- In today’s CEO Daily: Diane Brady on companies’ push to regionalize amid conflict.
- The big leadership story: Iran war raises energy prices and cyber threats, with taxpayers footing the bill.
- The markets: A sea of red as the Iranian conflict escalates, with no end in sight.
- Plus: All the news and watercooler chat from Fortune.
Good morning. Will the attacks on Iran accelerate the push to decentralize global companies? This year’s Edelman Trust Barometer referenced
the rise of the “poly-national”—a corporate structure that invests in long-term local relationships, compartmentalizing everything from talent to supply chains in individual countries. To stay ahead in a world that’s shifted from globalization to national interests,
the argument goes, companies must “operate as a network of businesses with a U.S. center, but a local face.”
It’s a variation of a strategy long deployed by consumer-facing global giants like
Coca-Cola and Procter & Gamble, which
prioritize global experience in their leaders and connect strong regional operations. HSBC
regionalized its operations at the start of last year, splitting its operations between “Eastern Markets” and “Western Markets.” And years of heightened tensions and tariff wars with China have long forced companies to alter what Singapore Prime Minister Lawrence Wong called the
“invented in California; made in China” strategy that helped firms like
Apple to scale so profitably.
There are other forces disrupting the model of a centralized company. I spoke yesterday with Christina Kosmowski, CEO of LogicMonitor, which monitors customers’ tech systems from data centers to the cloud. She is having more conversations with CEOs about doubling down on a regional strategy to build resilience. “When your systems go down, you can’t operate,” says Kosmowski. “The time frame to react is just within seconds, instead of hours and days.”
To be sure, decentralization comes with risks, not least of which is the duplication of systems, costs, and functions that get streamlined in an efficient corporate structure. As
Novartis CEO Vas Narasimhan
said to me last year, “to navigate complexity in the external world, you have to radically take out complexity internally.” That means creating a
leaner and simpler organization where everyone knows who is responsible for what. It’s possible to have that alongside autonomous and agile regional operations, of course, but it requires leaders whose teams are aligned on what efforts are localized—and what stays the same.
Contact CEO Daily via Diane Brady at diane.brady@fortune.com
