A leader’s perspective on trusting the ethnographic process, embracing a customer-oriented approach, and uniting the worlds of business and social sciences to build strategy.

RED LEADERSHIP PERSPECTIVES

A conversation between Zlatko Rihter, CEO at Mölnlycke and Martin Gronemann, Partner at ReD Associates

about

Zlatko Rihter assumed his position as Mölnlycke’s CEO in November 2020. Since then, he has drawn upon the experiences of healthcare professionals to shift Mölnlycke’s strategy away from being product- to fundamentally customer-oriented. In this interview he speaks to the value of ethnography in the strategy-building process and reflects on the common fears executives experience when considering this unfamiliar approach. Following their work with ReD, Mölnlycke has made ethnographic-led insights central to their core business areas and is now committed to a customer-oriented perspective. 

Mölnlycke

Mölnlycke is a world-leading medical products and solutions company that equips healthcare professionals to achieve the best patient, clinical, and economic outcomes. The core business is within wound care, operation room solutions (ORS), gloves, and antiseptics. Mölnlycke employs around 8,400 people. The company headquarters are in Gothenburg, Sweden and they operate in more than 100 countries worldwide. Since 2007, the company has been part of Investor AB, an engaged owner of high-quality, global companies founded by the Wallenberg family in 1916.

Part 1
Building an ethnographic-led strategy 

ReD: What kind of organisation did you encounter when you started at Mölnlycke? 

Zlatko Rihter: Six years before I joined Mölnlycke, the approach was that of a traditional functional organisation: you had sales, R&D, marketing, and operations, each in their own silos. The advantage of such a structure is that it is highly robust – especially when it comes to the quality of corporate processes. The main problem was that we had lost track of the customer’s fundamental needs. All the energy was going into internal processes while nobody truly owned the end-to-end business and its vision. So, the first thing I did was have a group look into who the customers really were. We ended up with four call points or customer clusters that we could build from and organise ourselves around. 

After having restructured all operational tasks and processes, Mölnlycke needed to come up with a strategy. We had many discussions about whether we should take a traditional strategic approach or an ethnographic one. We decided on ethnography, and that’s where ReD came in. At that point we had four fully-fledged organisations with end-to-end responsibility emerging and we decided to run four projects globally to really try to find out our customers’ key needs and contexts. 

ReD: What is a traditional strategy process and how is an ethnographic one different? 

Zlatko: If you’re taking the ethnographic road, then you begin with the customer. Everything else is secondary. You get an unbiased input on the customer, you go into depth, into context, and set pretty loose borders. At the end of the day, ethnography allows you to see patterns. In our case, these patterns didn’t fully match our portfolio and our next challenge was to decide which of these open-ended issues we should go for and address. We have done that and are now moving into the how: how to ensure that we have the right capability. 

Another difference between this type of approach and the traditional one, is that most strategy consultancies go away and then report back every few weeks. They do all this analysis, and have an extreme upper hand because they bombard you with data. Normally, if you don’t have in-house competencies, you bring in one of the traditional strategy houses: McKinsey, Bain, BGC, etc. These companies have a certain methodology that is very data driven. They look for data, go into the company’s financial statements and do a more inside-out type of analysis and form a strategy out of that. They don’t start with a customer in the same way. In a more traditional approach, you know what you’re getting and it’s solid enough. You minimise risk but you don’t optimise your opportunities because it’s rare that you get really creative innovation from them. 

With ReD we were part of the process. ReD is a company that’s really dedicated to ethnographic studies. You don’t do things in half measures. You have a strong methodology, many years experience, and you’re involved in different industries – including healthcare – which is important. You’re also a smaller company, so we get attention from a small, dedicated senior team; we don’t feel like just another one of your clients. As a result, we have now become quite committed to the ethnographic study’s outcomes. 

Because whatever I do, it will only be gratifying if I see that the work we do has an impact on the ground. 

ReD: What, in your experience, made you trust the ethnographic process?  

Zlatko: When I was first exposed to the ethnographic process around 10 years ago – I was at a different company back then – I was super sceptical and critical as I couldn’t understand the point. I had millions of questions at the beginning, but then the patterns began to emerge and I quickly became a big advocate for ethnography. The process itself was really interesting because it was very involved. What I learned at that time was to start to trust the process and the methodology – to go with it, instead of trying to work against it. 

“Often customers don’t know what they want if you ask them. But when you study them and their behaviour, you get the broader picture, you see patterns, issues and gaps that they experience but that they can’t tell you.”

Part 2
Embracing a customer-oriented approach 

ReD: How has going beyond transactional data helped you better understand your customers’ challenges? 

Zlatko: With transactional data alone, you lose many dynamics and an understanding of the future. Often customers don’t know what they want if you ask them. But when you study them and their behaviour, you get the broader picture: you see patterns, issues and gaps that they experience but that they can’t tell you.  

I have always been a big data statistics fan and I can dig into it like nobody else. But you need to go beyond that and look for the dynamics within the data. That’s when it gets exciting. If you do ethnographic work, you go to the next step where you start to connect the dots beyond the pure transactional data. 

If you take the case of Mölnlycke, I think our innovation briefs are now sharper and broader. With the unbiased approach of ethnography we got to the true challenges that our customers face. We didn’t start from our current offerings but instead had an opportunity to take a new look at things. Suddenly we noticed that the challenges were not only in the products themselves but also in how to apply them. For instance, user training or challenges that arise due to staff shortages. If we’d just looked at how our products were being used we would have missed the big picture. 

ReD: A lot of companies talk about customer-centricity but in most companies strategy is still being done in a traditional way. Why do you think that is the case?  

Zlatko: I think people are brought up that way, it becomes their comfort zone. From a corporate perspective, I will take an ethnographic approach every day of the week. I’ve presented what we did internally to a lot of executives who get super excited and tell me, “I’ll come back, I’ll call you and then let me know how you did it and we’ll do the same.” But they don’t dare to take that step. It’s also out of the comfort zone for many corporate people to spend time with customers. They don’t know what to ask. They’re a little bit scared even. “How should I act, what should I do?” It’s basic stuff that I think limits people. But it has to be said that more and more senior management teams are being exposed to ethnographic research nowadays. 

“In a more traditional approach… you minimise risk but you don’t optimise your opportunities”

Part 3 
From theory to practice

ReD: What needs to be in place for a company to get value out of an ethnographic approach? 

Zlatko: Three things: one, organisational setup. For us it also made sense to take a different, more customer-oriented approach to our strategy because we wanted to organise ourselves less around functions and more around customer clusters. Two, organisational maturity. I think you need a more mature or senior or capable organisation, for example, to handle ethnographic projects and their outcomes. Three, leadership courage. You have to be more courageous with that approach. I think many more board members and management teams have executed traditional strategies than ethnographic-led ones, as they’ve done it a few times and they know what’s coming.

ReD: Why do you think there is such a resistance in executive training and business schools to engaging with anthropological principles?  

Zlatko: There seems to be a big silo between the business world and the anthropological world. They’re two separate worlds that seldom meet. From a business perspective, anthropological knowledge is seen as “fluffy” because it can’t be fully translated into numbers or measured. But, of course, they are simply two different ways of measuring. I believe social studies should be closer to business because, at the end of the day, all of us are dealing with people. Be it in a B2C or a B2B environment, we are facing human beings that don’t always make rational decisions. 

In my industry, for example, it’s easy to think that everything is working perfectly at the customer level. However, we forget that customers are human beings: they don’t always adhere to processes and they’re not always compliant. Nothing is ever perfect in our world or as you see it in the brochures. When you really dig into the customer’s lives and their nests, you see that it’s chaotic, messy, and even bloody. And it’s our mission in life to bring some order into that, at least a little bit. If we do that well, we will be rewarded with a lot of business. It’s as simple as that.  

The trouble with most businesses is that they are looking for perfection, and that goes all the way up to the business schools. A truly anthropological vision, that understands the complexity people are dealing with, confuses them. But if you really want to address the key challenges, you need to start merging sciences together much more. 

Three recommendations for future leaders looking for growth 

1. Find the customer: go to the customer and look for what issues they have. If there are big issues, you’ll find them, and customers will always be prepared to pay for a solution for them. That’s the way to grow. 

2. Don’t forget the numbers: once you find an area of need, you have to start calculating. If you save 50 out of 100 hours of your customers’ time, you need to find a way to commercialise the hours that were saved. 

3. Focus on assisting the existing workflow of the customer, not trying to change it: try to automate what the customer already does, even if they are sub-optimising. If it helps them and they feel that they are benefiting from our system, then they will use it and pay for it as well.