Building a Transnational Company
Some two dozen managers have gathered around a conference table at Quintiles Transnational Corp., in Morrisville, N.C. They are listening to Dennis Gillings, chief executive of the 11-year-old company, give a slide presentation. It's nothing out of the ordinary -- except for one small detail: Gillings is nowhere in sight.
Gillings is in Quintiles's Reading, England, office. While his slides appear in North Carolina, his narrative arrives via speakerphone.
Nobody seems disconcerted, perhaps because faceless communication plays a big part in Quintiles's business. The company, which administers and analyzes drug-testing studies that pharmaceutical companies prepare for government agencies, has grown rapidly (see chart, page 2) while remaining consistently profitable. Much of the growth has come from Quintiles's venture into international markets. Although the company opened its first overseas location only in 1987, today it has offices in five countries. Thirty-five percent of its business is now done outside the United States. Along the way Quintiles has changed from a small U.S. professional-service business to a multinational growth company.
Several factors aided the transformation. Founder Gillings grew up in England, so he had British contacts and an international perspective. Also, Quintiles operates in a global marketplace: scientific reputations cross borders, most pharmaceutical research is published in English, and Quintiles's customers are mostly multinational pharmaceutical companies.
Those advantages helped Quintiles quickly become an international organization. The process began in 1986. Gillings was following the European Community's proposal for a unified market. If Quintiles had a well-established European presence by 1992, he reasoned, it could take advantage of a market poised for growth. To do that, Gillings believed he needed to start right away, even though his four-year-old company had only 35 employees in one U.S. location. So he decided to open a European office. "I think everyone within the company thought I was verging on crazy," he recalls.
To counter such doubts, Gillings proceeded cautiously. Before opening an office in London, in early 1987 he visited about 30 major European pharmaceutical companies. On each visit, he explained that his company was considering a European office and looking for advice and business. Although it took months, Gillings got three projects for his new office through those visits.
By August 1987 he had lined up enough work to open the office. To work on the first contracts, he took over four young employees eager to travel. In London he interviewed for permanent office staff. He also began searching for someone to run the office, preferably a native European with experience throughout the Continent, since Quintiles hoped to expand further. After more than six months, he found Ludo Reynders, a native Belgian who speaks four languages and had experience in a large pharmaceutical company. Until hiring him, early in 1988, Gillings commuted between London and North Carolina.
The expansion cost more than $200,000 over 14 months, but it paid off. Quintiles's British office grew rapidly. It soon moved outside London to Reading, where growth was cheaper. As Quintiles's European business grew Gillings considered opening another site, in Ireland. There unemployment runs high, and the Irish Industrial Development Authority offers generous incentives to companies like his.
Quintiles opened its Dublin office in 1990. In 1991 the company added an office outside Frankfurt, and in 1992 established one in Paris. Although Gillings followed a similar pattern -- starting small, hiring a native manager -- he had to overcome more difficult hurdles in Germany and France. Besides the language barriers, he discovered that German and French business law differs from the British-American legal tradition he knew. One resource he found helpful: using a U.S. accounting firm with international offices that could refer him to local business experts.
While Quintiles has been successful in growing its European offices, a joint venture started in Japan in 1990 has so far yielded only a little business there. The Japanese equivalent of the Food and Drug Administration is still reluctant to accept clinical drug-testing data submitted by contract-research organizations, according to Sara Creagh, Quintiles's executive vice-president. The company, however, has Japanese customers in other offices.
In any case, opening successful offices is only the first challenge to running a global business. Gillings envisioned an international company that could serve the global pharmaceutical market, a company through which a client could, for example, have data collected throughout Europe to be processed in North Carolina for submission to the U.S. government. For that, he needed offices that communicated seamlessly.
But the new offices, separated by culture, language, and thousands of miles, developed their own ways of doing things. Soon, for example, the British office began using a method for entering data different from the one the U.S. office used. And the two offices were using different software -- which didn't bode well for Gillings's dreams of international projects and databases! So he and his managers made a key decision: each office should add the other's software to its capabilities. That would force the two offices to learn from each other.
As the company's international business grew, so did Gillings's efforts to coordinate among offices. In the process, he was greatly influenced by Managing Across Borders: The Transnational Solution (Harvard Business School Press, 1989). The book's authors, Christopher Bartlett and Sumantra Ghoshal, argue for a new model of international management. Instead of either a headquarters that dominates overseas offices or independent subsidiaries that have little to do with one another, they advocate a "transnational" corporation. In such a company, offices around the world work together and learn from one another. They report to an international headquarters, but the overseas offices also have specialized areas of expertise. That, Gilings decided, was the kind of company he wanted.
To create it, Quintiles in 1990 started a transnational holding company to coordinate companywide policies among the worldwide subsidiaries. The company formed several "transnational committees," comprising the heads of a particular discipline, such as management information systems (MIS), from many of the offices. Gillings also started a management committee that included all office heads. The goal was to standardize enough policy for the company to take on multinational, multi-office projects. A number of its offices are now working together on such contracts.
That wouldn't be possible without today's technology. Everyone in the company can communicate through the electronic-mail system on his or her computer. Employees also communicate frequently by teleconferencing, voice mail, and fax, often faxing forms directly from one computer to another. Quintiles took a dramatic step early in 1992 by setting up a wide-area network to link the computers in many of its offices. Now a U.S. office can, for example, send data directly to the U.K. office without using a modem, which both speeds up delivery and improves accuracy.
No detail of the international communication is without challenges. They range from the profound (finding common terminology for a transnational committee to use) to the picayune (compensating for European and U.S. computer printers that use paper with different margins). Despite the inevitable difficulties, Quintiles today is further along than most young companies -- and perhaps most companies, period -- on the path to global business.
The communication among offices takes place because it's important to the company's management, and because it makes that clear. Drew Zinck, MIS director for U.S. operations, knows that from experience. During one MIS-committee phone meeting, he told his U.K. counterpart he couldn't divulge details of one of his office's marketing alliances because of a confidentiality agreement. When the meeting's minutes were routinely sent by E-mail to a number of top Quintiles managers, Zinck was besieged with E-mail messages from both sides of the Atlantic. Why was he withholding information from his colleague? Didn't he understand the importance of transnational cooperation?
Once Zinck explained, a solution was quickly found. But his experience is telling of how Quintiles uses information technology, combined with a commitment to a global way of business, to make the world a very small place indeed. After all, who would have thought two continents could seem as crowded a place to hold a business conversation as the office coffee machine?* * *
GROWING THROUGH INTERNATIONAL SALES
Year Growth Landmark Quintile's revenues
1986 Planning begins for London office $1.9
1987 London office opens 3.8
1989 London office expands to Reading 9.2
1990 Quintiles Transnational formed; Dublin 17.8office opens; friendship agreement with Japanese company
1991 Frankfurt office opens 30.5
1992 Paris office opens; British acquisition made 60.0 (est.)