Sat, Jun 08, 2002 page18

• Book praises Acer's organization

  A NEW MODEL An Australian professor says the company's cell-like structure allows it to be more nimble and adapt quicker to the rapidly changing economic environment

  • By Derek Parker / CONTRIBUTING REPORTER
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  In the debate over globalization, multinational corporations, especially those from the US, Europe and Japan, are often painted as the villains. But according to a new book, these companies are themselves facing a serious challenge from a new type of firm, with Taiwan firm Acer Inc (宏電) providing a model.

  Dragon Multinational: A New Model for Global Growth, by John Mathews, professor of management at the Macquarie Graduate School of Management in Sydney, Australia, examines some of the companies that have emerged in Asia over the past decade. He looks at companies as diverse as Indian-based steel company Ispat International, Hong Kong's Li & Fung and Singapore's Hong Leong Group. But it is Acer that most interests him as an example of accelerated globalization.

  "Companies like Acer have used innovative organizational structures to quickly establish strong global positions," Professor Mathews told the Taipei Times.

  "In an important way, companies like this are the first truly global firms. They are a far cry from the traditional multinational structure, with a corporate headquarters in one of the developed economies controlling subsidiaries around the world. These new companies have a networked character, and because of that they have been able to take advantage of the new opportunities presented by the interlinkages of the global economy."

  Nimble and adaptable

  Companies such as Acer have shown themselves to be much more nimble and adaptable than their old-style competitors. With a minimum of internal bureaucratic machinery and a maximum of Internet-based technology, Acer has been able to move quickly, often in a matter of a few weeks, to take advantage of opportunities. A traditional multinational would do the same only after a lengthy process.

  This advantage flows, says Mathews, from an organizational system based on "cells" rather than rigid divisions. The central unit acts not as a controller but as a coordinator, providing protocols that each part of the group can follow.

  The overall structure is like a federation of semi-autonomous firms interacting with each other through common platforms.

  Stan Shih (施振榮), head of the Acer group, has described this process as a "circle of dragons with no leading dragon" -- or, more practically, an "Internet organization."

  Finding the balance between autonomy and coordination is by no means easy. But an important point is that, when necessary, Acer has been able to implement organizational change quickly, rather than by the slow and difficult methods associated with traditional multinational firms.

  The structure also resolves the problems associated with hierarchy-based companies, where initiatives from subsidiaries are often stifled by the headquarters. This allows "dragon multinationals" to leverage local knowledge into strategic advantages, offsetting any problems that might arise by being a latecomer to the field.

  Acer has developed partner firms around the world, and has then used these partnerships to expand the group's reach into neighboring countries.

  `Born global'

  Another key characteristic of companies such as Acer is that they were "born global," according to Mathews, with an eye on the international marketplace from inception. This prevented a culture of fixed ideas from developing, and meant that the company was constantly looking for international linkages.

  Shih rates the outward-looking attitude of Acer as crucial to the company's success. He notes that Taiwan is a very small market in world terms, and accounts for less than 10 percent of Acer's global business.

  He sees accelerated globalization as essential for Taiwanese companies if they are to grow, with international strategies being built into business plans from an early stage. Globalization, in the age of the Internet, does not require large-scale operations. Linkage, leverage and the approach to the market are the keys.

  Taiwanese firms have some significant advantages in developing globalization strategies, the book says. A high level of technology and a pattern of dynamic competitiveness are crucial elements in accelerated globalization, although they must be matched by the willingness of a firm to move out of its "comfort zone" and into new and unknown markets.

  But there are also problems with the model examined in Dragon Multinational. One issue is the role of the visionary individual at the center. An advantage of traditional multinationals is the capacity to generate successors from within the firm, so that the firm outlasts its founder. It is not yet clear whether cell-based organizations can do this.

  Another difficulty arises when the group tries to raise external capital. Investors can be unwilling to put money into a group which is loosely organized, and where the application of funds may not be entirely transparent.

  `Against the grain'

  These problems aside, the impact of firms such as Acer is already being felt.

  "The picture that emerges is against the grain of much of the globalization debate," Mathews says. "That debate tends to portray globalization as driven by a handful of huge global firms, working to create a uniform world in their image."

  But traditional companies are struggling, in many ways, to keep up with flexible cell-based groups.

  "It's a question of attitude, approach and capacity to employ organizational innovations. We are seeing the outline of a new future take shape," Mathews says.

  Shih agrees, although he believes that there is still a good deal of life in the traditional organizational model.

  "The cell-based structure will not replace those centralized structures completely," he told the Taipei Times.

  "It depends on the company culture and the business operation strategies. The cell-based model will fit into the new economy better for certain companies or institutions, but we have to remember that in the end there is no `good' or `bad,' `right' or `wrong' way.

  Derek Parker is a writer based in Melbourne, Australia
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