GAC Berlin 2000 - Customer Focus and Globalization

By Kenneth Liss, Editor, HBS Working Knowledge

How can large, multinational companies maintain their global reach while keeping focused on the local, even individual needs of their customers?

Executives from three large firms joined HBS Professor Rohit Deshpandé for a look at this question on the Alumni Conference panel "Customer Focus and Globalization."

"The debate on small and local versus big and global is over," said Michael J. Burns, President of General Motors Europe. "The winner will be the one that combines them and knows its customers best."

General Motors, he noted, has been a global company for 75 years, with a tremendous network around the world. But, he added, "we really haven't taken advantage of that until recently."

But today, he said, with globalization happening at Internet speed, the same changes that are affecting the way GM operates around the world are also affecting the way the company interacts with its customers.

Global Reach and Flexibility

"The key is to leverage our global reach and take on the world as one company," said Burns. That requires a common global infrastructure that is flexible enough to adapt to differing conditions and circumstances in different parts of the world.

All GM customers, he said, expect and deserve three principal things: quality, safety and value. But that means different things in different parts of the world and a need for locally tailored content, products and services.

The Internet plays a key role in GM's global strategy, helping to tighten the supply chain, to capture and share knowledge throughout its worldwide operations and to "interact with our customers and dealers as never before." The company's common architecture, said Burns, makes it possible to launch new, customized Web sites in different markets and to conduct local experiments that provide an understanding of how to sell cars through the Internet and work with dealers.

"This is critical," he said, "when the Internet influences over 80% of new car sales."

Other keys to solving the global-local conundrum, in addition to the Internet and e-commerce, said Burns, include partnerships and strategic alliances and speed and innovation.

Partnerships and alliances, he said, "allow us to combine our strengths and create economies of scale." GM's commitment to speed and innovation "shows what a big and fast and connected company can do."

General Motors sees itself, said Burns, "as a global company that has an infrastructure of global processes and as a flexible company that can adapt. A company that can do this and develop a customer relationship on the individual level will be on the leading edge."

Focus on Processes

The panel's second speaker, John S. Clarkeson, chairman of the Boston Consulting Group, also focused on processes, the result, he said, of Edward Deming's dropping a bomb about 40 years ago on the concept of command-and-control organizations with one simple proposition: there is no one right way, one best way to do a job.

This has led today, said Clarkson to "one blindingly obvious point: the action in organizations is actually no longer in structures. It has moved to processes.

"The innovation that is taking place is looking for a new set of processes that cut across old structures. Competitive advantage seems to have to do with processes."

That doesn't get you out of the task of defining structures, he said. "But the measure of your effectiveness as a global corporation is the performance of these processes that you effect."

At the same time, said Clarkson, companies are still figuring out how to think about this concept and the idea of best practices in a global context. He described the results of an assignment for a large client that looked at best practices in a number of global firms.

"Nearly every one of them had reorganized in the last five years," he said, "and all thought they're going to have to do it again.

"To me that suggests that internal organization, global organization is still a work in progress. We are not at the end of the road in any sense."

New Building Blocks

Ton van der Laan, Senior Vice-President for International Customer Management at Unilever, focused on retailers, particularly international retailers, as the company's principal customers. ("For us, the consumer is the final customer, but we never deal with them directly," he said.)

The recent trend toward consolidation in the retail industry, said van der Laan, has forced Unilever to develop a different focus. The building blocks for Unilever have been the local operating companies where the customer interface takes place. It's a good structure, he said, that works well at the local level.

"However," he added, "our main international customers are not organized like this." A big retailer like Carrefour, for example, operates in many different countries and has had to operate with many different Unilever companies. "This is not very efficient."

Instead, Unilever has set up a different kind of model with key corporate strategic customers with whom they have a global relationship. This involves a number of steps, including:

• Creation of regional business groups that form a regional interface with corporate strategic customers
• International rollout of support systems and processes that also leverage Unilever at the country level
• Appointment of vice presidents who set the global agenda, manage the international customer network and do global business planning for each of these corporate strategic customers
• Regular top-to-top meetings between the chairman of Unilever and the chairs of these strategic customers

In the past, said van der Laan, Unilever had clear strategies for brands and for categories, but not for key customers. But today, the company's biggest customer accounts for more sales than its biggest brand. "To work strategically with your global customers means you have some issues with roles and responsibilities that have to be clarified.

"For the first time in Unilever, we have clearly made a strategy for each of our corporate strategic customers."

This process also includes what van der Laan called "customer scorecarding." "We use globally accepted scorecards to benchmark our relationships across countries and regions so we know exactly what we do with each customer where, what we are building up and how can we transfer it. We can do things once and ensure a very fast rollout."

"Implementation of this in our companies is very widespread," he added, "and very much connected to what John said about getting these key processes in place."