Nestlé: Generating Competitive Gaps

José López addresses IESE MBAs

23/04/2013 Barcelona

José López

José López, executive vice president of Global Operations at Nestlé, often tells people he is "responsible for anything that can go wrong at Nestlé."

And in today’s digital world, a single mistake can have enormous costs since any customer complaint will remain online indefinitely, López told IESE MBA students during a session held Monday on the school’s Barcelona campus. His presentation, "Managing the Supply Chain in a Global Company: The Case of Nestlé," was part of IESE’s MBA Global Leadership Series.

"If there was ever time we needed to go for zero defects, zero accidents, zero losses – now is the time," said López, who meets daily with the Nestlé’s quality manager, as well as its Digital Acceleration Team for updates on customer opinion.

López said he favors generating competitive gaps across the value chain, rather than the common approach of closing gaps to catch up with rivals.

"I think it’s a much better idea to create gaps," which Nestlé does by focusing on three areas, also referred to as the "three Cs": delight consumers, deliver competitive advantage and excel in compliance.

In its approach to CSR, Nestlé puts a spotlight on rural development, water and nutrition, he said. The three areas were chosen because they involved global problems that Nestlé – which seeks to be a leading company in nutrition, health and wellness - could effectively address, he said.

López said there is a lot of confusion in the world today about what it means to create value and what it means to create wealth. He recounted a recent trip to London where he met with the heads of various start-ups. Entrepreneurs generally fell into two types: those who sought to create real value for customers and others who were already focusing on a lucrative exit in the near future.

"At Nestlé value creation comes through work, not only money," he said. "It’s about creating a sustainable business model by engaging the hearts and the minds of all the Nestlé employees around the world, so that the company continues to be an engine for development and prosperity."

López also said that he believes "economies of scale are overrated," citing Nestlé’s relationships with some 690,000 farmers, many in emerging markets. Characterizing the company’s approach as "Hercules Meets Buddha," López said that he gained important insights on sustainability during nine years he spent working for Nestlé in Japan, where raw materials are scarce.

In Japan, he learned that "waste is not an option," he said.