Fish Can’t See WaterHow National Culture Can Make or Break Your Corporate StrategyKai Hammerich and Richard D. LewisJohn Wiley & Sons, Inc. © 2013

312 pages

“Corporate Culture”Like yin and yang, corporate strategy and culture are inseparable. National attributes influence different dimensions of corporate culture. Companies are subject to “national influencers,” the “water people don’t see,” just as fish are unaware of the water in which they swim. National influencers spring from a country’s history, including its politics, geography and climate; from its founders’ and leaders’ “values, beliefs and assumptions”; and from its national “types” or personalities. Despite differing subcultures, the overall core identity of a country generally falls along a continuum marked by one of three major overarching cultures:1. “Linear-active” – People in this culture prefer facts, figures, details and organized information, which they process directly. They believe in rules, directions, laws and logic. They are less diplomatic than other cultures; they demand order and punctuality. Linear-actives want results. Linear-active countries include Australia, Britain, Canada, Denmark, Finland, Germany, New Zealand, Norway, Sweden and the United States.2. “Multi-active” – People in this culture are emotional and talkative. Relationships are important to them. Multi-actives interrupt other speakers, use hand gestures and prefer to communicate face-to-face. They throw lavish parties and give gifts to circumvent rules. Multi-actives procrastinate and miss deadlines. Most of the world’s population – three billion people – belongs to a multi-active culture. Most Latin American, Mediterranean and Sub-Saharan African nations are multi-active, including Brazil, Chile, Mexico, Argentina, Italy, Portugal, Spain and Greece.3. “Reactive” – Members of this culture are good listeners, introverted, deferential and courteous. Most reactive national cultures are Asian, including Japan, China, Korea, Vietnam, Indonesia and Singapore. Reactives listen before speaking, then slowly form and state their opinions. Long silences show respect for their colleagues. Reactives don’t indulge in small talk. They speak in the third person and use the passive voice in order to avoid confrontation, which they shun.National TraitsEach country has a distinct set of national characteristics that affects how its businesses function. For example, initially consider France, Japan and Germany. France’s national traits include a proclivity for “theories, ideas” and “process.”

The French honor their language, culture and educational system. “Convinced of their intellectual superiority, they consider it their mission to civilize” everyone else. They care more about reputation than about profits, and they seldom abandon theories they think will work. The French resistance to learning English, the international language of business, hurts them in global commerce.Japan’s corporate and national cultures are tightly intertwined. The Japanese have trouble speaking other languages. They are courteous, respectful and concerned with saving face. Japanese “salarymen” often work for the same company for many years. They expect to work many extra hours, but they also expect regular promotions and raises tied to their age. Japanese culture takes a long-term view; immediate profits are of little concern. Maintaining an organization for the future matters most. The society considers the company, or kaisha, “sacred.”“After Japan, Germany is the country where nation-state traits impose themselves most thoroughly on corporate behavior.” German traits include a strong work ethic, a sense of order, a focus on the facts, and a definite hierarchy and bureaucracy. “The most important word in the German language is Ordnung...‘order’ or ‘orderliness’.” Companies are hierarchical, with the senior, most experienced person at the top. Germans excel at planning, statistics and analyzing problems, but are uneasy with improvisation.

“The Innovation Phase”National culture has a varying impact on companies at different stages in their life cycles. At the beginning, a firm’s “innovation stage...is, by its nature, volatile. Not all ideas are good and not all ideas can be successfully commercialized.”Nokia, the Finnish technology company, experienced record growth during its “embryonic period” but struggled in later phases. It came to exemplify a facet of Finnish culture “called Sisu...a combination of perseverance to overcome adversity combined with long-term perspective.” Nokia, founded on the two traditional Nordic principles of honesty and a strong work ethic, began as a pulp mill company in 1871. Regardless of their countries of origin, all Nokia employees embraced Finnish “personal respect, trust and empowerment.”Nokia produced TVs, PCs, rubber products and telephones. In 1992, the firm began making durable, easy-to-use cellphones. But Nokia became increasingly complicated and disorganized as an organization. From 1995 to 1997, it sold more than 100 different phone models in 150 countries and dealt with more than 500 different network operators. “Nokia 2.0,” the leading low-cost producer of cellphones, used Sisu to ward off its competitors, but managers became less team-oriented and less customer-focused. Finnish pride eventually gave way to entitlement and complacency, and the company avoided outside influences. Nokia’s vendors and customers complained about employees’ arrogance and lack of responsiveness.Apple’s strategy – “Why have 100 different models when you can have one insanely good one?” – was the opposite of Nokia’s. “Nokia 3.0” fought for survival as the iPhone and Android phones captured the luxury segment of its market and Asian firms came to dominate cheaper cellphones. In September 2010, Canadian Stephen Elop became Nokia’s first non-Finnish CEO. He told his

employees that, for Nokia to survive, it would have to jump off a “burning oil platform” into the cold waters of “cultural transformation.”

The “Growth” and “Maturity” PhasesTo expand product lines and achieve scale and efficiency during the growth period, businesses must be disciplined, innovative, and able to plan, execute and budget. They have to balance agility with quality control and think strategically for the long term. Companies working to achieve scale must manage complex processes; balance risk and costs with profits; and build long-term partnerships. In the maturity period – the final phase of a company’s life cycle – most organizations focus on strategy and staying competitive in a global marketplace.National traits deeply affected Japan’s Sony and Korea’s Samsung Electronics during their growth and maturity phases. Masura Ibuka, an engineer, and Akio Morita, who served as CEO for more than 40 years, founded the Sony Corporation. Obsessed with electronics, Morita traveled to America to learn how to make tape recorders. Sony’s first successful product was a pocket transistor radio. Over the next 20 years, Sony built TVs, radios, CD players, video recorders, camcorders and more. The Walkman debuted in 1979 and sold more than 100 million units. Sony expanded into music and entertainment with mixed success. Except for the top-selling PlayStation, Sony lost ground as technology shifted from analog to digital. Sony suffered major losses when the VHS video format overtook Betamax and Apple’s iPod became the dominant MP3 player.Though “Morita was the most Westernized CEO of any Japanese company” and “had an open mind,” he continued to embody Japanese traits. He promoted workers based on age over skills and expected them to stay with Sony for decades. Ibuka was even more traditionally Japanese.Sony’s rival, Samsung Electronics, is now the world’s largest electronics company. It reflects common Korean traits, including deference and respect for elders, courtesy, an emphasis on Confucian principles, deep national pride and mistrust of foreigners. Lee Byung-chull founded the company in 1938 with three main missions: to contribute to Korea’s economy, “pursue economic rationality” and value human capital.Samsung first focused on manufacturing color TVs and home appliances and became known for low-quality, inexpensive goods. In 1974, Lee and his son, Lee Kun-hee, decided to focus on semiconductors. A decade later, Samsung was making 64Mb DRAM chips and, by 1995, DRAM chips accounted for half its profits. Samsung expanded into cellphones, flat-screen TVs and computers. The 1997Asian financial crisis forced the firm into a strategic re-evaluation. In the next 10 years, Samsung’s revenues increased fivefold. In 2002, it became the leading producer of flat-screen monitors and DRAM chips, and the third largest producer of cellphones.

“Golden Rules”Although linear-actives have dominated economically for years, the tide is turning, with the BRIC countries (Brazil, Russia, India and China) gaining power. Linear-actives should follow these golden rules when dealing with reactives:

• Speak to build relationships and “promote harmony.”

• Listening is more important than speaking.• Don’t interrupt, confront or openly challenge your hosts.• Understand the concept of saving or losing face.• Be diplomatic and indirect with criticism or suggestions.• Leave your options open and stay flexible regarding rules.• Use your networks and reciprocate.• “Don’t rush or pressure Asians.”• Observe and respect your counterparts’ hierarchy.• Be patient and work to create connections and trust.

Linear-actives and multi-actives often clash. Linear-actives must learn to put people before profits, and they should follow these guidelines when dealing with multi-actives:

• Speak up to share your opinions.• Let your hosts express themselves fully and then reply.• Multitasking is normal and encouraged. Speakers often discuss multiple

things at once, and many people may talk at the same time.• Show your feelings and emotions. Outward displays of body language,

gestures and touch are normal and expected.• Interruptions are not only tolerated but even encouraged.• Be diplomatic – not direct – and flexible regarding rules.• Socialize. Expect to mix business with pleasure.• Be willing to think out loud and accept tardiness. Multi-actives are rarely

punctual.• “Seek and give favors with key people.”• Relationships and reputation are more important than making a profit.

Managing CrisesCrises can strike at any point in a firm’s development but are more common during transitions from one growth phase to the next. Corporate crises come in seven varieties: dealing with your competition, bad execution, a technological or process disruption, dealing with success, the passage of time, a change in leadership or navigating transformation. “A company under crisis will often revert to its core national culture”:For example, a US company will likely “become more hierarchical and more dogmatic,” while its workers will grow “less team-oriented.” Global companies must “see the water” surrounding them. Create a diverse organization not only in demographics but also in terms of different perspectives. Recognize the cultural impact of mergers and acquisitions. “Conduct a full strategy and cultural dynamics audit at least every five years.” Understand how your national and corporate culture affects your business.

About the Authors

Kai Hammerich is a managing director for Russell Reynolds Associates, a global search firm. British linguist Richard D. Lewis is the author of When Cultures Collide.