Succeeding in the New Global Market

May 6, 2008
A select group of industrial equipment companies are executing a formula for success that peers may want to take note of, if they plan to remain competitive in the emerging global market.
A recent study of 46 of the top public industrial companies found that five of the companies have created high performance operating models that eclipse the competition and give them the competitive edge in virtually every market. In fact, the study, which defines high performance by measuring profitability, growth, longevity and total returns to shareholders, revealed that these high performers have consistently outperformed and grown three times faster than their peers over the last five years. This finding suggests that the bar of success is rising to a level that will place many companies at risk of being left behind.Adding to the competitive challenge is the rise of a global market characterized by multiple centers of economic activity—a concept referred to in the study, performed by Accenture, as the “multi-polar world.” In this new world, the economic centers that include developed economies such as the United States, Europe and Japan, and emerging markets such as Brazil, Russia, India and China, are becoming increasingly interdependent. This growing interdependence will place ever greater demands on the resources needed for profitable growth, such as talent, favorable pricing, affordable raw materials, manufacturing capacity, and research and development.Industry players will need to rise to these challenges, recognizing that the new circumstances represent more opportunity than threat. The high performers have met these challenges head on and positioned themselves to capture the opportunities that lie ahead.According to the research, they are winning by focusing on three building blocks that underpin high performance in our industry: market focus and position, distinctive capabilities and performance anatomy.High performers enter new geographies with the goal of creating new markets—particularly in developing regions.Market leaders develop four distinctive capabilities. First is global flexibility—a value chain that is nimble enough to seize growth opportunities wherever they arise. They use customer insight to enable continuous generation of innovative products and services as well as to generate pricing power. Leaders experience extraordinary productivity through operational excellence and Lean Manufacturing processes that help optimize assets and successfully integrate acquisitions. Finally, a commitment to global recruitment, continuous learning and rigorous talent management and retention generates high people performance.The performance anatomy of leading companies is a culture and operating model built on a foundation of high expectations and obsession with results, driven by strong, decisive leadership.All three of these high-performance building blocks are underpinned by robust foundation functions. This includes world-class information technology that makes these high-performance businesses nimble, enabling the integrated systems on which their global operating models depend.Future imperatives
Sustained high performance in the future will demand ongoing commitment to the building blocks and foundation functions that support them. Continuing population growth and escalating demand for energy and infrastructure suggest that new markets, especially in Asia, will remain the motors of growth for industrial equipment companies. Competition in these markets will only intensify as consumer demand increases for innovation, quality and efficiency. But, as developed and emerging markets begin to blur, national and regional boundaries will become less important. Indeed, companies will begin to organize by value creation rather than by geography.Industrial equipment companies may forge their own individual paths to high performance and future value. However, those that start now to replicate some combination of the distinctive capabilities of high performance in our industry—global flexibility, innovation and pricing power, extraordinary productivity and people performance—will quickly establish a lead over their competition. This head start could be particularly important as companies seek to tackle the changing balance of economic power in the multi-polar world.Paul Loftus, [email protected], is North American Practice lead for Accenture, a consulting firm in New York City.