Consider the experience of a global consumer packaged goods company, and three of its regional business units. (Innosight was an advisor to the company). Region 1 had developed a new brand targeted at younger consumers, who were increasingly seeking healthier products. Region 2 had changed its production processes in ways that increased profitability. And Region 3 had developed new sustainability focused business models. For reasons we’ve seen time and again, regions that could have imported these innovations dismissed them, or worse, were simply unaware of them, as they innovated in silos.
Not everything needs to scale globally. Local innovations for local markets matter. But there are meaningful downsides of not scaling the great many innovations that are born locally but do have significant global potential. These include lost revenues, since a new product originating in one region could be sold to customers in others, and higher costs, since teams around the world often end up duplicating (or triplicating, or quadruplicating) investments in solving common problems. The CEO of McDonald’s, Chris Kempczinski, highlighted this in a recent memo, in which he noted that insufficient collaboration across regions meant that “we are trying to solve the same problems multiple times, aren’t always sharing ideas, and can be slow to innovate.”
Other disadvantages arising from insufficient global scaling are less obvious but also really matter. When regional businesses that started out with similar product portfolios don’t share innovations and instead evolve in isolation of one another, those portfolios become more divergent over time. This leads to a proliferation of product lines, which makes it more difficult for the corporate center to optimally allocate resources, and for shareholders to value the company and understand its growth prospects.
There are three common obstacles to scaling innovations from one to many markets. To illustrate both the obstacles and the solutions for overcoming them we’ll use the case of a global retail bank, which Innosight advised.