Fluent Essays

1. Discuss case synopsis 2. Brief about Global Knowledge management at Danone 3. What is your assessment of the Networking attitude initiative 4. What should Franck Mougin and Benedikt Benenati do next? Which of the three options they are considering (go wider, go deeper, go richer) do you recommend ? Why? 5.What are the basic approaches to knowledge sharing in large organizations? How do they differ? what are the strengths and weakness of each? why? _______ Professo and Res intended Copyrig 800-545- may be photoco A M Y C B E R T R A V I N C E A N E D Glo At you bu end of pieces what t At consid presid imple know Danon (CBU time t canno euros Amer Mo given notab other of com collea 5,000 Mo little accord Benen event new _______________ ors Amy C. Edmon search Assistant An d to serve as endor ght © 2007, 2008, 2 -7685, write Harvar reproduced, store opying, recording, o . 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Fi - 1 0 7 6 , 2 0 1 1 ______ Dessain, s are not s, call 1- blication chanical, ox that At the he Lego ox, but anone ougin e vice ing to share ntries, s units nt our If we billion n, and 3 and ools— h each l lines s with about d very agers, urther. titude Other inally, D o N ot C op y or P os t This document is authorized for educator review use only by DIVYA UPADHYAY, Alhosn University until Aug 2018. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860 608-107 Global Knowledge Management at Danone (A) 2 Benenati was working on “co-building events” where employees from different units within Danone networked with the goal of creating new practices or products rather than sharing existing ones. These extensions of the concept’s application posed certain management challenges. With its increasing complexity and breadth, the Networking Attitude’s informal spirit—which to Mougin was essential—was in question. Some managers wanted to give the Networking Attitude more structure, such as by tracking results or rewarding employees for networking. But Mougin feared that the spirit of the Networking Attitude might get lost. He knew he needed to make a decision on how to proceed. Danone: From 1966 to 1996 The modern history of Groupe Danone had its beginnings in 1966 when French glass bottle company Souchon-Neuvesel merged with industrial glass manufacturer Glaces de Boussois. Antoine Riboud had been involved in Souchon-Neuvesel (a family company) since 1943 and was named CEO in 1965. He was appointed chairman of the merged company, Boussois-Souchon-Neuvesel (BSN), in 1966. In 1968, BSN attempted a hostile takeover of French glass industry giant Saint-Gobain, five times the size of BSN. The takeover attempt fell through, but the event made Antoine Riboud a well- known figure in French business. Instead of continuing his company’s specialization in glass, Antoine Riboud decided to enter the food business with acquisitions of mineral water company Evian, French brewer Kronenbourg, and Société européenne de brasserie (the European Breweries Company). By 1970, BSN had become the leading French manufacturer of beer, mineral waters, and baby food.1 Venturing into Yogurt The company carrying the name Danone was originally established by the Greek doctor Isaac Carasso in Barcelona, Spain, in 1919. Diagnosing locals with digestive problems Carasso introduced a Balkan tradition that treated such conditions with yogurt. He imported cultures from Bulgaria and the Pasteur Institute in Paris, France, and initially sold his yogurts through pharmacies as medicine. Carasso was the first person to perfect an industrial process for making yogurt and named his company after his son Daniel.2 Daniel Carasso moved to France in the late 1920s where he ran the company after his father’s death. At the dawn of World War II, Carasso handed over Danone to friends and fled to the United States, where he established his business under the name Dannon. After the War, Carasso came back to Europe to revive the business there. He merged Danone with French cheesemaker Gervais, creating Gervais Danone, and acquired companies producing pasta, ready meals, and fresh packaged foods. In 1973 Gervais Danone merged with BSN, creating BSN Gervais Danone, the biggest food company in France. For Antoine Riboud, the merger was an opportunity to enter new markets with a decisive shift toward food products. Witnessing his company’s growth, Riboud ventured into another area close to his heart: social enterprise. In a speech in the early 1970s he insisted that companies should have 1 “History of Success, 1966–1980, from bottles to beverages in France,” Groupe Danone corporate website, http://www.danone.com/wps/portal/jump/DanoneCorporateIntl.Company.History.1966_1980, accessed August 2007. 2 Matthew Gwyther, “The MT Interview: Franck Riboud,” Management Today, August 1, 2006, via Factiva; “Danone: from Greek shop in Spain to empire rooted in France,” Agence France Presse, July 21, 2005, via Factiva; Donna Larcen, “Yogurt snack trend booming—new varieties are keeping fat-free snack lovers satisfied,” Charleston Daily Mail, March 8, 1995, via Factiva; Thomas Fuller, “PepsiCo Says It Won’t Try to Buy French Company,” The New York Times, July 26, 2005, via Factiva; and Dannon Company Website, http://www.dannon.com/about_company.aspx, accessed August 2007. D o N ot C op y or P os t This document is authorized for educator review use only by DIVYA UPADHYAY, Alhosn University until Aug 2018. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860 Global Knowledge Management at Danone (A) 608-107 3 social goals and should be managed “with the heart as well as the head.”3 He presented the company’s strategy as comprising both social and economic goals. “When you think of Antoine Riboud, you think of a civic company, close to the interests of the society and environment,” said Pierre Labasse, author of a book on the company. “He was seen as keeping the interests of his employees at heart.”4 During the 1970s and 1980s, BSN Gervais Danone refocused on food by selling off the company’s industrial glass section and establishing a strong base in Europe with acquisitions of Italian and Spanish food companies. In 1986, BSN Gervais Danone entered the growing biscuits (called “cookies” in the U.S.) industry by acquiring General Biscuit, with operating companies in Germany, the Netherlands, Belgium, France, and Italy. Later, the collapse of the Soviet Union meant new opportunities for BSN Gervais Danone in Eastern Europe. The company started to export to Eastern Europe, and later entered joint ventures with local producers, then acquired companies, including Russian biscuit maker Bolshevik. To reach consumers in emerging markets such as Asia, Latin America, and South Africa, BSN Gervais Danone relied on buyouts and partnerships. In 1994, the company changed its name to Groupe Danone. Franck Riboud In 1996, Franck Riboud took over from his father Antoine as chairman and CEO of Groupe Danone. The youngest of Antoine Riboud’s children, Franck Riboud was a sports enthusiast and an engineer by training. He had held various positions within Danone, working his way up to a top position in the beverages division. As the Riboud family held only about 1\% of the company’s capital when Franck Riboud was made chairman and CEO, some accused the family of nepotism: “I had no legitimacy,” he recalled.5 Riboud proceeded to restructure the company, which in 1996 had a broad product offering and an operating margin of 8.9\%. Danone was primarily a French-Spanish group; the French market then accounted for 42\% of turnover. Riboud consolidated Danone’s product portfolio from nine categories, selling noncore brands such as sauces, pasta, beer, and cheese. Three new product divisions were created: Fresh Dairy Products, Beverages, and Biscuits, with three international brands at the forefront of the new strategy: Danone, Evian, and LU. Said Pierre Deheunynck, vice president of people and organization development: When Franck Riboud took over in 1996, he did three very smart things. First, he directed to company’s focus towards health and nutrition. Second, he turned a Western European company into an international organization with operations worldwide. And third, he changed how the organization was managed. He created the expression jeu de jambe, or footwork,6 which perfectly describes Danone’s approach to dealing with many issues in a flexible way. 3 Dominique Vidalon, “Danone founder Antoine Riboud dies,” Reuters News, May 5, 2002, accessed via Factiva. 4 Thomas Fuller, “French fear eye of ‘ogre’ is on Danone,” International Herald Tribune, July 21, 2007, accessed via Factiva. 5 Gwyther, “The MT Interview: Franck Riboud.” 6 “Jeu de jambe” means dribbling and is a term used in various team sports such as soccer or basketball. It refers to the player moving a ball in a series of changes in direction and position to create opportunities to score a goal. According to a company glossary, Danone words, “Footwork is a matter of flexibility, pragmatism and daring, the capacity to bounce back and get over past failures. Just as sportsmen continually and rapidly replace their feet, managers have to take the right strategic stance.” D o N ot C op y or P os t This document is authorized for educator review use only by DIVYA UPADHYAY, Alhosn University until Aug 2018. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860 608-107 Global Knowledge Management at Danone (A) 4 Danone in the Twenty-First Century With its focus on nutrition and promoting health through three product divisions, Danone appeared to have a clear strategy for the new century. As CEO, Riboud’s larger vision extended beyond ordinary customer segments to include promoting health to people throughout the world. Meanwhile, some of Danones product lines were in a state of transition. Health Through Food Riboud continued to build on his father’s vision of double social and economic goals. In 2001 he launched the Danone Way, as a practical and sustainable approach to building socially responsible corporate values into the company’s policies and aspirations. As part of this initiative, Danone took responsibility for and assured excellence throughout the product life cycle, from the guarantee of quality raw materials and protection of water reserves in production, to the promise of affordable products for the consumer and environmentally-sound disposal options. Riboud also had a mission of bringing health through nutrition to people around the world. He explained: When I visit a CBU I am always given a presentation about the buying power of the consumer in category A, B, C, D, or E. For instance, out of 250 million people in an area we can launch a product for the 50 million of them who are in category B. But I started to wonder why we didn’t look at category C, so we developed a strategy focused on making our blockbuster brands affordable for those consumers. But what about category D, or the people living on two dollars a day? They are also part of our mission to bring health through food to a maximum of people, because they make up 80\% of the population in emerging countries. It’s not charity; it’s sustainable development. We have to create a new economic model. In 2004, Danone started a project with that objective in South Africa, where the local subsidiary launched the yogurt Danimal in the city of Soweto. Retailing for 13 cents and sold through a distribution network of local women known as “Daniladies,” the yogurt was enriched with vitamin A, zinc, and iron. In 2006 a similar project took shape in Bangladesh, where Danone formed a joint venture with the Grameen Group, a pioneer in the field of microcredit and a 2006 recipient of the Nobel Peace Prize. The Grameen Danone Foods Social Business Enterprise created a yogurt targeting the poor in Bangladesh living for less than 2 USD per day. Shakti Doi, meaning “power yogurt,” would retail for 3–4 cents and be launched in fully biodegradable plastic. Meanwhile, Riboud appointed French soccer player Zinédine Zidane as ambassador of Danone’s Program for Children.7 Zidane was involved in initiatives involving children in India, Indonesia, and Egypt. In November 2006, Zidane inaugurated the first dairy plant in Bangladesh. Riboud said, “I’m deeply convinced that our future relies on our ability to explore and invent new business models and new types of business corporations. This partnership with a company as iconic and visionary as the Grameen Bank is, for Danone, a huge step in that direction and in better achieving our mission: to bring health through food to the largest number of people.” A Strong Position in 2006 and Beyond Under Riboud’s leadership Danone was a thriving international company. Riboud had launched a research center in Paris in 2002, and established a vital business division in the Asia-Pacific in 2004. Danone had acquired more than 40 businesses in Asia, Latin America, Eastern and Central Europe, Africa, and the Middle East. In 2007 the company showed an operating margin of 13.4\%, with France 7 Gwyther, “The MT Interview: Franck Riboud.” D o N ot C op y or P os t This document is authorized for educator review use only by DIVYA UPADHYAY, Alhosn University until Aug 2018. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860 Global Knowledge Management at Danone (A) 608-107 5 accounting for 22\% and Western Europe 54\% of revenues. Of the 90,000 employees working for Danone worldwide, 47\% were employed in the Asia-Pacific region. Danone was the global leader in fresh dairy products and was tied with Swiss packaged food giant Nestlé in beverages. Danone was second only to American food company Kraft Foods in biscuits and cereal products worldwide. Of Danone’s €14 billion in 2006 revenues, €8 billion were generated in the dairy division, €2 billion in biscuits, and €4 billion in beverages. Danone’s four main blockbuster products, Activia, Actimel, Vitalinea, and Danonino (all in the dairy division), represented €4 billion in revenues (see Exhibit 1 for selected financials). In July 2007, Kraft Foods made an offer to purchase Danone’s biscuits division for €5.3 billion; the deal was expected to go through by the end of 2007. A week later, Danone launched a takeover offer to acquire Royal Numico N.V., a Dutch baby food company, for €55.00 per Numico share, or €12.3 billion. To Riboud, these developments were in sync with the company’s mission to bring health through food to a majority of people. In January 2008, Danone would reorganize into four business lines: Fresh Dairy Products, Water and Beverages, Baby Food, and Clinical Nutrition.8 Managing Knowledge for Competitive Advantage Making product, customer, and operational information available to Danone employees around the world where and when they needed it was a challenge in the global company. Mougin and his colleagues recognized a tension between a more efficient top-down approach and local managers’ desire for autonomy. They also confronted questions about the role of information technology in managing knowledge. Local Markets By the early 2000s, Riboud was committed to maintaining close touch with local markets, despite Danone’s wide-ranging presence on five continents. Mougin viewed decentralization as essential to Danone’s strategy. He explained, “In the group, a managing director who is in charge of an activity in a country is the decision-maker, with P&L responsibility. Headquarters can merely suggest options to him, but cannot impose conditions. We think that there are more disadvantages than advantages in looking for synergies, and the success of our decentralized management can be seen in our local brands.”9 This strategy led Danone to have products that differed from market to market, to stay close to consumers. Mougin believed this allowed Danone to move quickly, as needed in a competitive market where it was not the largest player. “While it takes Nestlé an average of 12–18 months to get a new product to the market, we can do a launch in three months. Some of our competitors have a lot of good ideas for new products, but we are able get them to the market earlier, because our frontline manager can execute quickly.” Decentralization and Integration Mougin recognized that being decentralized could be confusing for frontline managers. They lacked clear directions from headquarters and often didn’t know whom to turn to for advice. And, 8 Groupe Danone press release, “Groupe Danone reshapes its management structure,” July 31, 2007. 9 Adapted from Franck Mougin and Benedikt Benenati, “Story-telling at Danone: a Latin approach to knowledge management,” Les Amis de l’École de Paris, April 1, 2005. D o N ot C op y or P os t This document is authorized for educator review use only by DIVYA UPADHYAY, Alhosn University until Aug 2018. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860 608-107 Global Knowledge Management at Danone (A) 6 there was little horizontal communication among the large divisions. Fabien Razac, a marketing director, explained that it was difficult for CBUs to learn from each other: At Danone, we don’t have a lot of quantified organizational expertise. The expertise that we have is the sum of our individual knowledge. We don’t have a library with a bunch of files where you can go if you need to know how to perform a certain task. The key learnings are embedded in individuals around the world, and there is little incentive to formally categorize things into databases. You have to talk to people and network to do your job. The schizophrenia between bottom-up and top-down is there all the time. You need the top-down to re-prioritize and re-concentrate, and you need the bottom-up to nourish—to listen to the market, the latest ingredients, the latest innovations, to know what works with the competition. . . . It’s because of this confrontation and the local autonomy that we create value. Prior Approaches to Knowledge Management Danone had made prior attempts to leverage company talent—people, knowledge, and products—without centralized governance. In the late 1990s, Jacques Vincent, a former vice president, had initiated the Growth Program to foster growth through sharing brand assets among the CBUs to develop blockbuster brands. Deheunynck elaborated: The Growth Program was a short-term focus shift from portfolio management to growth management. We had 2\%–5\% quarterly growth, but it was very volatile. Because Danone is so entrepreneurial and decentralized and has a “not invented here” syndrome, Jacques Vincent wanted us to use our CBUs to leverage practices rather than to use consultants. We looked for good performers in areas such as renovation, innovation, proximity, affordability, etc. If we were able to put these ingredients into one basket, we would over-perform our competitors. The Growth Program enabled us to maintain consistent growth at around 5\%. The Growth Program was replaced by Growth Too in 2003. Growth Too aimed to accelerate growth by identifying, analyzing, and formalizing good practices in the 70 CBUs—primarily in the fields of marketing, sales, human resources, and organization—to ensure that these good practices were adopted by all CBUs.10 The dairy division introduced a concept called the diamond—a hexagon charting six key parameters of a brand used to measure a brand’s effectiveness and progress. Via Growth Too, the diamond had been widely spread throughout the company. Said Deheunynck, who became the leader of Growth Too: The diamond is used throughout Danone now, as is the pyramid on our affordability mission. The pyramid organizes our markets and our typologies of consumers [A to E]. For instance, in India and China, A-consumers can afford bottled water, while E-consumers may drink contaminated water, but this will differ across countries. Many consumers can’t access our products. Our future consumers are probably below the current ones, so we need to adjust our strategy over time. This pyramid is used in all BUs today, and thanks to Growth Too we helped the BUs to modelize their tools and their practices. Next, Danone created “Acceleration Units”—international working groups that specialized in a particular concept or brand. An Acceleration Unit might have between 4 and 40 high-level members from a single function or from multiple functions—for instance marketing directors, R&D directors, or supply chain directors. Acceleration Units sought to identify good practices within a specific area 10 Danone words, http://www.danone-values.com/US/mots/pages/fiche_5_1.html, accessed September 2007. D o N ot C op y or P os t This document is authorized for educator review use only by DIVYA UPADHYAY, Alhosn University until Aug 2018. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860 Global Knowledge Management at Danone (A) 608-107 7 (for instance, in marketing, or within the Activia brand) and then to formalize and circulate them, enabling CBUs to improve performance, or roll out new products faster.11 Nicolas Riom, general manager of Danone France and former marketing director at the fast- moving consumer goods (FMCG) companies Procter & Gamble and Kraft Foods, came to Danone with several ideas on how to exchange good practices across the organization: Because Danone is fast-moving and entrepreneurial, we might be less efficient in some operational functions, but we gain in entrepreneurship and linking operational people to the business. This is part of our uniqueness, so we try to invest in that feature, rather than trying to imitate the big companies. This is where this idea of networking comes in, to get the frontline managers to talk to each other to exchange practices as fast as possible. We wanted to build a model that was a continuous improvement process and we came up with the Danone Operating Model, a list of 144 formalized best practices, using a tool called THEMIS. Launched in 2001, THEMIS was Danone’s group-wide SAP (business software) system. Mougin believed that Danone’s 90,000 employees needed tools for coordination. Implementation of the well- defined procedures of SAP proved difficult. Said Deheunynck: We struggled a lot with the rollout of THEMIS. We thought that an ERP [enterprise resource planning tool] was necessary because the organization was so decentralized. We didn’t realize it at the time, but I think that the THEMIS project was countercultural, simply because we are not process driven. Being controlled by headquarters has always been a challenge for Danone. Managers cannot be P&L responsible while having any sort of tool or system imposed upon them from above. Danone headquarters did not want to impose one way of proceeding with the implementation, and Mougin encouraged direct discussion between departments about the software, leveraging the experiences of those who had already tested it. This networking and the informal exchanges of practices that followed became eye-openers for Mougin.12 Emmanuel Faber, executive vice president of Danone, Asia-Pacific, pointed to frontline managers as the appropriate target for practice sharing: The head of the logistics depot in Finland should network with someone in the Czech Republic, Italy, Argentina, and China, who all have the same function. At the end of the day these people know which processes we need to change and what the consequences of changing the processes are. The frontline managers deal with the issues on a daily basis. They may not be the most important people in the hierarchy, but they are the critical-mission people. Faber underscored the importance of helping frontline managers network. Whereas general managers collaborate to “drive top-line growth”—perhaps, sharing advertising strategies—frontline managers traditionally lacked such opportunities. Yet, as he explained, “Networking among frontline managers is about optimizing processes to generate the resources that can fuel this top-line growth.” 11 Ibid., http://www.danone-values.com/US/mots/pages/fiche_7_0.html. 12 Adapted from Mougin and Benenati, “Story-telling at Danone: a Latin approach to knowledge management.” D o N ot C op y or P os t This document is authorized for educator review use only by DIVYA UPADHYAY, Alhosn University until Aug 2018. Copying or …