Reflecting on the “Born Global” Micro Multinational Corporation

Many Latin American entrepreneurs descended onto the San Francisco Bay Area[1] over the last few weeks. Some of them took advantage of key events such as DreamForce (hosted by Salesforce), Endeavor Global, or TechCrunch Disrupt, while others created their own events[2]. They came to pitch their ventures while hoping to show-off their innovations, find partners, raise capital, pilot their products/services with potential customers, network with peers, and party with the little time remaining!

During this period, I heard more mobile app pitches than I can remember.  Current mobile app development is enabled by low barriers to entry, the ability to develop these apps from anywhere, the standardized development environments for Android or iOS, and their small capital requirements. What I witnessed was a show of the democratization of innovation at its best.  Anyone, anywhere, could aspire to have the next “new new” thing by combining a perceived market failure with social networks, digital media, location awareness, and mobility.

As I met with these entrepreneurs, I could not help but think back to decades ago when I was in their shoes: a young, recently minted Ph.D. from CMU in Electrical & Computer Engineering eager to make an impact on technology.

My own personal journey

Among the greatest fads for ambitious young professionals of my generation was to work for a Global 50[3] multinational corporation (MNC).  To me, the urge to join a legendary MNC was irresistible.  Having just completed my doctorate, I joined the ITT Corporation, which at the time was among the world’s largest MNCs a conglomerate operating in telecommunications and almost any other industrial sector.

I marveled at ITT’s ability to bring intellectual capital and hard assets to bear on fusing together business opportunities from across the globe, often flying under the radar of sovereign governments.  Developing such opportunities was beyond the reach of medium or even large domestic companies.  For example, a large infrastructure contract in an African country would be sold by an ITT subsidiary selling to that world region through government contacts in the form of development assistance.  The product would then be engineered by an ITT subsidiary in a third country, using R&D in a fourth country, manufactured in multiple countries, with a financial structure that would minimize taxes and maximize profitability in another country, and with loans obtained in yet another country.  These transactions were executed highly efficiently through a web of multiple subsidiaries around the world connected by a communications network of fax machines and phones, all operating under the MNC umbrella.  ITT and other MNCs led the globalization effort ahead of everyone else at the time, and in consequence enjoyed an unfair advantage because of their massive resources and considerable investments made over time to develop a global footprint.   

Things have changed dramatically since the 1970s and 80s.  Globalization today is an irreversible process supported by the marginal zero cost of instant multimedia communication, our increased awareness of our global village aided by inexpensive air travel, and our increased ability to navigate diverse business environments due to global migrants who travel from faraway places seeking socioeconomic mobility.  We have become more tolerant of other cultures and appreciative of other customs.  Hence, we have learned to manage diverse workforces, both when we are physically present and when we are only heard over a speakerphone, seen on a video screen, or connected over LinkedIn, e-mails, etc.  Specialized tools enable engineers and other business functions in different continents to collaborate and work together as they would be in the next cubicle. Physically and virtually, the modern organization has gained center stage while national boundaries have faded away.  Talent, price/performance, and timely results are key elements of the “glue” keeping these organizations together as part of an integrated value chain.

Today’s complex web of global transactions does not need to be kept within the MNC umbrella.  In fact, teams up and down the supply chain can form part of a web of resources providing a far lower transactions cost than if those teams operated within the walls of a single company!  In fact, a web of loosely joined small enterprises can deliver faster and cheaper solutions to global markets with products and services that were for the most part the “owned” by large global corporations just one or two decades ago, giving rise to the micro MNC.

Born Global MNCs

One interesting feature of the micro MNCs is that they are born globally anywhere in the planet.  Their value proposition is to target markets by breaking the “local first, global later” paradigm.  Unleashing the power of the entrepreneurial enterprise, start-ups maximize the benefit from the latest technologies including cloud computing, open source, webification, and web 2.0 communications, further lowering the unit cost of their focused contribution at maximum speed.  Web-based tools enable MNCs to seamlessly integrate their value proposition.  This new paradigm gives the rise to the MNC “global first, and always global” treating the local market as part of the global marketplace.

Current economic challenges in the West are the ultimate “legitimizers” of the micro MNC.  As corporations seek to compete in tougher markets, they will increase their propensity to consider new entrants (suppliers) from faraway places willing to adopt newer/disruptive technologies to provide increased value faster to global markets.  In contrast, nimble and dynamic entrepreneurs from emerging world regions will benefit from the techno-economic parity provided by the new new-economy, enjoy lower barriers to entry, take incrementally measured risks, and unleash their entrepreneurial spirit leveraging human talent and price-performance in the form of competitive products and services.  Hence, entrepreneurs will be able to pass on the efficiencies and productivity (and lower costs) they enjoy to enable a virtual distribution of functions geographically of best-in-class MNCs.

The Micro MNC has capture the imagination of global entrepreneurs and engage in a new wealth creation culture enabled by the democratization of innovation.

Last year, while visiting Uruguay on a business trip, I was invited to visit one of the country’s local incubators.  Since I had already visited many such incubators across Latin America, I anticipated what I would find.  Such incubators typically consist of rows upon rows of cubicles, with some public spaces and an assortment of different sized meeting rooms.  The cubicles tend to be populated by local geeks and nerds, each working on the “next big thing,” which is often based on the latest web 2.0 or 3.0 insights.

The visit confirmed my prior experiences visiting similar places, with every workspace representing the latest and greatest mobile apps or social next with teams of engineers (almost exclusively male) showing their wares hoping to knock me off my conscious state with their incredible innovations.[4]  As I moved from one workspace to the next, I arrived to one where all the entrepreneurs were female.  Surprised by this pleasant change, I couldn’t resist and asked them: “What do you do?”  The answer came rushing back: “We make one-of-a-kind custom jeans.” 

As I listened to their answer, I had doubts.  How could a country with a population of just over 3 million people sustain a high enough demand of expensive custom made designer jeans?  The answer was shocking on both counts: each pair of jeans cost between $500-600 and they do not sell those jeans in Uruguay.  Instead, these Uruguayan jean designers had a business partnership with someone who owned several boutiques around the wealthy suburbs of Los Angeles, California, including on the famous Rodeo Drive. 

The boutique staff painstakingly took the client’s precise measurements and superimposed them onto a photograph of the client.[5]  After several iterations, the client signed off on the design and its measurements, which were subsequently sent to a professional stitching factory in Guadalajara, Mexico.  With the design and measurements in hand, the factory assembled the jeans to perfection.  The jeans were then shipped onto one of the 10 daily flights that connect Guadalajara and Los Angeles.  NAFTA (the free trade agreement between Mexico, the U.S. and Canada) facilitates duty free trade, enabling the custom-made jeans to arrive to the Los Angeles boutique in under 24 hours.

Months later, I was recounting this anecdote to Danish students. A woman in the class with a big smiley told me after listening that this was her business in Copenhagen. She said “I source the custom jeans from a favela Co-Op in Rio (Brazil) of marginalized women providing an additional benefit to my socially conscious Scandinavian customers”. Furthermore she went on in the same breadth, “my site offers an additional service, to broker jeans exchanges between my customers as they are able to publish to their purchases with photos and measures, if they opt-in!”

There’s no doubt that the democratization of innovation is fueling the born global micro-Multi-National-Corporation!

Until my next blog post – Carlos B.

[1] The “Entrepreneurial Mecca of the Planet”.
[2] Such as the entrepreneurs funded by Start-up Chile.
[3] The fifty largest world corporations selected by a key performance indicators including: revenues, market capitalization, innovation efficiency, brand equity.  Fortune, Forbes, BusinessWeek are among the business journals that publish such a  corporate ranking.
[4] Unfortunately most of them were small variations of similar businesses I have already seen.
[5] New technology enables to perform extraordinary accurate body scans to ensure a perfect fit.

About Carlos S. Baradello

Investor, thought leader, university professor, and advisor in areas of corporate innovation, born global entrepreneurship and venture capital investing.
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