Are multinational institutions in conservative industries, like banks and insurance firms, doomed to fail to deliver on its function in society as we know it today? More and more employees in big firms can’t fake their learned corporate behavior and language anymore that is originated by internal politics, such as the UBS 43-pages long dresscode nonsense. It slows down real efficiency and kills the overall moral of company’ employees. Are we better off without the multinational institution and are there better alternatives?

I’ve wrote down my views in my own version of a PEST analysis, analysing Political, Economical, Social, and Technological factors that screen the external environment for upcoming trends that “endanger” the existence of multinational corporations. I’ve somewhat tweaked the conservative PEST analysis to fit my (limited) personal understanding of things, giving most attention to the Sociocultural aspect.

Political:

I refer here mainly to corporate politics, not to political as the typical macro-environmental factor by the guy who coined the PEST analysis. “Corporate politics” can still be a valid environmental scanning component of strategic management anyway.

Super Fragmentation

Here’s what you already know: Social media and the Internet have enabled humans to communicate at a global scale in much smarter ways. Anyone with a similar interest can now not only find each other easily and fast, but also collaborate together, disregarding physical distance. Also, you can easily find an expert solution to a  niche problem you have; cheaper and better.

As a result, projects, teams, experiences, deliverables, and opinions have become super fragmented and also public, and this trend is increasing. This has great implications for the multinational firm in terms of rising competition from …. everywhere! Competition consists of an army of mini competitors who probably are better at what they do in their mini niche than the team in the large firm you are working for (or with?).

Economical:

The Rise and Fall of Economies

Nothing is forever. Prosperity is not to be taken for granted. A massively large amount of traditional businesses that have been operating in the most conservative space for over 100 years, like banks and insurance firms, will not be able to overcome the sudden change needed when a too large amount of small -highly innovative- players will disrupt their entire industry. Almost all of these large firms will file bankrupt. Those that do survive had obtained a new management mind-set in time to rigorously adapted their businesses models to adjust to this new reality.

Generation Y

The multinational institution is inherently slower than a bunch of innovative individuals that have decided to work together. Due to their size and structure, multinationals will always fail to really compete, except for the ability for on-scale delivery – which is becoming much less wanted on global scale.  The Generation Y, or GenY, individuals are the “new workers” of the world, communicating and synergising via social media tools such as virtual communities.  They are already used to working individually, but remotely together on scale, while generating generally better outcomes.

Three examples:

1. Businessmodelgeneration: Leading business book co-created and pre-financed by 470 strategy practitioners = death for traditional publishing houses.
2. Community Banking: The Fidor Bank focuses on the mechanisms of the Web 2.0 and the latest technology in money transactions. Offering the best possible conditions to the individual are their promise (unlike traditional banks who only care about making more money) = death for traditional banking industry.
3. Open Source phenomenon: loads of individuals group together on the Internet to build the best software together, for free = death for traditional software suppliers.

Social / Cultural:

Average Joe & Pavlov

To whom is Joe being referred to in the slogan “not your average Joe”? It’s the average guy with the average job. Multinational firms offer a wealth of average jobs for average Joe’s. Fresh out of university they make them fit a profile and talk in vague language they invented, instead of asking newly hired youngsters to bring new ideas and innovation to the table. In order to (seemingly) keep control of big organisations most big firms still suffer from the standardisation disease. They are conditioning young people according a reward system first demonstrated by Ivan Pavlov. Fresh employees are trained to behave in such a way that fits the business model – to more or less function as a machine by executing repetitive things on everyday basis.

It is -and increasingly becomes- dangerous to behave the same without too much thinking, because competition (even the smallest firms) can take over and do things better, with a passion. Also, who’d really want to hang out with an average Joe in the first place, unless you identify yourself with them? It’s way cooler to surround yourself and work with people who are fun, innovative, passionate and impulsive, which you see back in their work results. It’s more lucrative too.

Corporate Culture

All you policy makers out there, remember that you don’t create a corporate culture with policies and rules; a culture happens. Culture is the byproduct of consistent behavior (thanks 37signals-guys for formulating this. I recommend every corporate stakeholder to read your book Rework).

Happiness Factor

The Internet and social tools have also caused a large increase in small companies and one-person firms that serve a (very) niche purpose. These self-employed people solve one problem in a direct way, without having to deal with internal politics and other annoying factors that are typical in multinational institutions. Small firms lead through innovation, their quick response time, their level of adaptability, and they exist to fulfil a direct need. Even though these individuals, at times, have to battle with worries of closing new deals and manage their work in the best way, they must be generally happier than the typical corporate cog, who’s just part of an arguably dying corporation, having to deal with internal politics and talking in non-sense vocabulary on everyday basis.

Is it questionable if happiness is a corporate responsibility, like stated in this Forbes article? ohhh, please!

Technological:

Revolution

With the rapidly progressing Internet-based technology enabling the continuous increase in individuals and small firms who are experts in their niche market, you could start to expect a revolution in your industry. So better prepare…. in particular if you still think “our customers don’t want to change” (even if you can “proof” it), like in the private banking industry. Innovation will rule you out if you’re not changing. The world will keep on turning without you; just ask former Lehman Brothers and Enron employees.
Here’s one example of a CEO of a technology driven firm who is suddenly realising they need a radical change, fast! Just a few years ago they were on top of their game…

Summary

The thick walls around the multinational corporation are corroding fast and will soon fall down in all industries, together with all the people who were refusing to acknowledge this new working standard. The Internet and social media tools offer such a wealth of opportunities for small businesses and individuals to efficiently collaborate and compete with multinational corporations that it has become questionable if the multinational corporation is still a desired business model to deliver work on scale.

This happening will not trigger another economic recession, but instead announce a new era in the way we work. Generation Y working methods will finally be fully embraced and fill the employment gaps caused by the extinct of the multinational corporation. We’ll organise ourselves in such a way online that delivery on-scale will be much more pleasant, efficient, and fun than before. GenY working methods will be more social and human, where everyone has better chances of finding work they do better than “the average Joe”, which they enjoy.

Technology and the Internet are the main enablers for this social change – a different way of using time, of communicating, of researching and gathering information, of having relationships with others.