It's All About Trust

By Tim Carroll -- Supply Chain Management Review, 4/1/2007

With today’s globally distributed supply chains, how do you ensure trust when so much of what you do is shaped by entities outside of your organization?

As a supply chain practitioner with a supply chain that spans 170 countries with $40 billion in spend, "challenge" is a word that I face every day. If I had to focus on one single challenge, it would be global integration, which also happens to be the single biggest opportunity.

Globalization is changing the fundamental model of the corporation. In the 19th century, we saw the emergence of the international corporation where most operations were centered in a home country, with overseas sales and distribution. Next was the “multinational” model of the 20th century where corporations created smaller versions of the parent company in multiple countries around the world with heavy local investments to gain access to the local market. This was the model in place when I joined IBM in 1981 where we established “mini-IBMs” in dozens of countries around the world. Yet this approach proved to be redundant because we started from scratch and replicated IBM in every country with its supply chain, finance, HR and other “back-office” functions. This is not only expensive, but it increasingly gets in the way of leveraging a company’s collective smarts.

This is why all businesses that operate around the world are moving to the next model—what IBM calls the globally integrated enterprise. A globally integrated company shapes its strategy, management, and operations in a truly global way. It locates operations and functions anywhere in the world based on the right cost, the right skills, and the right business environment. And it integrates those operations horizontally and globally.

With this new model come new challenges. Two in particular of paramount importance: the need for a new generation of leadership talent and the vital issue of trust.

Because the globally integrated company is radically different, it will have to be led by a new generation of leaders, with different skills, experiences, and judgment. I am spending a lot of time on this leadership challenge at IBM and progress is being made daily.

But of all the challenges raised by globalization, perhaps the most fundamental is trust. This isn’t just about issues such as ethics and legal compliance, which are obviously critical. What I’m referring to goes far beyond that. It’s about sustaining trust in enterprises that are based on increasingly distributed models. How do you ensure trust when your company’s operations, customer and employee relationships, and brand may be shaped— or even managed—by companies that are part of your “virtual” enterprise?

Businesses have to find other ways to build trust internally and externally. At IBM, we’ve set off down the path of empowering and enabling our people to make decisions and to act through blogging, wiki’s, and global online “jams,” where the entire IBM workforce comes together as equals to shape everything from new business ideas to our business processes and operations.

A globally integrated company looks very different, and this is where the opportunity lies. For example, at IBM, where we used to have separate supply chains in different markets, now we have one supply chain—a global one—for the entire company. In doing so, we have saved IBM and its shareholders more than $25 billion since 2002. We have also improved our time to market and customer satisfaction.

The newness of all this is a huge opportunity and a huge challenge. But for companies based on innovation, this is nothing new. We’re at a profound crossroads in business history and I bet your impulse, like mine, is to seize upon that and lead it, rather than to resist it or hide from it.