Business Book Review

Friday, October 27, 2006


Reading Suggestions & CONTENTS

“It is not global at the cost of local or vice versa. … The main success criteria are how to improve local activities through global Learning and how to apply locally what has been developed globally.”
“If we ask which has priority—which value must logically come first—there is no doubt that motivating employees to satisfy customers precedes increasing returns and paying profits to shareholders.”
“Despite far greater emphasis on ascription or achievement in certain cultures, the two usually develop together. It is … a question of where a cycle starts. The international leader surfs the crest of this dilemma.”
According to Trompenaars and Hampden-Turner, genuine leadership challenges the status quo, and this process induces dilemmas. In their research of sample leaders, the authors found that there are 21 stereotypical dilemmas that can be categorized as derivatives of each of the seven dimensions. The following examples are presented to demonstrate how reconciliation of these dilemmas constitutes effective value-generating leadership.

Of the many examples of the universalism-versusparticularism dilemma affecting the leaders, the authors found that the dominant one is the global-local dichotomy in which the primary questions is: Should there be one standardized approach, or should a local, particular method be tried? The answer lies in having a truly global reach, but with national sources of major influence. Seeing the need to implement more universalistic elements into Acer Computer’s strategy, Stan Shih designed the “global brand, local touch” strategy. He established Acer as a global brand name, with a good reputation, in combination with local assembly, local shareholders, local management, local identity, and local autonomy in marketing and distribution.

Another example deals with Rahmi Koç’s effort to utilize global learning to gain local market share for The Koç Group, one of Turkey’s largest conglomerates. Koç has developed joint partnerships, with such corporations as Ford and Fiat, so that his company can learn about their thinking, strategy, manufacturing techniques, and market intelligence—the main thrust being to improve local activities through global learning. The Koç Group also joins the giants in exporting so that it too can grow into a truly global player.

A second dilemma found in the area of universalism (rules) versus particularism (exceptions) is how to reconcile speed with continuous improvement. Jim Morgan, CEO of Applied Materials has accomplished that by designing organizational processes that pounce on mistakes and correct them quickly in order to accelerate learning. In these processes, what was acceptable last month is reclassified as unacceptable this month. Thus, every error is an opportunity to improve, and people are empowered to monitor themselves and rethink their work.

With regards to individualism versus communitarianism, Trompenaars and Hampden-Turner believe that effective leaders understand that individualism finds its fulfillment in service to the group and that group goals are of value to individuals only if they are allowed to participate in the process of developing these values. The authors define this reconciliation, which integrates individual creativity into teamwork, as co-opetition.

Understanding that the major challenge is not in finding enough individuals to generate good ideas, but in the business system that must translate those ideas into viable products and services, LEGO’s Christian Majgaard creates teams whose members have diverse values and abilities. He believes that this approach creates the potential for devising solutions that benefit from the kind of dissimilar viewpoints and novel inputs that dispel skepticism. His reconciliation is to make the goal, as well as the process of creating new shared realities, so exciting that diverse team members overcome their differences and “realize a unity of diversities that make the solution far more viable.”

Richard Branson of Virgin is also excellent at this type of reconciliation. He seems to have special talent for creating public sympathy for the wronged individual (“David”) confronting the collectivized assailant (“Goliath”). By taking on the likes of Coca-Cola, PepsiCo, the giant clearing banks, the pension industry, the U.S. gambling industry, 95 percent of British Airway’s British-originated airline traffic, Britain’s motor-car cartel, and the closed system of movie distribution, Branson has personalized Virgin, turning it into the underdog individual that comes to the rescue of the consuming public.

Gérard Mestrallet, president of Suez Lyonnaise des Eaux (SLDE), presents another valuable lesson in reconciling the individual versus the community. Through his efforts, the company has captured 52 percent of foreign-owned water and treatment systems by combining the energies released by privatization with social responsibility. After a 20-25 year overhaul, SLDE returns, to the served community, full ownership of its own municipal infrastructure.

Trompenaars and Hampden-Turner’s research shows that though the dilemma of specificity versus diffusion is very difficult to reconcile, this form of reconciliation is one of the most rewarding. Dell Computer is a prime example. Michael Dell’s dilemma was how to reconcile a broad spectrum of customers with deep, personalized customer relationships. Having entered the computer industry late, he had to do something that would differentiate him from the competition, and one of the things he decided to do was to bypass distributors and sell directly to customers. This model of direct selling received a boost from the Internet, which allowed the company to understand each customer’s problems in specific detail and, at the same time, serve a diffuse array of needs and consumers.

David Komansky of Merrill Lynch also faces a major dilemma in the arena of serving the entire spectrum of Internet users, while simultaneously digging deeply into their specific problems. He has reconciled that dilemma by integrating high tech with high touch. As customers are increasingly inundated by the deluge of numbers that the Internet gives them access to, the more they need help in interpreting them. Komansky uses the Internet to give better personal service (via high tech) to its high-touch customers and, at the same time, uses the Net to identify those high-tech customers to whom it makes good business sense to offer high touch.

Another excellent example of the reconciliation of specificity and diffusion is Kees Storm, of AEGON, the large Dutch insurance company. In his opinion, it is foolish to extol shareholder value above the rights and responsibilities of stakeholders. He views the needs of all stakeholders as being so interdependent that it is impossible to emphasize any single set without damaging the entire system and “precipitating a regressive spiral.” Thus, using stock options that give each interested employee a stake in shareholder profits, he motivates employees to satisfy customers, which results in higher sales and profits for shareholders who, in turn, reinvest in AEGON.

Trompenaars and Hampden-Turner found that their leaders all “either had passion as the context in which their reason made sense or had reason as their context in which their passion became meaningful.” In the case of Club Med, its prodigious growth had put a strain on its management structure. It had become incapable of keeping track of costs or logistics, and it had also fallen prey to chronic underinvestment. However, Philippe Bourguigon’s insistence that the aesthetic experience of a vacation start to make sense in the real world rescued the company. Although he ensures that every Club Med vacation is still a unique, personal dream come true, he also makes certain that the elements that go into that vacation are standardized, globalized, and systemized, and that they are also generated in high volumes and at low cost. He has discovered that it is possible to create fresh vacations out of standardized inputs, and that it is the combination of elements that is unique, not the elements themselves.

Hugo Levecke, president of ABN AMRO Lease Holding, provides an example of how to change an emotional entrepreneurial setting into a neutral, rationalized one. At one time, most of the division’s growth had been created by innovative entrepreneurs; however, as the business matured and became more international in scope, a need developed for more interdependence between the division’s units, but one that would not destroy the hearts of the people. Thus, Levecke focused on improving the quality of internal communications and establishing a rapid exchange of knowledge at all levels of the organization. To this end, he developed a companywide scoreboard for recording initiatives and results. In addition, he introduced periodic meetings, where teams of directors, or the specialists reporting to them, exchanged experiences resulting from the initiatives being attempted by a business unit. The division’s sense of entrepreneurialism has survived because each director has an intelligent audience to admire and critique each initiative.

Anders Knutsen’s feat was his ability to create a balance between market and product. When he assumed the leadership of Bang and Olufsen (B&O)—the Danish audiovisual company—the firm’s tradition of immaculate design and engineering was so perfect that fewer and fewer people could afford it. Thus, he launched “Break- Point az,” a plan to restore harmony between the feelings of customers and the excellence of design and technology without compromising either. Knutsen also extended “Idealand,” a nonlocal initiative in which engineers, music lovers, designers, and other experts, both within R&D and outside the company, could engage in dialogue that would stimulate and balance ideas.

Trompenaars and Hampden-Turner and note that the difference in achieved status versus ascribed status generates dilemmas when partners have different ideas about how people move up the organizational ladder. This dilemma has been a fundamental issue for Stuart Beckwith, founding entrepreneur and managing director of the BCIF group of companies. His organization provides small or family-run businesses with business training, consulting, and recruitment services. Recognizing the importance of “planning to let go,” Beckwith uses his “status” to ensure that his customers have succession plans in place and that their businesses will not be dependent on the founder’s personal presence. He also recognizes the need for BCIF, also a family-run business, to change. He has broken it up into a number of components, each of which focuses on a number of core business competencies, and has given his children the opportunity to drive new ventures. In this way, he has reconciled the tension between the “aging” founder and “young” successors.

Another example of reconciliation between achievement and ascription is the nonprofit status of British United Provident Association (BUPA), the U.K.’s largest private health insurer and provider. Instead of having a yield of 25 percent profit to shareholders and having to compete with Internet stocks on the AEX, Val Gooding, BUPA’s CEO, decided to make enough return to care for the old and the frail. She believes that caring about the people she serves, and ascribing status to them from the outset, is a prerequisite for success. For this reason, BUPA has no shareholders, demanding their cut, but is a provident association, residing in between for-profit and nonprofit status.

Gordon Billage is now CEO of Clifford-Thames (Holdings), Ltd., a growing printing and communications company. However, when he was the managing director of the company’s founding division, he used this ascribed status to reposition the firm to become a support-services enterprise, driven by technology data management and the delivery of information across a variety of media.

According to Trompenaars and Hampden-Turner, with dilemmas deriving from internal versus external control, the major issue is to connect the internally controlled culture of technology push with the externally controlled world of market pull in order to achieve a culture of inventiveness. The push of technology needs to help companies decide what markets they want to be pulled by, and the pull of the market needs to help them know what technology to push. The organization’s success depends on this integration.

Tim Morris, founding entrepreneur and managing director of MMP Business Management, has made this reconciliation the core of his success. MMP provides backoffice services to a diverse range of businesses; thus, one of the primary dilemmas Morris helps his clients reconcile is the need for control of key business processes and the need to let things go in order to be able to focus on key business. Morris moderates the control “freaks” (who think their simplistic administrative systems give them power), by constantly informing them of the variables beyond their control, which cannot be changed or stopped, but that can be responded to and used to their advantage. And, he moderates those entrepreneurs who want to leave everything for “lesser beings” to handle by giving them access to innovative Microsoft Office products that let them know how much cash they have, what payments are due in the near future, and who their debtors are.

Inner-directed, technologically minded Royal Dutch Shell Group had done its homework, costing out all the options of disposal of Brent Spar, an obsolete oil storage and loading buoy in the North Sea, and calculating them from multiple perspectives, including the environmental impact. Even the British government had endorsed the disposal, in a deep undersea trench, as being the best alternative for all stakeholders. However, when Greenpeace wrongly accused Shell of leaving 4000 tons of oil sludge and sediment in the core of the spar, Sir Mark Moody-Stuart, chairman of the company’s Committee of Managing Directors (CMD), was forced to stop the initiative. Although he believed, and still believes, that Shell’s approach to disposing of Brent Spar was technically correct, he understood that Shell must withdraw from that solution. He reasons that, “I learned that one can be absolutely right technically but that real decisions must take account of [outside] personalities, agendas, emotions, beliefs, symbols, and appearances.”

When Sergei Kiriyenko, former prime minister of the Russian Federation became president of NORSI Oil, he understood that Russian people both yearn for and dread change. He knew that the inner-directed younger generation, motivated by success, would create black markets and Mafia-type environments if they were not restrained, and that the outer-directed older generation would wait for some directive from above to save them. Thus, he achieved reconciliation by abolishing the company: “There is no company or edict coming to save you—only what you yourself create.” This forced everyone to negotiate new and better agreements that would allow them to avoid loss, make a profit, and survive.

In their research, Trompenaars and Hampden-Turner found that the reconciliation of the various aspects of time is crucial. Keeping the traditional products that made a company’s name can jeopardize the creation of new products. And, organizing time sequentially makes a company efficient but not very effective. Long-term and short-term thinking must be integrated on a higher level.

Karel Vuursteen of Heineken, approached the dilemma of past and future needs of product development exceptionally well. He needed to integrate Heineken’s tradition of stability with the future needs of the company, and he needed to integrate the traditions of the Heineken product with the need for innovation in the area of specialty beers, which are now jeopardizing the established names in the industry. Thus, Vuursteen embarked on two forms of relatively safe innovation: Process innovation searches for new and better means of creating the same result, and product innovation allows new drinks to be created from scratch without involving or risking Heineken’s premium product.

By sponsoring empowered teams, Martin Gillo, AMD’s (Advanced Micro Devices) vice president of human resources in Europe, created reconciliation of the extremes between the need for the sponsor to be responsible and the need for the team to have the time and freedom to be creative. When AMD, the large U.S. microchip maker, decided to build a mega-factory (the Fab) in the Dresden region of what was once East Germany, Gillo realized that trying to import and impose the company’s American culture on Dresden would be a mistake. Thus, he has done everything possible to preserve and develop “natural groups” that have learned and experimented together. As a result, these groups have grown in their ability to innovate, and this ability has made a big difference in increasing the Fab’s yield.

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References by chapter and a subject index are provided.


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