Multinational companies are under more pressure than ever to maintain their competitive edge. One way they try to meet the challenge is by implementing global headquarter-driven strategic initiatives designed to leverage their global scale with new or improved processes. Such strategic initiatives as harmonizing sales processes, launching a new global service for customers, building a shared service processing center or introducing standardized operations processes can create economies of scale and scope in operations. Successful initiatives may also make it possible to compare process performance across locations, uncovering new opportunities.
To try to improve the chance of success for such initiatives,1 companies often conduct a field test of the global initiative in a restricted part of the business, such as a single country market or a small group of country markets. If this pilot succeeds in demonstrating the value of the new practice, top management will roll out the initiative regionally or globally to realize its full economic and strategic value.
Senior executives sometimes regard learning as the primary goal of piloting a global initiative. They assume that if anything does go seriously wrong, the stakeholders will be forgiving because the pilot is just an experiment. Our research, however, has found that the stakes are actually much higher. (See “About the Research.”) During the pilot, the country market managers next in line to implement the strategic initiative form their own attitudes about it. Their assessment of the pilot often determines the extent to which it will be eventually adopted within the organization. In this way, a pilot is much more like a dress rehearsal than an experiment. If the performance fails to impress the country managers, they are likely to adopt the initiative in a perfunctory way, without genuinely integrating the processes within the organization.2 Or if the pilot’s performance is truly terrible, managers from across the organization may band together and refuse to even start their implementation.
1. A McKinsey Global Survey estimated that only 38% of transformations are completely successful at improving organizational performance. See “Organizing for Successful Change Management: A McKinsey Global Survey,” McKinsey Quarterly (July 2006).
2. See T. Kostova and K. Roth, “Adoption of an Organizational Practice by Subsidiaries of Multinational Corporations: Institutional and Relational Effects,” Academy of Management Journal 45, no. 1 (February 2002): 215-233.
3. While S.G. Winter and G. Szulanski focus on replication of existing practices, piloting addresses the creation of working templates for new practices that are then replicated. See S.G. Winter and G. Szulanski, “Replication as Strategy,” Organization Science 12, no. 6 (November/December 2001): 730-743.
4. A. De Meyer, C.H. Loch and M.T. Pich, “Managing Project Uncertainty: From Variation to Chaos,” MIT Sloan Management Review 43, no. 2 (winter 2002): 60-67. 5. J. Cantwell and R. Mudambi, “MNE Competence-Creating Subsidiary Mandates,” Strategic Management Journal 26, no. 12 (December 2005): 1109-1128.
6. For measurements of commitment to change, see L. Herscovitch and J.P. Meyer, “Commitment to Organizational Change: Extension of a Three-Component Model,” Journal of Applied Psychology 87, no. 3 (June 2002): 474-487.
7. See R. Milne, “Lift Maker’s Ascent to the Next Level,” Financial Times, Sept. 27, 2009.
8. See P. Rosenzweig, “The Halo Effect … and the Eight Other Business Delusions That Deceive Managers” (New York: Free Press, 2007).
9. See R.B. Cialdini, “Influence: Science and Practice,” 4th ed. (Needham Heights, Massachusetts: Allyn & Bacon, 2001).
10. An exception to this is if the new ways of working have to be encapsulated in a system where it is impossible to extend the functionality of the system at a later date, in which case the pilot has to be selected for maximum complexity.
11. R.G. Cooper, “Stage-Gate Systems: A New Tool for Managing New Products,” Business Horizons 33, no. 3 (1990): 44-54.
12. See A. Edmondson, “Psychological Safety and Learning Behavior in Work Teams,” Administrative Science Quarterly 44, no. 2 (June 1999): 350-383.
13. See X. Gilbert, B. Büchel and R. Davidson, “Smarter Execution: Seven Steps for Getting Results” (London: Financial Times/Prentice Hall, 2008).