A few days ago, during one of my travels, I had the opportunity to meet with the CFO of one of the largest lifestyle companies in the world. The company boasts a rich portfolio of brands spread across the globe. The operations are acutely decentralized, the go-to market is local with global operations, and the organization is agile in reacting to the changing needs of the consumer. However, in the wake of the current global economic changes, the CFO felt that the company needed to focus on efficiencies and saw tremendous benefits in standardization, centralization and consolidation; his earlier company reaped rich rewards through standardization. We had an interesting and stimulating discussion, after which I boarded the plane to return home.
Whilst aboard the aircraft, as the air hostesses served refreshments and went about making the passengers comfortable, I began ruminating on my discussion with the CFO. I started to compare my notes and the conversation with the live action unfolding before me. All airlines, to a certain degree, have the same serving trolley, a menu that you can reasonably predict, and a serving pattern. The difference however is in the personal interaction and the extra effort taken by the air hostess and the crew to please the customer. This differs from aircraft to aircraft of an airline and of course across service providers. I began to conclude that the CFO of the lifestyle company was going on a ‘’standardization high!’’
Organizational culture and maturity play a tremendous role in deciding the degree and scale of standardization. The trends and the recent landscape of the consulting industry is a good example. Here, I would like to draw a comparison between the old consulting companies, i.e. Accenture, Cap Gemini, and PWC with the new challengers such as TCS, Wipro, Infosys, and Cognizant. The first set of companies are mature, have regimental standardized processes — sales, finance and legal. Their organizational culture is top down and the decision making very process oriented. The challengers in this industry continue to be very entrepreneurial, risk-taking and less regimental in process standardization. The success of the latter has been largely due to their agility and their speed to value.
Standardization therefore needs to be directed without disturbing the fundamental nucleus of the organization and its culture. The lifestyle company is addressing the changing needs of consumers. Life style changes are frequent and often vary across different regions. In such a situation mass standardization may not work, it may actually fail to bring efficiencies. Organizations need to be mindful of the extent, depth and breadth of standardization, because it cannot be effected en-masse.
Mass-standardization changes control. Control brings dis-satisfaction. Standardization needs to ensure that decision making is not altered. Any move to mass standardize a global company with several local units, operating entities, legal branches affects the local control. The fast moving consumer goods industry is a good example. Many of the global companies have units in several regions of a country and in different countries as well. Their corporate functions are very local and decision making is within the territory. Successful companies have differentiated process standardization with regard to their global and local processes while having standardized more of the global processes vis-à-vis their local processes.
Innovation, research and development are pivotal to organizations. Companies such as Google, Yahoo, Apple and Intel have built their business based on continuous innovation. In their case, mass standardization would reduce their degree to innovate as well as their agility, which in turn might affect employee spontaneity. In such companies, standardization needs to be functional. For ex: Mass standardize the product go-to market after the product creation, but restrict the idea generation and product proto typing from lesser standardization.
Products, services and businesses have unique circumstances. Massive standardization across varied products, services and geographies may prove efficient for companies that have diversified business. Many infrastructure companies have interests in power equipment, transmission, construction, realty and capital goods. One of the major companies in this space tried to standardize the global tendering / bid management process with a centralized team pursuing the bid preparation, pricing and management. Over a period, the company began to lose market share. The businesses began to develop different objectives. Moreover, the buy-in from the varied vertical businesses was extremely low. As a result, a globalized bid management process and an organization that brought efficiencies in terms of cost reduction actually hurt the company’s revenues. The company then changed the bid management process and integrated it into the business unit level with lot more acceptance and independence to the business units. This helped it greatly though the company had to redesign the process and rework the standardization initiative.
Finally, standardization is also about continuous improvement in operation and delivery. Standardization traditionally focused on efficiencies, optimization and cost reduction. In the current environment, standardization needs to focus on customer experience, internal stakeholder acceptance, ease of doing business, agility and revenue growth.
So, before your competitor forces you to go on a standardization mode, it is important to devise your own method in the madness.