The Japanese Zero, though it was the most-feared fighter plane of World War II, was grossly underpowered. Japanese metallurgy and engine technology couldn’t come close to producing the horsepower of U.S. combat aircraft. But Japanese designers had tested the load limits set for American airframes and found them artificially stringent. So the designers pushed the envelope and produced a lightweight plane that could outmaneuver anything in the sky.

In the excerpt that follows, Garten draws on the dozens of interviews he conducted with CEOs for his book and offers a series of case studies on companies that are handling globalization successfully, and on those that are failing.

Many top business leaders have been involved in international business for so long that they may be overconfident that they understand the game. Important as the world economy is to them, and as aware as they are of the intensifying competition for world markets, my interviews didn’t detect the same enthusiasm, urgency, or imagination in their discussions about global strategies as business leaders showed when talking about the Internet. I didn’t sense the same awareness that, just as it is critical for the Internet to become part of a company’s DNA, so is it essential for a company to have a global mentality deeply embedded in all it does. The complacency I felt is likely to be a significant liability for many chief executives.

Companies need a global vision, a global strategy, a global hiring system, a global training program, a global procurement and supply system, and a global research-and-development operation. Companies must create a global system of financial and psychological incentives that aligns the activities and interests of every section with the company’s central vision and strategy.

To be sure, none of these issues is new to chief executives of multinational companies, and many are seized with them. But, in the New Economy, these issues often appear as yesterday’s problems because they have been around for a long time and aren’t as sexy as the Internet.

The fact is that no one has found the right formulas to deal with these global issues satisfactorily. CEOs often underestimate the extent of the organizational transformation that will need to take place even in the best firms. CEOs also frequently assume that being big and multinational is in itself a competitive advantage, even though the real test is whether global reach can be transformed into value for customers that a company’s competitors cannot provide.

In the future, great companies will recognize that whereas once the big challenge was getting access to new geography, today—with ever-lower trade barriers and the Internet—access is increasingly cheap. The premium now is on figuring out how operating around the world allows you to deliver more real value to customers than otherwise would be the case.

Getting the strategy right will be a preoccupation for the CEOs who succeed in the wired world market. Even the most internationally experienced business leaders continue to experiment.

Some examples will illustrate current thinking about organization—and show how much further there is to go:

Michael Bonsignore, a U.S. Naval Academy graduate and an engineer able to speak four languages, has lived in five countries and ran Honeywell’s European operations before becoming its chairman and CEO. While he considers the globalization of Honeywell one of his biggest accomplishments, he admits that getting the organizational structure right is a never-ending effort.

"When I first became CEO, the big issue was one of mind-set," he told me. "We had to get the words ‘domestic’ and ‘international’ out of our jargon....I worked to convince everyone that we should make our investments wherever in the world they would be optimized.

"We put worldwide teams together. We brought the various representatives of all the regions of the world together to plan our engineering and manufacturing. We would no longer build a factory in France at the same time we were building a factory in Singapore, both of which would have done overlapping things."

But for Bonsignore, even the right way of thinking about being global didn’t solve the organizational questions of how to do it.

"We have tried a lot of organizational structures—tight, loose, centralized, decentralized," he said. "We’re still working at it. I’ve always likened this to a job that is never done. If you take comfort that you have the right structure in place, you are probably in trouble."

Mark Moody-Stuart runs the Royal Dutch/Shell Group, one of the oldest multinational enterprises anywhere. Moody-Stuart, who earned a doctorate in geology from the University of Cambridge in 1966, has spent his entire professional life at Shell, with assignments in Oman, Brunei, Nigeria, Australia, Spain, Turkey, Malaysia, and the United Kingdom.

In the late 1990s, he presided over a reorganization of the corporation designed to align its focus with at least two global trends. One was the rise of global companies to which Shell wished to sell its products. These companies, which include airlines and auto manufacturers, want to deal with one or just a few suppliers—not one in each region in which they operate. The second trend is the rise of the global consumer, an international middle class with broadly similar tastes.

To appeal to both international companies and consumers, Shell decided to break down its national fiefdoms and create global groups that could see the entire world through the lens of products, and not geography. Rather than organizing to sell petrochemicals to one customer in France and one in Japan, the Anglo-Dutch company structured itself to serve the needs of, say, Airbus Industrie on a global scale. With this structure, Shell had a more streamlined view of the world. It could move more quickly, too.

"We used to have a kind of federal system—and a fantastically successful machine it was—to match the time in which it operated," Moody-Stuart told me in his London office. "It was an era of strong national boundaries, reinforced by all kinds of trade barriers.

"We set up what you might call a family of national companies—Shell Singapore, Shell Brazil, Shell Oil in the U.S. And we built the company on the basis of countries aggregated into regions. But the world doesn’t work like that any longer. You want to keep the autonomy and freedom of action of a smaller unit, but the basis on which those units are built changes.

"So, now, we have a global chemicals group, or a global aviation group—better to serve our global customers. These same customers are served around the world by the same unit. We deliver better because we have global scale in the product and the right global alignment of people."

Since my interviews took place, two of the world’s largest international companies found themselves in circumstances that illustrate how even the biggest and most experienced multinationals can founder in their efforts to get the organizational structure right. Let’s look at Coca-Cola Co..

Since the death in 1997 of Coke’s legendary leader Roberto Goizueta, the company has had problems. Recession in Asia, financial turmoil in Russia and Latin America, health and safety issues in Europe, diversity problems at home—crisis after crisis has overtaken the company. It all proved too much for Goizueta’s immediate successor, Douglas Ivester, who was forced to resign in early 2000. He was succeeded by Douglas Daft.

Part of Daft’s calculation was that Coca-Cola had become much too centralized and had lost its ability to understand local markets. "For a couple of years the world was moving in one direction, and we were moving in the other," he wrote in the Financial Times in March 2000. "The world was demanding greater flexibility, responsiveness, and local sensitivity while we were further centralizing decision-making and standardizing our practices.... The next big evolutionary step of ‘going global’ now has to be ‘going local.’"

Daft says Coke’s operations will be guided by three principles. First, "Think local, act local." Second, focus on marketing and outsource everything else. Third, be a model citizen in every country. "We must remember," he wrote, "we do not do business in markets; we do business in societies."

Procter & Gamble Co. is another example of a company struggling to find its way. In 1999, the consumer-products company launched a large-scale global reorganization. The six-year plan was to transform the company from one based on country-specific organizations, similar to what Shell had been, to one organized along product lines. Each new "global business unit" was to be devoted to a set of products, such as beauty care or food and beverages.

In the event, the execution of so radical a change proved the undoing of Durk Jaeger, the chairman and CEO, who was forced to resign after 17 months. Too much change happened in too short a time: Reporting chains were disrupted, key employees left, overlapping management jurisdictions created too much organizational complexity; and amid the turmoil P&G neglected the marketing of its core products. Result: The new CEO, A.G. Lafley, is being forced to rethink P&G’s entire approach to global business.

Beyond the difficulties of organizational issues, CEOs are badly underestimating the rise of global problems that will affect their businesses and the environment in which they operate. They are failing to see the gap between society’s expectations of what they should do and what they seem prepared to do. They face three kinds of risk:

First, the trend toward freer trade and investment around the world could falter, unless many social and economic problems and inequalities are addressed, and unless a sound regulatory structure is put in place to deal with such matters as trade, finance, economic development, cyberspace, the environment, and labor. Capitalism requires a strong foundation of rules and institutions, and in the international global arena these are sorely lacking.

CEOs argue that they have enough concerns in running their companies; they do not want to go where governments now tread. They do not want to be caught in the cross hairs of political controversy. This is understandable. Yet unless CEOs play a leading role in fashioning sensible pro-market arrangements, there either will be increasing chaos in world markets or ill-conceived governmental regulations—or, most likely, some combination of both.

Second, unless CEOs construe their mandate in a broader societal context, they and their companies risk becoming targets of resentment for public-interest groups and ordinary citizens who consider globalization to be a negative trend.

Third, there are several new and pressing issues that confront both governments and business executives, ranging from the possible effects of global warming to the implications of genetic engineering to the rise of international crime syndicates. All of these will complicate the functioning of markets and raise near-intractable questions about the rules of the game.

During my research, I asked every interviewee the question: "What most keeps you awake at night?"

By far the largest number of responses reflected a fear of a major disruption—rarely precisely defined—in globalization. Henry Paulson of Goldman Sachs, Nokia Corp.’s Jorma Ollila, Deutsche Bank AG’s Rolf Breuer, Hiroshi Okuda of Toyota Motor Corp., Rebecca Mark, formerly of Azurix Corp., and others said that their entire business strategies were based on the assumption of continued momentum in global economic liberalization. They can’t really afford for globalization to stop.

From the book The Mind of the C.E.O. Copyright ©2000, Jeffrey E. Garten. Reprinted by permission of Basic Books. All rights reserved.