How Irish subsidiaries can be global solution providers
MULTINATIONAL corporations are hugely important to the Irish economy. More than 1,000 foreign companies operate here, directly employing more than 150,000 people, and providing a large number of indirect jobs.
Last year, IDA Ireland supported 145 new investments. More than half set up new activities in established Irish subsidiaries. However, there are continuing uncertainties about our corporate tax rate and growing competition from lower-cost countries.
A study, in which I was a researcher, of more than 40 responses to organisational problems undertaken in leading Irish subsidiaries found that one way managers protect and build the reputation of their unit is to provide high-value innovative solutions. Their parent can then share these solutions across their global operations.
Innovative solutions to these problems include new business processes, practices or technologies, which not only ensure that Irish subsidiaries remain efficient and cutting-edge but build their profile and reputation as solution providers within their corporation.
Some innovations we discovered included new, creative and sometimes high-technology approaches to outsourcing, manufacturing and running development, sales and support operations.
Multinationals need subsidiaries to contribute through problem solving. Traditionally, a multinational's HQ took the lead. Today, building competitive advantage and meeting the needs of diverse and complex markets requires subsidiaries to be involved in providing solutions.
The best multinationals now look to their leading subsidiaries to be innovative and head office then leverages the most innovative solutions from their operations around the globe. This need for innovative problem solving and head office's constant appetite for new solutions opens a tremendous opportunity for Irish subsidiaries.
Instead of being a vulnerable outpost on a peripheral island, Irish subsidiaries can ensure their survival by becoming an important source for global innovative solutions that add value to their wider corporation.
Our study shows that subsidiary managers most likely to become global solution providers have developed three core abilities: first, these managers showed an astute ability to take a helicopter perspective on the organisational challenges, focusing on tackling corporate-wide needs instead of taking a narrow, local subsidiary perspective.
This enables them to take a more global view of a business problem and to consider how they can apply a solution which will meet the needs of the wider organisation.
Subsidiary senior managers can support this ability through continual open communication of organisational issues and imperatives, competitor and sector activities. Second, these subsidiary managers are able to mobilise relevant knowledge and expertise from both their own unit and other parts of the corporation, identifying the best knowledge to feed into their solution development regardless of where in the corporation it resides.
Third, they constantly developed their personal networks across the multinational, not just with HQ, but also with sister subsidiaries so they can liaise with corporate managers at key decision points in the solution development, securing support and buy-in for their proposed approach.
Socialisation, rotation of staff and ongoing interaction with sister subsidiaries and headquarters supports network building for problem solving. Top management support for these capabilities will allow their unit to further develop problem-solving skills and to become recognised within their corporation as a creative and innovative solutions provider.
There are, however, challenges for Irish subsidiary managers in developing innovative solutions. Multinational corporations are often large with complex structures – identifying the right person in the organisation and getting their buy-in can be difficult to negotiate.
It can also be challenging to identify what solution features need to be local and what can be applied globally: some solutions can be standardised across the global corporation while some must be adapted to meet country-specific needs.
Sometimes new problems don't require completely new solutions: tweaking current processes, practices or technologies in innovative ways can be effective in addressing a new problem. It is important, however, to overcome natural tendencies to apply existing legacy solutions to new problems, to start truly innovating when necessary. When such truly novel and innovative solutions are necessary, responding to the corporation's business challenges can provide an opportunity for Irish subsidiaries to be seen as solution providers and to foster their position as creative and innovative corporate players.
Based on a study by Dr Esther Tippmann (UCD Smurfit Business School), Dr Pamela Sharkey Scott (Dublin Institute of Technology) and Professor Vincent Mangematin (Grenoble Ecole de Management).