Fear stops many companies from trying new ideas and exploring opportunities for expansion, according to the head of a leading Swiss business school.
Dr Peter Lorange, who has been president of the Lausanne-based IMD business school since 1991, says globalisation presents opportunities for companies to expand, but many are hampered by an unwillingness at senior levels to commit resources to re-investment, a lack of internal networking and planning inflexibility.
"Very often your success becomes your worst enemy. You become arrogant, you do not want to see, you do not want to be flexible. Those attitudes are devastating," Dr Lorange said in Dublin this week.
A company needs to define pioneering activities as expansion targets, achieved through an understanding of the customer and the barriers to mobilising the organisation.
"From what we can see from our research, you need 10 pioneering activities, and after that four become worthwhile expanding, and as time goes on, that translates into one real banker," he said.
Dr Lorange was in Dublin to address a Strategic Planning Society Ireland-organised conference, sponsored by The Irish Times, where he gave the example of Citibank, of which he is a board member, as a company which engaged in cost cutting and margin-maintaining to such an extent in its consumer banking division that it nearly went out of business.
The international bank embarked on a $150 million (£101 million) investment programme in nine countries, creating new customer services and clawing back market share.
"The implication from that is you need a strong commitment from the top, a willingness to spend money from the top to make this happen."
Innovation is critical for global business success, he added. A company needs a team of "internal entrepreneurs" who have independence while being able to draw on resources and "counselling". Such a team needs to be built over time on the members' track record.
"They need your protection because they tend to break the rules. You need to be up front and open regarding new assignments," he said.
Hewlett-Packard's new electronic camera, he added, evolved from 31 project members' ideas, integrated and commercialised at speed.
In contrast, the Norwegian company, Norsk Hydro, let what later emerged as a significant commercial project languish for five years because of "planning rigidity". The company discovered that its fertiliser was being used as a de-icer by Swiss and Austrian skiing teams as a means of improving ski slopes, and successfully applied the product to airport runways. "Then the division manager said it was not part of our core business. It took five years of struggle before they were given the grand plan to market this . . . Now they are world leaders in de-icing runways." Speaking at the same conference, Mr Pat Maher, director of business development of Enterprise Ireland, said improving logistics was one of the major ways of improving competitiveness, particularly for retailers and consumer goods companies.
Some 80 per cent of the top 500 British companies had gained a competitive advantage by outsourcing activities which they would normally undertake themselves, according to a recent survey.
"They really want to be design houses, branding houses and marketing houses. They do not want to be in manufacturing in any major way," Mr Maher said.
For sub-suppliers, this means that they must be able, for computer companies, to service a production line every two hours.
"Information systems have a major bearing on it. The bigger retailers and manufacturers will let their trusted suppliers see exactly what their throughput of goods is," he said.
