www.hbr.orgANDCOMMENTARY HBRCASESTUDYMaking Local Knowledge Globalby Keith CernyHow can David Martin save the company and take it into the future?Five commentators offer expert advice.Reprint 96302HBRCASESTUDYMaking Local Knowledge Globalby Keith Cernyharvard business review mayjune 1996 page 1HBRs cases, which are fictional, present common managerial dilemmas and offer concrete solutions from experts. COPYRIGHT 1996 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.Can Lexington Labs managers learn to share what they know before its too late?AshisairplanecircledHeathrowAirportforthefifthtime,DavidMartinonceagainre-hearsed in his mind how he wanted that after-noonsmeetingwithLexingtonLabsseniorsales executives to play out. He had a feeling itwouldnt go the way he hoped.As chief operating officer of the Boston-areapharmaceuticalcompany,Martinwasrespon-sibleformotivatingandguidingtheoperatingmanagementfrom country managers to mar-keting executivesin Lexingtons internationallocations. When he had started at the companyeightyearsearlier,gatheringswiththesalesforcehadbeenfun,informalcelebrationsofLexingtons extraordinary success. Everyone knewoneanother,itseemed,andthesalesconfer-ences included as muchsocializing asthey didsharingofinformationaboutcustomers,com-petitors,andnewsalesandmarketingtech-niques. No longer. These days, with Lexingtonsexpansion to 60 offices in two dozen countries,many sales executives knew one another onlybyname,ifatall.Moreover,inrecentyears,most of the companys top sales personnel hadbegun to focus hard on their own businesses asmajorchangessweptthroughthehealthcareindustry.Indeed, those changes were already affectingLexingtonsbottomline.Eighteenmonthsbe-fore, the companys performance had begun tosoften. Sales, which had passed $1 billion in theearly1990s,werefalling,aswereearnings.Ofcourse,Martinalreadyhadtakensomemea-sures to rectify what he saw as a major part oftheproblemalackofinformationsharingacrossbordersandheplannedtotakemore.But as he anticipated that afternoons meetingin London with the companys top sales execu-tives, he was beginning to wonder if a more rad-ical overhaul of operations might be in order.ThesuccessofLexingtonLabsinthe1980swas well known in the pharmaceutical industry.Making Local Knowledge GlobalHBR CASE STUDYharvard business review mayjune 1996 page 2Keith Cerny, an associate in McKinsey & Companys office in Atlanta, Georgia, works primarily in pharmaceuticals, con-sumer goods, and telecommunications.Foundedin1981bythreedoctorsandanM.B.A. who had been friends since childhood,the company leveraged the scientific and med-icalexperienceavailableintheBostonareaand soon produced Azinomax, a leading blood-pressure medication. The product was a homerun and swiftly seized a major share in severalimportantmarkets.AzinomaxssuccessgaveLexingtontheresourcestodevelopahalfdozenotherimportantdrugsandtodiversifyawayfromcardiovascularproducts.Bythemid-1980s, the companys portfolio was diverseenoughtoincludeX-raycontrastmedia,syn-thetic hormones, and oral contraceptives.Atthesametimethatitwasbuildingitsproduct-line breadth, Lexington Labs was estab-lishinganinternationalpresence,movingag-gressively into Canada, Europe, Asia, and LatinAmerica.Martinhadworkedcloselywiththecompanysfoundingpartnersontheinterna-tionalexpansion,andtheyallhadagreedontheirstrategy:tosetupdecentralized,highlyindependentofficesandgivetheirmanagersthe freedom to hire locally, as well as to developlocalrelationshipsandprocesses.Thereason-ing: Once you had good products, success in thepharmaceuticalindustrydependedonwhomyouknew,fromthegovernmentregulatorswho had to approve every drug to the doctorswhoprescribedorrecommendedthem.Withitsdecentralizedstructure,LexingtonLabswasabletoemploywell-connectedlocalswhocouldtailortheirsalestechniquestotheircountrysbusinessenvironmentandculture.Clearly,theplanhadworked.Untilrecently,Lexingtons results spoke for themselves.But as Martin gazed out the airplanes win-dowattheEnglishcountryside,hereflectedthatLexingtonsdecentralizedstructure,oncesuchastrength,hadnowbecomeaseriousweakness.Decentralizationhadworkedwellfor the exigencies of the old health-care industry,inwhichrepresentativesofpharmaceuticalcompaniessucceededbydevelopingpersonalrelationships with individual doctors. The newhealth-care industry was strikingly different. Anewsensitivitytopricemeantthatgovern-ments werebeginning to place restrictions onreimbursements and, in many cases, to recom-mendtheuseofgenericdrugs.Italsowasgettingharderinsomecountriestoobtainregulatory approval for new drugs; as a result,pharmaceuticalcompaniesnolongercouldrely on new products to boost sales.ButmostcriticalforLexingtonLabswerethe changes taking place in the way drugs werebeing prescribed. New decision makersmostnotablygovernmentofficialsandhospitaladministratorswerenowverymuchinthemix,oftenhavingfinalsayonwhichdrugscould be prescribed for a wide range of condi-tions.Theimpactonthesalesprocesswasenormous. Suddenly, sales reps had to developnew relationships with individuals they did notknow and, perhaps more important, with indi-vidualswhodemandedawholenewtypeofsales presentation, including complex informa-tionaboutadrugscost-effectiveness.Increas-ingly,LexingtonLabssalesrepswerefindingthemselvesinfrontofmedication-approvalcommittees, bombarded with tough questionsabout health care economics and product ef-ficacy.Manycameawayfeelingthattheyneededbackupintheformofanexpertteam from within Lexington, as well as muchmorefinancialandmedicalinformationtogive their audience. They also came away feel-ing completely demoralized.Theproblemseemedclearenough,andMartinsensedthatthesolutionwas,too.Lexington Labs needed a system to encourageandfacilitatetheflowofknowledgeacrossborders.Salesexecutivesaroundtheworldneededtocommunicateaboutteam-sellingtechniquesthatworkedandaboutthemostpersuasivepresentationstheyhaddeveloped.Likewise,commonlyconfrontedproblemsneededtobediscussedsothatthecompanydidntkeepmakingthesamemistakesinonemarket after another. But what kind of system,Martin wondered, would work best? LexingtonLabs was no longer a small start-up firm, easilyadaptabletonewformsoftechnologyoref-fortstoshapeacorporateculture.Ithadbe-comealargeorganizationwithastrongcul-tureinplace,onethatvaluedindependence,andmanagersshowednoparticularinclina-tiontowardusingsystemssuchasE-mailorvoice mail.Astheplanecircledabovetheairportonemoretime,Martinreviewedthestepsheal-ready had taken to try to resolve the failure toshare knowledge. First, he had arranged for allthe companys senior sales managers to attenda so-called survival course in Canada designedtoincreasecommunicationandtrustamongtheparticipants.Therehadbeenalotofex-citementabouttheevent,herecalled,butinMaking Local Knowledge GlobalHBR CASE STUDYharvard business review mayjune 1996 page 3the end only one-quarter of those invited hadshown up. Most had given the same reason fornotattending:Performancewastooshakytospare a week away from the office.Martin also had approached Lexingtons ITgroupaboutinstallingaglobalE-mailsystemfor the companys top 250 managers. It was inthe process of being rolled out, but utilizationso far was low. The system was being used pri-marilyforsharingroutineadministrativeandscheduling data. Still,Martin reasoned,it hadbeen a start.Hehadbeenmoresuccessfulincreatinginternational project teams to review manufac-turing strategy, and that initiative had at leastledtosomecontactbetweenmanagersfromdifferent countries. In fact, two groups of se-niormanufacturingexecutivesfromsevendifferentforeignofficeshaddevelopedapro-posaltorationalizetheEuropeanplantnetwork.Unfortunately,Martinrecalled,Lexingtons board of directors had been reluc-tant to implement the plan, because they wereafraidofunderminingrelationshipswithnational governments.Martinsthoughtswereinterruptedbythepilots voice: The plane finally was cleared forlanding, two hours late. By the time he was ontheground,Martinknewhewouldhavetoheadstraighttothehotelsprivatediningroom, which he had rented for the sales meet-ing.Hehopednooneelsehadbeendelayed.Hehadinvitedonlythecompanystopeightsales executives to the session, and every voicemattered. But as soon as he entered the room,Martinnoticedoneimportantabsence:An-dreasKhlerofGermany.Khlerssecond-in-command, Karl Richter, was already present,however, and Martin hoped it would be just afew minutes before Khler himself arrived.He said his hellos and quickly invited every-onetothetabletobegin.Martinsplanhadbeen to hold a relaxed session over lunch thatafternoon,withthemainpresentationsanddiscussionsthefollowingday.Buttojump-start what he hoped would be a productive useoftime,hehadaskedalltheparticipantstocometothemeetingpreparedtomakeafewcomments about their countrys situation.Iwanttobeginbythankingyouforcom-ingtoLondonforthismeeting,Martinsaidwhen everyone was seated. As you know, ourperformance hascontinuedto decline, sothismeetinghasaparticularurgencytoit.Ilookforwardtohearingfromeachofyouaboutyourowncountry.HereMartinpausedforemphasisand then went on: And I would es-peciallylikethistobeaforumwhereweallshare our ideas about ways to bring LexingtonLabs back to its feet. I am confident that, work-ingtogether,wecanleverageourworld-classexpertiseintomakingthiscompanyaworld-class competitor again soon.In the silence that followed, Martin noticedseveralexecutivesshiftingintheirseatsandone checking his watch. Martin almost smiled:It could turn out to be a long session.Heglanced atthe agenda hehadpreparedfor the meeting. Germany was first. But Khlerstillhadnotarrived.MartinturnedtoKarlRichter.HasAndreassflightbeendelayed?he asked. Delayed? Not at all, Richter repliedwith a shrug. Andreas is not coming, he said.He is meeting with an important customer to-morrow and sends his regards.TypicalAndreasKhler,Martinthoughttohimself. The German operation was one of thefewLexingtonbusinessesdoingwellstillholdingtopmarketshareinseveralproducts.Khlerrarelyrespondedtophonecallsfromheadquarters,andhe hadflatlyrefusedwhenMartin asked him to attend the survival coursein Canada. You can call and bother me againwhen we are losing money, he had said. Un-til then, please leave us alone to run our busi-ness.Thecommenthadbeenmadewithalaugh, Martin recalled, but that it reflected theunits attitude was no laughing matter.So, Karl, why dont you go ahead and makeGermanyspresentationforustoday,Martinsaid. Just a few minutes on currentImnotheretocontribute,saidRichter,cuttingMartin off, albeit affably. Im heretoobserve.Andreasaskedmetotakenotes.Imto report the proceedings to him next weekin detail.Therewasmuffledlaughteraroundthetable.Martinlaughed,too,buthefeltapangoffrustration. Khlers absence and Richters glibcomments reinforced to him how complicatedit wouldbeto getLexington Labs, with itsin-dependent managers, to take the challenge ofknowledge sharing seriously.MartinturnednexttoRebeccaWoo,vicepresident of sales for North America. Woo hadbeen with Lexington Labs for five years, and al-thoughshewasbasedinNewYorkCity,sheGovernment officials and hospital administrators were having final say on which drugs could be prescribed.Making Local Knowledge GlobalHBR CASE STUDYharvard business review mayjune 1996 page 4and Martin had lunch together once a month.Theysometimesdiscussedthepoorcoordina-tion among sales operations, and Martin knewthat Woo shared his concerns about the lack ofcommunication across borders.Woo stood up to make her presentation. Atthe moment, Lexington Labs is holding steadyintheUnitedStates,butwereinforatoughbattleasaresultoftheincreasingpowerofpharmacybenefitmanagers,shebegan,andaroundtheroomafewothersnoddedtheirheads.Wevehadsomesuccesswithaggres-sivecountersellingtoindividualdoctors,butwhatwereallyneedtodoiscreateteamstomakesophisticatedpresentationstocentral-ized purchasers such as HMOsWe, too, need to persuade centralized pur-chasers,interruptedElaineRosen,theleadsalesexecutiveofLexingtonsBritishopera-tions.Butwecantseemtoputtheseteamstogether.Woonoddedandwenton:OneproblemIve noticed again and again is that salespeopleprefertospendtheirtimewithloyaldoctors,not with the new types of decision makers. Sec-ond, even when the salespeople work togetheron teams, they dont have the skills to preparethedetailedpharmaco-economicanalysisre-quiredtojustifythepurchaseofLexingtonproducts.Andthird,oursalesrepsjustarentusedtopricenegotiations,andtheyendupoverdiscounting for large purchases.Is any kind of team selling working well?asked Martin. This was exactly the kind of dis-cussionofcommonissueshehadhopedthemeeting in London would spark.Woowasquickwithheranswer.Actually,yes, she said. We had a very successful experi-encesellingasateamintoNewHampshireHomeCare,aleadingnursing-homechaininthe Northeast. A dedicated team of our peopleworked intensively with the chains executivestoputtogetheradetailedplanandeconomicjustification.MartinaskedJorgeQuesadaofthecom-panysSpanishoperations to present next. HeknewQuesada had had some experience withteam selling in a previous job, and he thoughthemightelaborateonWoospoints.Butin-stead,Quesadafocusedhisremarksonwhathe calledtheunique contextoftheSpanishmarketplace. Wewill never have budget limi-tations in Spainthe government wontallowit, he asserted.Thats what we said in Germany five yearsago, Richter countered.Maybeso,Quesadareplied,butrightnowwehave other,much morepressingcon-cerns.WearehavingagreatdealoftroublegettingOncoserapprovedbytheregulators.Theyreworriedthattherandomizationap-proachmayhave introduced some bias in thetrialOh, we had that problem, too, in Sweden,interjectedUlfOlsson,thatcountryssalesmanager.When? Quesada asked.Olssonsquintedashetriedtoremember.Id say about a year ago, he said at last.Whywerentwetold?Quesadacouldnthide his exasperation. Perhaps we might haveanticipated the regulators criticisms and beenready with some intelligent answers.Itoldheadquarters,Olssonsaid.Andin-deed he had, Martin recalled. The informationthenhadbeenfaxedtoeachcountrysoffice,butMartinrealizedhehadnotfollowedupafterthat.InSweden,Oncoserfinallyhadbeen approved, but not without a struggle.NexttomakeapresentationwasFranoisDupuis, the chief sales executive from France.Educated inParis and at the London BusinessSchool,DupuisspokeEnglishwithalmostnoaccent and his message was clear: The previousyear had been dismal for the French operation.The government was attempting to shift Lex-ingtonproductsintocategorieswithlowerlevels of reimbursement, and at the same timethere wasconcern about the possibleintroduc-tion of generics to the marketplace.HaveyouconsideredapplyingtheinitiativeRebecca just mentionedaggressive countersell-ingtodoctors?Martinasked.Thattechniqueseems to be working in the United StatesDupuisstoppedMartinwithawaveofhishand. That was something we did look into, hesaid.Ispentsometimeonthephonewithamanager in the Chicago office, and he seemed toknow a lot about the process; but to tell you thetruth, we never really got past generalities. Whathe was saying made sense for the North Ameri-can operations, but it didnt quite fit ours.Iheardaboutthatconversation,Woosaid.Afterward, the manager called me in New YorkandaskedifLexingtonhadanykindofmanualaboutcountersellingthathecouldsendyousomethingyoucouldadapttotheFrenchenvironment.Salespeople preferred to spend their time with loyal doctors, not with the new types of decision makers.Making Local Knowledge GlobalHBR CASE STUDYharvard business review mayjune 1996 page 5And?Martinpromptedher,buthealreadyhadguessedtheanswer.Therewasnomanual,and,beyondthat,Lexingtonsfinancialsituationwasnt exactly conducive to freeing up someonestime to create one.AfterpresentationsfromSweden,Belgium,andtheNetherlandsallsoundingby-nowfa-miliarthemesMartinturnedtoElaineRosenof the British operations to close up the session.Rosen had been with the company almost sinceits first days, and Martin knew she had an enor-mous stake, both financially and emotionally, initssuccess.Inaddition,herattitudehadalwaysbeenupbeat.Justamonthbefore,whentheyhad talked about Lexingtons future, she had toldMartin she was confident that the companys in-ternationaloperationscouldbeencouragedtoshare knowledge to everyones benefit.ButRosenstonenowwassomberasshedescribed the challenges her business was fac-ing.TheNationalHealthServicewasempha-sizing generics, she said, and hospital commit-teeswerebecomingincreasinglyimportantdecisionmakers.Tocompete,LexingtonLabsneededbothateamapproachandtheexper-tise to make it work.Do you have any sales and marketing initi-atives planned? Martin asked Rosen.She sighed deeply before answering. Frankly,Imnotsurewhatwecandoatthispoint,she said after a moment had passed. I calledontheNorthAmericanoperationsforinfor-mationabouttheirsuccesswithNewHamp-shireHomeCare,andwhiletheytriedtohelp,Ididntreallyhavethesensetheyhadthe time to spare, she said.Weregivingasmuchtimeaswehave,Woo came back quickly. Im sure everyone inthis room agrees that we have to run our ownoperations first before we can afford to take onthe problems of the others.Butwereall part of the sameoperation,Martinbrokein.Woolookedathimbutdidnotreply,andRosenquicklywrappedupherpresentation and sat down.Thateveningafterdinner,aloneinthehotelbar,Martinreflectedonwhathehadheardandseenatthemeeting.Itstruckhimhow little the managers talked to one another,howlittletheyseemedtoconnectonaper-sonallevel.IfLexingtoncoulduseanythingrightnow,itwasfriendshipsamongitssales-people.Friendsmakephonecallsand sendE-mail;friendsshareinformation;friendswantoneanothertosucceed.ButnowLexingtonwas too large, mature, and complex an organi-zationtoallowMartintocreatethiskindofnetwork among his salespeople. What was leftfor him to do?Just before turning in for the night, MartinwassurprisedtoseeElaineRosencomeintothe bar. She looked exhausted, but, more thanthat, she looked upset.Ihopedyoudbehere,shetoldMartintersely,sittingdownbesidehim.Ivejustchecked my messages and, just as I feared, I re-ceived a call from the field this afternoon. Itsvery badnews,David. Weve just lostamajornationalhospitalaccountarealopinionleaderintheU.K.aswellasoneofourfewprofitable customersand weve lost it to Cut-ler.Martin knewthat Cutler was Lexingtonsmajor competitor in the UnitedKingdom andthat it was doing extremely well lately, mainlyon the strength of its sophisticated team selling.Imsorry,Elaine,Martinsaid.Maybeattomorrowssessions,wecantalkabitaboutCutlerstechniquesatleastwhatweknowaboutthemandusethemasanexampleofan effective approachBut Rosen stopped Martin with her expres-sion. Iwontbethere tomorrow, David, shesaid.Ivehadalong-standingoffertojoinCutlerandIthink that now is the timetoac-cept. Rosen stood up to leave. Im sorry, sheadded,anditwascleartoMartinhowmuchshe meant those words. Lexington used to bethebest,mostterrificallyfunplacetowork.But it seems those days are over.Theycertainlywere,MartinreflectedasRosen left the bar. The question, however, wasnot how to recapture the old days but how tohelpLexingtonLabscatchuptothepresentand prepare for the future. He knew a big partof the answer lay in getting Lexington to func-tion as one global company, freely sharing bestpracticesandcriticalinformationacrossbor-ders. But how?How can David Martin save the company and take it into the future? Five Case Commentary Seecommentators offer expert advice.Lexington needed both a team approach and the expertise to make it work.harvard business review mayjune 1996 page 6Making Local Knowledge Global HBR CASESTUDYCase Commentaryby Louise GoeserHow can David Martin save the company and take it into the future?If only there were more friendships at Lexing-ton Labs, laments David Martin.ButfriendshipsarehardlywhatLexingtonLabs should be counting on right now to sparkthefreeandeffectiveexchangeofexpertiseacross units and borders. It is simply too largeand complex an organizationand too deep inacrisistorelyoninformalsystemsforthisabsolutelycriticalbusinessprocess.And,infact,researchrecentlyconductedatINSEADstronglysuggeststhatinformalsystemsbythemselvesdontworkinanybusinesssitua-tion topromotetheeffectivetransfer ofprac-tices.Instead,topmanagementmustcreatestrategies,structures,processes,andvaluesthat mandate what perhaps should come natu-rallybutusuallydoesnot:peoplesharingim-portant ideas.Tomymind,Martinisindeepertroublethanhe realizes. First,hethinkshe knows hisproblem,butheknowsonlyhalfofit.Cer-tainlyheseestheimmediate needtoget Lex-ingtonsglobalsalesexecutivessharingwhattheyknowaboutthenewsellingtechniquesthe market is demanding. But the more funda-mentalissueisthatLexingtonneedsaglobalstrategythatreflectstodaysmarketplace.Whatarethecompanyslong-termvision,goals, and values? How will performance alongthose dimensions be measured? It appears thatLexingtonLabshasnoanswersforthesecru-cial leadership questions, and yet they must beansweredifthecompanyistoreverseitscur-rentslide.Otherwise,howcanMartinmoti-vate and guide his sales force in the first place?Howcanhehelpthemunderstandwhytheymustshareinformationtobesuccessfulandwhichinformationneedstobeshared?Thoseissues are at the heart of Lexingtons maladyand recovery.Critical though they are, those issues cannotbe resolved in a day or even a month. The com-panystopleadersespeciallyitsCEOmustbegin immediately to redefine Lexingtons glo-bal strategy, making firm plans to be done withtheprocessinthreetosixmonths.Thestrat-egy must address the changing marketplace,Lexingtons product offerings and introductionprocess,thetransitionfromtodayslooselyknitorganizationtoamoretightlyknitone,andthedevelopmentofaglobaltalentpool.Thecompanysleadersmustcommitthem-selvestocommunicatingLexingtonsnewdi-rectionrelentlesslyandconsistently.Bytheend of the year, at the latest, every member ofthe organization should know Lexingtons val-uesandshort-andlong-termgoals,aswellashowperformancealongbothdimensionswillbe evaluated.A year, however, is a long time, and Martincannot wait even a week to stop the bleeding.Heandhissalesexecutivesneedtoidentifythe most threatening issues they face in eachregionandbegincoordinatedactionstore-gainmarketshare.Martinisright:Salesmanagersneedtostartsharingcriticalinfor-mation, in particular on how to create effective,sophisticatedteampresentationsforhospitalcommittees.Thisisacomplexandtechnicaltopicthatdemandsasystematicsolution.IsuggestthatMartinquicklyformaninternationalSWATteamofhisbestsales,marketing,andtechni-calemployeestoassemblewhatexpertiseLexington does hold on team selling. Unfortu-nately, the perfect person to run this group hasjustlefthimsittingatthebar:ElaineRosen.Heshoulddowhathecantostopherfromleaving,both tokeep herknowledge in-houseandtopreventthedemoralizingimpactherdeparture will likely cause. Yet even if she can-notberetained,theSWATteammustmoveforward.Martin should chargeit with prepar-ing a package on team selling and fund it totakeitsshowontheroad.TheSWATteamshouldliterallytravelfromregiontoregion,helping with crucial sales activities and dissem-inating expertise in formal training and discus-sion sessions.Martinalsoshouldchangethecompensa-tionstructureofthesalesforcetoreflectre-gional and company performance. The matterof compensation is, of course, always a compli-cated one and must be addressed thoughtfully.Atthispoint,however,Martinhasfewbettertools athis disposalwithwhich todeliver theLeaders must create strategies, structures, and values that mandate what should come naturally but usually does not: people sharing ideas.Making Local Knowledge GlobalHBR CASE STUDYharvard business review mayjune 1996 page 7message thatinformation exchangeat Lexing-ton Labs is no longer about seven-day survivalcourses.Itsaboutcorporatesurvivalperiod.AtWhirlpoolCorporation,thenecessityofsharingexpertiseandskillscomesstraightfrom our global strategya strategy developedanddrivenbyourchairmansofficewhichbringsustotherealsourceofMartinsprob-lem.Simplyput,LexingtonLabslacksleader-ship, and I say this because we have seen at ourcompanythatleadershipiswheretheex-changeofinformationislaunched,becomessystematic,andthenismonitoredandre-warded. Eight years ago, when Whirlpools ex-ecutiveteamdeterminedthatourstrategicfocuswastobecomeaglobalappliancecom-pany, we knew that our organization had to setthehigheststandardsforinformationex-changeacrossdivisionsandfunctions,nottomention geographical borders. To achieve thatgoal,weestablishedseveralprogramsthatinstitutionalizeknowledgesharing,withinsti-tutionalizebeingthekeyword.Theprogramsaretoonumeroustolist,butletmedescribetwo.Thefirsttakesplaceannually,wheneveryWhirlpoolbusinessisassessedbyacross-functionalteam from other parts oftheorga-nization.Duringthisprocess,eachbusinessdocuments up to five of its best practices. If theassessment team agrees that the best practiceshavevalueelsewhereintheorganization,abrief description and contact name are enteredintotheglobalWhirlpooldatabase.Otherparts of the organization then can match theirparticularbusinessneedswiththepracticesthatcouldimproveperformancemostswiftly.Simple guidelines, based on research and expe-rience,arepublishedtohelpmakethetrans-fers successful.A second way in which Whirlpool institution-alizesinformationsharingisthroughthefre-quentuseofglobalteamsandcouncils.Teamsare formed to solve key business issues or designglobalproducts.Globalcouncilsmeet,eitherinperson or by phone, with international managersfromsimilarfunctions.Forexample,aglobalcouncil may bring together the human-resourcesorquality-managementexecutivesofWhirl-pools businesses, which are located in more than140 countries. A primary purpose of these meet-ingsistodevelopworld-classprocessesbyshar-ing best practices. Like all our expertise-exchangesystems,theykeepusfocusedonWhirlpoolscommonchallengesandmosteffectivesolu-tions. In the final analysis, they keep us movingtoward a one-company approach, and they work.Butmakingthemworkishard;ittakescommitment from the entire organization, aswellascarefulplanningandmaintenance.Martin must start this process now. What liesahead of him is nothing short of a reinventionof Lexington Labs.Louise Goeser is vice president of corporate quality for Whirlpool Corporation. She is responsible for the companys Worldwide Excellence System, of which best-practice sharing is an important element.harvard business review mayjune 1996 page 8Making Local Knowledge Global HBR CASESTUDYCase Commentaryby Thomas H. DavenportHow can David Martin save the company and take it into the future?David Martin has somehow realized that bet-teruseofinformationcansaveLexingtonLabs. That in itself is the most encouraging as-pect of this case. Sure, he has taken a few mea-surestoimprovethecompanysinformationenvironment,includingatrust-buildingexer-cise in the woods and an E-mail system for se-niormanagers.Unfortunately,thosewell-intentioned changes are akin to planting onetreeinadesert.Alushforestofinformationand knowledge will not grow from the tree intime to save Lexington Labs.Theactionsneededtoreshapethecom-panysinformation ecologyfallinto four cate-gories:politics,cultureandbehavior,supportstructure, and technology. None of those cate-gories can be treated in isolation. Nor will anyactionworkimmediately.Butwithinayear,Lexington could have a substantially healthierinformationenvironmentandbebackontheroad to success.Lexingtons information politics are a nice ex-ampleofcorporatefeudalism.Feudalbaronsfromdifferentcountriesdecidewhatinforma-tion they need in order to run their part of thebusiness.Theydontaskothersforknowledgeandtheydontsharewhattheyhavelearned.Thisapproachhascertainbenefitsintermsoffocus,butitwontwork inLexingtonscurrentcompetitivesituation.Instead,thepoliticalmodelthatthecompanyneedsnowisfederal-ism, in which managers agree on the types of in-formationtheyregoingtoshareandontheinformation thatcan stay withineach businessunit.Lexingtonssalespeopleclearlyneedtosharewhattheyknowaboutproductsandcompetitors, but the companys executives mustdecidewhetherinformationoncustomers,fi-nances, and internal operations also needs to bewidelyshared. The firststepon thisfrontistogettheseniormanagersintoaroomtodeter-minepreciselywhichinformationstayslocalandwhichgetsreleasedtothefederation.Thatmeeting,besidesbeinglogisticallyimpor-tant, will also signal to the organization that in-formationatLexingtonLabsisnolongerjustthe realm of the computer people.Lexingtonsinformationculturewillhaveto place a much higher value on learning andonleveragingknowledge.Researcherswillcommunicatewithsalespeople;theGermanoffice will exchange ideas with Paris and Lon-don.Product-developmentandmarketingdecisions will be based on fact rather than in-tuition.Thecompanysfocusonitsrelation-ships with customers will be deepened throughsystematiccollectionofinformationaboutphysicians,hospitaladministrators, and regu-lators,butthefocusonwhomyouknowwill be no stronger than on what you know.Salespeople,likethoseatGenentechtoday,willhavelaptop-basedanalysesofdrugeco-nomicsandclinicalefficacyattheready.Thesenewattitudesandbehaviorswillbereinforcedbyperformance-evaluationandcompensationprogramsthatrewardinfor-mationheat-seekers.Lexingtonwillfireinfor-mationhoardersandturfprotectors,asJackWelch has done at General Electric. The realproofofthecompanystransformationwillcome when economically successful but infor-mationallychallengedmanagerslikeAndreasKhler are forced to change or leave.Martinmaybelievethatmanyofhissales-people are genetically incapable of such a trans-formation,andhemayberight.Heneedstostartreplacinghiscurrentstaffofsalesglad-handerswithmoreanalyticallyorientedsalesconsultants.Butthatwonthappenquickly,whichiswhychangestotheinformationsup-port structure are necessary. Despite its financialproblems, Lexington needs to add a group of in-formationcoordinatorstothefield.Theywillfunctionasinformationreportersandeditors,seekingout important stories (forexample,theOncoser randomizationproblem)frominternaland external sources, putting them in structured,usable form, and bringing them to the attentionof those with a need to know. The coordinatorsalsocanserveasmembersofsalesteams.Per-hapstheycouldcomefrom thecompanysin-formation systems organization, which in itscurrentstateprobablyprovidesonlydatarather than information or knowledge.The fourth domain that Martin should ad-dress is technology. A system for informationInformation environments are never static, and doing just one or two thingslike installing Martins systemis never enough.Making Local Knowledge GlobalHBR CASE STUDYharvard business review mayjune 1996 page 9sharing wont work unless people are inclinedtouseitandthereisahumanstructureinplacetosupportit.Itsano-brainerthattheE-mailsystemforthetop250managersshould be expanded to every professional andadministrativeemployee.Butthatshardlyenough. Lexington needs to build an informa-tion repository for the use of its field employ-ees. Clinical documents, discussion databases,salespresentations,andinformationaboutcompetitors all could be accessed through onesystem. The technology employed could be ei-ther Lotus Notes (the best option today if dis-cussion databases are a big part of the system)or an internal Web site, which is highly intui-tive andeasy touse.Hewlett-Packard,forex-ample, has a Web-based Electronic Sales Part-nersystemwiththousandsofitemsthatsupport the sales process; between 40 and 50documents are added every day.This multipronged approach addresses muchofwhatseemstobewrongwithLexingtonsinformationenvironment.Butitsnotaper-manentfix.AllthemeasuresIhaverecom-mendedmayeventuallytransformLexingtonfromaninformationdeserttoatropicalrainforest. At that point, information overload maybecometheproblem:Salespeople,forexam-ple,wontbeabletohacktheirwaythroughthe dense thickets of E-mail, voice mail, faxes,andWebpages.ThenMartinstaskwill betocraftarevisedinformationstrategy.Informa-tionenvironmentsareneverstatic,anddoingjust one or two thingslike installing Martinssystemis never enough.Thomas H. Davenport is a visiting professor and the director of the Information Management Program at the Graduate School of Business of the University of Texas at Austin.harvard business review mayjune 1996 page 10Making Local Knowledge Global HBR CASESTUDYCase Commentaryby Barry HarringtonHow can David Martin save the company and take it into the future?David Martin is poised to make a big mistake:He thinks the solution to his problem is man-aging the flow of information. The right solu-tion has nothing to do with information; it haseverythingtodowithnetworking,withpeo-ple.Itiseasyandmanycompanieshaveproved this to their own dismayto install in-formation systems that allow people to gatherreams of data. It is much harder, but far moreeffective,toinstallinformationsystemsthatallowpeopletonetworkwithoneanotheraroundwhatisactuallyalimitedbutcrucialbodyofknowledge.Ataminimum,thatiswhat Lexington Labs requiresifit is going toemerge from its crisis.Thecompanysproblemsaremorefunda-mentalandobviousthanthoserelatingtoinformationflowexcept,itseems,tothepeoplebackatheadquarters.Simplystated,Lexingtonneedsleadershipfromthecenter,andquickly.Itisinterestingtoconsiderwhythecompanycurrentlylacksleadership.Thereason, I would say, is that the CEO and his orher team back in the Boston suburbs have notclearly defined the role of the center itself. Is ittoformstrategy?Tohirethebestpeople?Tofocusthecompanyonaparticularexpertise?ThepeopleinLexingtonscorporateofficemustunderstandtheirdistinctiverole,orthecompany will go in as many directions as thereare subsidiaries. This lack of definition is com-moninfast-growing,successfulcompanies;theyhaveneverbeenforcedbycrisistocon-front the hard question of the centers purposeand then to fulfill that purpose.But even if the center figures out its role sothatitcanleadLexingtonLabs,Martinstillwill have to solve his problem through knowl-edgesharing.Knowledgenotinformation.Sharingnot acquiring. I make these distinc-tions because when we started designing Bain&Companysinternationalknowledge-sharingsystem several years ago, we purposely avoidedaccumulating the maximum amount of infor-mation.WecouldhavetappedtheInternet,required codification of all our work, and cre-ateda massivedatabase.Butwedidntthinkthe systems users would benefit by having ac-cesstowhatwouldbecomeastorehouseofthousands upon thousandsof documents.In-stead,wethoughttheywouldbenefitifoursystemcontainedonlytwoelements:knowl-edge relevant to our business and a list of thepeopleinthecompanytocallifsomeonewantedtolearnmoreaboutacertaintopic.ThatiswhatwehavecreatedwithBRAVA(BainResourceAccessforValueAddition),andIwouldsuggestthatMartinestablishasimilar system at Lexington.Heres how the system works: Every time acase team is convened to help a client, a casehistorianisappointed.Atthebeginningandconclusion of the project, the historian recordsin a one-page documentthe problem the cli-entfaces,theapproachtosolvingit,andtheexpectedandactualresults.Thissummary,which also prominentlylists thenames of thecaseteammembers,isthenenteredintoourcomputer system. In this way, when a new caseteam is put together, it can get on the BRAVAsystem and do a searchby industry, by prob-lemtype,evenbymanagementtechniquesusedandcomeup with two,three, or some-timesadozenexamples.Buttheinformationin the system is limited so that users are practi-callyforcedtocallthemanagerswhohavefirsthandexperience.Andourresearchshowsthat more than 60% of the time, they do.ButasystemsuchasBRAVAcannotworkwithout supportive measures, of which manag-erslikeMartinshouldbeaware.Forinstance,Bain motivates its people to use the system bybasingaportionoftheircompensationoncompliancethat is, on how reliably they con-tributetothedatabasewiththeircasehisto-ries.Inadditiontoestablishingsimilarincen-tives, if Martin decided to install a system suchasBRAVA,hewoulddowelltoincreasethenumberofface-to-facemeetings,conferences,and training sessions. The reason: Such contactbuilds a corporate culture that reinforces whatthenewtechnologysystemencouragesnetworking.Additionally,Martinwillhavetosingthepraises of the new system every chance he gets,frequentlybroadcastingtotheorganizationMartin is poised to make a big mistake: He thinks the solution is managing the flow of information.Making Local Knowledge GlobalHBR CASE STUDYharvard business review mayjune 1996 page 11how powerful it can be and talking up the sys-temssuccesses.(AtBain,forinstance,weenjoy telling the story of a director who had athree-hourplaneridetoprepareforanunex-pectedsalespresentationtoalargepotentialclientintheinsuranceindustry.ShegotontoBRAVA,accessedfivecasehistories,placedthreephonecallstothreedifferentofficesinthreedifferentcountries,andwasreadytomake a strong case for a particular solution bythe time she landed.) We also have found thatthe use of BRAVA is reinforced by its own util-ity, its own forward momentum. David Martinshouldtakenote:Gettinganetworklikethisgoingcannotbedoneinbitsandpieces.Heand his company must commit to it wholly andthen install it fully.Whenitcomestoinformation,acompanycan go two ways: It can manage individuals orit can manage the links between them. If Mar-tinwantstomakethemostofknowledgeatLexingtonLabs,hemustfocusonthelatter.Because for all the technological wizardry con-tainedincomplexITsystems,nothingintheworldcanreplacegoodold-fashionedtalk,human to human.Barry Harrington is a vice president and director at Bain & Company. He developed the consulting firms worldwide knowledge-sharing system.harvard business review mayjune 1996 page 12Making Local Knowledge Global HBR CASESTUDYCase Commentaryby George GoldsmithHow can David Martin save the company and take it into the future?ItsnowonderDavidMartinfeelshelpless:Hiscompanyiscollapsingaroundhim.Butrather than looking to high-tech informationsystemsorgadgetrytosaveLexingtonLabs,Martin must muster the courage to invest inanothersolutionentirely.Simplyput,thecompanyneedsadoctor.Thatis,itneedsanorganizationalpsychologistoracon-sultant with expertise in the field of corpo-rate culture.Effective leaderssomething Martinclearlyis notknow that financial performance is di-rectlylinked totheorganizations mood. Peo-ple tendto be upbeat when they arefulfilled,andfulfillmentisattainedintheworkplacethrough the act of helping customers. Satisfiedcustomersreturn,andemployeescontinuetofeel fulfilled. Its a virtuous circle, a self-enhancingstate. Lexington Labs is on the other side of themap.Thesalesforceisself-absorbed,passive,and quick to blame outside events for its poorperformance.Worse,thesalespeopleviewtheircustomersasstrangers,perplexingintheirbehaviorandunreasonableintheirde-mands. Theircustomers! In this environment,there are critical questions of strategy, informa-tiontechnology,andintellectualcapitaltoberesolved.Yetresolvingthemrequiresemo-tional energy, a spirit of cooperation, and opti-mism.NoITsystemintheworldcandeliverthose attitudes or states of mind.Butanorganizationaldoctorcan.Now,Ioften have heard senior executives express sus-picionoforganizationalpsychologistsorcul-turalconsultantsbecausetheyviewthemassome kind of luxury, called upon to make peo-ple in their organization feel better rather thanperformbetter.Thatperceptioncouldntbefurtherfromthetruth.Mostpeopleinthisfieldrefrainfromtalkingaboutagivenem-ployees personal psyche. Their goal is to refo-custheorganizationononepsycheonly:thecustomers. When employeesstopnursing oldwounds and agree that they all have the samepurposeservingthecustomerthedown-wardspiralofadestructiveorganizationalmoodcanbereversed.Martinfacesthehardtaskofdiggingintohisalreadystrappedre-sources and hiring a professional to jump-startthe process.WhatwouldthisoutsiderdoforLexingtonthat the company could not do alone?First,heorshewouldholdseparatemeet-ingswithMartin,hissalesexecutives,otherpeopleinthesalesorganization,andcustom-ersinordertogainanimpartialyetcompre-hensiveunderstandingoftheproblemsthecompany faces. The talks would examine whatbusinessandpersonalprocesseshaveworkedinthepastandwhatneedstobedone differ-ently.Thefocuswouldbenotonindividualsbut on developing multiple perspectives on theproblem at Lexington Labs.Second,thepsychologistorconsultantwouldprovidefeedbacktoMartin,makingsure his or her comments respected the confi-dentialityofthepreviousconversations.To-gether they could plan the third step, anothermeeting with the sales executivesone starklydifferent from the disaster in London.Thissessionshould be facilitated jointlybyMartin and the consultant. It should be highlyinteractiveandbeginwithremarksfromtheconsultant summarizing the emotional state ofthe organization in a descriptive, but not ana-lyticalorpunitive,manner.Thenextpartofthemeetingshouldmovethegrouptowardthe future by having it define a shared under-standing of what results the company needs toachieveinthenext3,6,and12months.Thegroupthenshouldlistspecificinitiativesthatwould help the company reach those goals.Fourth, Martin and the group should assignclearaccountabilityfordeliveryofthegoals.And, finally, the group should step back and as-sessthemeetingseffectivenessanddecidehow to make future meetings even more effec-tive. In general, the purpose of the meeting istoputstructureandmeaningbackintotheworkthesalespeoplearedoing.Itistohelpthem determine explicit ways to contribute tothe customerspositiveexperience,andthere-fore feel fulfilled and energized themselves. Ina nutshell, it is to get the Lexington sales forceintothevirtuouscircleofemployeeandcus-tomer satisfaction.What Lexington Labs really needs is a doctor: an organizational psychologist or a consultant with expertise in the field of corporate culture.Making Local Knowledge GlobalHBR CASE STUDYharvard business review mayjune 1996 page 13What I have just described may sound like afullagenda,butinmyexperienceworkingwithdozensofclientsin situationsnotunlikethe one at Lexington, I have found that crisplymanaging a full agenda establishes a new per-formance standard. These kinds of sessions arelong.Theyaregrueling.Butthoseinvolvedoften emerge with a renewed sense of mission,real work todo,andtheexperienceofhavinggotten things done together.WhenshouldthedoctorleaveLexingtonLabs?Martinwillhavetomakethatdelicateassessmenthimself,andheshouldlook tohissalespeople for the answer. Are they acting as ateam?Aretheyusinginformationtechnologytoworkcollaboratively?Aretheyspontane-ously picking up the phone to share ideas andexpertise? Aretheyenjoying their face-to-faceencounters? And, most important, are Lexing-tonscustomerssatisfied?Thecompanysbot-tomlinewillreflecttheorganizationsmoodlike a mirror.MoretimesthanIcancount,Ihavemetseniormanagerswhoharboredfantasiesthatinformationtechnologywouldchangeevery-thing about how they related to one another. Itell them to stop dreaming. IT is a support sys-tem. Once a company has clear goals, its mem-bers can use IT to achieve them, and they willif theorganizationalmoodisright.LexingtonLabshasneithercleargoalsnortherightmood.DavidMartinneedstowakeupandfacebothofthoseproblems,andhemustac-knowledge that he alone cannot fix them.George Goldsmith, CEO of the Tomorrow Lab in Concord, Massachusetts, was managing director of the Lotus Institute, Lotus Development Corporations research group, which focuses on organizational innovation and performance.harvard business review mayjune 1996 page 14Making Local Knowledge Global HBR CASESTUDYCase Commentaryby G. Kelly ODeaHow can David Martin save the company and take it into the future?TheimageofDavidMartincirclingaroundHeathrowservesasanaptmetaphorforthesituation he and Lexington Labs face: They arestuck in a holding pattern, going around in cir-cles, not in control of the situation, and latedangerouslylate.Butratherthanarrivingathis destination, Martin is about to begin a longjourney across some unfamiliar territory if hetakes the course I think is advisable.Martin thinks his problem is about informa-tion, and of course it is strategically importantto get his people sharing what they know andwhat they do well. But Lexington Labs doesntjustneedanimprovedITsystem.Itneedstomakeafundamentalchangeinitsorganiza-tional structure and way of working; that is, itneeds to revamp its entire approach to interna-tional marketing. Until now, the company hasbeenorganizedaroundcountries.Thisdecen-tralized,multilocalapproachhasbeenoneofthe two most commonly used models for inter-nationalmanagementoverthepast20years.Itsprimarybenefitisahighdegreeoflocalmarket sensitivity and focus, but the approachalsocanbehugelyinefficientandcostlysimply not affordableintodays environment.Moreover,itencouragesfiefdomsinwhichmanagers like Andreas Khler can openly em-brace a policy of isolationism.Butthe solutionforLexingtondoes notliein the other popular approach to internationalmanagement:thehighlycentralizedandcon-trolledglobalmethod.Althoughitdeploysacompanys assets efficiently, it is also the leastsensitivetolocalconcerns.Mostcompaniesnowrecognizethattheyneedtohavestrongtalentandresourcesonthegroundaswell.The old image of six cigar-smoking guys rulingthe world fromthecentralboardroomsimplywont work anymore.ThechallengeintodaysandtomorrowsworldthechallengeforDavidMartinandLexington Labsis how to be both globally ef-ficient and locally sensitive. To meet that chal-lenge,they must adopt what is now emergingas a newglobal lifeform, onethat I believewillbecomethedominantmodelfortherestofthedecade.Thisistheso-calledtransna-tionalmodel,whichcombinesglobaleffi-ciencies with local sensitivity by creating aninterdependent,highlycollaborative,andresponsive network of global teams. This orga-nizationalstructurerequiresamuchmorehorizontalapproachandtheeliminationofthelayersandcross-borderbarriersinhibitingmost international networks. It means organiz-ing quickly into flatter shapes and designatingteams to manage businesses and brands in dif-ferentcountries,incollaborationwithlocalmarket partners. Traditional hierarchical pyr-amidsgivewaytoflexiblecirclesofmultina-tionalteamsthatoperateacrossgeographicalborders and share common goals.AtOgilvy&Mather,wewerefortunatetocatchsightofthetransnationaltrendinitsearlystages.(Sixofourtop15clientshadbegun to move in that direction by 1992.) It be-came a core element of our global reorganiza-tionaroundclientsandbrands.Tofacilitatethetransition,weformedavirtualorgani-zationcomposedofmultinational,multi-disciplineteamsthatwouldprovideourclientswiththebestbalanceofglobalandlocal resources in managing their brands.Fouryearslater,thathasprovedtobetherightthing to do. Trend is now reality, and allof our top 15 clients are in some phase of tran-snational development, albeit at different ratesofspeed.Althoughtheyallwouldagreethatthis is the right way to go, none of them woulddeclare that theyve really cracked the code. Itisaconstantandoftendifficultprocessofadaptingtochangingmarketconditionsandrebalancingresourceswithinthenetwork.Itmeanswritingplansinpencilandknowingwhen to use the eraser.If Martin takes on the challenge of reorga-nizing Lexington Labsaccording to the tran-snationalmethod,hemustknowthatsuchaprocesswillrequirehimtobecomealeader.Hemustidentifyhisbestpeopleandgatherthem together to craft a new vision and way ofworking.Heandhisteamthenmustbethediscipleswhosettheexampleandstartcom-municatingthenewdirectiontoall,inawaythatpaintsadesirablepictureofthefutureThe challenge is how to be both globally efficient and locally sensitive. To meet that challenge, Lexington must adopt the transnational model.Making Local Knowledge GlobalHBR CASE STUDYharvard business review mayjune 1996 page 15and ignites everyone around the new mission.Actionsmust swiftlyfollowthewords. Asafirststep,Lexingtonssalesforcemustbereorganizedaroundproductsandbrandsrather than by geography. Team selling mustbecentraltothereorganization.Sharingofinformationandprovidingassistanceacrossbordersmustbecomethenormratherthantheexception.Onewaytoencouragesuchteamwork is through shared financial incen-tives that focus on total company and product-lineperformanceinadditiontotheusualin-centives for an individuals performance withina country.Central teams should be considered for keyproduct lines.Theirrole wouldbetomanagetheoveralleffort,actasaresourceforlocalteams,developproduct-specificexpertise,as-sistlocalteamsinmajorsellingefforts,andmove information across the network. Lessonslearnedfromcustomers,regulatorybattles,and competition also would be centrally pack-agedandavailabletoeveryone.Toencouragecollaborationandreduceduplicationofre-sources,Martinalsomightconsiderdistribut-ing the central costs across the markets.Allthesestepssounddaunting,andtheyare,butMartincannotaffordtokeepcir-clingaboveLexingtonsproblems.Hemustplungeinalthoughacrashlandingisnotadvisedandgettoworkonreorganizingthecompanysfundamentalwayofdoingbusiness.Withsometoughdecisionsandspeedyac-tion,LexingtonLabshasachancetoflyhighagain.G. Kelly ODea is president of Worldwide Client Services at Ogilvy & Mather, an international advertising agency based in New York City.Reprint 96302Case only 96302XCommentary only 96302ZTo order, call 800-988-0886or 617-783-7500 or go to www.hbr.org