Percy Barnevik had his work cut out for him in 1988 when he took the helm as CEO of Asea Brown Boveri (ABB), a freshly cast global engineering giant created through the merger of two firms in the electrical power equipment industry. His assignment: Transform the resulting collection of second- and third-tier companies into a first-class operation able to meet the organizational and strategic challenges of the world economy.

Little more than a decade later, ABB has become a prime example of what HBS professor Christopher Bartlett and London Business School's Sumantra Ghoshal have described as a "transnational corporation." This radically different corporate model was first developed in their influential 1989 book, Managing Across Borders: The Transnational Solution (HBS Publishing: 2001). "ABB," they write, "is truly what Barnevik set out to create -- 'a company that is big and small, global and local, decentralized but with central control.'"

According to Bartlett and Ghoshal's research, competing solely on the basis of scale efficiency or national market responsiveness or the ability to transfer specialized knowledge worldwide (approaches employed earlier by Japanese, European, and American corporations, respectively) no longer suffices. Modern transnational firms, in contrast, succeed by developing all three capabilities simultaneously. "It's the corporate equivalent of being able to walk, chew gum, and whistle at the same time," notes Bartlett. These days, the term "transnational" has become part of the business lexicon, as companies strive to build the capabilities demanded by an evolving global market.

Having examined the link between corporate strategy and organizational structure in the first edition of their book, as well as the effects of differences in cultural, national, and corporate heritages, Bartlett and Ghoshal now add their insights regarding the development of transnational managers. Making use of additional research that led to the publication of The Individualized Corporation (HarperBusiness: 1997), the authors explore the critical roles, tasks, and responsibilities these people have in building the successful transnational organization.

"The reality is," they say, "that there is now no such thing as a do-it-all global manager. Instead, there are groups of specialists, each of whom must share a transnational perspective." Accordingly, a new section of the book explores the most important roles and responsibilities of business, country, functional, and corporate managers. "Firms must recognize," Bartlett and Ghoshal declare, "that success relies not only on the strategies, structures, and systems typically controlled by senior management but on effecting changes in individuals' behavior."

In keeping with this thesis, Bartlett and Ghoshal outline a three-phase procedure that changes the thoughts and actions of managers accustomed to hierarchical bureaucracies. At ABB, for instance, Barnevik was intent from the start on replacing "the old context of imposed compliance and control with a more internalized model of behavior. In addition to stripping out structural overhead and simplifying bureaucratic reporting requirements," Bartlett and Ghoshal write, "Barnevik and his top team focused on the challenge of establishing strong norms of self-discipline and building a context of support and encouragement."

In the second stage of the transformation process, the emphasis is on building what Bartlett and Ghoshal describe as "stretch" and trust-pushing managers toward ambitious goals in an environment with a "bias toward inclusion and involvement, a sense of fairness and equity, and a belief in the competence of one's colleagues." Finally, a "regeneration phase" shifts management's attention to maintaining the momentum of change and coming as close as possible to achieving the ideal of the "self-driven, self-renewing organization."

Bartlett and Ghoshal observe that large companies with the best track records in accomplishing this transformation employ a gradual approach. At General Electric, for instance, under the leadership of CEO Jack Welch, the first two steps took more than a decade to complete. Meanwhile, attempts by other organizations to accelerate the process have been counterproductive. General Motors learned this the hard way in the 1980s, when it tried to implement the first two steps simultaneously. The result was a management overload that led to a breakdown of systems and relationships.

"Understanding the requirements for success as a modern transnational is just the beginning," say Bartlett and Ghoshal. "Implementation is far more difficult, especially in an era when people seek instant solutions at every turn. That's why we've included the application handbook in this edition" (see sidebar). According to their research, the greatest problem lies in teaching managers to think holistically and understand that the historic and cultural heritages of their nation, their industry, and especially their company are major factors in shaping the capabilities of their organization.

The prescriptions provided by Bartlett and Ghoshal offer no simple cure, but the long-term result of their regimen is likely to be robust and innovative companies well positioned for success in the new millennium.

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