“No innovation can replace direct discussions”
From Fortune, July 26, 2004
That’s what Samsung CEO Jong-Yong Yun, whose company prizes technology, says about understanding local markets. Going global has always been a tricky business. For many people, the emergence of a global economy has meant unprecedented wealth and unparalleled access to goods and services. A cosmetics brand born in Tennessee can become wildly popular in Shanghai. For those in business, however, globalization has brought unrelenting change and fierce competition. To find out how the best companies manage in a world that’s getting smaller and more complicated, we asked two CEOs of Fortune Global 500 companies how they’ve stayed on the top of the game. Whether based in Europe, the US, or Asia, they’ve successfully managed global businesses in everything from refrigerators to fragrances. Here’s what they had to say.
Lindsay Owen-Jones
L’Oreal
CEO since 1988
ON WHAT MAKES A GLOBAL BRAND: Ultimately it is a question of imagination and intuition in equal parts. It is intuition (when one asks) what do these brands have that just might seduce the world? But also in terms of imagination, what
could they become to seduce the world? It took imagination to think that a nice, homey, very basic, user-friendly, popular, and cheap but really not sophisticated make-up line called Maybelline made in Memphis could become the hottest thing for young women in Shanghai. That is why this business is always looking for candidates who not only have basic business disciplines but also an ability to dream. We call them, in French, poets et paysans.
ON RESEARCHING MARKETS: We try to do a major market visit every month. Since the beginning of the year we’ve been to the US, Japan, Russia, Germany, and Brazil. Typically, the first day we will spend just visiting stores. That is an opportunity not just to look at the stores but to look at what women are wearing and what they’ve got in their shopping carts. You look at them buying all kinds of other things, not just our products. I usually like to have a quick look at the clothes department if it is a department store. Or perhaps cereal or instant coffee if I’m in a supermarket.
ON BEAUTY: Understanding what women want anywhere, including your home country, is a major challenge, especially in something as personal as beauty. People do not talk honestly of their aspirations. You knock on the door and say, “Do you have a secret aspiration to be a chic French woman?”-they would laugh you out of the door. The key words I would use are observation, cultural understanding, empathy, and intuition. These are probably more important than the traditional scientific marketing-research approaches. I think we are helped by our European heritage. Cultural diversity is an everyday factor of differences. Our success in the US has been heightened by our understanding and awareness of
ethnic differences. Every new country you are successful in gives you an added dimension of understanding how the world is different. ON SETTING AN EXAMPLE: When you have spent a day tramping from morning to evening, and from store to store, eating sandwiches in a minibus as you go from one place to another, you are sending an unwritten message to teams everywhere in the world that the CEO is doing the same thing he expects them to do- which is for all of us to avoid (living) in some sort of ivory tower and to listen to our customers.
ON LONG-TERM PLANNING: Everybody who manages a business at L’Oreal has a basic responsibility to the company to do what we call “a cow and calves policy”. You are responsible not only for managing today’s business but also for preparing what will be profitable many years after you have left that particular country or assignment. And you will be judged not only on your ability to produce the numbers now but on the credibility of the plans that will be there when you leave—to create businesses that one day will be the future.
Charles O. Holliday
DuPont
CEO SINCE 1998
ON GLOBAL EXPANSION: Developing countries are growing more rapidly, but
you need to make sure you are bringing in the right products and services at the right time. We have ways of looking at the economy in each country to see if it’s ready for agricultural products, automotive products, or construction products. The metric we had going into a developing country was $1,000GDP per capita, and that’s still a general rule of thumb. But averages can be terrible in developing countries because they can be much different in the cities than in the country. You see that in China, where the differences in income are as wide as they can be between the coastal areas and the inner provinces. So we’ve done regional breakdowns. We look at Jakarta vs. the rest of Indonesia, for example. Jakarta might have a GDP of $1,500 per capita, yet the rest of the country is at $800. We might put in distribution around the major cities if we can’t get it into the entire country yet. In China, we sell our Corian countertop material to the upper end. We also bought a producer of solid-surface countertop that’s lower end. We are using our branding on it and all our technology to make it an even better lower-end product.
ON CHINA: We see China as a big logistics and distribution challenge. We build smaller facilities close to our customers to maximize the logistics, as opposed to a big, cost-efficient plant. The other thing about China is they are turning out about 300,000 engineers a year, compared with 62,000 in the US, and they are technically just as good as our crop in the US, so we are doing more of our engineering in China.
ON US COMPETITIVENESS: The real test is if we can go to a higher level of knowledge-content products, which means more research and development
around biotechnology and nanotechnology. If we are successful in leading the world in those sciences, then the US is going to be very successful. If we can’t, it is more problematic. Let’s take genetically modified food, which is a big business for us. The US is a world leader today. And the approvals from other parts of the world are starting to come in. Brazil and China are accepting genetically modified soybeans, for instance. It’s a great example of how the US is winning.