The danger of the projection model is that domestic companies, which are sensitive only to the domestic market, fail to recognize two things: They fail to recognize the need for differences in different markets around the world; and worse, they fail to recognize the fact that at some point in time the domestic market may stop being a lead market. And they become very hardwired to very detailed knowledge that they get from their domestic market.
Look at a company like Kao, another Japanese beauty-product company, which has tremendous capability in Japan in terms of market sensitivity, through its distribution channels and all kinds of intermediaries. It has tremendous infrastructure for market sensing, for understanding market trends, like nerves extending down to Japanese villages, and it’s fantastic. But you can become a hostage of your home market and the richness of the understanding you’ve developed there, because unless you have something comparable elsewhere, you are bound to keep overrelying on your domestic market’s feedback to develop new products and services. And you may fail to realize that it is no longer the center of the world.
That’s what happened to Motorola, which went through that very problem of having been the absolute leader in radio communications, mobile communications, and cellular telephones, and then failed to see early enough that the game was shifting from technology leadership to fashion accessory design, marketing, and distribution. Nokia managed to understand this much faster and much sooner, partly because they weren’t at the center of the universe and they knew they had to learn from markets far away from Finland.
s+b: In Alliance Advantage, your book with Gary Hamel, you wrote about how companies can add value through partnering. Many companies have created a global network of alliances as a way to gain capabilities or knowledge without the more disruptive and costly steps of a merger or acquisition. Does this strategy need to be modified for the metanational?
DOZ: No, actually I think learning alliances can be a key part of a metanational strategy. Companies need to say, “How do I access knowledge that I haven’t mastered yet, that I don’t really understand yet, that can be learned in the practical work of an alliance?” Alliances are very powerful metanational learning tools, provided we forge alliances very much with a learning mind-set and a learning agenda, and turn that agenda into some pretty down-to-earth, concrete learning steps.
The French–Italian chip company STMicroelectronics is an example of a company with all types of alliances with customers, which it uses very actively for learning. In another domain, there is a Portuguese company, one of the largest Portuguese groups, called Sonae, which does things like supermarkets and shopping mall development. That’s not very high-tech global stuff, but they have a very clearly articulated strategy of using alliances. It’s a way for them, first, to learn new businesses, and second, to acquire new knowledge from different national communities, in order to expand their existing businesses internationally.
s+b: Since last September 11, senior executives are thinking about security at a strategic level. Since a network of alliance partners is only as secure as the weakest partner, whether it’s vulnerable to physical attack or cyber attack, do we need a new level of due diligence in forming alliances?
DOZ: I think that is actually a good point. It depends on the field of activity of the alliance. You can argue that if it’s focused on running the airlines or integrated logistics, then yes, by all means. If it’s running advanced product development on a worldwide basis, one should probably say yes, although you can argue that there you could essentially save, store, reprocess, and create backups within the system. That way, if a lab is blown up, then you still have a real problem, but if nothing more than some of your data is lost, you can reconstitute it and you are not going to lose too much time. It depends quite a lot on the nature of the activity. Anything that is real-time, worldwide, service oriented, data intensive, information intensive, or is a security-related or national defense–related type of business, by all means factor that into due diligence.