Refreshed Group Strategy 2013-2015

136 Group mindset

Group values

Group mindset dimension #1:

Knowledge sharing and dissemination of best practice

Group mindset dimension # 2:

Group standardization and integration

Group mindset dimension # 3:

Capitalization on local specificities through differentiation and localization

Group value #1:

Glow

Group value #2:

Courage Group value #3:

SmartFun

Figure 5.13: Group mindset and group values – how do they combine? Source: Author.

What does it mean, for instance, to display ‘courageous group standardization and integration’? How to

‘capitalize on local specificities with glow’? Or in which way can ‘knowledge sharing and dissemination of best practice be approached with glow’? The answers to these questions have not been discussed – a discussion that seems timely in as much as the Navigator survey clearly testifies to the fact that the Solar group values are widely recognized (if not interpreted similarly). Although it is unknown to what extent Solar group values in practice act as guidelines for action, combining the group values and group mindset is an avenue for developing ‘group mindset’ not yet leveraged in Solar. Perhaps ‘group mindset’ generally could be considered SmartFun?

137

2013, covering the last half of the current strategy period from 2013-2015¹². Energy-efficient products and solutions are presented as growth drivers in the updated version of ”#1 in Technical Wholesale” for 2013-2015, which aims at turning Solar into a more profitable group:“Our focus is on increasing earnings, and we will do so by strengthening the way we handle day-to-day operations and by implementing a series of

strategic initiatives. The most essential objective is for us to begin utilizing our existing assets and

competences more fully. To do so, we must improve efficiency in all aspects of our business”, explains Group CEO Flemming H. Tomdrup. One of these strategic initiatives is to have an even more proactive, efficient and customer-oriented sales organization and uniform sales processes. Solar hopes to differentiate itself from competitors and create more value for customers by further improving the ability to supply both physical products and services. In addition, Solar will focus more on career development and recruitment due to the fact that demographic developments in the workforce pose challenges for future attraction and retention of employees. The refreshed group strategy’s aim is to:

• strengthen Solar’s position as one of Northern Europe’s leading technical wholesalers within electrical, plumbing and ventilation products,

• profit more from the business model which offers competitive logistics, product and service solutions,

• benefit maximally from daily operations by utilizing employees’ strong individual skills to create high-performance teams,

• be seen by customers as their preferred technical wholesaler,

• in time become one of the most profitable enterprises within the industry.

Over the course of the research project and strategy implementation, the corporate focus areas with regard to

‘group mindset’ have changed. The strategy company program manager explains: “We started off thinking

‘group mindset’ along the lines ‘one company’, but we have long moved on from that” (Participant observation/Field notes). The launch of the 2013-2015 business strategy also saw the initiation of a new governance style vis-à-vis mature and emerging markets (as foreseen in the 2010-2012 business strategy) dividing the Solar operations into two groups of ‘key markets’ and ‘challengers’ as illustrated in the below illustration from the 2013-strategy kick-off:

12You can watch the Solar CEO elaborate on group strategy (among other topics) in the Solar webcast of the ‘Solar Q3 presentation’

(1 hour, 21 minutes) http://www.solar.eu/Menu/Investor or http://storm.zoomvisionmamato.com/player/solar/objects/x5hp1dw3/.

138

Figure 5.14: Key markets and challenger markets. Source: Solar Group Strategy Presentation 2013.

This division was accompanied by a modular business model, a ‘hop-on/hop-off model’ where different countries all share a core technical wholesale offer, but may choose à la carte which other value propositions to offer depending on the competitive situation, market maturity and organizational pool of knowledge:

Figure 5.15: A modular business model of ‘hop-on, hop-off’. Source: Author developed from Solar Strategy Kick-off 2012 and Corporate HR.

139

This represents a marked change from previous phases of internationalization going for the all-in replication of a Danish business model in foreign markets. The change in governance style towards a modular business model has also been mirrored in the concrete roll-out of the company programs and projects through which the business strategy is carried out, one prominent example being the roll-out of the SAP-based ERP system Solar 8000 which is seen as one of the biggest and boldest moves in Solar history of a magnitude similar to embarking on internationalization (Exploratory interview: Magnus Dahlmann). Three countries are now running SAP on the group template, the fourth and last key market to convert to SAP, Sweden, will be fully operational by the end of Q2, 2014 (Solar press release, March 2014). Ideas to have a group-wide template have been abandoned, and so, the challenger markets are to run a less demanding Axapta solution, which will also suit the needs of the ‘sunshine companies’. Another example is the group-wide career development program as well as the employer branding campaign, representing Solar as a ‘Land of Can-do’ (cf. figure below): The individual countries are presented with the option of opting-out entirely, or implementing parts of the planned activities as well as implementing them in a localized manner.

Figure 5.16: Solar print and online job ads welcoming jobseekers to the land of can-do. Source: Solar Corporate HR.

Similarly, corporate communication on group strategy 2013-15 consisted of a basic communication toolkit in order to ensure message consistency, but how the message was delivered was left up to the individual countries, which chose to avail themselves of a variety of activities and channels, and with success, judging from a mini-Navigator survey conducted in the end of 2013. Further, corporate program management of strategic programs and projects was supplemented by locally situated company program managers, supporting local managers with strategy execution of both group and local initiatives.

Although increasing profits are the number one priority in this strategy, ‘group mindset’ remains part of the drivers of efficiency and growth as illustrated in the below overview of strategic goals and initiatives for the strategy period 2013-2015 by a ‘group mindset’-ring surrounding the entire strategy:

140

Figure 5.17: ‘Group Mindset’ as strategy facilitator and capability. Source: Mette Bredkjær: January 21, 2014, Global Leadership Academy meeting at Solar, Vejen, Denmark, presentation by Mette Bredkjær, Company Programme Manager. Globalization &

Group Mindset -International Strategy Execution.

Further, as the financial crisis takes its toll organically or acquisitively growing out of the crisis is not enough or not an option at all – operational excellence is necessary to optimize international resource utilization.

The financial crisis does seem to be wearing off for Solar, however. In the annual report for 2013 published March 2014, it is reported that Solar Group revenue and EBITA for 2013 exceeded most recently announced expectations slightly, but that the group’s earnings were still unsatisfactory – see table below:

Figure 5.18: Solar Financial highlights 2009-2013. Source: Solar 2013 Annual Report.

141

Further, it is emphasized that in 2013, Solar generated positive cash flow from operating activities while also reducing debt – a trend expected to continue in 2014. Q4 of 2013 ended with negative organic growth of 4.9%. The outlook for 2014, however, does remain somewhat grim and there is not support for Solar management hopes of a more positive development in 2014. Solar does inform their shareholders that they expect a positive growth for next year, 2015, 4% of which can be considered a 'normal organic growth rate' for Solar in that the growth rate from 2001-2011 was 4%, EBITA margin of 5-6%. Although searching for cross-country synergies seems to have been put on a temporary hold, as many subsidiaries struggle with making a profit at all, and the implementation of Solar 8000 continues in key markets, the CEO maintains that the business case for ‘group mindset’ remains intact at has been even strengthened in the 2011-2014 period: “The business case for ‘group mindset’ has been strengthened by the present crisis with

unsatisfactory earnings throughout the group. We need to be successful in leveraging productivity and efficiency premiums of cross-organizational synergies.” (Exploratory interview: Flemming H. Tomdrup). At the time of writing, the future of ‘group mindset’ as an organizational capability and managerial meta-competence with the prospect of facilitating international strategy execution is unknown. Solar is

approaching the strategy formulation process of setting the objectives for the company from 2015 onwards – a process to be headed by incoming CEO, Anders Wilhjelm, joining Solar as of April 1, 2014, i.e. at the same time as the completion of the research project on ‘group mindset.’