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Guiding the charge in emerging markets

A CEO's gradual refocus of resources to meet the new challenge is better than a mass reorganization, author Ram Charan argues in his latest book.

March 29, 2013

Assume you are the chief executive of a multinational company confronted with the challenge of doing business in China, India and other emerging markets — and with competing against emerging market-based rivals.

How do you respond? Do you reorganize your company from the top to bottom? Or do you take a gradual approach, focusing more resources on the developing world to reshape the company without upheaval?

In his latest book published by Crown Business, "Global Tilt: Leading Your Business Through the Great Economic Power Shift," business guru Ram Charan recommends the gradual route.

Charan, who is also coauthor of "Execution: The Discipline of Getting Things Done," a bestseller on implementation, says that reorganizing the company in one go might seem tempting.

"It's easier to bring new blood into key positions, and changes in decision making, budgets, capital allocations and KPIs [key performance indicators] can be executed all at once," he writes, and it can all be done in about six months.

But it is not worth the risk because "many people become confused and conflicted," he says, and some managers will depart while others find it "torture" to work with colleagues who don't know what they are doing in their new posts.

So, says Charan, focus instead on changing the existing organization by reallocating time and resources to the emerging economies. A CEO taking this approach will soon develop ideas on how to reorganize and about which employees are best suited to top posts in the brave new world.

Charan has a list of key questions for CEOs: Is your talent pool deep enough? Do your budgets reflect your growth priorities? Are crucial decisions being made the right way?

Given that "Execution" was widely read, "Global Tilt" will generate interest. But this is a very uneven book.

Its strongest element is Charan's advice on how to refocus a multinational corporation. This is supported by case studies of companies responding to global challenges, including General Electric Co., 3M Co. and the fast-growing Indian mobile telecom group Bharti Airtel Ltd.

These accounts are interesting: for example, the problems Bharti Airtel faced when it made an acquisition and expanded rapidly into Africa; or the dilemma GE had in 2011 when it established a joint venture with a state-owned Chinese manufacturer and decided to share core technology.

But there is not enough detail in the recommendations flowing from the case studies.

At one point, Charan writes that a way of dealing with "organization or behavioral impediments [to refocusing] is through a social mechanism, such as a meeting — telephonic or otherwise — at least every six weeks or so of people who need to collaborate." Oh really? Meetings? I would never have guessed.

Charan continues: "GE CEO Jeff Immelt conducts such a meeting every six weeks; P&G CEO Bob McDonald holds one monthly; and Ford CEO Alan Mulally conducts one every week."

But without knowing more about these meetings, such as how they combine with others and how the decisions from them are implemented, this is little more than name-dropping.

Charan rightly warns that the world is changing, with wealth and jobs "moving from North to South." He is correct to say that established multinationals must move faster, examine issues from a more global perspective and be ready to take bigger risks.

He is wrong to claim that "many business leaders in the North are blind" to the challenges. They are not.

Some, as Charan's examples demonstrate, have reacted quickly to global tilt. Others may have failed to follow. But to say, in 2013, that they are blind is a bit strong. Rather, they have probably got bogged down in the huge job of implementation. These CEOs would do well to read Charan's book — but read it selectively.

Reviewer Stefan Wagstyl is the emerging markets editor of the Financial Times of London, in which this review first appeared.

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