True or false? Digital ecosystems
Uncover what truly drives value in digital ecosystems: debunk myths and learn governance, data practices, and collaboration strategies...
Strategy
The view from the Moon: How to rethink your global strategy
As the distinction between products and services blurs and innovation flows in every direction, Yoshinori Fujikawa explains how companies must ‘shift, melt, and tilt’ to orchestrate capabilities across ecosystems
Rapid read:
- Global strategy must move beyond deciding where to make and sell to identifying where companies should learn, innovate, and access distinctive capabilities.
- Competitive advantage increasingly depends on locating the ecosystems best suited to developing specific capabilities, then connecting and mobilizing those capabilities across the organization.
- Headquarters should act as ecosystem orchestrators, determining which capabilities sit where and building the coordination mechanisms that allow knowledge and innovation to flow globally.
Imagine standing on the Moon and looking back at Earth. From that distance, national borders become just another layer. What may come into view are patterns of connection: flows of talent, knowledge, technology, capital, and data, linking different parts of the world. Some places emerge as hubs of scientific discovery; others excel in manufacturing, digital experimentation, AI frontiers, or social innovation.
Seen through this lens, the world looks less like a collection of geographical markets and more like a network of differentiated but interconnected innovation ecosystems. For much of the 20th century, global strategy was organized around an inadequate question: where to make and where to sell? Multinationals expanded by replicating a domestic product across borders and adapting functions to fit local needs, with headquarters coordinating activities from the center.
That logic remains important, but is no longer sufficient. Increasingly, firms go abroad not only to access customers, labor, and other resources, but also to access capabilities they cannot easily develop at home: specialized talent, demanding customers, research communities, supply chains, entrepreneurial networks, policy circles, and institutional knowledge embedded in local ecosystems.
At the same time, globalization is becoming more paradoxical. Geopolitical tensions mean borders and national security are more consequential, yet innovation is becoming more distributed and interconnected. Knowledge may originate in one ecosystem, be upgraded in another, and scaled through capabilities located somewhere else entirely.
The question is no longer simply: where should we make and sell? It is increasingly: where should we learn and mobilize, and how do we connect those capabilities to scale globally?
The shift, melt, and tilt of the global economy
Three forces help explain why global strategy increasingly needs to look beyond markets and toward ecosystems.
Shift
For decades, economists have documented a structural shift toward service economies. The so-called Petty-Clark Law describes how a nation’s growth engine moves over time from agriculture to manufacturing and then toward services. Today, services account for most of the business activity in advanced economies. But the strategic shift goes deeper. Where value is created and captured is changing. Value is realized not simply when a product changes hands, but through what customers accomplish with it over time. Nike creates value not just through shoes, but through its fitness ecosystem; Michelin moves from selling tires to helping fleet operators reduce cost per kilometer. Products increasingly serve as vehicles for delivering ongoing outcomes.
Melt
As this shift occurs, familiar boundaries dissolve. Manufacturers look like service companies: Apple is no longer just a hardware maker, but a provider of streaming, transactions, and storage; Komatsu connects construction equipment to optimization data. The movement also runs in reverse: service-rooted companies handle physical hardware like Amazon Echo, Google Nest, or Meta’s smart glasses as interfaces into service ecosystems. Industry boundaries blur as hardware, software, data, and experience converge.
Organizational boundaries also become more permeable as firms depend on customers, suppliers, technology partners, universities, and startups to create value together. In many industries, competitive advantage increasingly depends on the ecosystem in which the firm participates.
Tilt
Thomas Friedman once described globalization as making the world flat, but Pankaj Ghemawat reminded us that it remains decidedly bumpy. National differences in institutions, culture, regulation, infrastructure, and capabilities still matter, and globalization is about how best to manage such differences. Ram Charan added another image: the world is also tilting, as economic dynamism increasingly shifts from the traditional centers of the Global North to the emerging economies of the Global South.
That tilt now extends beyond economic growth to innovation. Kenya’s M-Pesa turned limited conventional banking infrastructure into an opportunity to pioneer mobile money. China moved rapidly to cashless payments and super-app ecosystems through Alipay and WeChat. Indonesia’s Gojek evolved from motorcycle ridesharing into a digital platform for mobility. Such “leapfrogging” challenges the assumption that new ideas develop primarily in advanced economies. Innovation can flow in all directions at once. Different places develop distinctive capabilities precisely because their customers, institutions, constraints, technologies, and histories differ.
Shape what's next
Strategy programs
The future won’t wait for your strategy to catch up
Explore programsSome ecosystems matter more than others
If capabilities are becoming more distributed, why do some places become good at particular things? Why does Silicon Valley remain a magnet for digital entrepreneurship? Why has Shenzhen developed extraordinary capabilities in rapid hardware experimentation and commercialization? Why does Switzerland punch above its weight in pharmaceuticals, life sciences, and precision industries?
Michael Porter and colleagues captured part of this logic in the “diamond” framework, showing how factor conditions, demanding customers, supporting industries, and competitive rivalry can combine to create distinctive advantages. Research on National Innovation Systems (NIS) broadens the lens: universities, companies, investors, governments, research institutions, suppliers, customers, infrastructure, and cultural norms interact over long periods to shape what a location becomes unusually good at.
Different histories and institutions generate different capabilities. A demanding customer base, a distinctive supplier network, a particular regulatory regime, deep scientific expertise, or a long industrial tradition can make one ecosystem substantially better suited than another for developing a particular capability.
Countries, cities, and regions are no longer simply markets or production locations, but capability-generating ecosystems. Within them, locations can emerge as Centers of Excellence (CoEs) for specific capabilities, where talent, knowledge, institutions, customers, partners, and accumulated experience combine to produce a capability that would be difficult to recreate elsewhere.
NISs foster capability, CoEs capitalize on capability, and global firms connect capability. That connection depends on what IMD’s Mark Greeven calls the “glue” layer – the mechanisms that create interdependencies across actors and capabilities. The challenge is to decide which capabilities should reside where, and how to connect them.
From footprints to portfolios
I have seen this logic play out firsthand in my work with more than 100 Japanese companies expanding abroad and multinationals operating in Asia.
The emerging multinational must master where to learn, innovate, and connect.
Yamaha Motor’s global configuration, for example, illustrates why there is no single best location for innovation. Motorcycle capabilities remain deeply rooted in Iwata, Japan, while other parts of the business have developed specialized roles elsewhere: leisure boats and marine activities in Georgia, financial services in California, and electric vehicles in Berlin. Yamaha doesn’t ask itself whether it should be global or Japanese. It asks which ecosystem should contribute which capability to the organization.
Recruit offers a similar story from the services industry. The Japanese company acquired US-based Indeed in 2012 and Glassdoor in 2018 to access expertise in digital platforms, data, matching technology, and online labor market insights. Those businesses now form the core of Recruit’s global HR technology business and its two-sided talent marketplace. The ecosystem that matters depends on the capability being sought.
The arrows also point in the opposite direction. For global companies, Japan is more than a large market in which to sell; it is an ecosystem from which to learn.
The signature ingredient of P&G’s SK-II, PITERA, traces its origins to observations at a Japanese sake brewery and the role of fermentation in skin appearance. SK-II grew from a Japanese skincare brand into a global prestige business. But the story did not stop in Japan. By 2012, Singapore had become the global headquarters for SK-II, while P&G announced that the global leadership of its broader skin care, cosmetics, and personal care business would move first from Cincinnati to Kobe and then to Singapore to be closer to Asia’s fast-growing and increasingly diverse beauty markets. Japan provided distinctive skincare knowledge and a demanding lead market, while Singapore provided a diverse, connected platform from which P&G could integrate insights across Asia and scale them globally.
7-Eleven presents an even more circular pattern. The convenience-store concept originated in the US, but its operating model was extensively developed in Japan, where convenience stores evolved into platforms offering fresh food, payments, logistics, as well as financial and other everyday services. Seven & i Holdings is now exploring ways to take the 7-Eleven business model refined in Japan into overseas markets, including back to the US. Canada’s Alimentation Couche-Tard also surprised many in Japan in 2024 by proposing to acquire Seven & i, though the bid was later withdrawn. Viewed from the Moon, both directions matter: capabilities can travel outward from Japan, while firms may also seek closer access to ecosystems where the model has evolved further.
These examples may appear to describe movements in opposite directions, but they reflect the same strategic logic. Competitive advantage increasingly depends not simply on where a company comes from, but on whether it can identify distinctive ecosystems, build or access the right capabilities within them, and mobilize those capabilities globally.
Not every Center of Excellence needs an address
Most CoEs are geographically anchored: a research center in one city, an engineering base in another. But some capabilities are more mobile.
MUJI’s former “World MUJI” initiative asked what products might emerge if it had originated somewhere other than Japan, tapping into designers and knowledge from around the world. Its current “Found MUJI” initiative takes this idea further: teams across cultures look for ordinary objects refined through generations of everyday use – “things discovered, not things created” – and then interpret them through the MUJI philosophy.
In 2006, MUJI discovered hand-knitted socks made by grandmothers in a Czech village, knitted to fit the human heel’s 90-degree angle rather than the standard industrial 120-degree fit. Scaling the idea meant reworking machine production in Japan’s traditional Nara sock-making district. Today, all MUJI socks are right-angled. A capability discovered in a Czech village was translated through Japanese manufacturing know-how and diffused globally.
In this model, the capability lies in the organization’s ability to travel, observe, recognize excellence wherever it exists, translate it through its own philosophy and production system, and scale it globally.
A new kind of home
This changes what headquarters is for. Traditional multinational HQs focused on control, resource allocation, and coordination among subsidiaries. In an ecosystem portfolio, the challenge is different. Valuable capabilities may emerge far from the corporate center, and knowledge need not flow primarily from headquarters outward.
Two tasks become especially important for leaders:
- Configuration: deciding what should be done where. Leaders need to determine which capabilities should remain anchored in the home market, which should be developed elsewhere, and which ecosystems offer the strongest conditions for learning and innovation.
- Coordination: ensuring that geographically dispersed capabilities do not remain isolated. An innovation developed in Kobe, Berlin, Milan, Boston, Nairobi, or a Czech village creates limited advantage if the wider organization cannot recognize it, connect it with complementary capabilities, and mobilize it where it can create value.
Corporate headquarters must increasingly resemble an ecosystem orchestrator. Each local innovation ecosystem needs its own “glue” connecting the actors within it. Headquarters, in turn, must provide a kind of “meta-glue” across ecosystems – connecting locally embedded capabilities so they can learn from, complement, and reinforce one another.
Looking back at Earth
Standing on the Moon does not make national differences disappear; rather, it makes their strategic significance easier to see. Beneath political borders lies another geography: a changing network of innovation systems, specialized capabilities, CoEs, and flows of knowledge connecting them.
The 20th-century multinational focused on where to make and sell; the emerging multinational must master where to learn, innovate, and connect. The world is not just a collection of markets, but a network of capabilities waiting to be integrated.
Five questions for leaders
In my work with executive teams, I invite participants to take the Moon perspective literally: set aside the organization they have inherited and imagine redesigning the business from scratch. That perspective encourages them not only to ask what they should do differently, but what they should start, stop, and continue in each location.
Ask yourself the following:
- If we were starting this business today, where in the world would we start, and why? Which ecosystem offers the strongest combination of customers, talent, technologies, partners, institutions, and competitive pressure from which we could learn fastest?
- What should our ideal global configuration look like by 2035? Which businesses, activities, functions, and CoEs should be located where, if we were designing for the future rather than preserving the footprint of the past?
- What should we start, stop, and continue in our home market, and elsewhere? Which activities still benefit from being anchored at home, and which would be stronger in another city, country, or regional ecosystem?
- Which capabilities should we concentrate, replicate, or connect? Which need to remain deeply embedded in a particular ecosystem, which can be transferred elsewhere, and which become more valuable when combined with complementary capabilities in other locations?
- Do we have the coordination mechanisms to make this configuration work? Can we quickly detect an innovation emerging in one location, translate it across contexts, and mobilize it across the organization? If not, what needs to change?
Authors
Related
What national competitiveness really depends on
There is no universal formula for national competitiveness. Switzerland, South Korea, and Canada show how different combinations of strengths can create advantage – and why those models must evolve as the world...
Strategic friction beats perfect harmony for better decision-making
Smooth board meetings and quick approvals are misleading indicators of effectiveness. Marianna Zangrillo and Thomas Keil reveal how the best-performing boards harness the power of carefully managed conflict....
Audio available
What if volatility became your competitive advantage?
Protecting against disruption is no longer enough. In a post-stability economy, businesses need to reinvent continuously – and learn how to profit from volatility....
Learn Brain Circuits
Join us for daily exercises focusing on issues from team building to developing an actionable sustainability plan to personal development. Go on - they only take five minutes.
Explore Leadership
What makes a great leader? Do you need charisma? How do you inspire your team? Our experts offer actionable insights through first-person narratives, behind-the-scenes interviews and The Help Desk.
Join Membership
Log in here to join in the conversation with the I by IMD community. Your subscription grants you access to the quarterly magazine plus daily articles, videos, podcasts and learning exercises.