2007: The Year of Corporate Transformation

Félix Cuesta. Professor. IE Business School

1 February 2007

World markets began to deregulate in 1994 with the signing of GATT, making it necessary for companies to gain global competitiveness.

In 2007, companies are faced more than ever with the challenge of transforming themselves into competitive players on the global market.

There are many well-known companies that have already completed this transformation and whose global competitiveness is now beyond question. Such is the case of sporting goods manufacturers like Nike, Adidas, Reebok and Converse All Star. In the sector of mobile telephones, companies such as Alcatel, Lucent Technologies, Nokia, and Ericsson also have successfully made the transition, as have other internationally renowned companies, such as Coca-Cola and Benetton.

European companies in general--and Spanish companies in particular--can no longer look upon the past with nostalgia. Nor can they attempt to undo the deregulation process that was set into motion on 15 March 1994 in Marrakech with the signing by 117 countries of The General Agreement on Tariffs and Trade or GATT. The negotiations began two years earlier in Uruguay, and the People’s Republic of China signed the agreement later under special conditions. Negotiations now are under way with Russia for its possible incorporation, although it is still uncertain under what conditions Russia will join.

Companies need to know their market. Is it saturated, global, competitive, rapidly changing, interactive, and technological? Or is it characterised by a combination of these features? They also need to have an idea of who their clients are in each market. Are they mature, trained, well informed, demanding and tech- savvy?

The key to success in the transformation process lies in being able to redefine the company and its core activities.

Simultaneously, and on a continual basis, companies must also identify potential partners that can help them establish ad hoc value chains for each business opportunity they identify.

In this way, companies can position themselves competitively, thanks to selective positioning, a variable cost structure, capacity and a know-how that can be adapted to each situation.

Once the optimisation phase has been completed, we will have a series of excellent, specialised core units ready to generate revenues through open and transparent collaboration. Later, a specific market opportunity needs to be identified, and then the core units likely to contribute most to the value chain must be singled out.

Once a feasible business opportunity has been identified, the construction process can be carried out through a number of specific steps

The process begins with the development of the ad hoc value chain, which will lead to the selection of the appropriate partners (chosen from a list of pre-selected and pre-approved partners kept in a data base). The negotiations with these partners will include clarifying the contribution of each one to the value chain and the most appropriate form of association, be it a strategic alliance, outsourcing or joint venture etc. The final outcome of these negotiations should be to define the value chain needed for that particular business opportunity.

Information technologies will be the main tool for operative integration, enabling the various components to interact from different locations. In other words, the different partners can be located almost anywhere, allowing for greater levels of excellence.

The next step will be to involve individuals from all the associated companies in the business project. For this step the internal communication and anthropology (logos, mottoes, etc.) will become the main support tools.

During the next three months, the situation is optimal for launching the operations and taking advantage of the business opportunity. Once the operation is concluded, the value chain is dissolved and the core units are free to deploy their resources in other business projects.

This is a dynamic process, which demands the highest level of stability possible and which, as always, requires executives to perform as excellent jugglers.

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