Reshape Global Operations to Drive Sustained Growth
Global expansion remains a core objective for most consumer products (CP) companies headquartered in the United States. But the strategies they are using to seize this growth opportunity too often feature the same flaw — and it’s one that can make the difference between sustained success and failure.
Recent EY research highlights the complexity of the growth challenge these companies face. Some 82 percent of U.S. headquartered CP companies say their traditional means of generating value are being undermined by disruptive change — in everything from consumer behavior to digital innovation. And 62 percent believe that sustaining profitable growth will only become harder over the next five years.
Global Growth Demands Bold Action
They see opportunities for growth, but only 18 percent of companies think they do a good job of valuing and prioritizing them. And while 68 percent know they must make bold changes, almost half of them say a relentless focus on cutting costs is limiting their room for action.
Many of these companies are global players with long histories of serving consumers. Yet our research points to a fundamental crisis of confidence: 56 percent of them say much of their heritage has become baggage — what delivered growth in the past holds them back today.
Finding Efficiency and Agility
When it comes to global expansion, this challenge of balancing the needs of the past with those of today — and the future — is particularly acute in relation to global operations.
Disruptive change is increasing the need for operations to become more agile and efficient — 69 percent of U.S. CP companies recognize this as an issue. But many say their efforts to achieve global efficiency — which tend to rely on optimizing operations by leveraging global scale — have reduced their agility. As a result, they lack the ability to respond quickly to change, which is essential for successful global expansion.
And this is the flaw that too often undermines their growth plans: They fail to build the kind of global operations needed to support global growth, or they leave it until they’ve finished creating their strategic expansion plans — which is too late.
How to Plan for Success
The design of global operations needs to be an integral part of global expansion planning. Companies that get this right tend to ask themselves five key questions:
1. Which global operations capabilities directly contribute to our successful global expansion, which ones indirectly contribute by enabling another process, and which ones aren’t perceived as adding value?
2. Which global operations capabilities are specific to the organization, which ones are generic to the CP industry, and how does the dividing line affect our target services delivery model?
3. Where is the prioritized list of global operations initiatives, aligned to the global expansion strategic plan, that we should fund this quarter, this fiscal year, and this three-year planning horizon?
4. Which business solutions, information solutions and technical solutions should constitute our global operations portfolio?
5. How should we manage our global operations portfolio to reduce the percentage of annual budget assigned to maintaining global operations, so that we can free funds for reinvestment in initiatives that enhance our global operations capabilities?
CP companies must be able to answer these questions in ways that leverage their heritage while eliminating their baggage. Then they will be able to fund investments in global operations that better support global expansion and put themselves in a far stronger position to thrive, despite the challenges associated with globalization.
Recent EY research highlights the complexity of the growth challenge these companies face. Some 82 percent of U.S. headquartered CP companies say their traditional means of generating value are being undermined by disruptive change — in everything from consumer behavior to digital innovation. And 62 percent believe that sustaining profitable growth will only become harder over the next five years.
Global Growth Demands Bold Action
They see opportunities for growth, but only 18 percent of companies think they do a good job of valuing and prioritizing them. And while 68 percent know they must make bold changes, almost half of them say a relentless focus on cutting costs is limiting their room for action.
Many of these companies are global players with long histories of serving consumers. Yet our research points to a fundamental crisis of confidence: 56 percent of them say much of their heritage has become baggage — what delivered growth in the past holds them back today.
Finding Efficiency and Agility
When it comes to global expansion, this challenge of balancing the needs of the past with those of today — and the future — is particularly acute in relation to global operations.
Disruptive change is increasing the need for operations to become more agile and efficient — 69 percent of U.S. CP companies recognize this as an issue. But many say their efforts to achieve global efficiency — which tend to rely on optimizing operations by leveraging global scale — have reduced their agility. As a result, they lack the ability to respond quickly to change, which is essential for successful global expansion.
And this is the flaw that too often undermines their growth plans: They fail to build the kind of global operations needed to support global growth, or they leave it until they’ve finished creating their strategic expansion plans — which is too late.
How to Plan for Success
The design of global operations needs to be an integral part of global expansion planning. Companies that get this right tend to ask themselves five key questions:
1. Which global operations capabilities directly contribute to our successful global expansion, which ones indirectly contribute by enabling another process, and which ones aren’t perceived as adding value?
2. Which global operations capabilities are specific to the organization, which ones are generic to the CP industry, and how does the dividing line affect our target services delivery model?
3. Where is the prioritized list of global operations initiatives, aligned to the global expansion strategic plan, that we should fund this quarter, this fiscal year, and this three-year planning horizon?
4. Which business solutions, information solutions and technical solutions should constitute our global operations portfolio?
5. How should we manage our global operations portfolio to reduce the percentage of annual budget assigned to maintaining global operations, so that we can free funds for reinvestment in initiatives that enhance our global operations capabilities?
CP companies must be able to answer these questions in ways that leverage their heritage while eliminating their baggage. Then they will be able to fund investments in global operations that better support global expansion and put themselves in a far stronger position to thrive, despite the challenges associated with globalization.