By Parag Khanna
A growing number of companies have become stateless superpowers, brands that impact billions of lives every day with their products and services. Coca-Cola and Disney are obvious examples, notable both for their longevity and ever expanding relevance. Coke is actually shorthand for an empire of more than 500 brands spanning sodas, juices, waters and vitamin drinks, not just the famous red-and-white striped bottle. Disney too could have rested comfortably on the licensing of Mickey Mouse and other characters dating back decades, but it too has taken a quantum leap even by its behemoth standards, with theme parks and the multi-product franchise of the Frozen film, and now the much-anticipated reinvention of Star Warsfor a new generation. Both have maintained visibility through diversification and adaptation.
While on one hand quintessentially American companies, both Coke and Disney have effectively outgrown America, no matter where their corporate headquarters. They are disembodied and universal global service providers. They are to be found everywhere, without regard to American foreign policies such as sanctions. They live in the world of supply and demand, not nations and borders.
What corporate superpowers have in common with the traditional kind—such as America or China—is a grand strategy, a vision for their role in the world and a means-and-ends approach to getting there. My academic training is in grand strategy—the military kind that is the stuff of classical geopolitics. But as more multinational companies transition from being rooted at home to being at home everywhere, they too need grand strategies. For close to a decade, I have been advising companies on how to navigate mega-trends in pursuit of lasting global footprints. The academic community has recognized this crossover as well, with scholars such as NYU and IESE professor Pankaj Ghemawat focusing on the intersection of corporate strategy and regulatory distance. Yale University’s new Jackson Institute is designed as non-traditional grand strategy outfit, training leaders across the public and private sectors. One of its prominent faculty members is General Stanley A. McChrystal, a mentor of mine, who now applies insights from his legendary Special Operations Forces career to the business world.
Apple may be the Sun Tzu of corporate grand strategy: It appears to have achieved the ultimate goal of victory without fighting. The world’s largest company barely needs to advertise yet commands iconic respect worldwide, and makes deeply desirable products that other brands can at best attempt to emulate. And yet it is too pricey to be universal, and its walled garden approach to both hardware and digital services from iTunes to the AppStore have cost it some market share in developing countries such as India where Samsung and Xiaomi have surged. To maintain dominance in a sector with so many competitors, Apple has cleverly insinuated itself into financial services. In wealthy countries the Apple Pay transactions orbit is expanding. In China, Merchant Bank credit card holders can buy an iPhone 6 at zero interest, while insurance giant Ping An gives away iPhones to new customers. Apple’s new strategy is not to be out of anyone’s league.
Google and Unilever are two more sprawling corporate superpowers with rapidly evolving grand strategies. Just a decade ago Google had little in the way of a public policy operation, while now it is deeply engaged in efforts to provide unfiltered Internet access in countries with intense censorship and embroiled with the NSA over data security. It has a global mission—one the likes of Julian Assange find messianic—to be the prime utility of global connectivity, very often at its own expense as it lays down fiber cables across the Pacific Ocean and launches satellites and blimps over Africa. Unilever (and logistics giant DHL) has greater reach than the Internet. Not a day goes by when half of humanity doesn’t come into contact with a Unilever product, some of which are the most basic essentials for a hygienic life, especially for the billions at the base of the economic pyramid. Such global utility firms have a deep identity, global strategy, and non-stop execution.
Google and Unilever have realized the blue ocean nature of corporate grand strategy: The world is open, they are first movers, and nobody is stopping them. What is more, their power and scale is such that if they didn’t do what they are doing, it isn’t clear who else would or when. Indeed, expectations are growing for companies to become global service providers where governments have fallen short. In an age of fiscal austerity and deadlocked politics, this new baseline reality will surely continue.In other words: With great power comes great responsibility.
This is particularly true for Western companies. Just a few years on from the financial crisis and Occupy Wall Street backlash, it may seem shocking that, as Edelman’s annual barometer reveals, trust in companies is rising worldwide while trust in governments is falling. Furthermore, Western MNCs have a 33% edge in favorability over developing country MNCs—and the more emerging markets open up to foreign corporate presence, the more their citizens prefer trusted Western brands. All of this means that there is still a very large window of opportunity for Western companies to expand globally and gain market share despite rising local competition.
Strategic expansion and greater visibility, however, require clarity and confidence over a company’s role and identity. Superpower corporate brands are categorically different from traditional companies because they are a part of our global infrastructural fabric. Most people would find it very hard to imagine what this world would be like without Cisco or Airbus. Although we don’t always realize it, we all rely intimately and constantly on them and many others like them. We deliver goods and services on the back of their supply chains. (DHL even moves battle stations for the US Army.) What they do is not “corporate social responsibility” but supply chain governance. They are part of how the world is run.
However, with a few exceptions, most mega-corporations struggle to project a brand that matches their global footprints and governance roles. They are still thought of as national (e.g. American), un-innovative, and insufficiently localized. GE found itself in exactly this dilemma several years ago before launching “GE Look Ahead” with The Economist (Disclosure: Factotum serves as the editorial production team for “GE Look Ahead”). In fact GE is a staggeringly innovative company whose products bring enormous benefits to mankind, but needed to better translate for diverse audiences the immense scale of what it does every day across the world.
Global companies not perceived as such miss out on opportunities to boost their brand given the important roles they play in global public goods.
The brand strategy continuum is critical to put identity before image and substance before style. Defining a client’s role in an increasingly complex global division of labor, advising on setting priorities, capturing real-world applications and devising thought leadership campaigns to match are all needed services. A brand is indeed as important as a credit rating–which is why it should be based on fundamentals rather than froth.
Many already or aspiring global companies need to similarly make this connection between their reach and their image. To be viewed as globally relevant and responsible, they must convert their grand strategy into a brand strategy. Europe provides interesting examples. Philips, the Dutch electronics company, is already the world leader in lighting technologies but has devoted significant resources to its Livable Cities campaign and awards focused on cost-effective energy saving solutions for poorer countries from India to Mongolia. SwissRe, the world’s largest reinsurer, has become a pioneer in in low-cost crop insurance and other financial products essential for agricultural resilience in climatically volatile geographies. In both cases, anticipation of emerging trends—urbanization and food insecurity—led companies to strategically expand their businesses both horizontally (new geographies) and vertically (new business models).
When global brands act on global issues, it has ripple effects well beyond narrow alignment with the bottom line. Coca-Cola supports the “right to water” movement because water is becoming scarce and expensive at its production sites, but it is also investing in the practices and technologies that will reshape the industry. No government or aid agency invested in inventor Dean Kamen’s portable Slingshot water desalination technology—but Coca-Cola did, ramping up its trials in water-stressed countries. Similarly, Shell had to go through several painful decades of developing Nigeria’s oil industry through political upheavals and economic crises before Sir Mark Moody-Stuart turned the company from human rights pariah into the champion of triple-bottom-line accounting (profits, people, planet) that it is emerging as today. It wasn’t just for image, but fundamentally about sustaining the license to operate. Other energy majors now race to brand themselves as diversified and ecologically conscious conglomerates such as BP’s “Beyond Petroleum” (BP). Of course Airbus and Boeing want to save on fuel costs, but isn’t the world better off thanks to their new investments in carbon-fiber aircraft designs that burn less and travel further?
This is therefore the moment for companies to determine their role in a world with huge demand for positive contributions and not enough supply. Grand strategy and brand strategy are two sides of the same coin.