Digital transformation can be daunting for many companies, but it is especially challenging on a global level. Global companies usually standardize their business processes in international operations, but they also need the flexibility to provide services to different types of customers, employees, and users.
The decision on globalization or localization is not black or white. Each company has different operational, organizational, cultural, legal, and financial considerations. Below we will discuss the advantages and disadvantages of standardization and differentiation. We will also give tips on how to balance globalization with localization.
1. Global standardization
International companies, especially those that acquire other companies, rarely have standardized business processes. Standardization allows companies to scale for growth by consolidating their business processes. Standardized processes drive operational efficiency and enable global transparency in the business. For example, financial reporting is faster and easier when procedures are standardized. Although standardization may require a large investment in process modeling, you ensure that all processes in all locations are designed to give you a competitive advantage. Global organizations strive for standardization when they want to deliver high-quality goods or services with high predictability.
2. Location
Localization reduces resistance to change as you adapt to the different geographical locations’ unique needs and requirements. Instead of changing local business processes to adapt to head office processes, localization allows you to retain the unique strategies that are appropriate for each location. Some sites may need the flexibility to handle data and transactions in local languages and currencies. Some countries have advanced requirements regarding taxes, currencies, and reporting rules. By differentiating your processes based on location, you ensure that you remain compatible and avoid possible penalties.
3. Globalization
If you want the best of both worlds, you should be strategic about which processes you standardize and differentiate. Some processes should always be standardized. These include back-office functions that enable a common service strategy. Other processes, such as regulatory and reporting processes, should usually be localized. Although you may want to find customer-oriented processes, you should probably globalize operations that are not as value-creating.
4. Balance between globalization and localization
A balance between globalization and localization becomes even more important when you consider change management. The need to manage organizational change in global locations increases, the more you standardize your processes. Although standardization can save you money in the long run, you need to invest in comprehensive change management in the short run. This means more than just end-user training; it is also about communicating change effects and status updates in projects.
5. Change management
The most challenging aspect of a global digital transformation may be getting a corporate culture to fit around an agreed goal. You have to take into account cultural differences and language differences.
Anchoring with management is especially important in global projects, as local units can be extremely reluctant to change to globalized processes. People cannot absorb what they do not understand, so you must convey the reasons for the change and what it means for the individual and their team. It also enables them to know how it can positively affect the employee and the organization as a whole and the costs and consequences of not changing.
6. Customizations of the software
Does globalizing your business processes reduce the amount of customization you need to make with the software? Maybe sometimes, but not always.
Another strategy to reduce adaptations is to enable flexibility. This may make globalization more difficult than usual, but not impossible.
7. Definition of a support structure
When deciding which processes to globalize and which to localize, consider whether your infrastructure will be globalized, localized, or tailored. Many companies choose to centralize support and help desk for ERP, while others prefer to offer decentralized support to cater to different locations. The earlier you define an infrastructure, the earlier your super users will accept new processes. This applies to both local on-prem and Cloud ERP implementations.
8. Definition of main data strategy
Master data is an essential aspect of change but is often overlooked by both global and local teams. Not only do you need to standardize and migrate master data, but also define how it will be handled in the future. For example, will local offices have the flexibility to manage their own local chart of accounts, or will the changes planned require centralized and global governance? The same should be determined for other types of master data, including customers, suppliers, and product registers.
A tip!
This may be your first global digital transformation, but it’s not ours. Our experts in digital transformation and ERP systems understand the challenges of both globalization and localization and help you find the right balance based on your organization’s unique business goals.