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 2| Accenture Institute for High Performance Business | Copyright © 2007 Accenture. All rights reserved. Taking Performance Anatomy Global: The Importance of Shared Mindsets to International Expansion · June 2007 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 3| Accenture Institute for High Performance Business | Copyright © 2007 Accenture. All rights reserved. Taking Performance Anatomy Global: The Importance of Shared Mindsets to International Expansion · June 2007 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

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