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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
How national culture impacts organizational culture—and business success
Using extensive case studies of successful global corporations, this book explores the impact of national culture on the corporate strategy and its execution, and through this ultimately business success—or failure. It does not argue that different cultures lead to different business results, but that all cultures impact organizations in ways both positive and negative, depending on the business cycle, the particular business, and the particular strategies being pursued. Depending on all of these factors, cultural dynamics can either enable or derail performance. But recognizing those cultural factors is difficult for business leaders; like everyone else, they too can be blind to the culture of which they are a part.
The book offers managers and leaders eight recommendations for recognizing those cultural factors that negatively impact performance, as well as those that can be harnessed to encourage superior performance. With real case studies from companies in Asia, Europe, and the United States, this book offers a truly global approach to organizational culture.
- Offers a fresh approach to the effects of national culture on organizational culture that is applicable to any country in any region
- Based on case studies of such companies as Toyota, Samsung, General Motors, Nokia, Walmart, Kone and British Leyland
- It describes the origins and nature of the most common corporate crisis and how culture impacts the response to such a crisis
- Ideal for managers, business leaders, and board members, as well as business school students
A welcome response to the flat-Earth fad that argues we're all alike, this book offers a nuanced and practical view of cultural differentiators and how they can enable or derail business performance.
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Seitenzahl: 481
Veröffentlichungsjahr: 2013
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Table of Contents
Endorsements
Title page
Copyright page
Preface
Acknowledgements
Introduction
What is “culture”?
The water that we couldn’t see when analyzing culture
The long-term view: corporate lifecycles and corporate culture
Interruptions of the lifecycle – when the crisis hit
“Global” companies
Summary
A brief chapter overview
Part I: Developing the Cultural Dynamic Model®
1: Corporate Culture, Strategy and Business Results
What is corporate culture?
Corporate culture and strategy: the cultural dynamic model®
The water people don’t see: the national influencers
The three levels of culture
The time lag of culture and cultural agility as a competitive advantage
Chapter summary
2: The Lewis Model – Setting the Scene
Linear-active cultures
Multi-active cultures
Reactive cultures
Getting things done
3: Nation-State Traits and how they affect Corporate Cultures in Seven Countries
The United States
Sweden
France
Japan
Italy
Germany
Great Britain
4: The Cultural Dynamic Model® and the Austin Motors Case
Introduction
The static cultural dynamic model® – bringing it all together
Work practices
Decoding observed behaviours and vision statements
Mission and vision statements
Identifying the values, assumptions and beliefs underpinning the “cultural universe”
A cultural dynamic and the full cultural dynamic model®
Case study: Austin Motors
Chapter closing
Part II: Cases: The Lifecycle of a Company from Innovation to Consolidation
5: The Embryonic Period
Values embedded during the early years: Apple, Microsoft and Dell
Traits that enable success over the business cycles
Case study: Nokia
Case study: KONE – agility and humility
Case study: Walmart – an American business tackling foreign markets
Chapter close – preview the growth period
6: The Growth Period
The product line expansion stage
The scale and efficiency phase
Case study: Sony versus Samsung Electronics
Chapter close
7: The Maturity Period
The consolidation phase
Case study: Toyota
Case study: FLSmidth
Case study: P&G
Key lessons from the eight cases
Part III: The Model in Action (Lessons for BOARDS, Managers and Investors)
8: Whither the West
Whither the West
Golden rules for dealing with reactive cultures
Golden rules for dealing with multi-active cultures
9: The Crisis
Strategy v. competition: being “outplayed”
Problems in execution
Disruption
Success – the success crisis
Time – if you don't move forwards you move backwards
Change of leadership
Navigating a transformation point
Differing cultural performances in times of crisis
Chapter closing
10: Enhancing Corporate Performance in a Multicultural World
Seeing the water that surrounds you
Two recommendations to investors
Two recommendations to boards
Four recommendations to management
Implications for countries
Chapter and book conclusion
Appendix
References and Websites
Index
“International organizations often boast of their experience and ability to deal and cope with sometimes very different national administrative cultures e.g. how to get civil servants from Sicily and Scandinavia to work together smoothly and effectively. Richard Lewis's books should be standard reading in the European Union's institutions, as they have been for years in the World Bank. Different cultural backgrounds enrich and enhance creativity in pooling intellectual resources but only if the members of the team understand and take into account the underlying cultural differences. I will gladly recommend this new book to my colleagues in Brussels. Richard's penetrative cultural insights combine with Kai Hammerich's in-depth understanding of corporate leadership to produce a valuable tool for executives in this era of globalization.”
Eero Vuohula, former official of EFTA and Director at the European Commission's Directorate of External Affairs
“Organizational culture is too often an afterthought for businesses. Whilst many organizations believe they are global, they do not recognize how their heritage has defined their current culture. This book provides a well thought out methodology and pragmatic insights in organizational culture, to enable business outcomes. This is really important for leaders working in an international environment and Human Resources professionals who see culture as the glue for organizational effectiveness.”
Hugo Bague, Group Executive Organisational Resources, Rio Tinto
“In essence the value of this book is in the successful linking of theory and reality: while insightful on several levels, it is factual, illustrative, and … . utterly practical for various audiences. Fish Can't See Water is not just an interesting read, but, most importantly, a useful guide for navigating the intricacies of the current, ever-changing (yet surprisingly the same), business world.”
Dr Iouri Bairatchnyi, Former Director, Cross Cultural Programmes, World Bank, Washington DC
This edition first published 2013
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Library of Congress Cataloging-in-Publication Data
Hammerich, Kai, 1960–
Fish can’t see water : how national culture can make or break your corporate strategy / Kai Hammerich and Richard D. Lewis.
pages cm
Includes bibliographical references and index.
ISBN 978-1-118-60856-2 (cloth)
1. Corporate culture—Cross-cultural studies. 2. Organizational behavior—Cross-cultural studies. 3. National characteristics. 4. Strategic planning. I. Lewis, Richard D. II. Title.
HD58.7.H343 2013
658.4'012–dc23 2013013592
A catalogue record for this book is available from the British Library.
ISBN 978-1-118-60856-2 (hardback) ISBN 978-1-118-60853-1 (ebk)
ISBN 978-1-118-60854-8 (ebk) ISBN 978-1-118-60855-5 (ebk)
Cover design: Dan Jubb. Front cover image: iStockPhoto/bora ucak.
Back cover image: iStockPhoto/Mirosław Kijewski.
Preface
It is no longer a secret that the biggest obstacle to successful globalization is the inability of most companies to understand the world view and aspirations of partners and competitors. Their culture is opaque, seems irrational. So does ours to them. But we are normal, surely? Looking at their behaviour, we perceive abnormalities. But the reverse seems true, too. Surely we can see ourselves? Clearly. Or can we? Can fish see water? Can we see our own cultural environment?
Where national traits are concerned, we are all experts and victims. Culture hides much more than it reveals and, strangely enough, what it hides, it hides most effectively from its own participants.
The two authors of this book come from very different backgrounds, consequently see things in a diverse manner. In writing this book, the authors learned a lot from each other. We have tried to share our flashes of enlightenment with you, our readers.
For more information, news and updates, blogs and articles and educational support materials including classroom presentations, cases, instructor notes etc please visit www.fishcantseewater.com.
RDL KH
Acknowledgements
No work on cross-culture escapes the influence of Ed Schein and Geert Hofstede, and we would like to acknowledge their pioneering of central concepts which figure prominently in this book.
Numerous multicultural people have helped inspire us in the creation of the central ideas in our book, including: the Asian brand expert Martin Roll, Lars Terney of Nordic Capital, Mikkel B. Rasmussen of ReD Associates, Jørgen Vig Knudstorp of Lego, Tue Mantoni of B&O, Jim Hagemann Snabe of SAP, Juha Äkräs and Stephen Elop of Nokia, Vagn Sørensen of FLSmidth, Niels B. Christansen of Danfoss, Barbara Annis of Barbara Annis & Associates and Dean Stamoulis of Russell Reynolds Associates, Karsten Feilberg, Kim Berknov, Jens Schultzer, Christian Mariager, John Youngblood and Bill Hoover.
We would like to thank everyone at Wiley for their thoughtful editing, and in particular our publisher, Rosemary Nixon for her constructive comments and unwavering support. Rosemary also introduced us to our development editor, Katherine Armstrong, who had a profound influence on the final structure of the manuscript and helped crystalize many of the key messages, through many long and sometimes challenging, but always enjoyable conversations.
Finally, this book would not have been possible without the daily support of Frances Phillips and Ceri Erskine, who have read the manuscript many times and suggested multiple improvements.
Richard D. Lewis and Kai Hammerich
London, July 2013
Introduction
The idea we present in this book is simple: national culture, through its influence on corporate culture, has a powerful but often-invisible impact on the success of global companies. What's more, the very same national traits that accelerated growth in one stage of the corporate lifecycle may derail that growth at a different stage or when an inevitable crisis hits. When you, as a leader of a global organization, become able to recognize the impact of national culture, you will be in a stronger position to lead your company. We will present you with two concepts, Richard D. Lewis’ renowned Lewis model and Kai Hammerich's new Cultural Dynamic Model®1. This framework will give you a precise language and a stronger conceptual understanding to discuss how national culture affects your organization and how it differs from other business culture influencers that you are more familiar with. It will outline what you, as a leader, need to watch out for and what actions you can take during a period of transformation. In a global world where most processes and products can and will be copied, culture matters more than ever and, as we will show, can be a source of sustainable competitive differentiation! As they say: “Culture eats Strategy for lunch!”
In this chapter and the following two, we will take you through the key concepts in the book. First, let's share four examples of what we mean.
Playing football in Brazil and Germany: Countries will go about getting things done in different ways, based on their national cultural traits. The Brazilian national football team plays a different style of football from the German. Their football skills and capabilities are different, as their players have developed differently due to their different national culture and socio-economic realities. In his book When Cultures Collide, Richard Lewis tells us that the Brazilians among other qualities are known to be relaxed, friendly, exuberant and emotional.2 Many Brazilian star players started playing football barefoot, on uneven ground in a favela on the outskirts of a large city. These characteristics led to an individualistic style, with an entertaining game, to impress their friends with their ball-artistry. Through this, they would gain local hero status. In contrast, Germans are known to enjoy being organized, communal, disciplined, logical and task oriented. A young German boy will join a local club at an early age, use proper boots and learn to play the game in a well-organized youth team. The German players grow up to be technically competent, and with a more systematic approach to the game – yet equally effective in delivering results. Thus, the way the two teams play is fundamentally different, but both are world-class competitors and have won multiple world championships. From these national differences you cannot conclude that either way is more effective, just that they are different.
Samsung Electronics has in a few years become the world's most valuable and largest consumer electronics company. It has done this through an unrelenting focus on execution and being the “fastest follower”. The Korean national traits of discipline, observance of protocol, competitive spirit, long-term orientation and suspicion of foreigners3 have created a formidable and focused company. It is also somewhat insular, with virtually all senior executives and board members being Korean albeit many with extensive international experience. Samsung Electronics employees are highly disciplined and attempt to achieve their mission, however difficult it might be. Although the Korean culture's emphasis on hierarchy and rote memorization may facilitate swift, effective strategy execution and the rapid rise to global prominence, this same emphasis may also obstruct expression of creative or dissenting opinions.4 If it doesn't proactively manage its Korean heritage, Samsung Electronics therefore could face significant challenges in maintaining its lead in the next business cycle and achieving its ambition of becoming the technological and creative leader and not just the fastest follower. Competing with American innovative and ambitious Google, Microsoft and Apple on their home turf of technological creativity and innovation is a tall order for anyone – and a challenge that will inspire Samsung's competitive spirits. The derailing effects of national traits can be overcome, but only with effort, time and dedicated leadership.
The Austin Motor Company initially developed a highly innovative and successful culture that demonstrated its native England's strong bias for innovation, action, get-things-done attitude and efficiency at fixing problems quickly. These national characteristics fed a “wing it” cultural business dynamic that helped the company navigate the uncertain times of an emerging cyclical industry, two war periods and ultimately propelled it to become the dominant local car manufacturer. However, when efficiency became the name of the game in the increasingly global and maturing industry, Austin's “wing it” culture paled in comparison with the quality and process focus of its German, French and Japanese rivals. By the 1970s, not even the efficiency-seeking mergers that created British Leyland could save Austin and its sister companies from this. Eventually, British taxpayers had to foot the bill for bailing them out.
GM: The American culture is at its best when displaying vibrant individualism, entrepreneurial spirit, risk-taking, innovation, ambition and results orientation combined with a focus on making money. “The business of America is business”, as they say. These traits very much characterized General Motors in the first part of the 20th century, when it emerged as the dominant American car company. Initially, GM lost out to Ford's one-product, one-colour (black) and low-cost car strategy. GM, in contrast, focused on a strategy offering multiple car brands from the entry-level Chevy to the up-market Cadillac and in multiple colours. By the 1950s, GM had become the leading industrial company in the world with over 50% market share in the US car market. However, to avoid a break-up, GM felt forced by the US government to stop focusing on gaining share, and instead focused on increasing profits by reducing cost. Over time it developed a more introverted, bureaucratic and customer-distant culture with increasingly uncompetitive products. A new cultural dynamic emerged, where the internally recruited executives sheltered themselves from the real world in a clubby white male culture on the top executive floors of the GM building. In this case, GM exemplifies a potentially derailing side of the American corporate culture, which can also be hierarchical, bureaucratic and command-and-control oriented, if not managed in the mature phase of a company's lifecycle or in a crisis. The term “red tape” was, after all, invented in the USA. Ultimately, the US government in 2009 bailed out GM.
In the next chapter, we will discuss how the lifecycle of a company interacts with the national culture of various countries in more detail. Some cultures are better suited to the early and more innovative phase, such as in England and Denmark; others are intrinsically better suited to the more process-focused mature phase such as in Germany, Japan and Korea. The USA is unique in that it has strengths throughout all stages, which may help to explain the country's success after WWII. Pragmatic business China may prove to be similar to the USA in this respect, though it is too early to tell with certainty. The key point here is that a company needs to be aware when a national characteristic potentially can derail its strategy – or accelerate it. A company can learn to master a new work practice that may not seem natural to it, through effort, practice, training and consistent leadership – but first it has to recognize the need, which can be challenging as we shall see in many of the cases in this book. This is where the “Fish can't see water” effect raises its head. Management and the board are often culturally blind to the effects of their own company's culture, and thus may not realise when deep change is required.
An equally important point here is that one can't conclude that how a company is organized based on its national heritage is inherently better compared to how another company from a different country is organized. It is just different. After all, companies from all over the world dominate the many sectors of the global economy.
However, let's not get ahead of ourselves. Let's begin the journey by asking the simple question: What is culture?
What is “culture”?
Ever since humans gained consciousness, social norms, beliefs, rituals and group behaviour became the heart and soul of human activity. Culture is the social programming of the mind that distinguishes the members of one category of people from another,5 as the famous Dutch cultural expert Hofstede says. We know from our own personal life that any group of people together for a longer period of time will develop its own culture whether explicitly or implicitly stated, based on the mix of people in the group and the task at hand.
Humans do not cooperate mindlessly. We are unlike other living creatures. In most groups of mammals, birds and fish, each member of the group will play exactly the same role and behave similarly to the others. Ants and termites establish elaborate societies, where the role of the individual is subordinated to the greater good of the nest or hive. In contrast, humans are wired for culture and capable of expressing great individuality within a society, while at the same time contributing to the greater good of the group. Humans will specialize within the group, depending on their particular skills and personality and contribute using their specific talent, whether as a craftsman, carer or as an artist. We are usually seen as different from other animals because of our inherent traits of consciousness, language and intelligence. However, in his book Wired for Culture6 Mark Pagel argues that we've had it the wrong way round. Many of these traits would not exist without our propensity for culture – our ability to cooperate in small tribal societies, enabling us to pass on knowledge, beliefs and practices so that we prospered while others declined.
Culture has a purpose, and the purpose is to help the group survive and succeed in their physical, political and spiritual environment, as measured by their own success criteria. A culture can be strong or weak, and effective or not, in achieving the objectives of the group. Only time will tell how long a culture can maintain its vitality before eventually leading to the demise of the group that created it. In business, strong corporate cultures emerge over time as repeated behaviour, results and success reinforce the existing behaviours, values and principles of thinking. A single individual, the founder or a very small group of individuals, most often shapes these core cultural values in the early phases of the group's existence, based on their own personal experiences, beliefs and values.
Culture is behaviour and behaviour is culture. Ed Schein, the American cultural expert, notes that “it is the consistency that is important and not the intensity of the attention”. Consistency builds strong cultures. Whether they are effective in achieving their goals is another matter. This is why “walking the talk”, as they say in America, is such a powerful way of influencing the culture of a company.7 Hands-on leaders have a stronger impact when they, through their own example, show people what they value and therefore want them to copy. Toyota embraces the very Japanese concept that “every mistake is an opportunity to learn” and expects every manager to teach his organization this philosophy. It is a deeply rooted principle, which is ingrained in the work principles on the shop floor at every Toyota assembly line. Every employee understands it and everybody does it. It takes Toyota years to teach these principles to the task- and results-oriented managers from Europe and the USA, who instinctively will criticize, pass blame or ignore it when a mistake happens. Anglo-Saxons are often more focused on short-term actions and results than investing in learning for the long term, as we shall see in the Toyota case. In Chapter 1 we will look deeper at how cultural influencers become imbedded in a corporate culture, through the actions of the leaders.
Fish can't see water. Our assumption in this book is that the vast majority of business organizations have a national culture at the heart of their corporate culture. An American company will be based on American values, think American and act American, just like a Japanese company will be Japanese at heart. However, this is also the blind spot of the organization. We can't easily see our own cultural programming in a mirror. In our own eyes we are normal, and that is what we see in the mirror. However, when we look at each other we see difference. That is what we mean by “Fish can't see water”! The proverb “You can take a Chinese person out of China, but you can't take China out of a Chinese person” could be said about most people. This book is about learning to identify the deep and often invisible national programming that affects the strategy execution of your organization.
The water that we couldn't see when analyzing culture
As we worked on this book, we wondered why so few authors on the two related subjects of corporate strategy and corporate culture had mentioned the importance of national culture and discussed its effect on corporate culture, and if they did, then often only in passing. We soon realized that there was a national cultural dynamic at play.8
Many influential business books on corporate strategy and corporate culture have originated in the USA.9 These books often discuss the subject through the corporate strategy perspective with limited reference to national culture and mostly use American examples when presenting business cases. They also use extensive data analysis to prove their points, usually based on more readily available American data. A small minority specifically discuss corporate culture, but again mostly use American examples. Both strains implicitly assume that since “the Business of America is Business” – and who can argue with the success of American business in the 20th century? – therefore the American way of doing business was superior. Consequently, it has been quite straightforward for them to implicitly conclude as evidenced through their recommendations and insights that global corporations would generally benefit from adopting an American-inspired performance-oriented and individualistically focused corporate culture. Trying to understand other national cultures and how those affected business performance was of less interest to them.
This implicit assumption is being seriously challenged. The world is changing. In 1980, the market capitalization of listed American corporations accounted for over 60% of the value of all major listed global companies, and by 2011 it had dropped to less than 30%.10 This is not because the American companies are underperforming; it is because the emerging markets companies are overperforming. Today most of the largest countries embrace the capitalistic system one way or another and are quickly learning from their American masters. They are also increasingly finding their own way of organizing their companies, often rooted in their national heritage and not just adopting American or European work practices.
Generally, these books, whether from the USA or Europe, seek rational predictability. In the West, we like to deal with certainties and facts; if the input expressed in numbers is this, the output will be that. This perspective works well for strategy where the realm can be expressed in numbers: the price, cost, profits, market share, or a balanced scorecard. They recognize culture, but with less hard data to support the conclusions; they only mention it occasionally. Consequently, most of the influential books on strategy continue to analyze companies along the facts- and numbers-based business strategy and execution dimension, and look at the linear relationship between the strategy, the way a company organizes and executes and the results, as shown in Diagram I.1.
Diagram I.1: Relationship between strategy, work practices and results
Unfortunately, culture is difficult to express numerically; it is by nature more anecdotal and in the realm of storytelling. We too would prefer culture to be part of a linear and measurable system; however, the subject is simply too complex and multi-faceted to allow for such a level of scientific predictability. There are simply too many variables interacting and they are difficult to measure with accuracy. This conclusion is indirectly supported by the largely vain effort to create a solid link between culture and performance in more recent American business literature on the subject, despite significant efforts. American academia largely abandoned its focus on corporate culture after an initial burst of interest in the 1980s and 1990s. “If you can't make money out of it, why bother?” would be an unsurprising American perspective.
In Europe there has been a stronger and somewhat more successful focus on using statistical analysis to identify the common five dimensions of national culture,11 which best classify the people types in various countries. The risk with this approach, however, is that the uniqueness of each national culture ends up being confined to statistical noise. In this book we are particularly interested in this statistical noise – i.e. what makes nations and their companies unique and not just the commonalities. Richard's “Lewis model” is unique in that it captures both the commonalities as well as the uniqueness of the people from each country, as you will see in Chapter 2.
Lastly, national traits only change slowly over the years. Countries and their people simply don't change that fast. Hence, the importance of analyzing how the national culture impacts a corporation over business cycles spanning decades. This is rarely done in our short-term-oriented Western world, where the stock market analysts, and thus the companies, tend to focus on the next quarter and maybe next year. Management consultants and business theorists may take a longer view, though often using years rather than decades as their unit of time measurement.
Therefore, in our view, the area of corporate culture needs a different approach. In this book we will guide you through our diagnostic framework that will help you identify and understand the root mechanisms, and the cultural dynamics at play in your or any other organization. Language is at the root of culture. Language is nature's tool for programming the mind. Therefore our aim is also to give you a more precise language to discuss these central aspects of culture.
While we use the abstraction of a single corporate culture throughout the book, we also recognize that the organizational culture in a company often is more homogeneous at the subsidiary level than at the corporate level and thus easier to analyze.12
The long-term view: corporate lifecycles and corporate culture
Corporations usually follow a similar path to greatness. Though, obviously, the time it takes will differ depending on the industry in which they operate. A Web 2.0 company like Facebook went global and big in five intense years, whereas companies relying on physical presence and physical goods will take longer. Until Web 2.0 came along, this normally was measured in multiple decades. However, there are sprinters too. Rapidly growing Chinese technology companies such as Huawei and Lenovo have managed to become dominant in China and a global top player in less than two or three decades, as has American Google, Apple and Microsoft, and German SAP. For each phase the particular national traits will have a different impact, sometimes benign, and sometimes derailing, as we shall see in the cases later in the book.
Below we have listed five lifecycle phases, which most companies will go through:
A large company will often encompass many product areas that are in different phases at the same time. Large companies normally have a mix of new ventures, smaller fast growing business units and emerging technologies that supplement the main business, where the majority of revenues and profits are derived from. As Samsung started to dominate the global TV set business in the early 2000s, they were working on establishing a new mobile smartphone line of business, which today is a main profit driver. We will define the lifecycle phase of a company, based on their main business, unless otherwise stated.
The innovation phase
This phase usually starts with an innovation or an innovative strategy. This is a volatile period for any company, where most struggle with getting commercial and technological traction, usually based on a single product or service. The founders are dominant in every aspect of company life and during this period will make the most profound impact on the corporate culture of the company. Sony rose to global prominence though a strong partnership between the founder and genius innovator Masaru Ibuka and his younger more commercial and internationally-oriented partner Akio Morita, who both influenced the core culture, as you will see in the Sony case. A particular critical moment is when the founders hand over the leadership to a more managerial regime, either during this phase or later. The perils of this early stage are well documented by the Macedonian, Dr Ichak Adizes, in his lifecycle model.
The geographic expansion
This phase is characterized by the rapid expansion of the company either regionally or globally, as the company sells its products and services in more markets. This is where the company meets the world for the first time. Some countries are more extrovert than others, which will impact their ability and ease of expanding. Maritime nations, for instance, tend to have a higher frequency of interaction with other countries and therefore are better used to dealing with cultural differences. Large nations will often find significant populations of immigrants from their country in the new markets, which may ease both the initial market acceptance and the ability to attract the first local employees with a good cultural fit. In this phase, the company should consider whether it will pursue a cultural dominant strategy with a single unified corporate culture or adopt a more locally-oriented model. In the intermediate hybrid model, it will adapt parts of the local cultures and work practices into its subsidiary work practice, which can dilute the core corporate culture. However, this choice is often not made consciously at this stage, as we will see later. This was a period where innovative Sony and Nokia both thrived, rapidly building a global business, using a largely hybrid model; both had explicit and strong corporate values to glue the decentralized organization together. Samsung and Toyota in contrast both used a dominant cultural strategy with little local interpretation allowed in the subsidiaries, and a strong central technical core. We will discuss the choice of subsidiary culture strategy in more detail in Chapter 7.
Product-line expansion
The company has a global presence and in this phase it will expand the number of product lines and broaden their product portfolio to cater to more customers and build stronger and deeper relationships with existing customers. Consumer goods companies expand their brand portfolio, while industrial companies add products to serve their customers in new areas, or use the same base technology to serve new segments. During this period the company needs to be innovative, agile and increasingly efficient at the same time. The national traits supporting innovation (individualism, agility) and efficiency (discipline and organization) may rub against each other and create significant conflicts and unintended cultural dynamics. The phase often marks the end of the organic growth period. This is a period where execution-oriented and ambitious Samsung thrived, expanding from DRAMs to television and consumer electronics to mobile phones.
Efficiency and scale focus
As the industry matures, there is a drive towards more efficiency often through sheer scale and a desire for a stronger market share position. This period is often characterized by the creation of global processes, discipline and tight execution focus using a global organizational structure. Companies from countries with strong individualism and an innovative creative bias, which thrived during the innovation phase, may well struggle in this period. Those countries, like Denmark, often have a high proportion of small and medium enterprise (SME) companies. Larger nations, in particular those with a history of organizing at scale at many levels of society, often thrive during this phase, though not always. As we shall see in the later cases, this is the phase where Austin stumbled and Toyota thrived, and execution-oriented Samsung Electronics rose to become the largest consumer electronics company from a revenues perspective.
Consolidation
This is the end game of an industry, with only a small handful of global or regional players dominating. This phase is characterized by less organic growth and a stronger focus on mergers and acquisitions (M&A), often of entities originating from different nations. The big challenge is making these acquisitions work. While they often make sense from an industrial and structural perspective, by reducing the number of players, the value creation for shareholders is frequently hampered by significant integration issues, often based in deeply rooted national and corporate cultural issues. In this phase, the two companies will both often come from a large nation, invariably with a strong culture, leading to the inevitable culture clash. This is the period where P&G and FLSmidth thrived, and GM stumbled.
While M&A is an important, fascinating and complex subject, we will not discuss this in detail here. It deserves a book on its own to be dealt with adequately, describing how tens of paired cultures, e.g. a French company merging with an American company, or a Chinese company buying a German company, are likely to play out across different industries at the different stages of their lifecycle. However, we will naturally touch the subject at times when relevant.
Diagram I.2 summarizes the normal corporate lifecycle.
Diagram I.2: The normal corporate lifecycle
You are probably able to identify the lifecycle stage of your company on the curve shown in the diagram. So that you can focus on the stage that is most relevant to you, we've presented case studies in chapters dedicated to each of these phases. Each chapter shares the story of how great companies thrived or dived in the phase because of a cultural dynamic influenced by its national culture.
We will at times refer to the simpler three-period version including the embryonic, the growth and the maturity period.
Interruptions of the lifecycle – when the crisis hit
Most companies will not continue to grow forever. At some stage they will invariably be hit by a life-threatening crisis, which they will either survive as Xerox did in the early 2000s or fail as Kodak experienced. Sometimes a company simply fades into economic irrelevance with the passing of time, as substitute products take over and habits change – like the coffee shops in 17th century London, now revived through Starbucks, the travelling theatre troupe or the craftsmen making knights' armour. As you read the cases, we will highlight what caused the crisis for each company and the role the national culture played in the events leading to the crisis. The typical causes of a corporate life-threatening crisis include:13
Less competitive strategy14Poor execution – of a sound strategyDisruption15Technological innovationProcess innovationSuccess – the success trap, which can lead to complacencyTime – if you don't move forwards in business, you go backwardsChange of leadership including the founder to managerial regime transitionNavigating the transition from one lifecycle phase to the next.As a company deals with the crisis it will ultimately either embark on a new and different growth curve, linger on or perish. Sometimes, it will have to reinvent itself as IBM did in the 1990s under Lou Gerstner's bold leadership, when it moved from hardware to services. Rarely will a company rediscover its original innovative spirits as Apple did with the return of Steve Jobs in 1997. Whatever it does, it often ends up in a new competitive environment, which will challenge its corporate culture and may rub against deeply rooted national traits, as we will see in many of our cases. During such a lifecycle transformation, the management needs to be acutely aware of what role the root national culture has and how they use the cultural accelerators to further the transformation and identify and deal with the potential cultural derailers. Diagram I.3 summarizes the full lifecycle model and the typical causes of the crisis.
Diagram I.3: Typical causes of the crisis in the full lifecycle model © Kai Hammerich, 2012
In Chapter 9, we discuss the crisis in more detail, in particular how the national culture influences the company during a crisis. As a leader it is important for you to observe that a company under crisis often will revert to its core national culture, as the psychologist in post-traumatic experiences would predict. However global it may be, an American corporation under pressure will often become more American. It will become more hierarchical, more command–control oriented, more dogmatic and more rigid, showing another side of the American corporate psyche. The finance department will increase its strengths, and the employees will become more individualistically focused on myopic objectives and less team oriented. It is indeed rare that a crisis will make a company more global and inclusive in its perspective. The same obviously goes for German, Indian, French, Brazilian, Chinese, Japanese, Danish, Italian, Finnish and Korean companies. They will all react differently to a crisis, as they revert to their own national uniqueness. No company and no leader can afford to ignore the effect of the national cultural heritage during a period of crisis!
“Global” companies
So does the global corporation exist? Yes and no is the short answer! Many corporations rightfully claim they are global. They have a global footprint; they have global operations, global customers and global employees. They may even have some shared global values and therefore postulate having a global culture. However, this latter claim is often misleading. The perspective may be politically correct in a global world, but hides the fact that virtually all global corporations have a single national culture at heart. They may have a thick veneer of globalization that enables them to cooperate effectively with other nations and some broadly accepted values to go with it, but in their heart they belong only to one nation. P&G, GE, IBM and Coca-Cola are all proud American companies. Just as Huawei, Siemens, Renault, Toyota and Tata are proud Chinese, German, French, Japanese and Indian companies and culturally and operationally very different.
There are very few successful dual-country companies. One such example is Unilever, a consumer goods company that was created by the merger of British Lever and Dutch Margarine Unie. It is dual-listed in London and Rotterdam. However, on closer inspection using our national cultural lenses, the two countries are related from a cultural perspective.16 They share a common mercantile, seafaring and colonial heritage and at Unilever this was combined with similar corporate values embedded by the founders of honesty, integrity and hard work, a belief in local autonomy (over centralization) and a belief in the value of human relationships.17
The dual culture also created significant tensions. The consensus-oriented Dutch managers would enjoy a good open and honest debate about issues before making a decision. However, they would often feel outmanoeuvred by their British counterparts, who preferred to discuss and agree decisions among themselves in advance of a meeting. It may also have contributed to the development of a quite “clubby”, networked and slow-reacting culture. The value placed on having “good” human relationships between managers from the different parts of the organization meant that dissent was often frowned upon and cross-national distrust masked behind apparent consensus.18
However, geographic proximity and a partly shared history do not guarantee cultural alignment. There are few, if any, successfully integrated Danish–Swedish corporations. A few national traits critical for the success of a business organization are fundamentally opposed. The Danish short-term pragmatism, agility and opportunism combined with jolly informality flies in the face of the Swedish desire for long-term planning, processes and consensus and a more formal social etiquette. These differences are caused by deeply rooted cultural differences that emerged in the two countries as they adapted to very different geopolitical environments after the Viking period, during the Mediaeval Age. Denmark – a small seafaring and fertile nation surrounded by bigger countries – needed to be agile, while Sweden benefited from developing its longer-term collectivist orientation to explore the rich, but hard to get to, natural resources.
International organizations like the UN and the Red Cross are global without having a unifying national culture at the core. Over time, such organizations may create a common culture based on the rules and procedures that have been adopted as their organizational etiquette, and will use bureaucracy and policies to reinforce the behaviour and habits. However, the resulting culture will rarely be as consistent and homogeneous as in an organization with a single national culture at heart or a unifying “raison d'être”. International organizations where the main and most influential donor is from a single country will often reflect those national values while international organizations, which are largely administrative – versus being in the front-line – often adopt many work practices from the country in which the HQ is located.
It is possible to create a homogeneous organizational culture for an international organization, when it is based on a professional culture, a common sense of purpose or having most of the employee base in the front line. An example of this would be Médecins Sans Frontières. The organization employs medical doctors, who share a common professional culture. They also share a strong sense of purpose of assisting people, without regard to race, political affiliation, gender, religion or nationality, who are in need in areas of armed conflict.
Summary
Kai recently met with a friend who is a director of a major management consultancy firm. He reflected on some of the change projects he was working on: “It is just so difficult to get a UK organization to adopt the Lean philosophy.19 With the French and the Germans it is much easier – they get it.” Essentially, the efforts to adapt Lean run against a number of deep national cultural traits in the English people – the independence, the anti-authoritarian perspective, the individualistic approach to life, their respect for the individual, the pragmatism, etc. Contrast this with the French and German cultures, where people are more at ease with designing, running and operating in organized systems and using what the English would consider quite rigid processes. Bureaucracy as an organizing principle was originally invented in Germany and successfully adopted by the French.
There are compelling benefits in having a single nation-state culture at the heart of an organization. It gives the employees a clear, moral, ethical and behavioural compass to work from, as any organization benefits from knowing where true north lies! It enhances consistency, which when reinforced repeatedly, will create a stronger culture. With a true north defined, everybody understands what is right and wrong, and can get on with the job. In the end, a consistent culture is superior to a vague one in terms of getting things done, as long as it doesn't derail itself and is focused on the task at hand.
One can't say if a particular nation is inherently more effective in getting things done than another. Most, if not all countries, have proven their ability to defend their own territory and establish a national culture. They have done this either through sheer might and scale in the case of China, Russia, Britain and the USA or through their ability over the centuries to resist the military powers of enemies, or potential cultural integration by occupiers in the case of Denmark, Switzerland and Vietnam. All countries have had leaders who at some point in their history made significant military, economic, technological or social progress by organizing their people to achieve whatever they set out to aspire to. Most nations have also faced a national disaster, e.g. a period where geopolitical trends weakened them or a war. National traits are often the by-product of such major events. They are neither good nor bad, they are simply different.
The Prussian General Von Moltke personally changed the culture of the Prussian Army over a 30-year period, as a response to a devastating defeat by the Napoleonic Army in 1806, to combine tactical disobedience with strategic discipline. He first used his new principles of leadership in battle, when the Austrian–Prussian Army defeated the Danish Army at Dannevirke in 1864. This led to the loss of one-third of Denmark's territory (Saxe-Lauenburg, Schleswig and Holstein) and started a period of introverted mourning. This, however, eventually also inspired the industrial revolution in Denmark, where young entrepreneurial companies with a global outlook, such as the cement engineering company FLSmidth, helped rebuild the Danish economy.
All companies are affected by their national heritage. Over the corporate lifecycle and during a period of crisis, the national traits will impact companies from different nations differently. Some countries have national traits that are better suited to the early innovative growth phase, while others thrive in the maturity phase. As a leader, it is important that you understand how this may impact your company.
As human beings, we are culturally programmed to view the world from our own national perspective. This makes us blind to our own culture. Just as fish don't see water, leadership teams from the same nation as the company, or who have worked at the company for a long period, may struggle to see when a potentially derailing cultural dynamic is at play.
Will the global company, without strong national roots, become more prevalent in the future? Maybe the digitalization and our own personal awareness and exposure to other countries will create more global companies. More companies today start out with a global outlook, not going through the local, then regional and then global expansion that characterized companies from the 19th and 20th centuries. Yet, digitalization also means that you don't need to have a physical presence in other countries to do business, which reduces the actual exposure and thus influence beyond the analytics of the data. The current dominant Web 2.0 companies, Google, Facebook, Amazon and eBay, with the exception of Skype, a Microsoft subsidiary, are all very American, having gone global almost instantly after quickly conquering America. Our own national culture is embedded at a young age and the organizational national culture, as we shall see in Chapter 1, is embedded through the founders, thus it may take some time before we see a rapid increase in the number of truly successful global companies without a distinct national culture at heart.
A brief chapter overview
In Chapter 1 we discuss how values, beliefs and assumptions are embedded in the organization, through the founders and leaders. We introduce the concept of business influencers and national influencers, and how they impact a company in different ways. We present the simple version of the Cultural Dynamic Model®, and use most of the chapter to discuss the effects of business influencers.
Chapter 2 will introduce the Lewis model, which triangulates national cultures between linear-active, multi-active and reactive national types. We use it to describe national traits and national types across the globe, and how the national influencers impact a company's corporate culture through its history, the national types and the founders and leaders.
In Chapter 3, we discuss the key national traits of a few countries in more detail: the USA, Sweden, France, Japan, Italy, Germany and Great Britain. From America's frontier spirit that laid the foundation for its entrepreneurial focus and short-term results orientation, and the idea that “The Business of America is Business”, to the more long-term oriented, elitist and intellectual business culture in France. We also look at the complex social values and rules in Japan that profoundly affect both corporate behaviour and how other cultures should interact with the Japanese. The main point is that no culture is perfect. All national cultures have different strengths and traits that may derail their success at each stage of their lifecycle.
Chapter 4 presents the full Cultural Dynamics Model® and introduces the key concept of a cultural dynamic. We will use the Austin Motor case to demonstrate the idea. A cultural dynamic describes the dynamic effect when the national and business influencers, through the company's work practices, start interacting with each other and often unintentionally change the corporate culture. The case also demonstrates how a highly innovative company stumbled in the efficiency and scale phase.
In Chapter 5 we will continue the detailed discussion of the lifecycle periods. We start with the embryonic period, which includes the early innovation phase and continues with the geographical expansion phase. We will present three cases, first Finnish Nokia and how it, in less than 20 years, became the global leader in mobile and then was hit by a crisis. We continue with two short cases describing the global expansion of Finnish KONE, and American Walmart's international expansion. These cases, in addition to the previous case on Austin Motors, illustrate the dynamics of this period and the influence of national culture.
In Chapter 6 we discuss the growth period when companies continue their geographical expansion, expand their product offerings and start focusing on efficiency and scale. We use the comparative case of Samsung and Sony to compare and contrast the fortunes of these two consumer electronics giants and crystallize key learning. During this period, the company will expand its number of product lines and the number of customer segments it addresses. It will establish itself as a more mature global corporation with global processes. The company needs different skills and capabilities to be successful, and thus different national traits will impact the success compared to the earlier embryonic period.
In Chapter 7, we describe the maturity period with the efficiency and scale phase and the ultimate consolidation phase through the cases of Japanese Toyota, Danish FLSmidth and American P&G. As the industry matures, there is a drive towards more efficiency often through sheer scale and a desire for a stronger market share position. Consolidation is the end game of an industry, with only a small handful of global or regional players in the segment. Again, this period requires different capabilities from the growth period and again different national traits will impact success. We will summarize the key learnings from the eight cases at the end of this chapter.
In Chapter 8, called “Whither the West”, we discuss how this new balanced global world will affect countries in the West and outline a few golden rules for dealing with people from reactive and multi-active cultures.
In Chapter 9, we will discuss how an existential crisis ultimately will hit most companies and what effect the national culture will play in both identifying it and handling its effects.
In the final Chapter 10, we will summarize our findings and present eight recommendations that the boards, management and investors should consider. We also list common traits that may switch from being an enabler to a derailer and vice versa in different countries, and in the Appendix we list common national enablers and derailers in over 25 countries. Finally, we briefly discuss what countries may learn from these findings and what implications they could have for them if they want to strengthen innovation and entrepreneurship and deal more effectively with national enablers and derailers that affect their ability to compete in a rapidly globalizing world.
Notes
1 © Kai Hammerich 2012.
2 Lewis R.D. (2006) When Cultures Collide, 3rd Edition. Nicholas Brealey, pp. 224–226 and 540–542.
3 Lewis (1996), pp. 503–504.
4 Chang S.-J. (2010) Samsung vs Sony. Wiley, pp. 99–100.
5 Hofstede G., Hofstede J., Minkov M. (2010) Cultures and Organizations, 3rd Edition. McGraw-Hill, p. 6.
6 Pagel M. (2012) Wired for Culture. Allan Lane.
7 Schein E.H. (2004) Organizational Culture and Leadership. Jossey Bass Publishers, p. 247.
8 Schein makes a similar observation; Hofstede et al. (2010), p. 339.
9 Collins J. (1995) Built to Last: Successful Habits of Visionary Companies. Harper Business Essentials; Peters T., Waterman R.H. (1982) In Search of Excellence. HarperCollins; Kotter J., Heskett J. (1992) Corporate Culture and Performance. Free Press.
10http://seekingalpha.com/article/259736-china-surpasses-japan-in-percentage-of-world-market-cap/.
11Hofstede et al. (2010).
12Schein (2004). Schein also notes that one can argue that large global corporations may not have a single overarching global culture, but a set of significant regional and functional or divisional subcultures.
13 For an excellent discussion of the subject also read Collins J. (2009) How the Mighty Fall. Random House.
14 Porter M. (1980) Competitive Strategy. Free Press.
15 Christensen C. (1997) The Innovator's Dilemma. HBS Press.
16 Hofstede G. (1980) Culture's Consequences. Sage.
17 Jones G. (2005) Renewing Unilever: Transformation and Tradition. Oxford University Press, Chapter 9.
18 Jones G. (2005), Chapter 9.
19 Japanese manufacturing philosophy originated by Toyota, particularly important in the efficiency and scale phase.
Part I
Developing the Cultural Dynamic Model®
1
Corporate Culture, Strategy and Business Results
In this chapter we discuss the mechanisms by which values, beliefs and assumptions are embedded in organizations through the behaviour of their leaders and their work practices. Drawing on the work of Ed Schein and Geert Hofstede, we go on to use the Cultural Dynamic Model® developed by Kai Hammerich, to guide our discussion of how business influencers and national influencers impact the corporate culture in fundamentally different ways: the staid national traits that are slow to change compared with more fluid business traits that can be influenced by management over a shorter time scale. In this chapter our discussion focuses on the business influencers, and in Chapter 2 on the national influencers, using the Lewis model – a triangular representation of national types. In Chapter 4 we bring it all together in the complete Cultural Dynamic Model®.
When Kai Hammerich was a newly minted and hopeful MBA from Kellogg Business School in 1984, he got his first job in marketing at Hewlett Packard in Denmark. To spur sales he came up with a promotional concept to expand the use of administrative computers , as servers with ERP (enterprise resource planning) applications on them were called at the time. The simple idea was to target secretaries rather than the heads of finance, and offer a 90% discount on word processing, email and graphics software, hoping that with use, the customers would need to upgrade to the then much more expensive computers. The campaign was a runaway success. HP Denmark more than tripled software revenues and profits.
Initially, the European software division was delighted, but they soon complained that the CFO was less than pleased with the deep discount. As the more pricey hardware upgrades started to roll in the software division had the sensible idea of asking the hardware division for a cross-subsidy. They argued that it was their discount solution that had enabled the hardware division to significantly increase sales and therefore profits. The response from the German head of the European computer division was disappointingly clear: “Over my dead body” – sophisticated business talk for a NO! Kai was disheartened. He felt this was not rational, and escalated the issue. Eventually, a senior CFO tersely told Kai that while he understood his frustration, the principle of the independent product division was sacrosanct at HP. Kai was right by MBA standards, but here was a fundamental belief at stake and that was more important than short-term MBA logic, and the campaign was called off. This belief in the independent product division was central to HP and had been inculcated in the organization by the two founders Bill Hewlett and Dave Packard. This was a principle that was not up for debate! It had become an embedded value – based on a business influencer.
The next sections explore the ways in which such beliefs become embedded in an organization.
First, let's look at the nature of organizational culture, or corporate culture as it is also called when describing a business organization.
