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Making far-reaching decisions
But, don’t worry about it: it’s nice! When you don’t know what
it is you do, it will be difcult for your rivals to copy it and do
the same.
Previously published in Harvard Business Review, March 2007
Company cloning – how to change a winning
formula
When you realise you have a competitive advantage of sorts
(because your performance is superior), a rm may often seek to
replicate its success in other parts of the globe. However, that is
easier said than done, if you do not quite know what you do that
Business Exposed178
gives you this advantage. And then things can go horribly wrong,
because the advantage might not be easy to export.
For example, I am sure many of you can name some of the
ludicrous examples of when companies expanded into a foreign
market and failed to adapt to the local circumstances.* It can
be because they didn’t adapt their product, their way of doing
business, or even their name. For example, United Airlines
famously handed out white owers on ights from Hong Kong,
where white owers represent death and bad luck. India’s M.P.
Been Products printed a swastika on all their products sold in
India (a symbol of good luck in many Far Eastern countries); this
did not go down well when they launched German Pilsner, while
Japan’s Kinki Nippon Tourist Company noticed it attracted some
unwelcome customers when it rst expanded abroad.
And it’s a perennial problem. Coca-Cola, when entering the
Chinese market in the 1920s with less than moderate success,
translated the sound of its name into Chinese characters, only
to nd out later that it, fairly unappealingly, translated into
“bite the wax tadpole”. Even further back, the British East India
Company just might have lost control over India in 1857 when
it continued to supply bullets encased in pigs’ fat to its Indian
soldiers, the tops of which had to be bitten off before they could
be red. Since it was against the soldiers’ religion to eat pork, it
seemed to have greatly whetted their appetite for pacism.
The message that always comes with these examples is: “Adapt to
local circumstances, stupid!” Don’t just implement what you’ve
been doing somewhere else, but implement an altered form of it,
adapted to the local context.
Well, in spite of these examples, I am not sure that an immediate
full-blown adaptation is the right path to glory . . .
Organizations and their business models are incredibly
complex systems, consisting of many tangible and intangible
* See, for instance, David A. Ricks (2006) Blunders in International Business, 4
th
edn,
Blackwell.
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Making far-reaching decisions
elements. And often we don’t quite know what is causing their
success – and, what’s more, often people from the company
itself don’t quite know what is making it a
success. Take the phenomenally successful
Southwest Airlines. Is their success due to
their swift logistics, the standardization of
their procedures, materials, and airplanes,
their coherent corporate culture, leadership
style, recruitment procedures, etc.? We don’t
quite know: probably a combination of all of
the above (and more).
Take Starbucks. Is it so successful because of the quality of its
coffee, the training of its personnel, the layout of its bars, the
logistics of the coffee-making processes, the ambiance, etc.? Well
. . . probably all the elements interact, and create the competitive
advantage together.
The problem with such a complex system is that when you
change two or three elements of it, you don’t quite know what
will happen. Because all the elements interact, you may be
screwing the whole thing up in ways you hadn’t anticipated and
won’t even be able to untangle and understand.
Therefore, Professors Gabriel Szulanski and Sid Winter – from
INSEAD and the Wharton School – recommend: “replicate”. That
is, before even thinking about making local adaptations, copy
exactly what you have. Only once you’ve got it working, adapt
it, very slowly, one step at a time.
Consider again Starbucks. It was originally replicated by its
founder, Howard Schultz, modelled perfectly on an Italian
espresso bar. “But it doesn’t look at all like an Italian espresso
bar!” you might shout. Very true. But the rst one in Seattle
did. There was standing-room only, full-fat milk, opera music,
wait staff with bow-ties, etc. Only when Howard got that to
work did he slowly start to make some alterations, through
trial and error, one step at a time. Had Howard tried to make
all sorts of adaptations right from the outset, it may not have
worked at all.
‘‘
often people
from the company
itself don’t know
what is making it
a success
’’
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