Global Firms Must Understand Local Practices
January 2008
STANFORD GRADUATE SCHOOL OF BUSINESS —Establishing Eli Lilly’s operations in China in the mid-1990s was no easy task, in part because company officials didn’t understand the local dynamics of doing business, Eli Lilly & Co. Chief Marketing Officer Robert Brown told a Business School audience.
“Everybody makes mistakes, and it’s important that you understand those as well” as career successes, Brown told a group of Business School students during a student-sponsored View from the Top address on January 17.
Brown said the 1995 launch of the company’s Chinese affiliate with a corporate mandate to log sales to $100 million in 5 years was marked with a series of challenges that he didn’t foresee. The most difficult: retaining high-quality workers in a country where employee turnover was high and corporate loyalty low. Brown thought one strategy to stem employee defections was to promote local workers to supervisory posts.
That approach backfired twice—the first time when one of three Chinese district managers in Beijing was promoted to a higher post. “The two other district managers quit because she won and they lost,” Brown said.
The promotion of 2 of 20 sales representatives led to a similar end. “We had 70 percent turnover within 30 days,” said Brown. “In China, the leader was often more important than the company,” he said. “These folks had no reason to believe in us and believe that if they stay with us and work with us, that future may look different and better. We had to start investing in the people.”
So Brown started a training program for local Chinese Eli Lilly employees, sending everyone to at least two weeks of business training each year, and putting 10 people in MBA schools. “What they saw then was this company is investing in me. That was a huge culture change,” Brown said. In three years, Eli Lilly’s turnover rate in China was down to 5 percent, and the company was attracting other workers who wanted to work in that kind of environment, Brown said.
Since then, the situation has again changed. Despite the company’s efforts, the turnover has climbed to about 38 percent today, compared to 25 percent for companies in China as a whole. “It’s a continual challenge. I think we did a reasonably good job of succeeding, but ultimately, we imploded.”
He also described the challenge of launching the drug Cialis in 2003, some five years after Pfizer Inc.’s Viagra stormed the market.
Today, most consumers will recognize Cialis as the erectile dysfunction drug that lasts longer. Lilly runs ads showing a cuddling couple being disrupted by an unexpected visitor and having to delay their night of romance for a few hours. Indeed, while Viagra and Bayer AG’s Levitra last about four hours, Cialis will last up to 36 hours.
Initially, Lilly wasn’t certain this long-lasting quality was a good thing. Brown said that doctors saw the drug’s 17 1/2-hour half-life as a potential health risk. But then he realized, “If we chose not to discuss that, our competitors would make it a bad thing. So we decided to market it as a drug that would let you choose the moments that were right for you and your partner.”
Although Cialis sales have not caught up with Viagra in the United States, they have surpassed Viagra in a number of overseas markets, sometimes with remarkable speed. Within 30 days of being launched in Europe, Cialis commanded a 30 percent market share.
Today, Brown says he is braced for more controversy as he embarks on a plan to market a “Once a Day” Cialis that men take every morning, whether or not they are planning a romantic evening.
The student View from the Top club and the School’s Center for Leadership Development and Research jointly sponsored the talk.