In discussing the subject of Wikinomics – a term used to describe a new model for collaborative economic activity in the global, digital age – we have shown how companies can offer new technologies faster than ever thought possible using resources that are not part of their traditional structure. The old monolithic multinational that creates value with a closed hierarchical management structure is on the way out. Success in today’s world will require companies reaching out beyond their boundaries to use knowledge and technologies from other sources. This will apply to even the stodgiest of the industrial manufacturing companies if they are to provide the new products that will compete in the world’s markets.

The plant floor is going global, and it’s using collaboration and openness to design and assemble things more efficiently. One example that comes to mind immediately is the new Boeing 787 Dreamliner. Boeing has staked a great deal of its future on this revolutionary technology, which has substituted new high-strength composites for aluminum in much of its structure. Boeing’s giant plant in Everett, Wash., has become basically an assembly plant for components representing over 70% of the airplane that have been codesigned from scratch and complete subassemblies fabricated by over 100 companies from six different countries. The original specification document sent to suppliers who were to design and build their component was only 20 pages long! But it has not been without its own unique problems either. The program is about three years behind schedule and has missed several roll-out dates. However, the technological advances promised in this design will likely set new standards for the industry. In the process, Boeing is going from an airplane manufacturer to a systems integrator.

The existing model for the multinational organization is a hub–and-spoke-type arrangement where the head office governs an international network of satellite corporations building products for the local markets. It is basically a collection of subsidiaries, not a unified global operation. Local production does make sense by avoiding international trade tariffs, exchange controls and other trade protectionist barriers.

But does this still make sense in the new global economy? Each national organization develops its own bloated bureaucracy and many redundant processes, many times thwarting opportunities for innovation and cost reduction. This new model will now have to rely on receding trade barriers that will free goods and people to circulate according to market needs. Suppliers will have a growing power and critical role in everything from design to distribution and after-sale service, drawing on expertise not available in any single location. Each company will have to decide what its core capabilities are and how it will relate the knowledge and competence to the other members of the consortium.

More next time.