In the early days of 2019, one Big Idea looks a little shaky. Ten years ago, its status seemed assured. Now its future is not so clear. What is Globalisation, and what is its future?
Sadly, I have no crystal ball, so any comments I make about the future of globalisation will be nothing more than opinion. But I can, at least, tell you a little about what this big idea is, and what it means for managers.
Continue reading Globalisation: Business, Politics, and Economics
In the 1980s, globalisation was the ‘Big New Thing’. Never mind that Chinese and Levantine traders had traded across half the globe at the start of the first millennium BCE. At the forefront of thinking about how multi-national corporations could organise themselves to prosper were a truly multi-national pair: an Australian, who’d worked in London and Paris and now occupied a professorship in the US, and an Indian who’d studied in the US and was a professor in France.
Christopher Bartlett and Sumantra Ghoshal surveyed the way multinationals organised themselves and categorised when each of the structures would be appropriate. Their legacy is visible on our high streets, in our back-offices, in factories and in building services today. A huge proportion of the goods we use are sold by multinationals.
Christopher Bartlett was born in 1943, and grew up in Australia. He studies Economics at the University of Queensland, gaining a BA in 1964. He worked as a marketing manager for the Alcoa company in Australia, before becoming a consultant with the London office of McKinsey and Co, and then a General Manager in France, for Baxter Laboratories.
But academia called to Bartlett, and he travelled to the US, to do a Masters (1971) and then PhD (1979) in business administration at Harvard, joining the faculty of Harvard Business School in 1979. He remained there and is not an emeritus Professor.
Sumantra Ghoshal was born in Calcutta, India, in 1946. He studied Physics at Delhi University, gaining his BSc. From there, he worked from 1969 to 1981 at the Indian Oil Corporation.
In 1981, a Fulbright scholarship took Ghoshal to the US, where he took a an SM at MIT in 1983, then did something extraordinary. He worked on and completed two different PhD theses at two different universities, at the same time. He was awarded a PhD by MIT in 1985 and a DBA by Harvard the next year.
And in 1985, he took up a position at Insead, where he became Professor of Business Policy in 1992. Two years later, he moved to the London Business School to become Professor of Strategic Leadership. He remained there until his untimely death from brain haemorrhage in 2004.
Surveying 250 managers from 9 multinational companies, Bartlett and Ghoshal concluded that there are three principal models that multinationals followed:
The Multinational structure is a decentralised, federal organisational structure that focuses on local markets and has only loose central control. They later called this model ‘multi-domestic’, and is most responsive to local demand. The corporation looks most like a portfolio of different companies. Now, these will be seen as band portfolios in which the brands have a lot of autonomy and much of their own infrastructure.
Food and drink, and household appliances are products that most need this strategy.
The global organisation tries to gain maximum economies of scale by centralising as many of its functions as possible. This often results in brands sharing infrastructure and services, leading to a lot of strategic decisions being driven by functional expertise and priorities. Brands therefore become increasingly global and undifferentiated in local markets.
Plant and heavy machinery, technical equipment, and raw materials production are products that most need this strategy.
Here, there is a lot more centralisation than in the multi-domestic corporation. But there is also more local autonomy than in the global model. One role of the centre is to facilitate knowledge transfer among the trading divisions, so they can share technologies and achieve economies, while making some of their own choices to optimise use of domestic supply chains and expertise.
Textiles, light machinery, and printing and publishing are products that most need this strategy.
Bartlett and Ghoshal considered that these three models left open the possibility of a new, fourth structure. This would combine elements of all three, and they also assessed which of the four models would work best, according to two pressures:
Their book on this topics, was the 1989 best-seller (often reprinted): Managing across Borders: A Transnational Solution.
When both pressures were high, their new model would be most suitable:
The transnational corporation is the most complex. It balances widespread global integration of technology and supply chains against the need to adapt products and services to local market preferences. It is supported by a strong central headquarters, that is able to move managers around to gain international experience and share knowledge.
Cars, consumer electronics, and pharmaceuticals are products that most need this strategy.
Bartlett and Ghoshal also discerned powerful shifts in the fundamental needs of a business strategy. Where Michael Porter had laid out strategies that would allow companies to win the largest share of a market, Ghoshal and Bartlett argued that corporations need a strategy to create value anew, and grow their market as a way of winning business. They said companies need to innovate their way out of market pressures, rather than push against them.
They also challenged the orthodoxy that began with the Scientific Management movement of Taylor, Gantt, Adamiecki, and the Gilbreths, and then the efficiency drives of people like Ford and Sloane. Sloane’s approach of Strategy, Structure, and Systems became the McKinsey 7S model. But Bartlett and Ghoshal wanted to replace Strategy, Structure, and Systems by Purpose, Process, and People.
The three Ps were the new building blocks of a corporation. In a series of articles for the Harvard Business Review, they placed responsibility for each of these firmly on the shoulders of top management.
So here we are, in 2017. And our world is dominated by a range of global, multinational, and transnational corporations, whose focus is on process and whose mantra is people. Not a bad body of work to act as a symbol of what multinational collaboration can achieve!
With the advent of the internet, we may feel like we are living in some form of global village. But if we allow that to translate into a belief that we are all the same, we will find ourselves running into problems. Each culture is different and these lead to differences in value. So when we try to communicate with one another, if we misread those cultural values, we can readily end up with misunderstandings, disputes, or conflict.
Dutch engineer and social scientist, Geert Hofstede, studied the systematic differences in national cultures and identified four, then five, then six dimensions on which to describe those differences.
Hostede was born in 1928, and grew up in The Hague, in the Netherlands. Although he went to study for an MSc in Mechanical Engineering at Delft University, in 1953, he had already had early experiences travelling to England and Indonesia, after technical college, which were to put him on the track of study cultures as a social psychologist. It was in post war England that he describes experiencing culture shock – his surprise at the difference between England and Holland, despite the geographic proximity and shared historical experiences.
After University, Hofstede spent two years with the Dutch army, and then ten in three commercial organisations, learning the craft of management. The third of these was IBM, where he founded the Personnel Research Department in 1965, which he led until 1971. It was during this time that he studied part-time for his PhD in Social Psychology at Groningen University.
It was also during this time that he gathered data on values and cultural outlook from 100,000 IBM employees around the world. This was to form the basis of his research, first published in Hofstede’s 1980 book, Culture’s Consequences. This compared cultural norms, behaviours and values across different countries. He originally identified 4 dimensions, which he later increased to five.
In 1980, he co-founded the Institute for Research on Intercultural Cooperation, which is now located at Tilburg University. He was its first director, until he retired in 1993.
Just before retirement, he revisited his research and the IBM data, writing Cultures and Organizations: Software of the Mind with Gert Jan Hofstede and Michael Minkov. Minkov’s own work led the group to include a sixth cultural dimension.
Hofstede originally described four cultural dimensions, which he expanded to six incorporating research by Michael Harris Bond into long-term orientation, and Michael Minkov into indulgence and restraint.
These six cultural dimensions are:
This measures the tendency for society members to prefer being part of a strong group. Western societies such as those of Northern Europe and North America tend to be more individualistic, whilst Latin America and Asia have more collectivist cultures.
Some societies are more tolerant of ambiguity and more accepting of change. Others enforce behavioural norms and regulations strongly, to suppress change. In Europe, Southern and Eastern countries, including Germany, are more avoidant, whilst the Anglophone and Nordic countries are more accepting. Chinese cultures have low scores for uncertainty avoidance.
This measures inequalities of power within the society, and the level of unquestioned authoritarianism. Traditional societies and societies with strong religious adherence seem also to have high scores, such as in Asia, Latin American and Africa. Northern European countries have lower scores.
This dimension measures assertiveness, desire for material gain, and tendency to honour competitive personas, against a more empathic, caring and co-operative culture. This varies widely across continents, with Scandinavian countries strongly to the Feminine end of the spectrum, and Anglophone countries strongly Masculine.
Far Eastern countries like China are archetypes of very long range mind-sets, while Africa and the Muslim world, along with Anglophone countries are much shorter term in their outlook.
This measures the extent to which people seek immediate gratification and pleasure, as opposed to a more disciplined, ascetic outlook, which strongly enforces social norms. Latin America and the Western countries tend to be more indulgent, whilst Asian countries and the Muslim world tend to be more restrained.
Hofstede’s work is not without its stern critics. Whilst I am unqualified to judge it against these, one criticism seems to be self-evidently valid. Hofstede’s original work was based on his IBM survey data. Whilst this did indeed span very many national cultures, the survey set was highly dominated by white collar males – the sales and engineering employees of IBM in the 1960s and 1970s. We have to question the representativeness of that sample.
And, whilst the cultural descriptions Hofstede’s work allocates to different nations ring true; we must also question how far this takes us from stereotyping. However, Hofstede’s work does find practical application in International commerce, particularly in the fields of marketing, communications, and negotiation.
Hofstede’s work has also been applied to organisational cultures, but this seems to be an extension beyond his original research base. For a stronger link to organisational cultures, we need to look at the work of another Dutchman, Fons Trompenaars, whose model of 14 cultural polarities is also widely used.
You may enjoy the Cross Cultural Business Pocketbook.
Many of us in the UK (home of the Pocketblog) and the US may harbour the false belief that online global commercial domination is a purely US-centred phenomenon. After all, Amazon, Google, Facebook and eBay’s only online competitors in revenue terms are the more insular Chinese businesses JD and Tencent. But kicking at their heels, and with equally large ambitions, is a name that I suspect will become more familiar in the coming years: Rakuten. It was founded by Japanese entrepreneur, Hiroshi Mikitani.
Hiroshi Mikitani was born in 1965, in Kobe, Japan. His father is an economist (Professor at Yale and Emeritus Professor at Kobe University) and his mother was in business. After graduating from Hitotsubashi University in 1988, Mikitani gained a place with the prestigious Industrial Bank of Japan and there he may have been expected to stay, had he not bucked the trend of Japanese culture. But a posting in the US led him to apply for a Harvard MBA, which he earned in 1993. There he was exposed to more of the entrepreneurial culture he had experienced when his father had moved to Yale and, in 1997, at the start of the internet as commercial platform, he left the bank.
He started the business now trading simply as Rakuten and, whilst it has been acquisitive and so has he personally (acquiring a range two sports teams and more latterly, gaining senior cultural appointments), Rakuten is the platform for his business interests and philosophy of business.
Rakuten is a Japanese-based e-commerce business working in a different model from most of its large US competitors. Currently, with a 2014 revenue of US$5.6 Bn, it is the tenth largest online business in the world by revenue, and fifth largest e-commerce trader. Rakuten’s model is unlike others in that it trades by selling trading space to small and medium businesses – a bazaar model. Unlike Amazon’s market place, however, Rakuten’s traders can customise their stores entirely, allowing them to personalise their shoppers’ experiences. Rakuten’s strapline is ‘Shopping is entertainment!’ Mikitani likes exclamation marks!
I think Rakuten will continue to grow, so Mikitani’s philosophy is worth studying. Let’s look at a few strands.
Mikitani is driving all Rakuten operations globally to work entirely in English – even at home in Japan. Now, a global English speaking culture is not surprising in many of the large global corporates, headquartered in the US, but Rakuten is Japanese owned and managed. So this is a big deal that has attracted criticism and scorn from some of Mikitani’s peers among Japanese business leaders. His response is to say ‘English is not an advantage anymore – it is a requirement.’ He believes the friction in doing business between different Rakuten offices around the world is so reduced that it makes the policy the right one – even at the cost of not promoting non-English speaking corporate staff.
Readers may have barely heard of Rakuten, but you may well know some of the names it has acquired in its rapid global expansion. Mikitani seems bent on globalising his business and dominating online retailing. And one of Rakuten’s five principles for success is ‘Speed!! Speed!! Speed!!’ The double exclamation marks are theirs, not mine.
Mikitani has a real sense of mission about his desire to allow businesses to trade in the way they choose, rather than creating a corporate template for everyone to conform to. His Business-to-Business-to-Consumer (B2B2C) model pre-dates Amazon’s use of its marketplace and FBA trading, and sticks resolutely to his original vision of boutique trading.
Perhaps the strongest indication of Mikitani’s commitment to global web commerce is the announcement, in March 2015, that Rakuten will soon accept Bitcoin across all of its global marketplaces. This involves a massive investment in Bitnet, a startup payment system that Rakuten will start by integrating into its U.S. marketplace to allow customers to pay in Bitcoins.
Mikitani has written two books, Marketplace 3.0: Rewriting the Rules of Borderless Business (2013) and The Power to Compete: An Economist and an Entrepreneur on Revitalizing Japan in the Global Economy (2014, written with his father, Ryoichi Mikitani). He is also a LinkedIn Influencer, where his short articles are frequently pithy and insightful.
It is a truism that we live in a global culture. But it is not in fact quite true: we live in a highly connected set of cultures and making political and business interactions work across the divides between them is far from easy. Fons Trompenaars is the foremost thinker in how businesses can understand and manage these differences pragmatically.
Fons Trompenaars was born in 1953, with a Dutch father and French mother. He grew up in the Netherlands and earned a Master’s degree in Business Economics at Vrije Universiteit Amsterdam in 1979. He then moved to the US, to continue his education at Wharton, gaining a PhD in 1983.
Working for Royal Dutch Shell, Trompenaars gained experience of many business cultures, being posted to nine countries in less than that number of years. He also met long-term collaborator and business partner, the British academic, Charles Hampden-Turner. In 1989, the two of them founded a consulting business, then called the Centre for International Business Studies. It has subsequently been acquired by international professional services firm KPMG, and renamed Trompenaars Hampden-Turner (THT) Consulting.
In 1997, the two wrote their hugely influential book, Riding the Waves of Culture: Understanding Diversity in Global Business, which set out their model for understanding cultural differences.
Accolades, awards and academic positions have followed for Trompenaars, as have several other books that build upon his ideas and spread them outwards, but Riding the Waves of Culture remains his pre-eminent work and very much a modern business classic that no manager who works in an international context can afford to be ignorant of.
The essential thesis at the heart of Trompenaars’ thinking is that the challenge of leadership is to resolve choices – dilemmas – in the context of different cultural pressures. People from all cultures face much the same dilemmas, but their cultural backgrounds influence the way they will choose to address those dilemmas. Leaders need to reconcile those differences to create effective change and to manage efficiently.
Trompenaars and Hampden-Turner created a powerful model for understanding cultural differences. Superficially their model resembles that of Geert Hofstede, another Dutchman. However, while Hofstede focuses on the underlying psychology that drives differences, Trompenaars and Hampden-Turner are more practical in their approach, aiming to create a tool that managers can use to work with the differences. Both approaches are, however, informed by meticulous research.
Riding the Waves defines culture as the rules and approaches a coherent society adopts, to resolve the issues it faces. These become ingrained in its population and therefore second nature, at which point an external observer recognises them as culture. Consequently, we need to understand the rules and approaches we take and those that the people we deal with accept, and therefore we need to recognise and adapt ourselves to the differences. Failure to recognise and adapt to cultural differences leads to a breakdown in communication and trust.
The model that Trompenaars and Hampden-Turner created sets out seven continua that they represent as pairs of opposite attitudes. Each culture occupies a unique position on each of these continua, creating a very rich array of possibilities. Even were there only 5 positions on each scale, this would yield 78,000 possible cultures, rising to 824,000 with a seven-point scale. Let’s look at the seven continua.
Universalist cultures value and apply rigorous standards and like to enforce rules. Particularist societies prefer the flexibility of adapting the rules to the circumstances, valuing people over set rules and therefore embracing exceptions.
This is about how a society values the group. Collectivist cultures place care for the group and the need for consensus above the needs of the individuals within it. Individualist cultures value autonomy and the creative opportunities they believe it offers.
The extent to which people within a culture display their emotions (Affective) or keep them hidden (Neutral). In Neutral cultures, reason plays a far more overt role in decision-making.
A subtle concept about the way we relate to one another. In Specific cultures relationships form around the sharing of specific resources or objectives, whereas in Diffuse cultures, the sharing is far more widespread, creating more holistic relationships.
This dimension represents the way society evaluates our status. Achievement-oriented cultures are more meritocratic and allocate status according to performance, whilst Ascription-oriented cultures pay greater attention to background, education, and connections.
Unlike those above, this dimension is not about social attitudes, but in this case attitudes to time. Sequential cultures tend to be more orderly and value planning more than Synchronic cultures, which take a flexible view of time, with greater spontaneity and less orderly use of time.
This continuum is also not about social relationships, but the expectations about whether we as a society can either control nature (Internal) or are subject to it (External). The labels refer to the source of control for our society – either internal, within society or external, from the environment.
Where Trompenaars and Hampden-Turner create a powerful resource for managers is in articulating, for each of the 14 polarities, a series of strategies that allow us to adapt to a culture that shows each of these 14 characteristics. This is vital, because your own cultural preferences will be different from those of people of another country or even region within your own country.
In addition, their research also rated many countries on each of the scales, allowing readers to understand the cultural preferences of the people they are dealing with. Many of their findings match recognisable cultural stereotypes, but many do not. If you want to figure out why a British business person with a strong preference for rules and an orderly approach to time, but a mixed attitude to merit versus background can best do business with their counterpart in Latin America, with a fluid approach to rules, a highly emotional response to pressure, and an ambiguous relationship with time, Riding the Waves of Culture is the book for you.
You may enjoy the Cross-cultural Business Pocketbook
In last week’s Pocketblog, we looked at the 5S approach to ordering and organising a workspace, introducing five Japanese words: seiri, seiton, seiso, seiketsu, and shitsuke.
It struck me that there are an awful lot of Japanese terms that have enriched our business language, so I thought I’d list a few more. Of course, readers of the Pocketblog will also probably be familiar with gemba too.
I think that some of the concepts that they raise are absolutely fascinating – and necessary to us in the West. Let’s look at a few more, some familiar, some little known.
Collaboration and information sharing. Keeping others informed.
Radical change. The opposite of…
Continuous flow of incremental improvements.
A progress tracking approach that follows instances through a process. Literally ‘billboard’. Increasingly used in project management and team workflow. There is a lovely (free) web-based app called Trello that works on Mac, PC and mobile app formats.
Literally: ‘death from overwork’. Don’t!
The spirit of co-operating for the common good.
Perception and foresight, coupled with good judgement.
The sense of regret when we become aware of waste and failure to use well any things of value. (I am so glad I now have a word for this). It comes from the concept, ‘mottai’ that things have inherent value, or dignity. Nice.
… are the three forms of waste
Literally, ‘going around the roots’. Refers to the informal stakeholder alignment and political process that lay the groundwork for effective consensus or change.
Currently popular style of presenting, with 20 slides, each lasting 20 seconds. Gives a fast and dynamic way to present an idea. Pecha Kucha nights often consist of a dozen or more presentations. Literally, ‘chit-chat’.
Making error proof. Creating something so that mistakes cannot be made.
Public truth. The things that are appropriate to share in a public situation. It literally means ‘facade’ and we might contrast it with ‘honne’, meaning your true feelings. Puts me in mind of the Johari Window.
One of the best known, most widely used, and least researched models that managers are introduced to is ‘Maslow’s Hierarchy of Needs’.
Maslow argued that our motivations and values change as our needs change. Once a need is fulfilled, we turn our focus onto the next one, in a hierarchy from physiological needs for survival and shelter, up to higher needs that, arguably, drive those of us who have everything we ‘need’.
You can read all about Maslow’s Hierarchy in The Motivation Pocketbook.
Clare Graves was a student and near contemporary of Maslow, who wanted to produce a better model. In doing so, he focused on different views of self actualisation and categorised a whole hierarchy of value systems.
His model, now formalised as ‘Spiral Dynamics’ sets out a series of value sets that mark out increasingly mature world views. It takes Maslow’s model to a higher level of complexity.
These world views can be interpreted as personal value sets, or as group cultures. They represent the different ways different people think about issues. As we as individuals, organisations and societies progress up the spiral, we are coming to grips with more complex and sophisticated ways of seeing the world.
In simple terms, the levels of the spiral are:
Whilst Graves originated the thinking behind the model, it was formalised and given the name ‘Spiral Dynamics’ in the 1996 book ‘Spiral Dynamics: Mastering Values, Leadership and Change
http://www.spiraldynamics.org/
… the website of Chris Cowan’s NVC Consulting, andhttp://www.spiraldynamics.net/
… the website of Don Beck’s Spiral Dynamics Integral
Models are useful if they explain or predict aspects of the world. Spiral Dynamics – in either interpretation – offers a way to understand people’s responses to situations and also the cultures of organisations and societies. Culture clashes emerge when sub-groups are forced together, that have value sets at different levels in the spiral.
The Emotional Intelligence Pocketbook
The Working Relationships Pocketbook
The Workplace Politics Pocketbook
The Cross-cultural Business Pocketbook
Lots of Pocketbooks use the word ‘empathy’. The problem is that scientists still find it hard to properly characterise. New Scientist magazine ran a fascinating feature article on 13 March 2010 called ’Empathy Overkill’. In this article they studied what we can learn when our empathy systems go into overdrive. There are some people who suffer from forms of extreme empathy, such as:
unconsciously echoing other people actions
…..– even inappropriate ones
…..observe in others
Empathy appears to be due to some specialised brain cells called mirror neurons that are at the top of our brains. They activate in the same way, whether we do something or we see someone else do it. They let us ‘try out’ other people’s movements and gestures.
It seems that some people’s mirror neurons are not inhibited enough, causing them to literally live-out the actions or sensations they observe.
As well as the medical implications of extreme empathy, scientists are also looking at the link between empathic responses and compassion. Evidence suggests that an inability physically identify with other people’s pain does correlate with high self-assessed levels of ‘cold-heartedness’.
So, it is your mirror neurons that let you know how other people are feeling. When a colleague walks into work tomorrow, they will help you know whether that colleague is feeling good or bad.
John Mattock is passionate about the value of cross cultural empathy in business. If you want to work with business people in another culture, being sensitive to their cultural norms and making the effort to understand them will bring you sustainable competitive advantage. The Cross-Cultural Business Pocketbook is chock-full of great tips to build up your understanding and for how to communicate effectively across cultures. A series of two-page mini guides to a handful of cultures on their own make this an insightful and valuable book.
If you want to read other people’s minds, let your mirror neurons tell you what’s going on. What you choose to do with that information is up to you. If you work with people from other cultures, then your empathy skills may be stretched to their limits, but if you prime them well and are sympathetic to the emotions your mirror neurons detect, then you may just get better results for your efforts.
If you have come across from our sister site, the Teachers’ Pocketbooks Blog, or are interested in empathy in the classroom, you may like this short post.
