GE: greater autonomy for local leaders
In the first wave of globalization, companies assumed that they could take global products and adopt a highly commoditized, standardized approach to distributing them around the world. But as many companies have learned, this one-size-fits-all approach will simply not work in a world with divergent incomes, preferences and business environments.
Around 2009, the industrial giant GE recognized that a new approach was needed. The company decided to create a global growth and operating model, with local modifications.
``We gave regional leaders more scope to decide on the strategy and the customer interface, and to modify product characteristics in order to adapt to the local needs,’’ says Ferdinando Nani Beccalli-Falco, president and CEO of GE International. ``This way, we were balancing our decision-making process by making sure that not everything is run from the center.’’
The company also launched an experiment, which began in India and Germany, to give national leaders full P&L responsibility.
``Whenever you hold the purse strings, you can take and implement the decisions that are necessary to satisfy the specific needs of the market,’’ says Beccalli-Falco.
To date, the experiment has been a success. Since making the change, the company’s business in India has grown at between 35 and 40 percent. And, although the change was made less than a year ago in Germany, it also is showing positive gains.
But despite these encouraging signs, Beccalli-Falco says, this is still very much a work in progress. ``You can never draw a line,’’ he says. ``What is good for the organization today might not be good tomorrow. We need to evolve continually to respond to the ever-changing environment and shifting business priorities.’’
This case study was included in Ernst & Young’s Globalization Report, ``The world is bumpy: globalization and new strategies for growth.’’