Although three-quarters of companies are aspiring to go global, only 10% feels ready to do so, research by BCG and IMD shows. Their Global Readiness Survey suggests that it is no longer an issue of strategy, but of execution that is holding the readiness back. Mid-sized companies score the lowest on their readiness, with laggard companies especially weak in business capabilities (strong in large companies) and organisational and executional alignment (strong in small companies).
The Boston Consulting Group and IMD Business School recently released their ‘The Globalisation Capability Gap: Execution, Not Strategy, Separates Leaders from Laggards’ report, for which they surveyed 362 executives, working for a wide variety of companies throughout the world, on 22 capabilities. The Global Readiness Survey was executed with the aim to understand both the aspirations and the preparedness of companies to go global.
The research shows that almost three-quarters (72%) of companies have aspirations to go global, with the highest percentage found in Japan (78%), followed by Russia, Central and Eastern Europe (77%) and the US and Europe (both at 72%). The technology, media and telecom industry has the highest global aspiration at 82%.
Although aspirations are high, the survey also highlights that not all companies feel ready to globalise, with around 49% saying they are, which leads to a gap of 23% between the global aspirations and the global readiness. The Middle East and African region feels most ready, with 51% of companies agreeing to this. Only 10% of companies feel they are ready to go global, scoring higher than 50% across all of the 22 capabilities.
Strategy vs. execution
Many companies do have strategies to go overseas, which has been an issue in the past, and feel increasingly comfortable with the strategic readiness of their companies. The survey shows that the issue might not be the lack of strategy, but the divergence between strategy and execution. While two-thirds of companies say their leadership gives high priority to global activity, less than half say the global projects are sufficiently funded. Also when conquering the local market, execution falls short from strategy, with 61% of companies having the ability to develop products for the local markets, yet 45% has effective sales and go-to-market capabilities.
Size does matter
Mid-sized companies turn out to be the least ‘globalisation-proof’, as they score lower on overall global readiness (at 43%) than their smaller (50%) and larger (51%) peers. According to the researchers, mid-sized companies are less agile and effective than small companies and do not have the scale or systems of the larger ones. The larger companies score the highest on the ‘core’ business capabilities (at 54%), this includes setting up a global supply chain, while the smallest companies score the highest on organisational and executional alignment (at 50%), related to learning and agility.
When separating the so-called ‘leaders’, that are ‘globalisation-proof’, from the ‘laggards’, that are not ready, the researchers find that they perform similarly on a handful of capabilities, such as those in leadership and governance and in learning and agility. The leaders, however, score much higher (by more than 40%) on more than 22 capabilities unrelated to aspiration. Nearly all of these are in business capabilities and organisational and executional alignment, needed to succeed overseas. The laggards score especially low in closing capability gaps (52% difference from leaders), creating internal systems suitable for a global company (also a 52% difference) and the ability to handle complex global businesses (49% difference).
According to the researchers, this highlights the fact that execution, not strategic capabilities, separates success from failure. “Companies clearly recognise the need to globalise, but few of them are truly ready to execute and bring to life their global strategies,” comments Dinesh Khanna, a partner in BCG's Singapore office and global leader of the Global Advantage practice. “Companies that want to win overseas should be focusing on the nuts and bolts of going global.”
The report concludes: “Globalisation is not a simple or a singular activity. As the survey makes evident, companies need to attack it from many angles. They need to embark on a transformation that combines the right strategy with better execution. […]The bar for successful globalisation is rising. It’s not enough for globalisation to be a priority. Senior leaders need to ensure that their companies embrace globalisation as a live-or-die proposition. For many companies, the stakes are that high.”