Chapter OneHow We Got Here
What you'll learn in this chapter:
Culture and the Bottom Line: Doing It Right; Doing it Wrong
The Global Century
From the Twentieth to the Twenty-First Century
What It Means to Manage across Cultures
What Is a Global Mindset?
Culture and the Bottom Line: Doing It Right; Doing It Wrong
Can culture have an impact on the bottom line? We're about to show you how large that impact can be!
In May 2005, IBM sold its ThinkPad computer business to Lenovo Group Ltd., a Chinese manufacturer of personal computers that previously had sold only in China. Immediately upon the acquisition of the ThinkPad, Lenovo, which had purchased the business for over a billion dollars, was thrust into the global scene in a big way. Thinking it needed to address its new market to enhance sales, Lenovo brought in Western managers and tried to remake itself culturally overnight.
A quintessential Chinese company that led its workers in twice-daily calisthenics, Lenovo felt compelled to adopt English as the official company language and hired its new chief executive officer from Dell Computer Corporation. Regardless of the intent, instead of a confluence of cultures, there were immediate riptides and floods. The Americans were frustrated by the Chinese need for harmony and inability to make public statements that showed disagreement. The Americans misinterpreted this as lack of engagement and inability to add value. In an attempt to streamline operations, the American management cut 10 percent of the company's global workforce and shifted the marketing headquarters to Bangalore, India. This was especially threatening to Lenovo because it was a company that took great pride in being essentially Chinese. Then, because things weren't moving quickly enough, the American CEO replaced a popular Chinese executive with someone from the United States. That caused a tidal wave of discord, and other key Chinese executives quit in protest, saying that they could see they weren't valued.
Chen Shaopeng, president of Lenovo's China operations, said: "When we disagreed in meetings we kept silent, but Americans assumed we were agreeing." The loquacious Americans talked so much that the Chinese felt the Americans didn't give them space to express themselves. What was the bottom-line impact? The company had serious problems that hurt it in the marketplace. Market share dropped from 7.8 percent to 7.3 percent at a time when the rest of the market was growing.
However, the story doesn't end there. Bill Amelio, Lenovo's American CEO, pointed out in a 2008 interview, "Lenovo's Chinese heritage is a very strong part of our global DNA.... Our basic challenge is to take that diversity and make it work for us as a competitive weapon."
To Lenovo's credit, the desire to make its global diversity a competitive advantage is reflected in the company's eschewal of a single headquarters. Amelio is based in Singapore; the company's chairman, a Chinese national, is based in Raleigh, North Carolina; and world headquarters are in Raleigh, Singapore, Paris, and Beijing with research and development labs scattered globally as well as in Yamato, Japan.
In other words, having learned from its earlier mistakes, Lenovo is in the process of making itself a truly global corporation that does what Amelio calls "worldsourcingwhere we source talent, manufacturing, and markets from whichever location in the world it makes the most sense."
As we will learn throughout this book, it takes more than sourcing to make global diversity a competitive advantage. It takes skill to enable that talent to overcome the cultural challenges it will encounter and elicit the special qualities each individual can contribute.
McDonald's in Europe is an excellent example of how an organization has used an appreciation of culture as a competitive business advantage. In October 2008, in the middle of a recession, McDonald's saw its sales from existing stores rise 8.2 percent globally, led by sales in Europe, Asia, and the Middle East. That story stands in contrast to the blaring television images of a McDonald's fast-food restaurant being burned or bulldozed as French activists attempt to destroy a McDonald's under construction. The French are a nation for whom good food and quality dining are cultural icons akin to the Eiffel Tower. Yet somehow McDonald's is thriving in France, with revenues second only to those in the United States. What's more, the French spend more than twice as much on their McMeals as Americans do, even though the cost of a Big Mac is about the same.
The company has about 950 restaurants in France, and in 2006 its sales in France grew by 8 percent, which is a pretty good growth for a country that treasures fine dining. It makes one wonder what they're doing right.
The CEO, Denis Hennequin, mastered the concept of being global. He said, "Yes.... We were born in the USA, but we are made in France, made in Italy, made in Spain." Hennequin respects cultures and has succeeded in harnessing culture to be a competitive advantage. While maintaining a global brand, he has adapted it to be respectful of local tastes and values. He's made the golden arches more discreet to blend in with their neighborhoods, banished Ronald McDonald, and adapted the restaurants so that they are more in keeping with the expectations of French diners. Some of the restaurants have leather upholstery, and some have fireplaces and candles.
He's adapted the menu to include le petit moutarde (a small burger on a ciabatta roll with a sophisticated mustard sauce). In addition to satisfying local tastes, McDonald's has developed relationships with local suppliers. The bottom line is that McDonald's is thriving in Europe because it gets the culture right.
Throughout the rest of the book we show other examples, linked to lessons of do's and don'ts, which taken together underscore the importance of culture and will help you gain your own global mindset and develop your intercultural skills.
The Global Century
It simply can't be overstated: You will not succeed in global business today if you don't understand, appreciate, and know how to manage across cultures. No matter how smart you are, how innately talented, or how technically competent, without intercultural skills you will not achieve your potential.
Why? you ask.
Because in the twenty-first century, the whole world is your marketplace, and the people you work with come from every part of the globe. Indeed, global cultural diversity is not a slogan; it's an everyday fact of the workplace. It affects the way you interact with the people around you, conduct conference calls, set deadlines, and make presentations. Your customers, colleagues, and suppliers are probably from different cultures, and you need to understand their values and behaviors to manage them, sell to them, and satisfy their needs. In other words, in the twentieth century, you needed to be culturally adept to do business "over there," but now, in the twenty-first century, you need to understand culture to do business "over here."
Today, when you venture into the work world, you're entering a global marketplace with thousands of vendor booths, dozens of currencies, and myriad baffling behaviors.
Though it's much more subtle, when you telephone a foreign colleague, attend a meeting overseas, participate in a global team, or manage workers in an international office, you may find behaviors as perplexing as if you were trying to bargain for goods in an outdoor market in Bangkok or Bangalore. Indeed, understanding culture is as important as using the correct currency if you want to succeed in business today.
However, this can be surprising because people dress similarly, work in offices that are like your own, and may even share your tastes in cuisine. Don't be fooled; the similarities are only on the surface. As you'll see throughout this book, products, services, and customer expectations are different in each culture, and organizations have to plan differently to succeed in various parts of the world. Look at the cultural faux pas committed every day by well-meaning corporate executives who have been lulled into thinking that everyone is becoming the same and so are stunned when reminded of how confusingand possibly divisivecultural barriers can be. Stories abound: Starbucks, General Motors, Kentucky Fried Chicken, and Burger King all have made major cultural miscalculations that cost money and were potentially disastrous for the business.
Culture is important for an organization's success. It is also important for your individual success whether or not you work or travel internationally. Understanding culture is important for your success even if all your work takes place in your home headquarters. As you look at any leading multinational corporation, you'll see people from a variety of ethnicities, cultural backgrounds, and personal styles, all filling important slots as peers in the organization. The world has come to you, and in an environment where intellectual contribution is the key component people bring to work, the ability to interact effectively needs to be part of your core skill set.
From the Twentieth to the Twenty-First Century
How did we get here? In the early and middle twentieth century, businesses succeeded on the basis of financial resources, technology, and labor power. The business powerhouses of that time were U.S. Steel, American Can Company, General Motors, General Electric, and AT&T, all highly industrialized and heavily reliant on worker production. In many instances, individual workers were viewed as parts in a production cycle. Henry Ford's introduction of the modern assembly line, for example, meant that Ford Motor Company could mass-produce automobiles without regard to the individual talent of the people on the line. In other words, individuality wasn't a particularly important element in the success of the company and most employees were viewed as interchangeable parts. Perhaps in that environment worker individuality and uniqueness were even impediments to efficiency.
During that period, managers and executives needed skills related to efficiency that could ensure that their employees would deliver high-quality products on time; they needed to inspire organizational loyalty among their subordinates with the understanding that loyalty would be rewarded by promotions and longevity with the firm, and a manager's most coveted skills were those relating to productivity. Although individual judgment and creativity were valued, their use within the company generally was restricted to a select, small group of senior executives whose purview might be limited to a very small geographic area.
As the world moved into the information age, talent and individuality became increasingly important to the creation of the product as well as its production. Technology, ranging from sophisticated robotics to simple spell checkers, replaced the need for a significant amount of supervision to achieve quality control. In a technology-driven world, fewer line workers and supervisors were needed, and as a result lower-level production jobs began to disappear. Global competition also entered the marketplace, and organizations became more productive and began to cut jobs. Companies became flatter, workforces became leaner, and as the pace of change accelerated, companies were required to become ever more nimble.
As workers began acknowledging the shift from the traditional paternalistic or maternalistic system (AT&T was called "Ma Bell"), they also began to morph into a different type of resourceone that would thrive on individual talent. Individuals recognized that their long-term economic viability depended on their personal skill sets. In the new environment, promotions would be based on achievement and unique contributions rather than longevity. The personnel department changed its name to the human resources department, and the manager's role changed from being a production supervisor to being a talent manager.
At the beginning of the twenty-first century, the intellectual prowess of an organization's people often defines a company and what it produces. In fact, capital markets look to invest in firms that are endowed with an intellectual talent base. Not only did the huge multinational corporations of the mid-twentieth century trim their production workforces, but a new type of powerhouse emerged. Companies such as Google, Microsoft, Apple, and Cisco, among others, created products and services in which the firm's wealth resided in the intellectual capacity of its employees rather than in the production lines. Even venerable organizations such as General Electric and Siemens became as reliant on the intellectual contributions of their workers as they were on their production capability. Today, in most companies intellectual capital has become the ultimate resource necessary for success, and so nurturing and managing that capital has become a crucial business challenge.
As intellectual capital became an increasingly critical corporate asset, businesses realized that they had to seek out those talented individuals no matter where they resided in the world and be able to integrate them into a global talent pool. Technology responded to that need by developing a host of collaborative software products. By the end of the twentieth century, we had seen managers evolve from production supervisors to human resource developers. At the same time, the strength of the workforce evolved from valuing uniformity to valuing individuality and uniqueness. In other words, it became critical to value diversity whether it was domestic or intercultural.
What It Means to Manage Across Cultures
Today it's not at all uncommon to manage business functions in other countries with direct and matrixed reporting relationships to functional teams in many countries. It's also not unusual to interact with colleagues at home who have a variety of backgrounds and diverse personal styles, all of which respond to different management techniques. Learning these techniques and building an awareness of how to manage these diverse cultures is what this book is about.
In the following chapters you'll learn the seven key characteristics in the CultureWizard (CW) Model©, which are easy to understand and will help you identify and translate behaviors so that you will be more effective as you do business (see page 53). You'll begin to learn the attributes of a global mindset, and through case studies you'll see how talented people manage business across cultures.
What Is a Global Mindset?
In all but the most local services, globalization has fundamentally changed the way we conduct work. Almost all business today is global or soon will be. Even your local restaurant may use a telephone-based reservation service half a world away, and when you put in an e-mail address, you're often unaware of where in the world it's going. A global mindset is the ability to recognize and adapt to cultural signals so that you intuitively see global opportunities and are effective in dealing with people from different backgrounds around the world.
Business leaders view the world as both a place to find resourceshuman and otherwiseand a place to locate and maximize markets. Obviously, the more able you are to identify cultural differences and the more capable you are at appreciating them, the better you'll be able to manage culturally distinct behaviors.
Why do you need a global mindset? A global mindset is the ability to see global opportunities intuitively. It enables those who have it to work effectively wherever they are in the world. To appreciate the importance of a global mindset, we think it's worthwhile to consider the confluence of the following phenomena in the global business community:
* Global sourcing refers to the procurement of everything from raw materials to human capital around the world.
* Global mobility refers to the flow of people and ideas around the world. Wherever you are in the world, you're likely to encounter people from other cultures.
* Global marketing refers to the ability to develop products and services appropriate for the markets at which they're aimed. Organizations need to have people who understand cultural differences so that they can create products and services customized to local needs.
* Finally, the phrase global wisdom and collaboration refers to the intellectual capital that fuels the contemporary marketplace. People need cultural skills to be able to collaborate, innovate, and maximize benefits and opportunities for themselves and their organizations.
Let's look at each of these phenomena in more depth.
Global sourcing is the worldwide search for human resources to provide an organization with the best people for the work regardless of their location. We used to want spice and silk from India and China, but today commodities go beyond natural and manufactured goods; we're looking for talented individuals. Global sourcing means that you're able to seek talent anywhere in the world, recognize it, and capitalize on it for your business. One prerequisite for making this effective is your ability to appreciate cultural differences and know enough so that you can interact with people from other countries.
Take, for example, the multinational Dutch firm that outsourced the development of a new global information technology service platform to an Indian company. When the Dutch head of the IT group met with the programming team in Bangalore to discuss the core platform on which to build the application, he casually suggested that the Indians use a well-known, commercially available platform. This was only one of many platforms that could be used but one with which the manager was familiar. He asked the lead on the Indian team if they could build the application on that platform.