed knowledge so that it can be marshaled for innovative problem-solving.

Melding Capabilities: A capability to meld knowledge about new technologies and novel customer needs from diverse sources into coherent innovation, overcoming the problems associated with melding complex knowledge and integrating it into solutions.

Goal: Operationalizing innovations more efficiently than competitors

Relaying Capabilities: An ability to transfer newly created solutions, in usable form, into the day-to-day operations that underpin the supply chain.

Leveraging Capabilities: The capability to leverage innovations across global customer segments or applications and to assemble an efficient global supply chain by flexibly combining operational strength from different sites. These may either be established sites in an existing network of operations or sites operated by a partner.

Together, these capabilities will allow the metanational to sense, mobilize, and operationalize underexploited pockets of knowledge scattered around the world. The resulting organization will consistently outpace competitors in the race to take advantage of the opportunities emerging from the increased dispersion of relevant knowledge. The challenge, for budding global competitors and existing multinationals alike, is to develop these capabilities and the organizational structures, processes, and incentive systems to harness them.

Reprinted by permission of Harvard Business School Press. Excerpt of From Global to Metanational: How Companies Win in the Knowledge Economy by Yves Doz, Jose Santos, and Peter Williamson. Copyright © 2001 by Harvard Business School Publishing Corporation.

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