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This publication is the sixth in a series exploring the profound changes in globalization and how to navigate this new world.

For decades, Siemens exemplified the global enterprise. The conglomerate achieved great success by designing, building, and selling physical products: power generators, medical diagnostic equipment, rolling stock, automated machine tools, and other industrial goods. Customers bought these “assets” and were responsible for their upkeep and future upgrades. Siemens’s performance depended largely on selling machines, spare parts, and equipment maintenance contracts. Accordingly, the company’s nine divisions were organized by product line. Large global manufacturing plants were set up to optimize costs, many of them in countries with low labor costs. This structure of a global manufacturing and service network supplying markets around the world, a central headquarters orchestrating the businesses, and local management teams was typical of the global operating models developed in the twentieth century.

Today, Siemens is amid a profound transformation. “More and more, we are moving away from our traditional corporate structures and organizing ourselves as a customer service company,” the chief strategy officer told us. Instead of viewing itself primarily as a hardware manufacturer, Siemens is becoming a provider of value-added services, such as those that help utilities increase the uptime of their turbines. Teams that cut across business units identify opportunities to create value for customers. MindSphere, a data and analytics platform developed by Siemens, is being rolled out across all businesses, regions, and local offices to securely collect and analyze data from digitally connected equipment deployed around the world. Large, labor-intensive global plants are giving way to smaller, highly automated factories located closer to customers in order to provide greater flexibility and faster delivery.

The changes at Siemens reflect the fundamental transformation in the operating model of multinational enterprises as they adapt to a global economy that is being radically redefined by a confluence of geopolitical, technological, and customer megatrends. (See “The New Globalization: Going Beyond the Rhetoric,” BCG article, April 2017.) While this “new globalization” presents significant challenges to traditional operating models, it is creating enormous opportunities for enterprises that develop the right value propositions and have the organizations capable of delivering them.

Companies as diverse as Netflix, Alibaba, and Uber have quickly built multibillion-dollar global businesses by using their new-age operating models to penetrate vast borderless communities of digitally connected consumers, companies, and devices. Traditional multinationals such as Rolls-Royce, General Electric, and Philips are realigning their global operating models to the new reality — and creating new revenue growth by delivering digitally enabled services, remotely adding value through their installed bases of equipment around the world, and offering more personalized products. (See “New Business Models for a New Global Landscape,” BCG article, November 2017.) These changes are coming at a time of growing geopolitical uncertainty, requiring global business models that can adapt to the changing rules of the game, make them more resistant to shocks, and create new sources of competitive advantage. (See “Building a Resilient Business Inspired by Biology,” BCG article, April 2017.)

To understand how global enterprises are adapting, we interviewed more than 50 C-suite executives at leading MNCs over the past two years. Here we describe how they are transforming their operating models — both in terms of the value propositions they offer for generating revenue and the global operations that deliver them — to align with the new global landscape.

Even though global GDP growth has cooled from the high rates at the turn of the century, companies can find abundant new opportunities for revenue growth — and even create new markets — by transforming their value propositions. Companies can capitalize on the integration of physical and digital products and shifts in consumer behavior by offering value propositions that are far more oriented toward customers and solutions. As Rishad Premji, the head of strategy at the Indian IT services company Wipro, explained, “Previously, clients redesigned their processes for efficiency. Future growth will come from redesigning processes to be human centric and have the customer at their core.” The chief strategy officer of a global medical equipment company noted that customer-centric solutions are its fastest-growing business.

Through our interviews and research, we have identified three dominant value propositions that are emerging. We call them cross-border servitization, personalization, and communitization. To varying degrees, many companies that we studied are already bringing these value propositions to market.

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