Globalisation, Strategy, Technology and Organisational Maturity

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This post is going a little off-track from the previous 5 posts around SharePoint project failure and I promise I will get back on track again soon. I felt that I had to talk about this topic while we are looking at the nature of project failure, wicked problems and SharePoint. Not sure if it is really a part 6 so I have made a new, separate interlude in between the project failure series. Why don’t you let me know, reader, if you think this belongs as a part of the “project failure” series!

My wife is studying a business course at university and I have been reading some of her reference books. One book was particularly good and really got me thinking about technology’s contribution to global organisations and how at this scale, most problems likely have a large degree of wickedness.

This edited book is called Global Strategies: Insights from the World’s Leading Thinkers (The Harvard Business Review Book Series), and it is well worth reading – even for you technical geeks.

What it does is look at the strategy, and execution of strategy, that has led some organisations to make the transition from regional to global success story at the expense of their competitors. We are talking corporations with tens of thousands of employees here too, and the CEO perspective really hits home to you – the sheer *mammoth scale* of it all.

Trying to change a culture at an organisation of 20 employees can be an insurmountable challenge. Try 45,000 employees across 15 subsidiaries in 10 different countries. (Makes a SharePoint rollout seem like a walk in the park.)

Two chapters of the book that really struck me, were “The Right Way to go Global: An Interview with David Whitwam”, and “Local Memoirs of a Global Manager”. After I read them, I tried to think about the impact technology would have on helping them with their strategy – more on that in a moment.

Also, in reading this book, it made me cringe when I remember what I used to be like, as a younger idealistic twenty something with a huge passion for technology, but utterly nil business acumen.

I was an anal-retentive security and infrastructure specialist trying to impose order on the typical chaos that is a typical IT environment, large and small. But in defence of this attitude, I think it was more that I was trying to find better ways to help the organisation in the only way I knew how to – try and tame the technology.

So nowadays I look at the sheer passion behind proponents of various dogmatic technology wars like Windows vs *nix, Java vs .Net, C# vs VB, Security at all costs, SharePoint vs ?,  and smile in a kind of way that I’m sure that more experienced people smiled at me back then. This sort of passion that if harnessed can be used for tremendously positive outcomes, if you can get past the initial *naivety* to technology’s place in it all.

David Whitwam and Whirlpool

David Whitwam was the CEO of Whirlpool Corporation from 1987 to 2004, the white goods manufacturer. In this 1994 interview, he outlined some of the strategies he embarked on to catapult Whirlpool into the global market. 

In 1987 Whirlpool was facing margin pressures in the mature North American white goods market. In 1989 Whirlpool purchased the under-performing NV Phillips appliance business in Europe, that was facing similar pressures. Rather than immediately cut costs and change operations, Whitwam implemented a strategy to create a “unified, customer focused organisation capable of using its combined talents to achieve breakthrough performance in markets around the world“. Below are some of his reasons as to why they took their chosen course of action.

Most international manufacturers aren’t truly global. They’re what I call ‘flag planters’. They may have acquired or established businesses all over the world, but their regional or national divisions still operate as autonomous entities

Let me use the washing machine as an example. Washing technology is washing technology. But our German products are feature-rich and thus considered to be higher-end. The products that come out of Italy run at lower RPM’s and are less costly. Still, the reality is that the insides of machines do not vary a great deal. Both the German and Italian washing machines can be standardised and simplified by reducing the number of parts, which is true of any product family. Yet when we bought Phillips, the washing machines made in the Italian and German facilities didn’t have one screw in common. Today products are being designed to ensure that a wide variety of products can be built on the same basic platform

Duh! Makes perfect sense doesn’t it.  Phillips manufacturing costs cannot compete in terms of economies of scale on account of no re-use between divisions. There are so many costly consequences to this problem to mention. But this wouldn’t take too much effort to model on the immediate cost savings to be had with the ‘platform’ strategy implemented. Well executed, the sort of competitive advantage that could be derived is significant.

Now let’s think about the issues at the Philips plants again. When you think about the sort of technology that facilitates the execution of the strategy to standardise, what would we need? Of course, it would be nice if we all used the same tools, all shared the same data, all had access to the most up to date information at the right time.  But the reality is that at this point, it is far too early to deal with the technological aspects. Let’s see why…

Now I don’t know about you, but I have worked in companies where sub-divisions of the one company were so autonomous that communication and co-operation was very poor. The “us and them” mentality was very prevalent indeed. As a result of this technology ‘maturity’ was inconsistent, with rampant vendor, functionality and interoperability overlap. But it went deeper than that – suspicion and mistrust manifests itself across an organisation at many levels.

On an even more micro scale, take that example of the two Philips factories and think about it in terms of your own IT department workplace within your division. How many little turf wars are there being played out on a micro scale on a daily basis. Do you have your Apple fanboi who is intent on getting rid of all those crappy Windoze PC’s? Do you have a conspiracy theorist security “nazi” who insists that your Antartica office MUST have 802.1x security implemented at all costs? Do half the programmers hate .NET and the other half hate Java? Does your Packeteer and RiverBed fanbois think each-other are idiots?

Now focus back out at an international, multi-organisational level. Go from one IT department, to in the case of Whirlpool and Phillips, the triple whammy of regional, cultural and dual corporate walls to break down across many disciplines – not just IT. So that is a whole stratospheric level of hurt to turn around…

If you’re going to ask people to work together in pursuing global ends across organisational and geographic boundaries, you have to give them a vision of what they’re striving to achieve, as well as a unifying philosophy to guide their efforts.

That’s why we worked so hard at Whirlpool to define and communicate our vision.

Okay, so we have top level commitment – tick that box. This is standard recommendation fodder in pretty much *every* best practice methodology that exists out there. Pity it doesn’t happen often enough but for Whirlpool it has and that’s great.

So what about selling that vision to the organisation? Where is the resistance and how to you break through it?

Top level managers often incorrectly assume that since consumers differ from location to location, their businesses can’t operate effectively as a unified entity. … And you have to remember that we were planning to build a global enterprise, not a US army of occupation. If you try and gain control over an organisation by simply subjugating it with your preconceptions, you can expect to pay for your short-term profits with long-term resentment and resistance …

This is interesting because it is counter to the way IT departments tend to conduct themselves. When a company merges, the big fight begins between IT departments on whose technology ‘wins’. But why are IT departments even fighting this battle? It’s not even their call! The question they should be asking the executive is “What is the vision and philosophy we are striving for? How can we help the organisation achieve this? Are we even ready to deal with the technology issues?”

When we first took engineers and manufacturing people from the US to Europe to go through the plants, they would spend all their time walking around and saying to themselves, “We do all of these things better at home.” The Europeans who toured the US facilities had the same parochial attitude. Neither group spent any time looking at what it could learn from the other.

There are numerous companies and many improvement experts that talk of satisfying internal customers. At Whirlpool, we once did the same, but we currently believe that internal customers do not exist. … Companies that believe they have internal customers … lose sight of what they’re trying to accomplish as an organisation.

Unfortunately in the interview Whitwam talks of strategy to overcome these barriers, but does not quantify how long it took. In fact he stated that he did not believe that Whirlpool were ‘there’ yet and were not yet a truly global organisation. This is despite the fact that revenue increased a little over 4 billion in 1988 to over $7 billion in 1992.

Of all of the strategies that he outlines to align people and break down these barriers (too many to mention), there was one quote in particular that I loved.

… Other programs … pay people – from top management to those on the factory floor – on the basis of return-on-equity (ROE) or return-on-net-asset (RONA) goals. Employees at Whirlpool all understand what ROE and RONA mean, what drives those measurements, and how they’re linked to shareholder value

This quote for me, is very important, and really was what inspired me to write the SharePoint ROI series. It gets to the essence of why senior managers really couldn’t give a toss about why, say, Linux is more or less secure than Windows or why SharePoint is better or worse than Google Apps, or why their security guy gets so uptight about them using Blackberry’s. They are answerable to shareholders and they are measured by the performance of the company in terms of profitability and growth. Profitability and growth is much more about the alignment of people to a common goal than it is about picking a particular technology. If you can achieve the alignment of a global organisation to the execution of your strategy, then the technology side of things will take care of itself.

So here is a company, actively teaching its workforce to think like a CFO, to make decisions and look at problems with the view of its potential to impact the bottom line. This type of education has two other added bonuses too. As I mentioned in my post about Selling SharePoint, if you can’t describe a problem in terms of a quantifiable problem, how can you measure if you have solved the problem? By having a continued focus on the performance goals of the company, you can tackle the solution to problems in terms of how much they will improve that bottom line.

And finally, the workforce might gain a few skills in their budgeting at home πŸ™‚

Gurcharan Das

So now we take another tack and look at a slightly different perspective and talk about Vicks Vaporub – the stuff you rub on your chest and soles of your feet when you have a cold.  Vicks is owned by Procter & Gamble, and Gurcharan Das ended up as the CEO of Procter & Gamble India, and later Managing Director, Procter & Gamble Worldwide in Strategic Planning.

Now Vicks is a global brand, sold all over the world. But this story is one of knowing your local market, and I think a good case study on global companies, strategy and technology.

But this story is earlier than that and tells of when Das was product manager for Vicks in India. He noticed that sales were particularly strong in the South, but poor in the North. He had the choice of pouring more marketing resources into the poorly performing North, or invest those resources into further developing the South. He chose the latter, and it was the right choice. As it happened, North Indians didn’t like to rub things onto their bodies. In the South, people were accustomed to rubbing all sorts of balms onto their bodies for aches, pains or whatever else.

…yet the more important lesson was that it is usually better to build on your strength than try to correct a weakness. Listen and react to the market. Resist the temptation to impose your will on it.

Also when Das took over Vicks, the marketing was run in the same manner as North America. The bulk of the advertising was in winter, yet sales data showed that in India, significant sales occurred in the monsoon season – summer. Das brought forward his marketing to these warmer months and was rewarded by an immediate sales gain. Further capitalising on this notion, Das invented a brand new ailment for Vicks to treat – “the wet monsoon cold” – clever πŸ™‚

Now this is good, clever local business strategy, but this next move for me was a stroke of utter genius. In the mid 1980’s the company was in a stand off against chemists and pharmacists who had boycotted sale of Vicks and other products in a fight for higher margins from the pharmaceuticals companies. Das realised that the ingredients of Vicks were all natural, herbal formulas.

All their ingredients were found in thousand year old Sanskrit text. What was more, the ancient Ayurvedic system of medicine enjoyed special patronage of the government. If we could change our government registration from Western medicine to Indian medicine, we could expand our distribution to food stores, general stores, and street kiosks and thus reduce dependence on the pharmacists … what was more, a new registration would allow us to set up a new plant for Vicks in a tax-advantaged “backward area,” where we could raise productivity dramatically by means of improved technology, better work practices, and lower labor costs.

This turned out to be a master stroke, and highlights the importance of local focus in the success of products in a global market. Das makes the point though, that he is not suggesting that managing a global brand is a completely localised process.

Multinational companies have a natural advantage over local companies because they have talented people solving similar problems for identical brands in different parts of the world, and these brand managers can learn from each other’s successes and failures. If a good idea emerges from Egypt, a smart brand manager in Malaysia or Venezuela will at least give it a test.

Managerial basics are the same everywhere, in the West and in the Third World. there is a popular misconception among managers that you need to push a powerful brand name with a standard product, package, and advertising in order to conquer global markets, but actually the key to success is a tremendous amount of local passion for the brand and a feeling of local pride and ownership.

Das made one other comment that I liked too.

The irony is that all the money a company makes is made outside the the company (at the point of sale)., yet the employees spend their time inside the company, usually arguing over turf.  Unfortunately, we don’t see customers around us when we show up for work in the mornings.

When I became CEO I made a rule that every employee in every department had to go out every year and meet 20 consumers and 20 retailers in order to qualify for their annual raise. This not only helps to remind us who pays our salaries, we also get a payoff in good ideas to improve our products and services

And Technology?

In reading this book, you can see that those companies who have succeeded have combined global ideas in terms of standardisation, simplification and economies of scale with a sharp local focus on what the consumer wants in each region. This puts me in a conundrum. For it to succeed, technology to support this has to both be standard, yet completely localised.

IT departments are generally not a profit centre and in general, are fairly far removed from the end customer. Thus it is unsurprising, in my experience, that most tend to act in a way that Whitwam described  “a US army of occupation”. A recent example for me was a worldwide company who insisted that Outlook Web Access (webmail) should not be allowed at all for un-quantified “security reasons”. The time zone difference between Australia and Africa (the two locations with the largest staff presence) were such that there was barely any time overlap from when the Australian office closed and when the African offices started for the day. Since staff could not log in to webmail when at home, many decisions took much longer to be made, because the average email took a day to get a reply.

Consider a competitor who can get decisions made, actions agreed upon without this day’s lag? Who is going to be more efficient and nimble in the marketplace? Which company is better placed to learn from the experiences of each-other?

At a macro level, there will always be a need for some technology to be the same. For Whirlpool, to base their product range on a common platform aimed at the reduction of costs of bringing new products to market, require good technology to go with the willpower and vision. But as illustrated with Vicks, to service a local customer, with different needs to customers in other areas, some flexibility is required to this over-arching attitude.

Vision always comes first. Selling the vision to the organisation and aligning staff to it comes second and then, technology to facilitate the execution of the vision comes third.

I think that a lot of IT organisational problems stem from either failure of setting a clear vision or failure in articulating and selling of that vision to staff. I think that the closer you get to the customer (point of sale), the more flexibility is needed in your application of technology. Back in the bowels and engine room of the company consistency of technology and process is very important.

Ultimate arbitration on whatever your leaning is bottom line, right now and into the future.

And SharePoint? (and why SharePoint can fail?)

SharePoint (and products like it) of course are tools that facilitate information sharing among a group of people via a variety of great features. The irony is (and this has been explored in the posts on wicked problems), that it requires a lot of planning, due to the architecture of the product in particular, the broad nature of how it can be used, and the way the product requires practitioners to think in *advance* of how to classify, segregate and divide up information, as well as staff to un-learn practices that they have been performing a certain way for years.

But without a shared understanding of the vision and strategy of an organisation to achieve that vision, SharePoint can exacerbate the problem of silos, turf wars and staff not working in a coordinated fashion to achieve the strategic organisational goals. Whitwam went against the grain of conventional process improvement theory when he stated that that internal customers did not exist at Whirlpool. “Companies that believe they have internal customers lose sight of what they’re trying to accomplish as an organisation”.

So you may have gotten to here and you are still wondering what the hell is the point of this post? Well thanks for sticking with me – I am finally there πŸ™‚

In my last post, I talked about “organisational maturity“, in relation to how SharePoint projects can be doomed to fail from the start. I never really provided a definition for organisational maturity other than “awareness and pragmatic adoption of best practice methodologies”. In reading this book I realise that it goes much deeper than that, right back to organisational vision, formulation of strategy, buy-in of that strategy globally and quality of execution of that strategy.

At the start of this post I mentioned that if you could channel the sort of passion that IT professionals have in technology, inspire them into thinking beyond the technology and incorporate them better into global strategy, that is going a long way towards improving “organisational maturity” and therefore better equipped to handle problems that could easily become “wicked”.

Thanks for reading

Paul

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