Overcoming adversity through innovation – Daikin at 100 (C): China market lessons

The board of Nestlé S.A. announced that Anna Mohl would become the CEO of Nestlé Health Science (NHSc) — a global leader in nutritional science — on 1 January 2024. She was delighted to hear about her new position but knew there was little time to celebrate. The pressure was on her to make timely strategic decisions to navigate some operating challenges while future-proofing the business for years to come. As Anna sat at her desk and looked out the large window, she began reflecting on how NHSc had grown under her predecessor, Greg Behar, who was instrumental in expanding it into new markets and establishing it as a well-known player in nutritional health solutions. Anna’s dilemmas boiled down to four main questions: Should the company choose organic or inorganic growth? What about market expansion and exploring potential outside North America? How to ensure continued product innovation via research and development (R&D) and potential acquisitions? Finally, how best to align sustainability goals with financial performance? And, of course, expectations were high and a lot was at stake. Anna was aware that the journey ahead would not be easy, but she was ready to tackle the challenges head-on, steering the company towards long-term success.

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The China Resources Beer (CR Beer) case study is a compelling narrative of the world’s largest beer producer by volume under the leadership of CEO Hou Xiaohai. In 2016 CR Beer embarked on a pivotal transformation journey. This case study offers critical insights that particularly resonate with Chinese corporations navigating similar challenges in an era marking the end of China’s rapid economic growth. Faced with industry saturation, changing consumer behaviors, the rise of digital technology and the imperative shift from expansive to high-quality growth, CR Beer’s story mirrors the predicament in which many Chinese companies find themselves today. The case delves into CR Beer’s strategic overhaul, how it optimized its vast 60,000-employee structure, streamlined operations and embraced digital transformation to remain competitive. CR Beer’s transformation was characterized by tackling “three mountains” – operational inefficiency due to numerous small factories with high costs and low-capacity utilization, weak brand presence in the high-end beer market and an underutilized and mismatched workforce. The study also highlights the company’s innovative approach to rebranding for younger consumers, integrating consumer insights into product development and exploring new business models. It underscores the importance of internal cultural shifts to support these external changes and the role of leadership in guiding transformation. CR Beer’s journey from traditional efficiency to future-readiness offers valuable lessons in managing large-scale organizational change, strategic management and business innovation. It provides essential insights for understanding the complexities of transformation in a rapidly evolving industry, making it a crucial read for those interested in organizational change, particularly in the context of the Chinese market and its unique challenges and opportunities.

BARCELONA, JANUARY 2023. What started in 2016 as a humble entrepreneurial attempt to contribute to a more sustainable future had turned into a solid eyewear brand present in major Western markets. François van den Abeele was even more excited by the rapid development of the Sea2see Foundation, which he set up in Ghana. But success brought its own new questions and issues. From the start, he had relied on the superb craftmanship and dedication of an Italian frame manufacturer. Over time that relationship had turned into a mutual dependency: He was now one of its major clients but, reciprocally, had developed a key supplier risk. What if something happened to that relationship? Should he develop a broader set of suppliers and, if so, how could that be done without antagonizing a great working relationship? Recycling very much set the stage for the brand’s sustainability claims, but it also took massive amounts of time to manage. As other companies started to develop their own fishing net recycling supply chains, did it still make sense to invest so much time in the upstream phase or should he pour his energy into his beloved brand? Finally, maybe it was also time to revisit the growth/profitability dilemma and open up the capital to increase the speed of growth, all for the benefit of the environment as impact fed on scale.

Five friends created DIDA in 1983 and turned it into a global provider of IT infrastructure and services. Riding the wave of rapid growth of communication networks and increasingly global business relationships of corporations, DIDA established its brand through its strong alignment with dominant infrastructure companies such as Cisco and Microsoft. Navigating the end of the internet bubble, DIDA served as a major reseller of these companies’ products, adding value with its integration services by increasing its clients’ efficiency and enabling collaboration within corporate networks. By 2005 DIDA had resumed rapid growth through partnerships, equity-based alliances and, most prominently, acquisitions, which led to a network of subsidiaries in more than 50 countries and six continents. By the end of 2009, DIDA had shown its critics that it could grow and integrate. However, its revenue was growing faster than its profits and it was not poised to help corporations move to the next generation of internet technology which would require new capabilities for installing and managing large data centers for computing as a service (CaaS) and cloud computing. The case ends with DIDA’s CEO reviewing the prospects of shrinking core markets and displacement by technological disruption. He acknowledges the need to make choices and get ahead of technological trends again in a changing IT infrastructure landscape. DIDA could seek to further grow its core business or internalize new capabilities to get ready for a CaaS future. Should DIDA seek more profitable growth organically or through acquisitions?

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