RTM: Perhaps you could start by telling us what the old structure looked like.

RF: Each country had a lot of independence.  The general managers in our national subsidiaries were free to develop their own sales and marketing strategies.  Each country had its own warehouse and its own ERP system.

Canon Europe did exist, but essentially it carried out back-office functions such as accounting, and liaised with Japan on product management.  I was a marketing general manager for Germany and I guess I visited Europe once or twice a month.  Although I was told when and how to introduce products, not much was tightly controlled and directives were rather flexible.

“You have to warn people not to expect too much too fast.”

RTM: Why make the change?

RF: We could see that the market was changing.  A couple of large accounts approached us and asked for European coordination.  Since our national subsidiaries had so much independence, this wasn’t really possible.  We also found that marketing messages were inconsistent across Europe.  And there was a lot of duplication, with everyone planning his or her own channel strategies.

RTM: And what have you moved to today?

RF: Well, we established CCI Europe here in Amsterdam.  This consists not just of product managers but also of a marketing team and a business operations team. Marketing looks after marketing communications, marketing strategy, market research and also new media strategies.

Business Operations plans channel strategy and key customer strategy and it carries out sales coordination with the countries.  We have also started some pan-European sales teams.  At the moment that is limited to the sales of consumables.

The number of warehouses has been consolidated to one central warehouse in the Netherlands, five regional ones in Germany, the UK, Sweden and Italy and in France, and two satellites in Spain and Switzerland.  We have moved to a single European ERP system.

RTM: So what goes on at a national level today?

RF: Previously you would have a troika of managers in each CCI subsidiary, each responsible for a different function, such as sales or marketing, and all reporting to the national president.  Now we have a single manager who is responsible for everything and who reports both to the national President and also into CCI Europe.  In each country we have a European coordinator who is responsible for liaising between the country and Europe.  He or she reports both to the national general manager and into the European teams.

RTM: How easy has it been to formulate pan-European channel strategies, given the cultural differences between different European countries?

RF: We have basically developed a strategy for each of three main channels – specialist retailers (camera shops), wholesalers and mass retail.  We believe that each of these groups has its own business logic, which we need to understand if we are to maximise sales.

We found that the needs of players within a particular channel are rather similar, especially for cross-border customers.  But we also found out that the terms and conditions retailers received from Canon varied widely, without there being a particularly clear reason for those discrepancies.

“We also found that marketing messages were inconsistent across Europe.“

RTM: What are the benefits of the reorganisation?

RF: Previously, at a European level, it was very hard to know what was really going on. For instance, by the time Canon Europe had got the sales figures from the national subsidiaries, the data was old.  Now, with a single ERP system, we can see what is going on in real time.

Another allied advantage is that we can respond positively when customers decide to start building their own regional warehouses.  For instance, a major distributor is consolidating its Nordic logistics into a single warehouse in Stockholm.  Today we can welcome the move and even help the distributor to make the change smoothly.  Before, our general managers in Denmark, Norway and Finland would have felt threatened by the move. They would have been worrying about the impact of the change on their national sales levels. 

Also, we have a consistent marketing and brand strategy with fully aligned marketing communications.  We have also been able to develop pan-European promotions.  Before, we would have had to deal with different buyers and agencies in each country.  So this is a big saving.

RTM: What problems have you encountered?  I mean, there must have been some resistance at national level.  You were taking power away from some important people. And people always say that things are different in their country.

“You can engineer European logistics but you can’t engineer a European mindset.”

RF: Yes, there was resistance.  Two and half years on, there is still some resistance.  You can engineer European logistics but you can’t engineer a European mindset.  That has to follow!  But we have managed to build some strong teams and people are seeing the benefits now.

RTM:  What are the secrets?

RF: I think you have to involve people very early on and get them to buy into the new strategy.  This whole new approach came out of discussions we had three years ago, discussions that included a lot of national managers.

You also need to build strong teams and these should comprise a mixture of people from national subsidiaries, the European head office and new "blood" from outside who can take a fresh approach.

This is the approach we adopted with the country coordinators.  We also found that it was best to get them to spend roughly half their time at national level working with national management and half the time centrally here in Amsterdam, where they could talk to their equivalents from other countries. 

RTM: So the whole process takes a lot of patience.

RF: Yes, and you have to manage expectations.  The new European ERP system, for example, is very good, but it doesn’t have all the features that had been developed in some of the customised national systems.  You have to warn people not to expect too much too fast.

RTM: I guess one of the problems is how you reward people. 

RF: Yes.  Our managers are now rewarded for hitting a triangle of goals.  One corner is their personal performance; another is based on national performance, and the third is for achieving European objectives.

You have to ensure that it is fair so that general managers who lose sales because a distributor has moved its warehouse to another country still get rewarded for the sales that the distributor is making from there.  It is a fine balance.  It is a thin line that you have to walk along.  The secret is to keep discussing it, to keep thinking about it.

“Retailers really haven’t put in place European operations of their own.”

RTM: And are you finding that large accounts are becoming more pan-European?

RF: Certainly the distributors are.

RTM: And the retailers?

RF: (Laughs) That is the paradox, really.  Now, when they come to us and say they want pan-European strategies, we can say: "OK, let’s look at how we can align our supply chains and Sales and Marketing approach".  Often their reply is: "No, we can’t actually do that!"  Sometimes what they are really after is just an extra margin for being a European customer.

In fact, we often find that the retailers really haven’t put in place European operations of their own – power is typically still devolved to a national level.  But at least now we can start talking about how we could work with them internationally.
   
RTM: So what are the lessons you have learned?

RF: For me there are three lessons.  The first is that change starts with people.  Change is a journey and the destination can change while you are on the way.  You have to prepare people’s mindsets so that they are ready to travel rather than seeing the journey as a threat.  The people aspect can never be overestimated; you can never put enough emphasis on it, and defining roles and responsibilities is vital.

Secondly, you can never communicate too much.  You may feel that you have done a good job but there will always be people who will feel they do not understand.

Finally, consistency.  Initially you have to establish a framework, a European mindset.  When you start with such a process you can never allow exceptions.  If you do, you will end up with a whole series of them.  You will be confronted every day with reasons why there should be an exception at a local level!  They will come up with thousands and thousands of reasons why!

But when you have defined the business processes and business policies, then you can be a little bit more flexible and give people more autonomy within the framework.  The European mindset has to be there first.  If this mindset doesn’t exist then there will be abuse.  If it does exist, then you can allow autonomy.