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GLOBAL CXO OUTLOOK
Growth Strategies for 2012 and Beyond
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Dear friends,
Business leadership in the emerging global order is a whole new paradigm. The challenges of the past, such as limited tech-nology access and limited access to global resources (capital, talent, natural resources), have given way to a world without boundaries. Instead, companies operating in different geographies and industries are now confronted with a fresh set of challenges that mainly stem from the competitive global business regime, alongside the call for sustainable development.
Building Growth Strategies for 2012 and Beyond, the theme of our first Global CXO study, is an onerous task that may be accomplished with a careful analysis of the key imperatives of global growth and development that can help organizations globally to do business better. This study, based on a survey of more than 300 CEOs and other C-level executives at global enterprises, underscores three key imperatives: strategic innovation, adoption of green practices, and a meaningful pres-ence in emerging markets such as India and China.
The findings of this survey, conducted by Forbes Insights in association with Wipro, amplify the key factors that underpin the imperatives as well their inter-connectedness. This could serve as actionable input in CXO decision-making. Let me now share my views on the three key imperatives:
Strategic innovationManaging top- and bottom-line performance remains the top business priority of CXOs around the globe. However, in working towards this objective, business leadership would be called upon to place a premium on strategic innovation, which will act as the true differentiator in the competitive business arena. Innovate or perish is the dictum.
In earlier days, R&D was among the first casualties in times of business distress. But with innovation acquiring a strategic focus, companies have begun to sharpen the focus on innovation when the chips are down. More than two thirds of the surveyed leaders said that the 2008 meltdown made innovation even more of a business imperative.
What is important to note is that innovation is not just a process but an all-encompassing approach that is cross-cutting, touching upon every vital pillar of business covering products and processes, financial and risk management, talent devel-opment, and branding and promotion, among others. Hence, in building growth strategies, the business leadership would need to pursue a collaborative approach wherein all key stakeholders, including customers and strategic suppliers, partici-pate in the dialogue.
While the innovation canvas is broad, the underlying processes would necessarily have to be robust, smart, and data-rich. It is equally important that the returns are tangible and aligned with the top- and bottom-line performance of the company. In these circumstances, cost becomes an important consideration, more so in developing markets that take time to warm up to innovative products, processes, and practices. Nearly 80% of the CXO respondents to the survey echoed the view that cus-tomer willingness to pay should be a critical yardstick to measure the viability of an innovative product or service.
Innovation has another important dimension that relates to timeliness. Getting a product or service swiftly out to market is a critical business tactic and part of every enterprise’s strategy to outwit competition. Having a faster time-to-market is an imperative both in mature and developing markets, more so in the supercharged business domains of ICT, retail, and automotive.
Dear friends,
Business leadership in the emerging global order is a whole new paradigm. The challenges of past, such as limited technology access, and limited access to global resources (capital, talent, natural resources) have given way to a world without boundaries. Instead, companies operating in di�erent geographies and industries are now confronted with a fresh set of challenges that mainly stem from the competitive global business regime alongside the call for sustainable development.
‘Building Growth Strategies for 2012 and Beyond’, which is the theme of our rst Global CXO study, is an onerous task that may be accomplished with a careful analysis of the key imperatives of global growth and development that can help organizations globally to do business better. This study, based on insights from over 300 CEOs and other C-level executives at global enterprises, underscores three key imperatives, namely, strategic innovation, adoption of green practices, and meaningful presence in emerging markets, such as, India and China.
The ndings of this study, conducted by Wipro, in association with Forbes Insights, amplify the key factors that underpin the imperatives as well their inter-connectedness. This could serve as actionable inputs in CXO decision making. Let me now share my views on the three key imperatives:
Strategic Innovation: Managing the top and bottom line performance remains the top business priority of CXOs around the globe. However, in working towards this objective, business leadership would be called upon to place a premium on strategic innovation which will act as the true di�erentiator in the competitive business arena. Innovate or perish is the dictum.
In the earlier days, R&D was among the rst casualties in times of business distress. But with innovation acquiring a strategic focus, companies have begun to sharpen the focus on innovation when the chips are down. More than two-thirds of the surveyed leaders said that the 2008 meltdown made innovation even more of a business imperative.
What is important to note is that innovation is not just a process but an all-encompassing approach that is cross-cutting, touching upon every vital pillar of business covering products and processes, nancial and risk management, talent development, and branding and promotion, among others. Hence, in building growth strategies, the business leadership would need to pursue a collaborative approach wherein all key stakeholders including customers and strategic suppliers participate in the dialogue.
While the innovation canvas is broad, the underlying processes would necessarily have to be robust, smart and data-rich. It is equally important that the returns are tangible and aligned with the top and bottom line performance of the company. In these circumstances, cost becomes an important consideration, more so in developing markets that take time to warm up to innovative products, processes and practices. Nearly 80% of the CXO respondents to the survey echoed the view that customer willingness to pay should be a critical yardstick to measure the viability of an innovative product or service.
Rajan Kohli CMO -Wipro Global IT Business
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Innovation has another important dimension that relates to timeliness. Getting a product or service swiftly out to market
is a critical business tactic and part of every enterprise’s strategy to outwit competition. Having a faster time-to-market
(TTM) is an imperative both in mature and developing markets, more so in the supercharged business domains of ICT,
retail and automotive.Adoption of green practices:As I mentioned at the outset, going green is an imperative, few companies can a�ord to overlook today. For long, the
adoption of green practices was viewed as an obligation that the current generation owed to future generations. But
that’s passing. Going green has a strong business case, provided it is underpinned by the innovation imperative.
Over time, several leading companies have demonstrated how innovations resulting in the adoption of green practices
led to signi�cant business gains and higher pro�tability. This is the case not only in traditional sectors like mining and
manufacturing, but also in the IT domain where several players, for instance, have taken cognizance of the
environmental impact that rapid expansion of data centers has brought in its wake. Green IT is thus becoming the norm,
facilitated by complementary software technologies like server virtualization & cloud computing.
Importantly, three out of four survey respondents said they believed there is a strong business case for sustainable
development. Eco-e�ciency is not just about carbon credits. It can earn revenue and help reduce costs, two key drivers
that should lure enterprises towards adoption of green practices. Interestingly, several companies have jumped onto the
green bandwagon because their customers asked for it.Nonetheless, for a greater number of companies to repose their faith in green practices, the underlying costs will have
to come down a few notches.. Concerted industry action, with due government support, will go a long way toward
broad basing the green economy. While three-fourths of respondents have said that green initiatives by business cannot
be successful without the support of local and national governments, there is ample evidence of private green initiatives
in�uencing policy changes.Presence in emerging economies:This brings me to the third key imperative- presence in emerging markets. Innovation, which is central to the
strengthening of the green economy, gains vital importance in the context of emerging markets like India, China, South
Africa and Brazil. It is markets like these that support and promote innovations, owing to a lower cost base and rich
talent availability, and it is here that most global companies are pitching for revenue growth. So it comes as no surprise
that more than three quarters of respondents indicated that investment and expansion into emerging markets is vital to
their strategies for today and times to come.Strategic inputs from the peer group as seen with this study are what provide CXOs with that unique 360° view they
require to constantly drive their enterprises to work smarter. The CEOs and C-level executives who took time o� their
busy schedule to share insightful responses to our queries as part of this research, which attempts to share the collective
experience and wisdom of how best to build growth strategies for 2012 & beyond. We thank them for their candid
responses and insightful comments on the industry.
Regards
Rajan KohliCMO - Wipro Global IT Business
Regards
Adoption of green practicesAs I mentioned at the outset, going green is an imperative few companies can afford to overlook today. For many years, the adoption of green practices was viewed as an obligation that the current generation owed to future generations. But that’s passing. Going green has a strong business case, provided it is underpinned by the innovation imperative.
Over time, several leading companies have demonstrated how innovations resulting in the adoption of green practices led to significant business gains and higher profitability. This is the case not only in traditional sectors like mining and man-ufacturing, but also in the IT domain where several players, for instance, have taken cognizance of the environmental impact that rapid expansion of data centers has brought in its wake. Green IT is thus becoming the norm, facilitated by software technologies like server virtualization and cloud computing.
Importantly, three out of four survey respondents said they believed there is a strong business case for sustainable devel-opment. Eco-efficiency is not just about carbon credits. It can earn revenue and help reduce costs, two key drivers that should lure enterprises towards adoption of green practices. Interestingly, several companies have jumped onto the green bandwagon because their customers asked for it.
Nonetheless, for a greater number of companies to repose their faith in green practices, the underlying costs will have to come down a few notches. Concerted industry action, with due government support, will go a long way toward broad-basing the green economy. While three fourths of respondents said that green initiatives by business could not be successful without the support of local and national governments, there is ample evidence of private green initiatives influ-encing policy changes.
Presence in emerging economiesThis brings me to the third key imperative: presence in emerging markets. Innovation, which is central to the strengthen-ing of the green economy, gains vital importance in the context of emerging markets like India, China, South Africa, and Brazil. It is markets like these that support and promote innovations, owing to a lower cost base and rich talent availabil-ity, and it is here that most global companies are pitching for revenue growth. So it comes as no surprise that more than three quarters of respondents indicated that investment and expansion into emerging markets is vital to their strategies for today and times to come.
Strategic inputs from the peer group as seen with this study are what provide CXOs with that unique 360-degree view they require to constantly drive their enterprises to work smarter. The CEOs and C-level executives who took time off their busy schedule to share insightful responses to our queries as part of this research, which attempts to share the collec-tive experience and wisdom of how best to build growth strategies for 2012 and beyond. We thank them for their candid responses and insightful comments on the industry.
Regards,
Rajan KohliCMO - Wipro Global IT Business
4
Key findings 5
Introduction 6
Seeking the key differentiator 8
Going green for business growth 15
Developing opportunities in the developing world 22
Methodology 27
Table of ConTenTs
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Forbes Insights, in association with Wipro, conducted an exclusive survey of more than 300 CEOs and other C-level executives at
global enterprises ($500M-plus in annual revenue). The key findings of this survey include:
• Strategicinnovationismoreimportantthanevertodrivinggrowth.This commitment to innovation will impact how
companies approach environmentally friendly, or green, business practices, as well as how they manage their expansion into
global emerging markets. For example, in some cases, companies are using so-called reverse-innovation, taking innovative
products and services from their emerging market efforts (such as in China) and commercializing them elsewhere in the world.
• C-levelexecutivesseeinnovationasawaytodifferentiatetheirbusinesses,particularlyfollowingthe2008-09
recession. Fully two thirds of the executives said they believe that innovation is more critical than ever because of the
economic downturn of 2008-09.
• Speed-to-marketisnecessaryforsuccessfulinnovation. More than 80% of survey respondents agreed that getting a
product or service swiftly out to market is a critical business innovation tactic.
• Costremainsthebiggesthurdletofosteringinnovation. It topped the list of innovation barriers cited by C-level
executives, followed by issues related to the regulatory environment, and finding and retaining top talent.
• Payingattentiontobestpracticesisthemosteffectivewaytofosterinnovation.Other innovation tactics promoted
by executives included technology, data-based decision making, and customer collaboration.
• Executivesseeaveryclearbusinesscaseforusing“green”businesspractices. The most important factors they
cited include reducing costs, improving operational efficiency, and meeting customer demand for more environmentally
friendly products.
• Embracinggreenbusinesspracticesaspartofacorporateinnovationstrategyisessentialtotheirsuccess.
Overall, nearly three quarters of C-level executives indicated their companies had incorporated environmental elements into
their innovation strategies.
• GreenITisapriorityformorethanthreequartersofcompanies. Their strategies in this area include reducing data
center footprints, greater use of server virtualization, and greater use of cloud computing.
• Executivesseeinvestmentandexpansionintoemergingmarketsascrucialtotheirstrategiestodayandinthenear
future. More than half believe China holds the greatest opportunity, followed by India, Southeast Asia, and Eastern Europe.
• Expansionintoemergingmarketsisbeingdrivenbylowercostsandahigherrateofgrowth,accordingto
executivessurveyed. Potential barriers to strategic success in these areas include poor distribution channels, unstable
political environments, and a shortage of skilled talent.
Key findings
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Managing top- and bottom-line performance emerged as the top business priority for about a third of the 308 senior executives responding to a February 2011 survey conducted by Forbes Insights, in association with Wipro. (Fig. 1) The survey polled 122 CEOs and 186 other C-level executives worldwide.
What kinds of tools do these top-level executives expect to use to shape their strategies for growth in 2012 and beyond? The survey focused on three key areas:
Strategic innovationAn overwhelming number of respondents agreed that innovation—both related to new products and services and to business practices—is critically important to driv-ing growth. And more than two-thirds of the surveyed leaders say that the 2008-09 recession made innova-tion even more of a business imperative. Innovation is being driven by data-based business decisions and intel-ligence; collaboration with external customers and vendors; enhanced risk management solutions; selective outsourcing; vigilant compliance; and integrated global communications. As they go down this road, leaders are trying to keep an eye on costs—which they cited as the biggest hurdle to innovation.
SuStainable developmentSo-called “green” initiatives have the greatest chance for long-term success when they make business sense. Three out of four survey respondents indicated they believe there is a strong business case for sustainable develop-ment. Eco-efficiency can earn revenue and help to reduce costs, two legitimate reasons for companies to adopt such initiatives. Another reason: more than a third of respon-dents said their companies were taking up green practices because their customers were asking for it.
inTroduCTion
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Managing top- and bottom-line performance
Figure 1: What are your company’s current top business priorities?
Expanding into new and emerging markets
Cutting costs
Developing new products and services
Driving innovation and research & development
Leveraging technology
Recruiting and retaining employees/talent
Driving environmentally conscious growth
Improving supply-chain effectiveness
Ensuring risk and regulatory compliance
Building value through M&A
Building and maintaining our competitive position and brand
Over the past decade, the art of doing business has changed. Companies are re-shaping strategies to innovate and
compete globally. New methodologies, new opportunities, new markets, new technologies, and new practices are
being brought into play with an eye on boosting profits and curbing costs.
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emerging marketSChina and India are the most popular investment spots for survey respondents, with China the clear favor-ite—the country’s rising purchasing power presents opportunities for a diverse range of business. Venturing into developing markets is not a surprising business ini-tiative—these economies offer faster, higher growth potential compared to more mature markets. However, emerging economies also may present challenges: poor distribution channels, skill shortages, volatile political climates, and strong local and international rivals, for
example. The trick for foreign entrants may be to for-mulate business plans that consider the socio-economic trends in those emerging markets, and correctly identify the opportunities and challenges there.
All in all, the corporate mood appears buoyant head-ing into 2012. Chief executives and their direct reports are confident their companies are performing well in var-ious aspects of business. They believe their strategies of innovation, sustainability and expansion are effective—and this will continue in 2012 and beyond.
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“Any company not thinking about innovation is not going to have long-term sustainable success.” So said Wong Wai Ming, senior vice-president and chief financial officer of Lenovo, one of the world’s largest computer companies. Without innovation, you can survive for a few years “but then you die,” noted Jean-David Calvet, chief procurement officer of Alacatel-Lucent, a global communications firm.
Their thoughts reflect those of more than 90% of respondents to the survey who wholeheartedly agreed on the importance to business of innovation in products and services, and business practices. (Fig. 2)
Fully two thirds of the senior executives said they believe that innovation is more critical than ever because of the economic downturn of 2008-09. (Fig. 3) The silver lining is that the bad times may actually lead to good ideas. True, recession makes jittery companies cut research bud-gets, lay off staff, pare operations, and freeze hiring. But on the flip side, an economic slump forces companies to survive, so they cut costs, shed flabby operations, and find innovative ways to make money.
Consider the situation at Xerox, which announced that it added 1,031 U.S. patents to its intellectual property portfolio in 2010, an increase of 46% from 2009, ranking it among the top 20 companies for U.S. patents in 2010. “It is critical to our customers’ success that we continue to push the boundaries of the unknown,” noted Sophie Vandebroek, Xerox’s chief technology officer and president of the Xerox Innovation Group. “We are passionate about innovating. It is at the very core of what Xerox does. More than 2,400 employees, past and present, have been granted five or more patents, an extraordinary accomplishment.”
sTraTegiC innovaTion
seeking the Key differentiator
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Figure 2: Importance of innovation
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Figure 3: Did the economic downturn of 2008-09 change your company’s approach to innovation?
• Innovation is now more important than it was prior to the recession
• Innovation is less important than it was prior to the recession
• It did not change our approach to innovation
“It is critical to our customers’ success that we continue to push the boundaries of the unknown.” –SoPhIEVandEbroEk,Xerox
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alCaTEl-luCEnT Innovation,innovation,innovation
Imagine no ugly cell phone tower antennae. Instead, they’re replaced by a miniature base station that can be attached at the bottom of the tower, or on an electricity pole,or on the side of a building. Plus, this equipment can slash a telephone company’s operating expenses and electricity consumption.
LightRadio is an innovation from global communications company Alcatel-Lucent that seems to make this imagining a reality. Jean-David Calvet, Alcatel-Lucent’s chief procurement officer, calls the device a typical example of how different components of the company work together to develop innovative products in partnership with key suppliers. An internal team was set up consisting of personnel from Bell Labs, a core unit responsible for pure research, and the products division responsible for defining new products, “to create a disruptive approach to the market,” according to Calvet. The development was done in partnerships with Freescale and HP.
Another important element in Alcatel-Lucent’s innovation is its partnership with its customers, the telecommunications operators. If a product is provided as part of a solution, it should be what the customer demands, noted Calvet; through partnerships with customers, Alcatel-Lucent provides end-to-end solutions, from concept to product.
Equally fruitful are partnerships with suppliers, as seen in the development of lightRadio. Of course, some suppliers are simply that and little more, but others are so-called preferred or strategic suppliers and are treated differently. With these suppliers, Alcatel-Lucent has an “in-depth, common, win-win relationship, working together, especially on innovation”, said Calvet. The criteria for selection for the strategic suppliers are different from those for “normal” suppliers, noted Calvet, adding that the relationship with preferred suppliers is less transactional, more strategic.
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The range of patents reflects Xerox’s focus on mak-ing business processes easier and more efficient, said Vandebroek. For example, the 2010 patents included solu-tions that improve inventory management, e-mail overload and personalized packaging. Other patents help in doc-ument management and in making sense out of large volumes of information. Patents on printing systems using less power are a way for Xerox also to minimize the envi-ronmental impact of its products and services.
FocuSing on eFFective innovationThe key is effective innovation. Corporate resources should be allotted neither to too many channels (because that can lead to a lack of focus) nor too few (because that would stifle creativity). To drive business innovation, robust data should underpin all decisions and competitive intel-ligence, according to three in four of survey respondents worldwide. Collaboration within the company, as well as with customers and supply chain partners, is another effective tactic to spur innovation, three in four of the senior executives believe. “One way to go beyond pure technical innovation is to work together, between research and R&D and key sup-pliers, to define new approaches to be the first to market with innovative products. This is one of the main elements of our strategy,” said Alcatel-Lucent’s Calvet. He noted that its recent lightRadio cell architecture is the outcome of such a collaboration. (See sidebar, page 8)
There are other examples of internal innovation. Toyota practices kaizen or “continuous improvement,” in which teams get together not only to problem-solve the weak points, but also to look at what are considered the strong points, said Norm Bafunno, president of Toyota Motor Manufacturing Indiana (TMMI) in the U.S.
Also applied at Toyota is obeya (which means “big room” in Japanese), a key project-management tool used primarily in product development to shorten the Plan-Do-Check-Act or PDCA cycle, which in turn leads to a speedier-to-market approach. Obeya is all about effective and timely communication between upper and lower man-agement, and across functions, who meet daily in ongoing
sessions. An obeya group at Toyota would typically include engineers, assembly workers, marketers, designers and sup-pliers; an obeya room would have whiteboards with graphics to depict schedules, progress, warnings, and scenarios for a product’s development. “When there’s a big problem, we know [we] have to change, but when there isn’t a problem, we still want to innovate. That’s where I think this culture, this kaizen, this sharing of ideas...this obeya links, where you try to generate ideas for something that may already be per-forming pretty well,” noted Bafunno. (See sidebar, page 12)
getting cuStomer inputListening to customers is imperative for business inno-vation; there is no point in having a great idea if nobody wants to buy it. “We have to come up with products that meet the need of customers and the ways to service that need,” noted Lenovo’s Wong Wai Ming. Apple may have opened up the market for tablet computers with its iPad, but as consumer demand has risen, others, like Lenovo, are entering the market. Lenovo unveiled its LePad in end-March, rolling it out first in China, its home-turf. Xerox’s newly launched Innovation Hub in India aims to under-stand customer needs by leveraging the experience of local partners (See sidebar, page 11).
But the speed-to-market approach isn’t restricted to computers or electronics companies. Fashion houses live or
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Figure 4: Innovation requires getting new products and/or services to the market swiftly
• Strongly Agree • Agree • Disagree • Strongly Disagree • Don’t know
“When there’s a big problem, we know [we] have to change, but when there isn’t
a problem, we still want to innovate.” –normbafunno,Toyota
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die by their ability to set runway trends. Carmakers world-wide increase sales by regularly launching new models which promise better mileage, better looks, and better eco-friend-liness. Retail banks hasten to be the first to offer consumers new financial solutions or savings schemes. Getting a prod-uct or service swiftly out to market is a critical business tactic, agreed 81% of surveyed executives. (Fig. 4)
Companies take a breather in emerging countries, how-ever. Product and service innovation is less important in developing markets than mature markets, according to 67% of senior executives surveyed.
The reasons are diverse. In a less developed market, companies may have fewer rivals, or consumers may have fewer choices of product or service available to them, or have lower user maturity. Or purchasing power? To be sure, customer willingness to pay should be a critical yard-stick to measure the viability of an innovative product or service, said 79% of respondents. Spending millions of dol-lars on development is only worthwhile if the product or service sells. Price is less of a concern than the willingness of a consumer to pay.
the litmuS teSt oF a great idea: will it Sell? CFOs are leery of pouring money into ideas that either won’t get off the ground or will end up gathering dust. They tend to become particularly anxious about funds for innovation when companies have to tighten their belts. Not surprising, then, that 39% of respondents point to cost as the biggest hurdle to fostering innovation. (Fig. 5) It is seen as a bigger challenge than talent recruitment and restrictive regulatory environments.
Figure 5: What are the biggest barriers your company currently faces regarding fostering innovation?
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Lack of understanding about innovation
Corporate comfort with risk
Lack of an organizational framework for innovation
Leadership lacks vision
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XEroX Innovativeresearch
The Xerox India Innovation Hub, which opened in March 2010, has a few unique characteristics. For a start, it is Xerox’s
first research center in an emerging market, and has an initial objective to develop document management solutions
for India and other markets. At the hub, Xerox is not taking the conventional “captive” route of relying on in-house
research skills and facilities, a strategy that some multinational companies have pursued in their research centers in
emerging markets.
Instead, the Xerox hub has adopted Open Innovation, working in some ways as an incubator for ideas from
entrepreneurs and entities outside the company, especially its local partners. “Our Open Innovation model is core to
how we innovate at Xerox. The best way for us to understand customer needs is to partner with local people and
leverage their experience,” said Falynne Smith, public relations manager for developing markets operations at Xerox
Corporation. “The reason we call it an Innovation Hub is because it’s a central point that brings together research from
all of our centers with the best and brightest minds in India. We’re building a strong global innovation network by
partnering and collaborating, rather than competing.”
Located in Chennai in southern India, the hub “represents innovation without borders in its truest form”, said Smith.
“We’ve leveraged our existing competencies to help solve emerging-markets business problems in India, but also to use
the talent there to address global concerns. This team is engaged in innovation-focused projects spanning a wide
range of exciting areas, including business process optimization, information and secure content management, cloud
computing and collective intelligence-based systems.
In many of these fields, Xerox is using the hub to expand partnerships with leading Indian technical and business
schools. Some examples:
• Apartnershipwith thewell-known Indian Institute of TechnologyMadras (IITMadras) to use on-demand cloud
computing to improve the efficiency and economics of document-services delivery
• Another partnership with IIT Madras’s Rural Technology Business Incubator to develop innovative solutions
to improve workflow at small technology-based businesses in rural India
• AcollaborationwiththeIndianInstituteofScienceonaprojectonmachine-learningandgame-theoryprinciplesto
improve the performance of online service marketplaces
• A projectwith the Indian Institute of Technology Bombay to develop linguistic databases to provide automated
translation of documents
• AprojectwiththeIndianInstituteofTechnologyKharagpuronthedynamicsofmobilephoneusers.
The Xerox hub also can leverage the experience of a channel partner network of 500 partners, value-added resellers
and sub-distributors spread across 28 locations in India. These partners are expected to deliver appropriate solutions to
customers and, through their interaction with the latter, are well placed to provide feedback to Xerox on customer
requirements and problems.
According to Smith, in the year since the India Innovation Hub opened, it has been “flourishing with activity that is
benefiting Xerox clients all over the world.”
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Leadership, meanwhile, must be the driver of corporate innovation. Four out of five respondents said business inno-vation should be a clear priority for a company’s leadership. Fully 77% of senior executives worldwide agree also that the top bosses should be willing to take risks to facilitate business innovation.
Toyota’s Bafunno agreed that risk-taking is important for a company’s leadership, but that it should be seen in context of a company’s culture. If a leadership team is not in line with the right kind of environment to take risks, no risks will be taken, he said.
toolS For innovationDriving business innovation requires effective tools. Survey respondents had clear likes and dislikes (Fig. 6):• Attention to best practices is the premier technique for
fully 80% of surveyed respondents. Learning from the success and failures of others may be a no-brainer, but the lessons must be prudently fitted to suit each company’s peculiar circumstances and culture.
• The next most-effective tool for business innovation is technology, rated effective by 79% of respondents.
• Closely related to technology, data-based decision-mak-ing ranks third, tied with collaboration with customers.
Technology that fosters greater internal collaboration
• Very effective • Effective • Ineffective • Very ineffective • Don’t know/NA
Figure 6: How effective do you believe the following tools and tactics are for driving business innovation?
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Collaboration with customers
Collaboration with supply chain partners/vendors
Data-based decision making
Integrated global communications
Data-based competitive intelligence
Enhanced risk management solutions
New organizational structures
Selective outsourcing
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ToyoTa Continuousimprovement
Innovation isn’t about “eureka” moments. More often, it is about continuously tweaking an existing idea, and making
small changes that lead to a better, more competitive product or service. At Toyota, this is embodied in the practice of
kaizen or “continuous improvement,” and linked to the Japanese automaker’s use of obeya or “big room,’ a
management tool that encourages cross-function communication to spur the product development process. Engineers,
assembly workers, marketers, designers, suppliers and others engage in ongoing sessions to mark progress, resolve
problems and insert changes, with the aim of improving the final product.
What are the criteria for good ideas generated by the application of kaizen and obeya?
Toyota Motor Manufacturing Indiana (TMMI) tries not to limit the generation of ideas for improvement, but categorizes
and prioritizes them based on their potential impact. “We try to hit on those major categories, and within those we try
to figure what’s going to give us the best result and what we can implement,” said Norm Bafunno, TMMI’s president.
“And that’s a win-win for everybody.”
He cited an example of innovation for posture change. During assembly of a
vehicle, even though the doors are off to maximize access, the center line of a
vehicle is challenging to reach. “So we look at other ways to place parts
within that area; maybe it’s with a special assist arm, or how we fasten it to
the floor, and things like that. Those are the kind of ideas that would occur
with obeya,” said Bafunno.
Another example: innovation in relocating equipment. An employee asked, “I
have to take four steps to pick up that part—why can’t I just take two?” So
TMMI looked at the equipment and moved it. “It may sound simple, but I tell
you it isn’t the result of engineers coming in and saying move that equipment
closer. The team members came up with the idea and said this is going to be
more efficient,” said Bafunno. He sees such kinds of improvement as the core
link to Toyota’s overall vision, creating innovation at the plants aligned with it.
The TMMI president believes cost is always important in decisions on new ideas, but it isn’t the biggest challenge in the
automotive industry; instead, the No 1 hurdle is to design very flexible equipment that builds the cars and trucks. “So
innovation can occur through what I consider to be continuous improvement of the equipment that we have or the
application of that equipment in a different model,” he said. “There are a lot of ways in which you can save and
improve and innovate that don’t cost a lot of money. In our industry, the point of view in assembly operation is that we
don’t look at that as being a major stop to innovation at all.”
Continuous improvement is built into the annual planning process. Each year, TMMI assigns tasks to its executives and
asks for some innovative breakthrough activities. These ideas are measured and monitored throughout the year. Some
turn out to be good, some do not. But their existence indicates the espousal of innovation and risk-taking at a senior
level at Toyota.
“There are a lot of ways in which you
can save and improve and innovate that
don’t cost a lot of money.”
–normbafunno,
Toyota
15
A trawl through corporate websites will show that almost every large business has a sustainability initiative (some more energetic than the others), often in keeping with its social responsibility aims. Green practices are the way for-ward, and make a great marketing tool as they highlight the “engaged” side of a company. But sustainable practices are not only the right thing for companies to do, but also are critical from a business growth perspective.
It is against this background that many organizations have implemented strategies to improve their environ-mental standing. According to the survey results, reducing costs is the most important reason for adopting green busi-ness practices given by 41% of respondents, particularly by the chief executives among them. (Fig. 7) About one in three respondents worldwide turn to eco-friendly action to improve operational efficiency, meet customer demand, and comply with regulations.
FocuSing on return, not coStImprobably, some companies are inhibited from participat-ing in carbon-emission reduction because of the perceived costs involved. Can they become believers? They can, if they understand that by cutting their carbon output they are taking the waste out of their systems and are driving efficiencies—efficiencies that can then be converted into cost savings better used for growth and expansion, said Justin Barrow, co-founder and chief innovation officer of China-based Climate Action, which pro-vides carbon offsetting services to help businesses to meet their green or corporate social responsibility objectives.
Mark Watson, head of environmental affairs at Cathay Pacific, one of Asia’s leading airlines and a Climate Action client, said there is always a cost imperative in the airline industry, which works on thin margins, and where profitability is an ongoing challenge. But while moves such as fleet modernization and innovative technologies carry “significant upfront costs,” these are offset in the longer term by fuel savings and efficiencies. “It is a bit of a red herring to say that being greener is going to cost more money,” said Watson. “We have seen that companies that
invest in small but significant environmental projects are generating cost-savings and are also getting the reputa-tional benefits [that go] beyond the bottom-line savings.”
To mitigate its carbon emissions, the Hong Kong-based airline has explored initiatives that include fleet modern-ization, innovative engine technologies, and biofuels. (See sidebar, page 18)
susTainable developmenT
going green for business growthFigure 7: Which of the following factors are most important to your company’s use of green business practices?
0% 50% 100%
Meet internal objectives for sustainability or climate change
Reduce consumption of fossil fuels
Be a good corporate citizen
Comply with current or future regulation
Be a good corporate citizen
Meet customer demand for greener products
Reduce costs
41
37
35
33
31
27
25
“We have seen that companies that invest in small but significant environmental projects are generating cost-savings and are
also getting the reputational benefits.” –markWaTSon,CathayPacific
16
ClPholdInGS Withpowercomesresponsibility
Worldwide demand for electricity is expected to grow by 2.2% annually through 2035, with more than 80% of that
increase coming from non-OECD countries, according to the World Energy Outlook 2010. The emerging markets of
China and India lead the demand, as they ramp up their economic growth. In both countries coal-fired generation is
the cheapest and most-prolific form of electricity. It is also the most polluting.
This focus on coal created a dilemma for CLP Holdings when it debated its
climate-change strategy, said Andrew Brandler, the company’s CEO. A
leading power company in Asia, Hong Kong-based CLP invests and
operates in China and India, as well as Southeast Asia, Taiwan, and
Australia. Rejecting coal entirely and becoming a niche player in renewable
energy would have been an easy solution, said Brandler, but these
emerging markets will continue to use coal for many decades.
CLP decided instead to balance its generation portfolio, and move towards
de-carbonization by offsetting the emissions from coal-fired generation in
part with non-fossil-fuel generation and renewable energy. “We are
balancing the economic, social, and financial goals that sustainability is all
about,” said Brandler. “If we ignore the benefits of power, that’s not
helping these societies. Someone else will build those coal-fired stations; if we can set an example and build them
cheaper and more effectively, with cleaner technologies, then that is contributing to the social development of these
countries.”
The company also changed its business approach to be compatible with global objectives for stabilizing greenhouse
gas emissions to limit climate change. In 2007, CLP developed Climate Vision 2050, which sets a group-wide target of
reducing carbon-emission intensity by 75%, by 2050. It continues to review its targets regularly, and has set even
stricter milestones for cutting carbon intensity, increasing renewable energy capacity, and using non-carbon-emitting
generating capacity.
Balancing the company’s generation portfolio is an imperative. As Brandler put it, “We see carbon as a threat to any
business. In 2050 if you are a carbon-intensive business, you are in big trouble; chances are you won’t be in business by
then. That’s the important part of our 2050 vision. We want to be in business in 2050, but that doesn’t mean you take
action in 2049; you have to move down this path and be ahead of the curve as the world moves down that path.”
“We are balancing the economic, social,
and financial goals that sustainability is all about.”
–andrEWbrandlEr, ClPholdings
17
Heavily fuel-reliant industries such as logistics, auto-motive, shipping or aviation have a greater stake in carbon-offset and energy-efficiency action. UPS began a carbon-offset program in 2009 in response to customer demands for environmentally responsible shipping options. (See sidebar, page 20) Under the program, customers of the U.S—based logistics firm can choose to pay a small fee to calculate the carbon emissions from their shipments. UPS collects the fee, chips in a matching amount, and uses the money to fund environmental projects worldwide. Elizabeth Rasberry, a spokesperson for UPS, said that the initiative is recognition that UPS is “a critical part of our customers’ supply chain and we have an obligation to help them operate in a more environmentally sustainable way.”
green =i nnovationBecoming part of a corporate innovation strategy gives a boost to environmentally responsible action. Overall, 71% of respondents said their companies had embraced green strategies as part of their innovation strategies. (Fig. 8) The results were most dramatic in the Asia Pacific region, where 100% of the companies linked green practices to innovation.
There greater enthusiasm in Asia could have several reasons. Companies in the region are catching up with counterparts in the West who have been practicing sustain-able business longer. As environmental regulations become stricter worldwide, vendors in Asia servicing Western com-panies have had to ramp up their green practices not only to meet their customers’ requirements but also to comply with enhanced rules at home. Governments in Asia are introducing tighter controls on environmental degradation, with taxes and penalties imposed on polluters.
reducing it’S carbon FootprintIT remains one of the biggest consumers of energy within the enterprise. Global data center capacity has been rising considerably, and with it the amount of electricity these facilities consume, as well as the amount of greenhouse gases they emit.
Respondents expressed concern over the impact IT has on their energy consumption. More than three quarters
100
60
69
71
21
17
15
17
13
13
2
Figure 8: As part of your innovation strategy, has your company embraced “green” practices?
Total respondents
Americas
EMEA
APAC
• Yes • Not now, but will be adopting in the future • No • Don’t know
1
1
Figure 9: Is green IT a priority for your company?
• Yes• No• Don’t know
19%
77%
4%
18
of the C-level executives indicated using IT solutions that consume less energy and are more environmentally friendly is a priority for their companies. (Fig. 9)
Specifically, executives pointed to data centers as a key energy consumer, and reducing data center footprints was the most common element of their green IT strategies. (Fig. 10) That was followed by two critical and comple-mentary software technologies that are also linked to reducing data center size: greater use of server virtualiza-tion and greater use of cloud computing.
creating an eco-Friendly FrameworkAs with innovation, companies need an organizational frame-work to spur green business practices. In fact, more than 80% of executives in the survey agreed that is the case. (Fig. 11)
Asked about what it takes to drive companies to focus on the environment, Climate Action’s Barrow indicated that it all boils down to “strong executive leadership,” which needs to demonstrate that it is prepared to make decisions that stand by what the company wants to repre-sent now and the future.
Andrew Brandler, CEO of CLP Holdings, a power gen-eration company, agreed. “Certainly the leadership team [has it] imbued in all their strategies that we need to de-carbonize.” After laying out sustainable-development targets in its Climate Vision 2050 strategy paper, CLP car-ried out an exercise to educate its 6,000 employees about the targets.
Cathay’s Watson added that a company’s middle man-agement also plays a part in sustainable development, and in fact “it’s everybody’s duty to do their bit.”
in need oF government SupportCan business do it alone? Three-fourths of respondents believe green initiatives by business cannot be successful without the support of local and national governments. (Fig. 12) They reflect the opinion of international associations such as the World Business Council for Sustainable Development, a CEO-led, global association of about 200 companies. The council believes that tackling climate challenges requires greater collaboration across business sectors and between business, government, academia and civil society.
Figure 10: Which of the following elements are part of your company’s green IT strategy?
0% 50% 100%
Reducing data center footprint
46
42
41
32
30
30
30
20
20
17
Greater use of server virtualization
Greater use of cloud computing
Shifting data center location
Replacing older servers, computers, and peripherals
Assessing energy consumption of all equipment purchases
Greater use of outsourcing
Monitoring use of IT energy consumption
Using smart grid or other energy management technologies
Implementing ways to reduce, store, and dispose of e-waste
19
CaThayPaCIfIC flyingingreenerskies
The aviation sector today accounts for 2% of the world’s carbon dioxide emissions; by 2050 this is forecast to grow to
3%. So how can the aviation industry fly greener?
To mitigate the emission of greenhouse gases, the International Air Transport Association (IATA) has set certain goals,
including improving fuel-efficiency by 1.5% annually from through 2020, and halving CO2 emissions (from 2005 levels)
by 2050. Hong Kong-based Cathay Pacific, one of the world’s largest airlines, subscribes to the IATA targets. “It’s
going to be challenging,” said Mark Watson, head of environmental affairs at Cathay Pacific, “but with new engine
technologies, development of sustainable biofuels and improvements in air traffic management, for example, those
targets are achievable.”
Along with the innovative engine technologies and biofuels that Watson mentioned, Cathay has also modernized its
fleet in a bid to lower its carbon emission. Over the past two years, 10 new Boeing 777-300s have replaced less fuel-
efficient passenger aircraft mainly on Cathay’s trans-Pacific routes.
Cathay also has been supporting development of sustainable biofuels as a member of the Sustainable Aviation Fuel
Users Group, an industry working group led by Boeing to examine the commercial development of sustainable aviation
fuel. Watson believes biofuels will be important in the industry, not least because prices of conventional fuel are
heading upwards.
Cathay scrutinizes real-time wind data to plan flight routes and speeds. It also works closely with governments,
particularly those in Asia-Pacific, to improve the efficiency of global air-traffic management. Delays mean more holding
time, which means more fuel burn, which means more cost to airline and more emissions. But governments, not
airlines, control air-traffic management. “What we can do is operate our aircraft in the most effective way we can, not
just in terms of fuel conservation management, but also at the maximum environmental optimum,” said Watson.
Finally, Cathay gets its customers involved. The airline’s FLY greener program offers passengers the option of offsetting
the carbon emissions from their flights with either frequent-flyer miles or cash. Similar offsets apply to staff travel
within Cathay and its parent company, Swire Group. The “offset” amount is ploughed into selected environmental
projects, including three in China. Watson is very pleased with the offset program, and said the airline is working to
increase interest and uptake, particularly among corporate clients, which are a key market and an important part of
the airline’s premium proposition.
20
Certainly, government support (and money) can con-tribute to a cleaner environment. CLP’s Brandler said encouraging national policies assisted the company’s accelerated foray into renewable energy in India, China, Thailand, and Australia. China, for example, has set sig-nificant targets for low-carbon energy, energy efficiency, and clean technology in its 12th Five-Year Plan covering 2011-15. For its part, India has boosted allocations for clean environment schemes in the 2011-12 budget.
But government involvement can also be painful for companies. The carbon tax versus cap-and-trade debate has passionate detractors and supporters on both sides. In the survey, three out of four respondents were convinced car-bon taxes would soon become widespread globally. (Fig. 13)
Ultimately, it all comes down to companies believing there is a strong business case for sustainable development. Cathay’s Watson concurred. “What companies have finally woken up to is that sustainable development is not a fad. It’s here to stay. If done effectively, it can help to deal with strategy, and be an effective tool to help to create value for the company. At the end of the day, that is what businesses do—they are there to create shareholder value,” he said.
CLP Holdings’ Brandler refers to sustainability activity as long-term risk management. “Doing nothing is a clear threat, being ahead of the curve is a clear opportunity and the challenge is getting that balance right as you move for-ward...Businesses that are going to be around at the end of century will have to look at it that way,” he said. “As chief executive, I want the business to be thriving. [Sustainable development] is part of our core strategy otherwise we know we are not going to be in business in the future.”
Figure 13: Carbon taxes will soon become widespread globally.
• Strongly agree • Agree • Disagree • Strongly disagree • Don’t know
26 48 14 4 8
Figure 11: Companies need an organizational framework to spur green business practices
42 41 10 4 3
• Strongly agree • Agree • Disagree • Strongly disagree • Don’t know
Figure 12: Green initiatives by business cannot be successful without the support of national and local governments
• Strongly agree • Agree • Disagree • Strongly disagree • Don’t know
29 42 20 6 3
“What companies have finally woken up to is that sustainable development is not a fad. It’s here to stay.” –markWaTSon,CathayPacific
21
uPS Greeningacustomer’ssupplychain
For logistics companies, which move millions of packages each year by land, sea and air, the conundrum is how to cut
fuel consumption and carbon emissions, cater to environmentally responsible customers, and offset unavoidable
carbon output. UPS has found a few schemes.
Since late 2009, UPS has been offering a carbon offset option to customers in which they can choose to pay a small
fee to calculate the carbon dioxide emissions from their shipments. The fee is collected by UPS, which matches the
amount and uses the money to fund environmental projects such as a 39.9-mw wind-power plant in Nicaragua, a
wastewater biogas-to-energy system in Thailand, a landfill gas scheme in China that captures methane released at the
site to generate clean electricity, and two commercial reforestation schemes in Tanzania. UPS contributes a total of up
to US$1 million annually.
For its own operations, UPS reduces fossil-fuel consumption by using alternative fuels and increasing operational
efficiency. The company has a fleet of more than 1,900 vehicles that run on alternative fuels. UPS said that so far it has
explored eight different alternative-fuel technologies, such as liquefied natural gas, compressed natural gas (CNG),
hybrid-electricity and electricity. The bulk of the “greener” fleet is deployed in the U.S., but CNG vehicles ply for UPS in
Germany, France, Chile and Brazil, and propane-powered vehicles make deliveries in Canada and Mexico.
UPS also has reduced its carbon emissions by improving the fuel efficiency of its domestic delivery fleet—by 10% in
the past decade, and by aiming for another 10% improvement over the next decade. This has been achieved by
minimizing both the number of miles driven and the number of minutes vehicles idle during delivery and pickup. Every
gallon of fuel is maximized, using proprietary software, methodologies and training programs. Telematics captures
hundreds of data elements from UPS vehicles to improve efficiency and customer service, slash energy consumption
and emissions, and make drivers safer. “Telematics also helps to reduce the amount of time spent idling by 15 minutes
per driver per day. That equates to 25 gallons of fuel per driver per year. There are definite cost savings there,” noted
Elizabeth Rasberry, a spokesperson for UPS.
22
Figure 15: In which emerging markets does your company see greatest opportunities for growth in the next two years?
China
India
Southeast Asia
Eastern Europe
Russia
Brazil
Middle East
South Africa
Turkey
Mexico
North Africa
Indonesia
0% 50% 100%
55
29
21
20
15
11
10
10
8
7
7
6
Emerging markets—from the explosive markets of China and India to developing areas such as Southeast Asia and Eastern Europe—are critical to the growth of global enter-prises. More than three quarters of respondents indicated that investment and expansion into emerging markets is extremely or very important to their strategies today, and a similar number believe it will continue to be crucial two years from now. (Fig. 14)
For companies to grow fast organically, it is necessary to grow fast in emerging markets where the rate of growth is quicker, noted Wong Wai Ming, senior vice-president and CFO of Lenovo, the Chinese computer maker. While Lenovo is based in China, it is a global brand, having pur-chased the personal computer business of IBM in 2005.
Unsurprisingly, China—the second largest economy in the world—tops the list of markets that executives believe have the greatest opportunity for growth in the next 24 months. (Fig. 15) In fact, more than half of respondents (55%) cited China, followed by India (29%), Southeast Asia (21%), and Eastern Europe (21%).
emerging marKeTs
developing opportunities in the developing world
Figure 14: Importance of investment/expansion into emerging markets
• Extremely important • Very important • Important • Somewhat important • Not important
42 33 18 3 4
39 30 17 9 5
Today
Two years from now
23
For many businesses, China presents multiple opportu-nities for growth. On the one hand, many companies have been manufacturing in China due to lower costs and high capacity. On the other, the emergence of the Chinese con-sumer over the past few years has made it a more viable market for selling goods and services. For example, Gap, the U.S. retailers, last year launched four flagship stores in Shanghai and Beijing, along with an e-commerce site. According to a Gap spokesperson, “China is the corner-stone of our global growth strategy and we entered with a view towards setting the foundation for building a long-term brand.”
“Emerging markets are on the agenda for companies looking for growth opportunities. Rapid economic prog-ress in the past decade and growth potential in Brazil, Russia, India and Mexico have established them as strategic market priorities for Xerox,” noted Falynne Smith, pub-lic relations manager for Developing Markets Operations at Xerox. “Emerging markets are resilient and clients in those areas seek more value-added services and technology to strengthen their competitive advantage. This represents a prime opportunity for our services business – helping improve productivity, enhance efficiency, and reduce costs so they can focus on their core business.”
0% 50% 100%
9
10
10
11
12
12
Similar social and business culture to home market
Strong IT infrastructure
Stable political environment
Transparent financial markets
Strong law and order system
Strong civil and business legal system
12
14
15
15
15
16
16
19
20
35
Lower costs
They are growing faster than developed markets
Growing consumer base
Fewer domestic rivals
Good recognition of our brand
Pool of skilled local talent
They have industries that complement our own
Fewer international rivals
Investor-friendly policies of governments
Shrinking consumer base in our home economy
Figure 16: What are the key drivers for your company to target emerging markets?
24
lEnoVo Protectandattack
The world is awash with new tablets from the major computer-makers: Apple, Dell, Samsung, Motorola, Hewlett-
Packard, and Toshiba. Lenovo, too, has launched its LePad and IdeaPad (a hybrid notebook-tablet), but only within
China, its strongest market. Lenovo will watch how these products perform at home before releasing them elsewhere,
a tactic also employed last year for LePhone, its first smartphone, which is selling robustly in China.
Staggered launches are part of Lenovo’s “protect and attack” strategy in
which it protects the core business in China and mature commercial
markets, and attacks in fast-growing emerging markets such as India,
Russia and Brazil. “We plan our business on a global basis but when we
launch, we identify a market that will give us the best chance of success.
Once we have that, we roll out continuously,” said Wong Wai Ming,
Lenovo’s senior vice-president and CFO. The initial focus is always on China,
a market that accounts for about 46% of its worldwide sales, and where it
has strong brand recognition.
Going forward, Lenovo is investing in its brand. The Chinese company
came on the global stage in 2005 by buying IBM’s PC business. From the
consumer’s perspective, acknowledged Wong, Lenovo is still not as well
known as other international brands. Despite the IBM unit acquisition,
Lenovo is still a Chinese brand, with all the less-than-positive perceptions that has for Western consumers. Even within
its stronghold of China, international rivals can turn consumers’ heads (and renminbi) towards their own strong brands.
“We plan our business on a global basis but when we launch, we identify a market that
will give us the best chance of success.”
–WonGWaImInG,
lenovo
25
driverS and barrierSInterestingly, investor-friendly government policies and political stability—traditionally considered attractive incentives for investors—are not rated highly by respon-dents when it comes to emerging markets. Respondents indicated their companies’ emerging market strategies were focused mostly on costs and the overall pace of growth. (Fig. 16)
But respondents also noted significant barriers to strategic success in emerging markets. While no single concern rose above others, many appeared worried about a foundation that could support the growth they desire. (Fig. 17) For instance, about one in five respondents (21%) said poor distribution channels were a hindrance. A simi-lar percentage (18%) were concerned about a shortage of skilled talent.
Xerox’s Smith agreed that “in terms of innovation, talent in India is an issue. We have more demand than sup-ply.” But, she added, “at the same time there are a lot of great minds thinking about this and how to solve this prob-lem and build a larger pool of talent.”
Constraining regulatory policies
0% 50% 100%
14
14
Figure 17: What are the key barriers in your target emerging markets?
Poor distribution channels
Unstable political environment
Lack of understanding of social/business culture
Shortage of skilled talent
Inadequate domestic partners and/or suppliers
Feeble law and order system
Corruption
Opaque financial markets
Inadequate infrastructure
21
19
18
18
17
16
16
15
15
15
Strong presence of international rivals
Lack of need for our products/services
13
12
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Feeble legal system
Strong presence of domestic rivals
Little recognition of our brand
26
GaP Global,butwitheyesforChina
Gap is hoping to tempt China’s consumers to spend on its jeans and casual wear. The U.S. apparel retailer last year
opened four flagship stores in Shanghai and Beijing, two prosperous Chinese cities, along with an e-commerce site.
The investment in China came after lengthy market research and “marks the beginning of a long-term, multi-channel
strategy that will eventually result in more stores throughout the country,” said a Gap spokesperson.
Given the compulsion to save in China, and its lower purchasing power, does Gap anticipate sufficient sales to justify
the costs of a China venture? The Gap spokesperson said the company doesn’t disclose forward-looking projections
for sales or earnings, but has “great confidence that Gap will be well-received by Chinese customers and that our
target demographic will embrace the brand.” She added that Gap’s approach to pricing was to offer a range from
value to premium of “stylish, quality products at accessible prices, all tailored to the Chinese fit.”
There is less traction for Gap in India, a market that the company continues to evaluate, along with other emerging
markets. Entry into new markets worldwide is part of Gap’s global growth strategy, which includes franchise, online
and company-owned expansions.
Gap’s strategy for global growth is to leverage core brands across multiple platforms, channels and geographies. “With
regard to new countries, we take a different approach depending on the market. For instance, first we identify large
markets, like China and Italy, with significant long-term upside for our brands and decide to make the investment to
own and operate our own stores, whether it’s full-priced brands or our outlet models,” said the Gap spokesperson.
In smaller countries with projected growth and a limited risk profile like Australia and the Middle East, Gap leverages
its successful business model. In major regions where it has its own stores, the company builds dedicated e-commerce
sites, such as in Canada, Europe and China, so customers can get localized shipping and rates. In other markets, where
Gap wants to test its brand acceptance and build market share, it ships directly from the U.S. Gap’s goal is to improve
top-line revenue, and to increase the percentage of its online and international revenue to 30% of total revenue by
2014, up from 22% of total revenue in 2010.
27
methodology
The information in this report is based on the results of a survey and one-on-one interviews conducted by Forbes Insights in
March 2011.
Forbes Insights, in association with Wipro, surveyed 308 C-level executives at large global enterprises with annual revenues
of more than US$500 million. About a third worked for companies with annual revenues of $US5 billion or more.
All respondents had C-level titles, including CEO (40%), COO (10%), CFO (13%), CIO (15%), CMO (10%), and other C-level
executives (13%). They represented a wide range of industries, including manufacturing (28%), banking/financial services
(23%), retail (10%), telecommunications (10%), insurance (7%), and energy (7%)
Geographically, 37% of respondents were located in the U.S., 6% were located elsewhere in the Americas, 39% were from
Europe/Middle East/Africa, and 18% were from Asia Pacific.
acknowledgementS
The Global CXO Outlook was produced by Forbes Insights in association with Wipro.
For Forbes Insights, Bina Jang wrote the report. Stuart Feil is the practice’s editorial director, and Christiaan Rizy is the director.
For more information about Forbes Insights, visit: www.forbes.com/forbesinsights
Forbes Insights would like to acknowledge the support and contributions of Karthik Negandra and Rahul Koul of Wipro in
helping to develop the theme of the study and refine the report.
