Monday, November 22, 1999

Driving Success at New Blue

My article of choice this week was a great piece on Lou Gerstner as Technology Leader of the Year. I thought it appropriate for the discussion of IBM’s cultural issues, organizational changes and the impact upon employees.

Titled Driving Success At New Blue – Louis V. Gerstner Jr. Helps IBM’s Customers Use Technology, this article is first of all a tribute to Gerstner’s reign at IBM. Since joining IBM on April Fools’ Day of 1993, Gerstner has been credited as the architect of the vast turnaround IBM currently has underway. The stock price and profitability metrics do indeed indicate a high degree of successfulness in Gerstner’s plan. However, the company’s total transformation as it morphs into the e-business arena is what is setting the stage for the company’s continued success.

Gerstner states that upon his arrival in 1993, his vision for IBM was simply to “return to its former position of leadership.” However, Gerstner is not talking about leadership based on the proprietary standards propagation which IBM enjoyed in the past. Rather Gerstner wants IBM to be the company that customers turn to for technology innovation and an understanding of how to “explore technology for competitive advantage”.

The first step Gerstner took in this regard was one of dismantling the spin-off strategy that had just begun under the former CEO. Though the spin off strategy designed to create 10 separate IBM companies, akin to the Baby Bell creation AT&T went through, probably would have provided a temporary level of stock valuation increase which was sorely needed at the time, Gerstner instead “recognized the greater value in keeping it [IBM] whole.” This effort to leverage the organization into a vertically integrated solutions company is what set the stage for IBM’s comeback.

Gerstner chose this path in part because he joined IBM with what he called the “mindset of a customer.” As an example, in IBM Redux (1999, HarperBusiness) Doug Garr “recounts the tale of an IBM supplier that wanted to return an overpayment of $20,000.” Unfortunately, no one at IBM would accept the money because to do so “would have required someone to take responsibility for the error.” This form of denial was due in large part to “a culture that had been inbred for 40 years and sustained by success.” The fuel for this culture was an over-reliance on hiring candidates fresh out of school and promoting almost entirely from within such that the results was a “workforce with a very unique set of business practices.” To change such a system caused much consternation among many of IBM’s workforce but it was a necessary step in order to facilitate change.

Garr points out that the “paternalistic, cradle-to-grave employment model of post-war Japan” was really modeled after the “personnel practices of IBM founder Thomas J. Watson.” Gerstner reversed this “family” approach with a series of “tough love” initiatives designed to encourage the desired behaviors. In doing so, Gerstner initiated a 60% increase in variable pay (pay for performance) and substantially increased the number of employees eligible to participate in stock option programs. In 1996 he doubled the number of stock option eligible individuals, doubled it again in 1997, and tripled the number of participating employees in 1998. This most certainly forced a cultural revolution of sorts within the IBM workforce for better and worse almost simultaneously.

In this article, Gerstner picks at the hierarchical issues of organization structures and argues that any enterprise need only think about three things “strategy, decision-making, and processes.” Gerstner then states that Strategy should be centralized or common and decision-making and process development should be pushed as far out as possible toward the organizational person actually touching the customer. Quite a change from the IBM of old which Garr describes as a “Soviet-style bureaucracy.”

Lastly, Gerstner also set about to change the IBM culture in a myriad of more minor ways as well. For instance, the R&D Division’s motto changed from “Famous for its science and technology and vital to IBM” to “…vital to IBM’s future”. A small shift to forward looking from a rearview reverence, but telling in the change it sets up over time.

All in all, a well-done article on a success story that is not without its controversy.

Resources

Teresko, J. (1999, December 6). Driving success at new blue [Online].
Available: http://www.industryweek.com

Fatehi, Kamal. "International Management: A Cross-Cultural and Functional Perspective." Prentice Hall. 1996.

The Lure of Global Branding

My article of choice this week was only available in a summary form on the Internet. However, since I enjoyed it, I chased down the full text in the off-line world and summarized it below.

Titled The Lure of Global Branding, this article discusses the potential for global branding to become a key weapon in a firm’s successful international arsenal. Just as Fatehi suggests that organizational structure can become a tool for the management of an international firm, so too can branding set the stage to unify a firm’s assets when properly employed.

Of course the strength of any branding tool as a management weapon depends on many implementation issues. The article suggests at least three common areas of consideration all companies must do in striving for a global branding implementation.

· stimulate the sharing of insights and best practices across countries
· support a common global brand-planning process
· assign managerial responsibility for brands in order to fight local bias

Taken point by point, these global branding issues could correlate just as well with almost any multi-cultural management quandary. Regardless of whether it is branding, product development, or channel management, the international firm must involve team members across countries, support a common process, and assign management responsibility to fight the country by country, segment by segment silos that develop without such global reinforcement.

As with most weapons of choice however, the problem for branding management is how to “balance the need to leverage global strengths with the need to recognize local differences.” In doing so, one of the key issues is whether or not the brand’s slogan, or for that matter, the firm’s name can successfully translate across cultures. In a given example IBM, in Argentina adjusted their “Solutions for a Small Planet” tag-line to read “Solutions for a Small World” thus fitting better with the market’s word usage in Argentina. Akio Morita on the other hand, in choosing the name for the company that would become known worldwide as Sony, specifically recognized that the collection of letters that comprise “Sony” could be pronounced nearly the same all over the world. He also liked the perceived reference to “sunny,” and its root in the Latin word “sonus” for sound. Whether a firm brands for a single global approach or adjusts as needed as IBM did, it would be a grave mistake to forget to check key elements of any branding campaign against cultural and language differences in potential markets.

At the same time, companies who “stampede blindly toward creating a global brand without considering whether such a move fits well with their company or their markets, risk falling over a cliff.” Perceived economies of scale may prove difficult to capture, the influence of neighboring markets may be negative or simply elusive, and the requirements demanded of the management team may prove too difficult to secure. Thus, as is true with most management tools, the implementation of global branding must be weighed carefully and then executed with swift care and precision.

Though the master Sony brand has a solid global presence, Sony is currently struggling with just such an implementation issue as it works to position the Sony brand for equal success in the global online world. Of course, this must be done in conjunction with, as opposed to in conflict with, the aggressive local efforts surrounding the Internet in each market and market segment. All truly international firms must recognize and embrace the power and the challenge of global branding in both the off-line as well as the online worlds.


Resources

Aaker, D. & Joachimsthaler, E. (1999, November-December). The lure of global branding. Harvard Business Review, 137-144.

Aaker, D. & Joachimsthaler, E. (1999, November-December). The lure of global branding [Online]. Available: http://www.hbsp.harvard.edu/products/hbr/novdec99/99601.html

Fatehi, Kamal. "International Management: A Cross-Cultural and Functional Perspective." Prentice Hall. 1996.

Thursday, October 28, 1999

China’s Car Guy

“China’s Car Guy”: FORTUNE October 11, 1999

This week I came across an article in Fortune magazine about General Motor’s (GM) venture into the Chinese marketplace and the 48 year old Chinese business, Mr. Hu Mao Yuan, person who made it work.

Hu, president of Shanghai General Motors (SGM), in the interview conducted by FORTUNE stated that his greatest fear would be that “the largest joint venture in the People’s Republic would wind up as an auto company that just produces quarrels between its partners.” To make matters worse, USA critics of the venture derided GM for “giving away too much technology and getting locked into making Buick sedans that are too expensive for the market.” From the success the joint venture has achieved, the worries and criticisms were needless at least given the path that Hu and GM set the venture onto. To that end, GM held out a very bold vision; “changing the very nature of competition in China” and in Hu, China (and GM) found someone who “could bridge the gap between Western and Chinese business practices.”

As I read the article, I noted that Hu highlighted many of the cultural difference issues one would expect, however he also noted a few things that surprised me. For instance, he stated that issues of trust, communication, egos, and differences in social, political, and legal systems all created obstacles which I would have expected. But then he surprised me by stating that “Americans are known as individualists but they spend a lot of time building teamwork.” He further added that “Chinese nowadays are increasingly focused on individual development.” Both statements surprised me in their frankness and the repealing of my assumption as to ‘commonly held’ knowledge. Hu then goes on to describe how the parties finally established “ a level of trust” which enabled the development of relationships some of which Hu rightly refers to as “a secret weapon” in achieving success. To this point I felt I could directly relate as I’ve found in my own cross-cultural adventures that if you could establish a basic one-human-to-another level of communication, everything else would become easier to at least talk through.

Hu also indicated just how far China had come by sharing that in the 1950’s “saying that a joint venture’s interests should come first could land you in jail.” On the other hand GM’s vision of building “a world-class auto industry in China,” their $2 billion in investment and the resulting “Bucks with fewer deviations from specs than those built in North America” have begun to change the mindset in China.

I think though that Hu’s self-developed “4S” principles get at the real heart of his success story. Hu’s first “S” is to “study each other’s culture and practices to get the advantages of both.” The second is to put SGM–the joint venture’s needs ahead of either party. The third is to standardize wherever possible. And the fourth, which is really a double “S” is to be a spring, “which represents the idea of being flexible rather than stubborn.”

Clearly Hu’s attitude which he fostered amongst the venture’s partners and workers has provided a foundation to make “everything easier to achieve”. That’s probably good advice for each of us to consider in our study of Global Management techniques.

Monday, October 11, 1999

Cultural Style & Management

Sometimes progress can only come from the pain of reality. In this case, a strong dose of cultural awareness was the result of a painful clash with the reality of different management styles and culture approaches to decision making.

The first Japanese manager I worked for at Sony Electronics was very much a Theory Z manager. He really worked to empower his people and enable them to drive their businesses. He encouraged his people to try new and creative alternatives and to incubate new business opportunities. Under his management, I was able to really excel at the immediate business responsibilities. Additionally, I asked and received support for several new business attempts that were creatively outside of the traditional scope of the specific job I was hired to perform. What I did not fully appreciate at the time was the degree to which this particular manager’s approach was different from that of the typical Japanese manager.

After several years of pleasant bliss, one of the creative side projects I had started showed enough financial promise that I was transferred to another Japanese boss so as to allow more focused time to be spent on the new business opportunity. This new boss was much more a Theory X style manager. However, in the introductory weeks of our new relationship, my new manager, being very aware of my prior manager’s participatory manner, spent a great deal of time promising that he would help me build a long term management position within the company as the project became successful. I took these promises at face value and immediately began to build the leadership team required. Simultaneously, I began execution of the business planning process. What I didn’t realize at the time however, almost derailed the entire project.

My quick and relatively autonomous action, which would have been rewarded by my former boss, was seen as a terrible breach of protocol by my new boss. He was insulted by my decisiveness and the fact that I took two end points and executed the middle ground without seeking his consensus on the ground in-between. It was not the outcome that was in question but the self-reliant approach to my decision making. This unintentional breach of consensus protocol, while serious enough in my new boss’ mind, escalated into what was perceived as a sign of disrespect for an elder when I didn’t immediately understand why he was so upset with my approach to advancing the business.

Only after seeking advice from my former manager and asking him to intercede on my behalf, was I able to begin to recover from my dance with this form of cultural conflict. Not fully adjusting to the impact of the different management styles may have been a simple misstep but compounding the situation by unintentionally ignoring the highly traditional consensus oriented Japanese style of decision making, resulted in some very stressful months while relationship repair attempts were made.

Today, this same manager is still very much a Theory X manager and I still cringe at the consequences of his style. However, I’ve learned the need to keep him posted every step of the way and to seek his consensus on every decision as it goes. For me, the process seems painfully slow, but to ignore his bias would be to assure that the project would grind to a halt. The need for a dose of patience to deal with a value difference in the decision making process is the end lesson learned.

Thursday, October 07, 1999

Siblings’ Lives, on Divergent Paths Since ’60, Trace U.S.-German Divide

An interesting article caught my eye today in the New York Times. Titled: “Siblings’ Lives, on Divergent Paths Since ’60, Trace U.S.-German Divide.” Though the article compared and contrasted the lives of a brother and sister, one who ended up in the USA and another who stayed in East Germany, I think it spoke volumes to an underlying economic issue facing the two countries.

The two siblings, now in their mid-fifties, separated in 1960 while trying to escape East German Communism for the West. The sister struck out and ended up in rural Missouri while the brother ended up marooned in East Germany 17 months before the wall went up. Now the brother is without job prospects and favors social practices while the sister says, “If you want to work, I don't give a damn, you find work” and she wants the government out of her day to day existence. “Hans sees his sister as "way over to the political right." Heidi views her brother as the victim of a German system "that still assumes people are so dumb they need to be taken care of."

What I found most interesting about this comparison however was what must be an inherent difference in a socialistic-based system versus the democratic system of the USA. As a US citizen of German heritage, I’ve thought of German immigrants to the USA as hardy individuals with a strong work ethic.

However, Hans’ story stresses socialistic tendencies in a country where “there are 46 pensioners for every 100 active workers today; (and) in 2030 there will be 96 pensioners for every 100.” Hans receives an almost identical income stream as his sister and relishes the free health care and generous unemployment benefits enjoyed by himself, his wife, and his child. On the other hand, Heidi has raised 11 children and currently runs a day care operation out of her farm house in Missouri while continuing to believe in the value of work for work’s sake.

That two siblings raised in near identical conditions until the age of 16 and 18 and then placed into two entirely different social systems could develop such vastly different outlooks seems to me to be a true testament of the wide range of issues we all need to think about.