The Importance of Shared Mindsets to International Expansion

Taking Performance Anatomy Global: The Importance of Shared Mindsets to International Expansion

By Joshua B. Bellin and Chi T. Pham

Research Report

June 2007 Taking Performance Anatomy Global: The Importance of Shared Mindsets to International Expansion · June 2007

With the pull of international markets the “ability to understand local customs budget travelers. While many of these and global operations, managers are and ways of doing business.”1 Both brands already have an international increasingly concerned about the concerns reveal a major dilemma presence – the company manages problem of maintaining a common involved in building a global organiza- hotels in over 60 countries – Marriott corporate culture and identity as they tion: How does a company maintain is planning to expand further, aiming look to build a global enterprise. A a single identity, a unity of purpose, to increase the number of its overseas recent survey by Accenture of over and a consistent way of doing business hotels by 30 percent by 2009. The 900 global senior executives reveals while also allowing for the flexibility company plans to add at least 12,000 that, among the challenges they face needed to succeed in vastly different rooms in Asia alone and expand in building a global organization, the markets? Far from being an academic significantly into Europe as well.4 greatest – selected by nearly half the question, this problem is an every- respondents – was the “ability to main- day reality for many companies. Given the vast differences in language, tain a common corporate culture.” The [See sidebar] culture, law, economies, and customs, second-largest challenge – chosen by Marriott is faced with unique challenges 44 percent of the respondents – was Consider, for example, Marriott in each new market it enters. While International, which operates eighteen understanding and coming to terms different brands of hotels, ranging from the Ritz Carlton, aimed at the luxury traveler, to the residential Fairfield Inn aimed predominantly at business and

The emergence of a global commodity in high demand. estimates that 40,000 people use a multi-polar world With a more diffuse and educated washing machine for the first time workforce, and with the rapid spread each week – a huge opportunity for Research conducted by Accenture’s of cutting-edge technologies, new detergent sales. Young populations Policy and Corporate Affairs group, Silicon Valleys are cropping up around with fast-growing incomes make these an internal macroeconomic think the world – from South Korea to India markets attractive to companies like tank, suggests that globalization to Poland. Innovation is no longer Unilever; what’s more, new media outlets may be entering a qualitatively new the exclusive domain of developed in which to advertise, the expansion stage: a multi-polar world.2 Emerging economies. Meanwhile, the potential for of Western retailers through which to economies, which largely have been new markets is vast; evidence suggests sell products, and the growth of R&D proficient in providing low-cost manu- that emerging economies will represent centers in places like India have made facturing and services to more developed more than half of global consumption these markets much more accessible.3 economies, are becoming sources of by 2025. China, for example, is already capital, talent and ideas in their own the largest market for mobile phones, right – as well as the home of billions and Mexico the second-largest market of new consumers. Indeed, an estimated for soft drinks. 97 percent of the 438 million people expected to join the global workforce Reportedly, Unilever is prepared to shed by 2050 will hail from developing coun- or under fund slow-growth established tries, meaning that talent will soon be a brands popular in its European home market – such as Bertolli Olive Oil – in favor of products that are popular in emerging markets. In Asia, the company

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with these differences can be challeng- The failure to safeguard and propagate such as a global reporting matrix and ing, the company must do something consistent company mindsets can present decision-making channels to accommo- that is arguably far more difficult: a significant roadblock to successful date the complexity of new operations. deliver the promise of each brand international expansion. UPS learned Yet clearly, internationalization also on a global scale. this the hard way: In its first efforts to involves major “soft” transformations. expand outside of North America into Two leading scholars on the transna- For a hotel chain, especially one that Germany, it found that transferring tional corporation have elaborated on serves well-traveled and globally minded values and attitudes to an operation these “soft” aspects, concluding that customers, the consistency and reliability abroad was not an automatic process. when going global, companies have of a brand can serve as a major com- The specific policies and practices that to change not only their business petitive advantage. Ed Fuller, executive had brought UPS overwhelming success configurations and organizational president and managing director of in its home market were not well structures but also their “behavioral International Lodging at Marriott, notes received in Germany, and the company context” – the motivation, values and that “if you talk to our competitors was unable to attract talented local commitments of employees. These or talk to our customers, one of the employees who were committed to scholars found that successful interna- strengths Marriott has is consistently the “UPS Way.” At a high cost of $59 tional companies focus most of their delivering the brand promise.” For million in lost revenues, UPS learned attention on the demanding task of Marriott, consistency is not strictly that nurturing values and attitudes cultivating employees’ attitudes, about maintaining the same physical took priority over transferring practices, assumptions, and behaviors. comforts and decor across geographies processes and policies to new operations.5 and brands – indeed, one brand, Since that time, UPS has redefined the It is generally understood that there Renaissance, is specifically tailored to “UPS Way”: the motto now emphasizes is an important connection between local styles and architecture – but is the company’s core values and principles employees’ attitudes and the execution of also about preserving a strong service- more than its specific practices. a company’s strategies (and, ultimately, oriented mindset among the worldwide business results). Accenture’s research staff, what Marriott calls the “spirit to So how do values and mindsets distin- into high-performance businesses shows serve.” Jim Pilarski, senior vice president guish high-performing companies that shared corporate mindsets – what of human resources for international from unsuccessful ones? Why do some we call “performance anatomy” are lodging, says that “a customer traveling companies expand internationally with absolutely critical to business perfor- to one of our hotels in Europe may not ease while others experience difficulties? mance. Shared mindsets help translate be treated exactly like a person traveling What part of the solution can be dealt established company values into company to Thailand. But if the outcome of that with through processes? What part practices by creating heuristics – experience is a very memorable one, a through people? commonly understood guidelines on very positive one, then we’ve achieved how to recognize and solve problems – our goal of a consistent customer that in turn guide the organization in experience.” Even where differences Shared mindsets: The path to making decisions.6 In high-performance exist, Fuller explains, “you still have to high performance businesses, shared mindsets help consistently deliver the values; you still companies live their values through have to consistently deliver certain Companies that are highly adept at observable decisions, actions and, quality levels.” managing the “hard” aspects of inter- ultimately, results. (See Figure 1.) national expansion often ignore or under prioritize the “soft” aspects – and by the time they recognize the importance of the latter, it is frequently too late. “Hard” aspects involve the formal changes necessary for implementing any major growth initiative: for example, constructing organizational structures

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Companies expanding internationally A common identity can be critical for and managing performance anatomy need to focus on performance anatomy organizations, especially for those facing mindsets helps achieve buy-in from for three major reasons: enormous centrifugal forces across the employees who will be carrying national, cultural, and linguistic bound- out the change process. First, shared mindsets create heuristics, aries. By fostering common mindsets, a which over time become a way of company can unify regional operations solving problems that is unique to a and overcome the challenges of oper- The five mindsets of a company. When a company has a high ating in a diverse array of cultures and performance anatomy performance anatomy, executives can geographies. be confident that the organization is Accenture has identified five business operating in a consistent manner; it Third, shared mindsets help a global activities – and accompanying mindsets becomes easier to communicate, plan workforce focus on common goals. It – that are essential to high perfor- and implement strategies and operations helps managers at all levels and across mance: balancing market-making and on a global scale. all regions understand and accept the execution; cultivating and managing imperatives involved in structuring a talent; leveraging IT as a strategic asset; Second, the company’s mindsets create company to compete internationally. measuring performance selectively; and a common identity that can be pack- Since internationalization is a major innovating and renewing continuously. aged and shared with new employees change initiative that often involves when the company enters new regions. organizational restructuring, alignment throughout the organization about processes and goals is critical. Fostering

Figure 1: Performance anatomy translates core values into distinctive practices and business results

Performance Anatomy Practices Results

Balance market-making Balance market-making with execution with focus on execution

Multiply talent Mindsets Multiply talent Leadership View IT as a strategic asset values View IT as a strategic asset

Use a selective scorecard Use a selective scorecard Renew continuously

Strategic history Renew continuously

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Balancing market-making Mexico as having enormous growth the chance to pick from a wider pool and execution potential.8 When Wal-Mart operates of talent. Managing talent involves When identifying new markets in in new markets, a shared company far more than implementing new or which they can compete, companies mindset on executing strategies helps extended HR practices; it involves will benefit from having a specific enormously in the process of deciding actively nurturing a global mindset. rationale for entry and a general and when to be flexible and when to stay Indeed, academic studies have found well-understood recipe for success. firm. In China, for example, without that a major impediment to companies Marriott, for example, carefully chooses compromising its strategy of “Everyday expanding internationally is the which of its lodging brands to introduce Low Prices,” Wal-Mart actively adapts parochial behavior of a handful of into which market; managers base their its stores to Chinese consumers who, managers in key positions.11 Their lack choices on a deep understanding of the in contrast to US consumers, do their of understanding and acceptance of brands, the markets and the company’s shopping from store to store on foot, international activities is often the overall strategy. Having a shared mindset typically shop for food every one or largest obstacle to internationalization. about how, where and when to expand two days, and usually have smaller internationally can prevent haphazard refrigerators. The company therefore Successful international companies processes and costly missteps. Companies stocks a large array of fresh (and live) view talent management as a chance with a clear sense of their identity, food in its Chinese stores, and shelves to build a group of leaders with global values, and the advantages these bring, products in proximity to each other experience, perspectives and networks. are more likely than their competitors with a keen eye to Chinese consumers’ The rigor these companies use to develop to reproduce these distinguishing tastes.9 Wal-Mart also tailors the and deploy globally minded leaders is characteristics in new markets. Anders logistical side of its operations to evident at every level in the company. Dahlvig, for example, CEO of the build local conditions. In the small towns The global financial services firm HSBC, it yourself furniture retailer IKEA, of Mexico, where consumer products for example, in an explicit effort to harkens back to his company’s original often cost far more than in the large develop leaders with wide-ranging founding in Sweden to explain the cities, Wal-Mart’s vast and technology- international experience, tracks the advantages of IKEA’s identity. “We have oriented logistical fleet helps keeps careers of their best performers and stood for something different from the prices low. In addition, however, the over time gives them opportunities to local, domestic competition,” he notes, retailer tries to cut its overhead work in different countries.12 Besides referring to IKEA’s distinctive proposition whenever possible: it uses concrete developing global leaders, companies of premium furniture at low prices. floors, for instance, because they can also foster a common vision and “That uniqueness has given us the same require fewer cleaning staff to shared values in all leaders. Costco advantages in each country that we maintain them.10 trains its overseas mid- and top-level had in Sweden in the early days.”7 managers in the United States, where Successful international companies company values are strongly empha- However, companies seeking to expand understand the necessity of balancing sized. When expanding into new markets, internationally need to balance their local knowledge with a careful consid- Costco sends out “SWAT teams” of informed approach to finding new eration of what their competitive seasoned employees – expatriates who markets with a disciplined focus on advantage will be in new and diverse will stay in the new market until “the execution. Achieving this balance often geographies. Costco way” is firmly established and involves thoughtful adaptation to local perpetuated by local talent. According conditions. Consider Wal-Mart, which Cultivating and managing talent to a top executive, these teams “set up has turned abroad as its growth For companies expanding internationally, operations and teach local employees prospects in the United States have managing talent – which includes the what the Costco culture is all about.”13 diminished, and which now sees discovery, development and deployment emerging markets such as China and of leaders with a global mindset – is both a challenge and an opportunity. The challenge is to develop and deploy skills globally, while the opportunity is

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The talent and leadership development increasingly need to manage the infor- dollar microprocessor fabrication facili- programs of successful international mation, communications and analytics ties are reproduced step by step wherever companies aim to instill cultural norms, necessary to grow and sustain effective the company invests globally. The influence individual managerial behavior, operations; in other words, they’ll need logistical advantages of this approach and shape organizational processes that to manage complexity. As one noted include bringing production facilities up reinforce worldwide strategic and orga- expert on international organizations to speed quickly, having the flexibility nizational objectives – while at the wrote about IT in global companies: to shift production between facilities, same time taking into account the “Complexity is the main drawback to and limiting the impact of localized needs of different locations. Marriott, the transnational form…. Indeed, the natural or man-made disasters on for example, emphasizes its “take care superior management of complexity production. While some critics have of associates” mindset in every hotel and may become the prime source of com- charged that “Copy Exactly” may stifle region it enters, especially in markets petitive advantage.”14 A companywide innovation, the enterprise-wide mindset where it may face specific talent-related focus on integrated IT and rigorous that sustains it – an emphasis on the challenges. The focus of these programs analytics is especially important when value of communication, access to can therefore vary depending on the dealing with far-flung operations, information, and the availability of needs of the region. In Eastern Europe, language barriers and cultural divides. best practices – cement the experience for instance, where employees are of Intel as “one company,” despite its generally skeptical of management, The Mexican cement company CEMEX, ever-growing global footprint.16 Marriott aims to gain associates’ trust for example, has leveraged IT to help and emotional attachment; meanwhile, develop a competitive advantage with Like Intel and CEMEX, companies in Asia, where notions of employee a simple commodity.15 The company’s focused on leveraging information empowerment are not widespread, the use of global positioning systems and technology as a strategic asset may company makes an effort to train and complex predictive analytics—developed find that doing so not only unifies a empower associates to make indepen- originally to overcome the logistical geographically diffuse company but dent decisions and take initiative. challenges of heavy traffic, inclement also becomes the basis for competitive weather, and an unpredictable labor advantage. There is no single recipe for success, but market in Mexico – help it reduce costs research has shown that international significantly and deliver its product Measuring performance selectively companies whose mindset is to multiply reliably. These are important advantages Companies going global will face the talent throughout the organization take in established markets, but this use of challenge of how to integrate their care to recruit, train and deploy globally IT truly sets CEMEX apart from local unique values and culture within new minded leaders; they understand that competition in most emerging markets. geographic and cultural settings. As Jim these people will be the ones to take CEMEX also uses its IT to develop a Pilarski at Marriott puts it, “How do you the enterprise above and beyond powerful analytical capability—that keep that magic from getting diluted as national borders to become a truly is, the ability to use data throughout you continue to grow across borders?” global corporation. the organization for better strategic Indeed, the magic can easily get watered decision making. For example, it makes down, as seen in the case of troubled Leveraging IT as a strategic asset heavy use of analytics when assessing merger between two large steel com- For many international organizations, the potential value of an acquisition panies – one from the United States, keeping technology and IT systems, and, after an acquisition, ensuring the other from South Korea. In a video and the thinking behind them, consis- that CEMEX’s operations, processes, town meeting meant to address the tent across borders is important. But and systems are transplanted into concerns of employees in both countries, leveraging information technology as the acquired company. only the U.S. employees asked questions; a strategic asset, not merely making the South Koreans were unaccustomed it consistent, can have even greater Intel also derives a global competitive to asking questions in such a format, and benefits. Companies that do so will advantage from its strategic use of their concerns were never addressed.17 information technology, specifically as it relates to its distinctive “Copy Exactly” practices, wherein multi-billion

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To help achieve a uniform set of values, units to continually improve their engage with new markets, customers practices and customs, an international own operations and the company’s and ways of operating. JW Marriott, for company can implement a chosen set overall. Without a clear mindset and example, acknowledges that expansion of incentives, performance measures series of practices emphasizing contin- beyond the core Marriott brand was and other associated methods – what uous renewal, this potential may “one of the single most important we call a “selective scorecard.” For never reached. strategic decisions that allowed us Marriott, employees’ engagement with to grow.” The challenge for managers is their jobs is considered a key metric At Marriott, where managers often therefore to see international expansion linked to property revenue and company recite CEO Bill Marriott’s phrase “Success as an opportunity to test and acquire revenue in general. The company there- is never final,” the company has adopted new ideas, not as a routine operation fore uses its own selective scorecard to formal and informal communication in which to institute old ones. measure and track employee engagement channels to encourage employees to throughout the world, and even ties share best practices, including the the bonuses of general managers to the Worldwide Business Forum, a one-hour Leading with a performance results of an employee opinion survey. video presentation that features what’s anatomy The company has developed a series of taking place in different markets. training programs to help general man- According to Ed Fuller, “We show Poland The five mindsets that make up a high agers focus on employee engagement what’s happening in Lima, Peru, and performance anatomy can help global in their hotels. Marriott also rigorously we showcase work that’s being done companies translate strategies and tracks other metrics through a work in Egypt to people in China.” Marriott practices into superior results. Creating environment scorecard, which measures also has a process to test innovative and sustaining this anatomy isn’t a the respect for and treatment of asso- ideas and disseminate the good ones passive activity; it requires the active ciates. Ed Fuller concedes that “there to properties all over the world. For participation of managers at all levels are many people in many markets who example, the “At Your Service” initiative, of the organization. initially don’t believe we practice this a personalized program that allows guests [value of respect].” But, he continues, to request certain amenities and services Senior leaders need to initiate the “because it’s measured, because it’s prior to their arrival, was developed and process by carefully selecting and tied to a GM’s bonus, it’s practiced very prototyped at a JW Marriott property honing the company’s core values. consistently. Once we’ve practiced it, in Mexico City, and later introduced Particularly in international organizations, they believe it.” Selective scorecards worldwide. In addition, the company these core values need to be stated in are therefore extremely important in requires regional managers to meet simple, jargon-free language and should allowing a company to measure and with other regional leaders, creating be universal enough to transcend act on the more intangible elements many informal opportunities to transfer national cultures. Leaders must foster that can lead to the success or failure knowledge. Jim Pilarski, in fact, popu- these values to employees across the of international expansion. larized a succession-planning initiative global organization through impassioned that was implemented in one of his and convincing internal communica- Innovating and renewing regions abroad. He explains that the tions. They should bring the values to life As companies begin to deal more initiative “is now a law and has become by referencing past business successes with diverse markets, customers and an operating standard for us.” and strategic stories. Doing so will employees, they have a unique oppor- reinforce the heuristics that have helped tunity to innovate and transfer new To fully establish the mindset of con- the company in the past, and can serve knowledge across their organizations. tinuous renewal, organizations need as a guideline for the future. The challenge, however, is taking to free themselves from the inertia advantage of this opportunity and of their past and constantly seek new empowering international business and better ways of doing business.18 International expansion can be a good time to initiate this practice, since it affords companies the opportunity to

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Aside from communicating the core • ensure that the organization under- tional restructuring may entail. They values, leaders must also encourage and stands which practices to preserve need to have a firm understanding model the five performance-anatomy and which to change on the basis of both the goals of international- mindsets. They need to: of local knowledge. ization and the means by which it will be achieved. • balance the imperatives of local Country managers, in particular, must conditions and companywide busi- use the company’s shared values and With the active participation of leaders ness objectives by recognizing how mindsets as a means of reinforcing at all levels, an international company distinctive capabilities confer com- similarities across the global organ- can manage its shared mindsets as a petitive advantages in local markets; ization, thereby integrating their way to build distinctive capabilities • actively recruit and develop people geography’s operations within those and competitive advantage. Executives with global mindset; of the global company. today are rightly nervous about main- • invest in technologies that can be taining a common corporate identity a source of international competitive Finally, the managers closest to the as their companies expand across the advantage and that can lead to a operations must be sure to translate globe. But successfully managing and more integrated global organization; the company’s mindsets into local prac- propagating shared values and mindsets • rely on simple, memorable ways tices. International expansion usually across diverse organizations may just of measuring success and use every requires organizational changes, so be the key factor that separates the occasion to share those success these managers must be prepared to winners from the mere survivors. stories throughout the organization; both articulate and implement the imperatives that a successful interna-

About the authors About Accenture About the Accenture Institute for High Performance Business Joshua B. Bellin (joshua.b.bellin@ Accenture is a global management accenture.com) and Chi T. Pham consulting, technology services and The Accenture Institute for High ([email protected]) are outsourcing company. Committed to Performance Business creates strategic research associates with the Accenture delivering innovation, Accenture collab- insights into key management issues Institute for High Performance Business orates with its clients to help them through original research and analysis. in Boston. become high-performance businesses Its management researchers combine and governments. With deep industry world-class reputations with Accenture’s and business-process expertise, broad extensive consulting, technology and global resources and a proven track outsourcing experience to conduct record, Accenture can mobilize the innovative research and analysis into right people, skills and technologies to how organizations become and remain help clients improve their performance. high-performance businesses. With approximately 158,000 people in 49 countries, the company generated net revenues of US$16.65 billion for the fiscal year ending August 31, 2006. Its homepage is www.accenture.com.

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Notes 6 Author conversation with Eleanor Westney, 14 Jay R. Galbraith. Designing the Global 1 Accenture’s Global C-Suite Survey is an annual professor at the Sloan School of Management Corporation (San Francisco: Jossey-Bass, survey of more than 900 C-suite executives in of the Massachusetts Institute of Technology, 2000), 43. the U.S., UK, France, Germany, Italy, Spain, Japan, February 9, 2007. 15 Jeanne Harris and Thomas Davenport, Canada and China. For details, see “Maintaining 7 Katarina Kling and Ingela Goteman, “IKEA CEO Competing on Analytics. (Boston: Harvard Common Corporate Culture Is Chief Concern for Anders Dahlvig on International Growth and Business School Press, 2007), 102. Global Executives, Outweighing Geopolitical IKEA’s Unique Corporate Culture and Brand 16 Eric Pfeiffer, “The Secret of Intel’s Success: Copy Issues, Accenture Survey Finds,” January 25, 2007, Identity,” Academy of Management Executive, it All,” National Post, July 7, 2003. See also “Intel http://newsroom.accenture.com/article_display.cfm? February 2003. Backgrounder: Copy Exactly Factory Strategy,” article_id=4493 (accessed April 17, 2007). 8 John Lyons, “Southern Hospitality: In Mexico, http://www.intel.com/pressroom/kits/ 2 “The Rise of the Multi-Polar World,” 2007, Wal-Mart is Defying its Critics,” Wall Street manufacturing/copy_exactly_bkgrnd.htm http://www.accenture.com/Global/Research_and_ Journal, March 5, 2007. (accessed June 25, 2007) Insights/Policy_And_Corporate_Affairs/Executive 9 Clay Chandler, Susan Kaufman, Joan Levinstein, 17 Erik Granered, “Managing Change Across Summary.htm and Wang Ting, “The Great Wal-Mart of China,” Cultures,” Multilingual, December 2006. 3 Deborah Ball, “As Its Brands Lag at Home, Fortune, July 25, 2005. 18 Bartlett and Ghoshal, 271. Unilever Makes a Risky Bet,” Wall Street 10 Lyons, 2007. Journal, March 22, 2007. 11 Christopher A. Bartlett and Sumantra Ghoshal, 4 Wall Street Journal, “Marriott International Inc.: Managing Across Borders (Boston: Harvard Number of Rooms to Increase by Up to 10,000 Business School Press, 2002), 211. Globally,”October 20, 2006. 12 Douglas Ready and Jay Conger, “Make Your 5 Greg Niemann. Big Brown: The Untold Story of Company a Talent Factory,” Harvard Business UPS (San Francisco: Jossey-Bass, 2007), 161–177. Review, June 2007. 13 Jenny McCune, “Exporting Corporate Culture: A Cohesive Culture Helps Hold Far-flung Operations Together. But Prepare to be Adaptable in your Implementation,” Management Review, December 1999.

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