Subba’s Serendipitous moments

May 14, 2007

SAP’s challenge — Beyond globalization!

Filed under: Business,Leadership,Model,Strategy — Subbaraman Iyer @ 2:14 pm

Wall Street on friday wrote  (subscription required) an interesting piece on SAP’s globalization efforts. The main point in the story was that SAP faced several challenges in its effort to globalize. From the story, it seems that SAP clearly had two distinct power centres. One was based out of the company head quarters at Waldorf, Germany and the other was based out of Palo Alto, California.

Apparently the clashes between the two groups was covered in the German media. Last year, at Waldorf there was even a town hall meeting over the "Americanization of SAP".

Perhaps this divide explains why some of the R&D and new product initiatives seemed to overlap, and in some cases  there was duplication of efforts.

Shai Agassi — the brilliant visionary who led SAP’s technology and new product development was the only non German on SAP’s board and must surely have found it difficult to deal with these issues, especially so as the product development efforts were distributed globally between Germany, US, India and other countries and he had ownership for new products. There has been intense speculation that Shai left SAP recently in a rather abrupt fashion apparently frustrated at the "culture" issues and the poor "passion to cost" ratio.

I think it is only fair that I quote Shai Agassi who has responded to the WSJ article. Incidentally the entire WSJ article is also available at Shai’s blog here.

I am sure SAP founders like Dr. Hasso would continue with their globalization initiatives. I think it is extremely important that they do so, given the competiton for SAP is increasing and coming from multiple quarters.

I would like to frame this issue, beyond just a globalization issue. Based on pure empirical and anecdotal evidence, it seems that German companies are more resistant to assimilate and integrate people from other cultures, and also have a tendency to impose their thinking on others, maybe much more than the US companies. Is there something in the German culture that makes them more aggressive and less consensus seeking?

Just as I am writing this post, I saw Daimler Chrysler hiving off a major portion of their investment in Chrysler. So, another mega – cross border merger seems to have failed. Well, that would be another post.

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  1. Interesting – but you are missing that German post WWII culture is more consensus driven than any major country one. Drives outsiders crazy – repeating and meeting again and talking it over – so everybody is on board and everybody has a chance to raise objections.

    The next point is performance: No company wants to go global and see the non home-country investments dilute the bottom line or not being able to fix them. Case of Daimler Chrysler — case of SAP development not respecting what is coming out of the US… interesting enough the same happened with India @ SAP originally – but India is in much better shape than the US is. Why? The US employees got hired to ‘show’ the way — and the US business culture is not too sensible once empowered by their management… See Mr. Stutz going to SAP in Germany to ‘clear things out’ — and now he is predicted a short life span @ SAP (speculation – we will see). The Indian employees got hired because of talent (and yes, cost, too) and fitted in. Convinced through performance. Overcame cultural challenges. The US employees are still struggling with it.

    Personally it all comes from the arrogance of being the ‘biggest’. US culture is coined being the largest economy in the world. Germany is coined to some point to be the largest in the EU. And even India has it’s points of arrogance towards smaller / less successful economies -right?

    Comment by Holger — May 16, 2007 @ 1:38 am | Reply

  2. I think it is too mean to think of departure of some CEO and dilution of some investment by a company can be equated like with a cultural divide.

    Will you consider success of Mittal and making of a global steel empire as imperialistic attitude of Indians?

    I would say these are all too simplistic views about what happens within board room of organization as large such as Daimler, Chrysler or SAP.

    In today’s corporate world no one can afford to think about one’s nationality. It is all about who can drive ideas and bring value to the organization and personal ambition of individuals.

    World is becoming too small, one who can innovate and convert ideas into implementation and give value to customers will rule the corporate world. If organizations and leaders within the organization think in terms of age old concept of culture bound by thin imaginary lines drawn on maps, they will get into their own trap sooner or later.


    Comment by Hemant — May 26, 2007 @ 6:38 pm | Reply

  3. […] Is the co-CEO model the solution to the leadership challenge amidst such strategic and operational challenges? I am not so sure. SAP has had several leadership challenges in recent times as listed here. […]

    Pingback by SAP faces the moment of truth « Subba’s Serendipitous moments — February 10, 2010 @ 10:59 am | Reply

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