World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version - Page 88

additional content of the size difference between us and Nike comes back to the difference in our North America businesses. Years ago, we sent over European executives who didn’t understand American sports. We didn’t know baseball, basketball, and American football; we didn’t appreciate that sport in the U.S. originates in high school and college instead of in clubs (as it does in Europe). We created products that were great for Europeans but not necessarily for Americans. We had already begun to change this before I arrived. But I looked at it again and concluded that we needed to overinvest in America over a longer period of time, to ensure that we could build market share and margin. In other regions we have different strategies, because we have different goals. We’re trying to defend a high market position in Europe; in China, we’re trying to grow a strong market position but defend our margin. Focused Execution It sounds like your strategy is oriented toward long-term investments. RØRSTED: There is no long term without the short term. You need to get both right. You can be oriented toward quarterly results and still have long- term goals. Our management board compensation has two components: long-term incentives based on our 2020 targets and short-term incentives. It’s like being in university; you have to pass every exam along the way. You can’t just wait until the last quarter and try to catch up. Not every decision can be long-term. If a market suddenly slows down, as Europe is right now, you need to act [in a way that’s] relevant to that change. I think a lot of companies underestimate 86 world monitor the importance of getting the daily job done in a way they can be proud of. Leaders think they get famous for strategy, and they don’t really focus on the everyday execution, because they think you don’t get famous for that. But unless you have good execution in place, you will struggle with growth, because the operational foundation on which you grow is fragile. For example, we have outgrown our infrastructure in the United States. During the second half of last year, we missed revenue because our distribution system simply couldn’t keep up with our demand. In a sense, this was a self-created problem. We saw it coming, and nobody dealt with it. It’s cumbersome to create new warehouses. Then, suddenly, we had a problem. That’s why operational excellence — our One Adidas initiative — is so fundamental for our company. It helps us avoid creating problems for ourselves. What’s involved in the One Adidas initiative? RØRSTED: Our company has always been very good at generating top-line [results], but without leverage over costs. We added €9 billion (US$11.6 billion) to our top line between 2008 and 2016 with no change in operating margin. One Adidas is about improving operational excellence, so we get scale into our business model. And we are building consistency into our data sets. RUNAU: Adidas historically operated through strong country-based organizations. It grew basically from the bottom up, and each country created its own systems. We are bringing them together. Thus, for example, in 2014, we had more than 50 different intranet sites around the globe. Now we have one. RØRSTED: If I have a message to send employees, for example, to describe a decision the board has made, I send one message globally. In 2014, our system couldn’t do that. Back then, employees didn’t really know what was coming through the system. Digital Best in Class