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Globalization: what does it mean for OD practitioners?
Naomi Stanford, March 10 2009
Agenda
What is globalization?
Global design: features, capabilities, principles
Unilever: competing in a global market
Amul: competing in the home market
Takeaways
What is globalization?
What is globalization?Globalization is the integration of national economies into the international economy through trade, direct foreign investment (by corporations and multinationals), short term capital flows, international flows of workers, and flows of technology.*
(Note this defines economic globalization rather than cultural globalization)
*Bhagwait, J. (2007). In Defense of Globalization. Oxford University Press
Global company?Strategy A – local response Strategy B – global response
Compete in global marketCompete in home market
Amul, India. This farmers' co-operative spans 2.6m members and collects 6.5m litres of milk a day, Its ice-cream business survived the arrival of Unilever; its chocolate milk has thrived despite Nestlé.
But globalization drivers impact local and global response
CommunicationsInternet reach and capabilityLow cost communications technologies
PeopleSearch for talentQuest for innovationLabor cost arbitrage
SourcingNeed to secure access to raw maCompetition for supplies
MarketsIroning out instability in home marketsGaining access to new profit poolsMultinationalization of customers
EconomicsEconomic reforms in rapidly developing economiesChallenges from rapidly developing economiesFree trade agreements
FinancesReadily available global financeEconomies of scale
Strategy A: local response has some/all of this
Deep knowledge of local markets
Quick response to customer needs (often hard-to-please, price sensitive)
Ability to defend position (David v. Goliath)
Focused on local growth
Showing resilience
Government help/protection/subsidy
Strong operating platforms (assets may be much younger than those of more established multi-nationals)
Strategy B: global response has some/all of this
Globalization of fashion and design, e.g. iPod
Globally valued brand e.g. CocaCola
Global leading edge technology e.g Microsoft
Globally innovative and admired business method e.g.TataSteel
Significant global activity/sales/markets/networks e.g. Wipro
Commitment to further globalization e.g. Embraer
International investments/access to capital for financing international expansion e.g. Lenovo
Discussion
What is your experience of an organization’s strategy around globalization – reach or response?
How much is globalization part of your OD portfolio?
What is your role in helping organizations respond to globalization?
Design features for global capability
Design features
1. Rapid decision making
2. Knowledge/IP sharing
3. Multiple perspectives mind-set
4. Alliance model of stakeholders
5. Quick innovation
6. Voracious learning and adapting
7. Effective distribution channels
8. International management talent
Strategy A: local response design has some/all of this
Strategy B: global response design has some/all of this
Design capabilities
Recognizing right brain as well as left brain approaches
Deploying design principles to strategy and operations
Working with global realities (time zones, language differences, culture difference …)
Using analytics to optimize workflow, performance …
Capturing innovation/development ideas from consumers
Exploiting and developing collaborative technologies
Considering the moral and ethical implications of organisationalperformance
Marketing to ‘the bottom of the pyramid’ (critical for the survival of global markets)
Converting macro trends into micro trends
System design model –traditional
Global design model – evolving
Adapted from: Werhane, P. (2008). Mental Models, Moral Imagination and System Thinking in the Age of Globalization. Journal of Business Ethics 78:463-474
Global design principles1. Design for your business model and strategy
2. Design to enhance your business success
3. Design for your specific business, organisation, and industry
4. Design for your value proposition
5. Design at a whole system level (whatever system model you are using)
6. …
7. …
DiscussionWhat globalisation features are evident in organizations you work with/in?
What level of global capability do organisationsyou work with/in have?
How much of a piecemeal approach compared with a systems (traditional or evolving) approach do organisations take to globalising?
Unilever: global or local?
Unilever “We were just not executing as well as we should have”
Richard RiversHead of Corporate Strategy
“We were just not executing as well as we should have”
Richard RiversHead of Corporate Strategy
“We tended to exaggerate complexity”
Simon CliftChief Marketing Officer, Unilever
“We tended to exaggerate complexity”
Simon CliftChief Marketing Officer, Unilever“P & G is simply sharper
and more aggressive than Unilever”
Charles MillsAnalyst, Credit Suisse
“P & G is simply sharper and more aggressive than Unilever”
Charles MillsAnalyst, Credit Suisse
2004 state
People– 223,000 people
Critical tasks– Portfolio of brands too tailored
Culture– Local bosses had become kings
Formal organization– Duplication of structures
2008 state
People– 179,000
Critical tasks– Launch of healthier food products
Culture– Global standards with local
variance
Formal organization– Reduction in structures e.g. China
“We are much better organized now to defend ourselves”
Ralph KuglerUnilever. Home and Personal Care Division
“We are much better organized now to defend ourselves”
Ralph KuglerUnilever. Home and Personal Care Division
Using the traditional systems model
Amul: global or local?
Amul: factsIndia's largest food products marketing organisation.
A state level body of milk cooperatives in Gujarat which aims toprovide remunerative returns to the farmers and also serve the interest of consumers by providing quality products which are good value for money.
Members:13 district cooperative milk producers' Union
No. of Producer Members:2.6 million
No. of Village Societies:12,792
Total Milk handling capacity:10.16 million litres per day
Milk collection (Total - 2006-07):2.38 billion litres
Milk collection (Daily Average 2006-07):6.5 million litres
Amul: using the evolving systems modelAmul Dairy has transformed the milk collection process for millions of
small farmers by
Introducing automatic, computerized collection system which reduces the time for weighing, quality testing and payment processing from a few hours with payment days later, to five minutes and immediate payment.
Collecting milk each day from no more than 10 miles from the farmer, with this nationwide, decentralized, collection process.
Developing a computerized quality testing machine, which makes the process transparent and fair to the farmer, and
Buying exclusively from women—a decision which has increased the status of the women, while developing a positive brand imagefor India's largest food products business
Starting a unique initiative called the Internet Sewa Project
Sales growth 2007Overall 2007 sales registered a growth of 13.4 per cent to reachRs. 4,277.84 crores (Rs. 42.77 billion).
Amul Milk in pouches have grown by 40% in value terms.
Ghee in Amul and Sagar brands have also grown by 28%.
UHT Milk has also shown an impressive value growth of 25%.
Flavoured Milk segment has seen an exponential increase of 55%..
Processed Cheese recorded 20% growth in value sales
Health-spread category, Amul Lite and Delicious Margarine have performed extremely well, with a combined growth of 58% in salesvalue.
Ice-cream segment registered impressive growth in sales
Amul/Unilever: competing in the same marketAmul Ice Cream Unilever Ice Cream
Popsicle®
Breyers®
Good Humor®
Klondike®
Takeaways
Discussion
What are the implications of globalisation for OD practitioners?
What issues/concerns do you have around designing/developing for globalization?
What would you have liked this session to cover that it did not?
Takeaways
Globalisation is an organizational given
Responding to globalization is an organizational imperative for survival
Designing and developing global features and capabilities into organizations is a must do response
One organization’s global design and development is not the same as another organization’s
