wine nations vs beer nations: management issues
I have had the chance to witness a number of companies from Western Europe in different industries trying to build management teams in various countries within the CEE region.
The most typical scenario is that a local GM runs the country reporting to HQ in Western Europe. Sometimes this works, sometimes it doesn’t; obviously.
It becomes interesting when it doesn’t work for one company, but it works fine for competitors.
It is even more interesting when a company has absolutely no problem managing one country, while it’s having tons of problems managing another one right next to it.
This is a complex problem, here I just turn attention to one factor: cultural fit; itself a complex issue. To simplify it, let’s categorize European cultures based on national drinks.
Wine nations: France, Spain, Portugal, Italy, Hungary, Bulgaria, Greece, etc.
Beer nations: UK, Ireland, Belgium, Germany, Austria, Czech Republic, etc.
Vodka/hard liquor nations: Scandinavian countries, Russia, Poland, etc.
There are lots of nuances, like some beer and wine nations also have a significant hard liquor component, or that some beer nations also have good white wine, but it’s not that important to elaborate on these here.
There is an obvious fit between nations under the same category: there are German companies (beer) for example with Czech and Hungarian operations having much less problems with the Czechs (beer) and much more with the Hungarians (wine).
Sometimes things look good, but unless the integration is managed right, there is a time bomb clicking under the surface. Many top managers from UK or German companies managing Spanish, French or Italian units (or people) could testify to this.
I noticed the following pattern of behavior of companies that managed to build successful management teams:
The wine guys learned to appreciate beer, the beer guys learned to appreciate wine (to keep it simple I leave the spirit nations out of this for now).
More specifically:
- they exhibited a strong drive to understand differences: what are the managers like in the target geographies, how and why are they different (wine vs. beer), how is business done here (what’s the wine / beer culture like), what are the success factors there, how can we go wrong, etc.
- they exhibited a strong appreciation for differences and adjusted their behavior when necessary
- as follows from the previous points: they communicated obsessively.
Pattern of behavior of companies that were unsuccessful building successful management teams:
They expected the wine guys to become beer guys or vice versa.
This fundamental mistake results in passivity and inertia as main style elements:
- crucial tasks are delegated to administrators
- there is no attempt to try to understand the target culture. A good example is a German manager who “interviewed” a Hungarian manager from Transylvania (those guys are so different that they are subjects of many jokes even among Hungarians) and practically walked out of the interview after 10 mins. This mistake is no different from going to China to hire a manager and refusing somebody after 10 mins based on obvious differences. What actually happened is that the German guy realized in the first 5 minutes: “Mein Gott, this is not beer!!!”
- they disregarded market intelligence and didn’t adjust expectations and behaviors.
The short takeaway:
- don’t go shopping for beer in the wine store or for wine in the beers store
- don’t try to turn wine into beer or vice versa: you will inevitably fail.
- you can mix wine with beer, but it doesn’t taste like a drink and you can’t shove it down the throat of people for too long.
The metaphysics of patterns
For the past 15 years I have led thousands of structured conversation with people in various settings when there was something important at stake: deals, interviews, coaching and advisory sessions, fund raising, various projects, etc.
One practice that proved to be very useful is to always identify dominating patterns.
So what is a pattern?
A pattern is of course a returning theme (over years) in identity (not by the psychological definition). What’s interesting about it is that it is not a part of the “personality” , but the other way around! So the pattern is stronger than the person and as such the person has no “control” over the pattern, unless he/she consciously works on getting rid of it or perhaps making it stronger.
I’ve noticed individual and “social” patterns. In both cases, the patterns create recurring situations that seemingly control all participants.
Examples I have seen recently among CEOs (individual patterns):
a. incredible opportunities keep up presenting themselves, but consistently wasted by the person
b. the person attracts deals but drives away his team
c. respected by the team, delivers results, but not taken seriously by peers
Examples of social patterns:
d. the unresolved issue of succession planning issue at multinationals in the CEE. term after term new expats are coming.
e. decision making patterns in particular industries (steel and software comes to mind immediately)
f. the unresolved issue of integrating minorities/immigrants in Western Europe
How you can benefit from being aware of patterns (using the examples above):
a. you maybe presenting one of those incredible opportunities, or you maybe taken in by the excitement surrounding the person, but you will be cautious before signing exclusive deals for example.
b. you also trust the guy instinctively but if he wants to sign a long term deal with you, you will make it contingent on key members in his team; if he wants to hire you, you’ll politely say no
c. if you are his/her boss, this anomaly is a good enough reason to take some initiative to prevent the disintegration of your team. If you report to this guy, get ready for changes.
Being aware of patterns is beneficial when things look very promising on the surface; this is when most people miss them entirely. The trick is of course to consciously look for patterns, to dig and to monitor them, stay aware of them.
An impractical perspective on the wine business
As we go from south to north we come across with wine nations, beer nations and of course spirit nations. Wine consumption however is growing globally, including in beer and spirit nations and as a result of this the wine selection is getting wider in all major super and hypermarkets.
People buy cheap wine, expensive wine and wine in between. Wine lovers are well educated: they pronounce merlot, savignon, pinot appropriately, they are aware what are the native grapes in particular regions; some of them are even aware of what years were the best in which regions; so wine buyers are clear on the price value of a particular bottle of wine.
They perceive wine on sale to be just as irresistible as Nike shoes, LV bags or other products on sale. More or less this is the case when people are browsing at the wine section of Tesco, Lidle, Loblaws or other denominations.
Wine has become a product, like sneakers, shaving blades, hilti rock-drill and other practical products. The fields of applications are also well defined:
- I am going somewhere, gotta bring something
- Someone’s coming, gotta have something
- for movies
- for dinner
- everybody’s favourite: intimate times
- for conversations
- for forgetting, for celebrating
- for parties
- for closing business deals
- etc. etc. etc.
By “gaining” function, wine has degraded to the level of consumer’s goods. Since the mass views decline as progress, I should probably say: wine has advanced to the consumers’ goods category.
This has not always been like this. Like everything that has anything to do with luxury, wine is not “goods” or product. The “luxury goods” category from this point of view is an oxymoron.
According to the definition I propose: luxury is a field that has no practical considerations; to put it differently: it’s not bound by (practical, inferior) conditions; we could also say: it’s independent, which is in analogy with superiority.
When looked at from below, the superior is always luxurious. It’s likely that the expression “luxus” originates from “below”, since luxus, as a “surplus” may only be perceived as such from an inferior position; from a superior position this “extra” is integral, natural.
One who surrounds himself with luxury goods while he builds a career, “serves” clients, etc. and perhaps makes such statements like he likes luxury or that he leads a luxurious lifestyle, is in a grave contradiction. This is true also when one backs up such a statement with something like:
I only buy Mercedes because I can relate to the philosophy of striving for perfection. Coming up with ideas for this may occasionally birth very funny statements, which however are meant dead seriously at the time:
- I am a princess so I deserve royal treatment: the only brand that is appropriate for this is prada, gucci, etc.
- “a BMW is like a predator in a suit (someone with more imagination may go as far as specifying: like a cheetah, a panther or a lion), EXACTLY LIKE ME!”
It’s typical of the sometime downright stupid “business thinking” that they seriously ask questions like if you were a car, what brand would you be; or which brand expresses your working/leadership/personality type the most.
To summarize before we move on: the luxury industry is the mass’ perception about the style elements of superiority.
Back to wine.
Wine is not a product. It’s also obvious that it didn’t become from “below” so to speak. It was not an highly observant ape man who accidentally started to grow grape, and then accidentally left it to ferment, etc. I don’t want to continue because it wouldn’t be worthy of applying inferior speculations (how it was discovered, “invented”, etc.) to things like wine.
Wine was not invented, it is a natural phenomena. Conceptually, in relations to certain principles, wine had always existed even before its manifestation. If certain conditions are present on the manifest plane, wine will also appear.
The creation of conditions for its manifestation was a ritual, whereby one “plays” with time from a “position” (of creation) “above” or “before” time, just like in metallurgy, where man eliminates time as it relates to the ore in earth thereby accelerating the manifestation of the potentially existing metal (see Eliade: Forgerons at alchimistes)
To elaborate on the ritual of bringing the wine from potentialities to actuality is not relevant here. Much more interesting is the ritual of knowing the wine through tasting it (by no means CONSUMING it).
The birthplace wine is obviously very important; grapes native to a particular region are prerequisites for (near) perfect wine, since it is not by blind chance that it is precisely this type of grape that is native to a particular region. Shiraz from Australia maybe without doubt tasty, but by no means may it become perfect.
Today of course this kind of “mixing” is pervasive and it is driven mostly by marketing. “Shiraz has been incredibly hot this year”. “Last year the Australians made a killing in the “shiraz-merlot” segment, etc. …and the marketing guys are thinking (or not): why is cabernet-shiraz more popular than shiraz merlot?
When it comes to the masses there’s nothing to think about: the stronger the taste the more popular the wine. The more unsophisticated the (person’s) taste, the stronger the taste (of wine) must be.
This is probably the foundation of the popularity of Chinese fast food as well.
To keep it short, just the bottom line:
The basic rules of tasting wine:
- get to know the wine where it appears: go there
- before getting to know the wine more intimately, explore the area, talk to the locals, taste their food with their own regional spices, try their water, notice the smell of air, etc.
- it is incredibly important that you get introduced to the wine by the grower personally, in the cellar, preferably straight from the barrel. The grower will tell you about the history of the cellar and the family, about the wine you’re tasting, about the harvest conditions that year, about everything.
All these are part of the conditions facilitating manifestation so they are incredibly important from the point of view of getting to know the wine appropriately.
It is easy to see that the grower is not introducing a product.
It’s about a principle thing so about something that transcends both the grower, the guest and the wine; it integrates the grower, the wine (together with the area, the people there, local food, drinks, history, etc.) and the guest (pilgrim) into an indivisible unity the centre of which is perfection that in this particular moment manifests itself as wine.
An uplifting experience.
Of course after such an introduction you bring home a couple of bottles. It’s important to note that the price given by the grower is symbolical and not subject to negotiation. The indicated price maybe influenced by to what degree the feeling of indivisible unity has been actualized during the introduction. Sympathy may play a role, but not necessarily. The price must be accepted.
When one opens the wine at home he gets only a pale reflection of the original experience; in a way he just relives the memory; but this pale, reflective memory is still incomparably better than picking up a bottle at tesco (loblaws, whatever); the only thing we can learn from such a wine is aromas, smell, %’s, a year that is nothing more than a number, etc. This means that we actually don’t know the wine we’re drinking and our relationship with it is purely physical.
Instead of shopping in supermarkets we must go and get to know wines personally, the right way.
Since the nature of wine is contrary to that of business, the wine business corrupts wine. The only way of preventing the inevitable decline, is that we at the very least maintain personal contact with select growers and since trade is impossible to eliminate, we conduct wine trade in a fashion that corresponds with the nature of wine.
Executive Search in Central Eastern Europe – basic overview of challenges
Executive search firm face a special situation in CEE: these markets don’t fit the classical search model. Below are 3+1 factors supporting this observation.
1. Markets here are fundamentally different from those in North America and Western Europe.
a. Multinationals that are present in the region are mostly managed by expacts, with a board outside of this region. These operations don’t create strategies, just execute them; at best they create regional strategies, in context of the overall corporate strategy established elsewhere.
b. Most mid-sized companies are based in Western Europe. This means that local managing directors or general managers mostly execute a particular function (running the manufacturing plant, or the sales function, rarely doing both).
c. Other potential mid-sized clients are owned by local families.
2. Searches are run on a lower level. Due to the above market characteristics,
- there is almost no need for board searches, or classical CEO searches. Part of the responsibilities of expats running multies in the CEE is to ensure efficient succession planning: to be replaced by a local when they leave. For more than 20 years, this objective is almost never achieved, so always a new expat is sent to continue running the business. It is still very common in multies, that a large percentage of direct reports of the CEO is also made up by expacts (this being a declining tendency).
- Most retained search assignments are focused on general manager and managing director roles and their direct reports in organziations that range 50-2000 people in size (small and mid-sized companies), as well as on senior manager and director level (belo VPs) searches at multies.
3. Markets are diluted. The gap that was left by the lack of classical executive search firms in this market were filled by recruiting companies essentially diluting the market (performing contingency based searches for higher level roles for a fee level that only fits recruiting services) and local search firms who lack global or international capabilities. Some of these managed to expand internationally, thus establishing themselves successfully. The overwhelming majority of new players trying to establish themselves in these markets, readily made price and business model compromises (e.g. working with inexperienced consultants facing the clients), which coupled with the resulting decline of service quality and credibility, further diluted the markets: a new generation of customers now have completely false expectations when it comes to executive search.
Dilution of players: while in North America and Western Europe it is not uncommon that ex chief executives of market leading companies are running search practices, in CEE this phenomena does not exist.
This dilution of the markets resulted in fee levels that are much lower than the classical search fees.
+1. This last observation concerns the executive search market globally. Due to a number of involutive factors that we have outlined elsewhere, the executive search field has lost considerable prestige globally. Players are increasingly opportunistic and the perceived value has been continuously declining. Since an appropriate vantage point is missing (or disappearing), elitism is almost non-existent.
Service with a smile
Peope from North America expect the same smile in restaurants in Europe that they are used to at home. This expectation is problematic; especially in Eastern Europe.
The (North) American smile is the embodiment of the American culture. You can’t find it in its original form anywhere else.
Waiters in Eastern Europe work in a completely different context. Since this context is not any worse than the American, expecting them to exhibit North American behavior (or at least to produce a North American smile) would be the same as expecting them to change their culture for our sake… and this would be borderline arrogant.
So the conclusion is easy to draw: it’s not the waiter!!!
India and the CEE: potential polarization between quantity and quality?
Laszlo Kövari
An article caught my attention a while ago on cnet, that turns attention to India as an emerging innovation hub and a potential competitor to the Silicon Valley.
The article supports the message that I’ve been also promulgating for the last couple of years, i.e. that India will become a threat to the USA and that the CEE MAYBE turned into a counterweight for balance.
The cnet article in a nutshell:
- 250,000 engineers work in R&D in India
- the tendency is that expats are returning home, and new grads are staying home
- R&D outsourcing (as opposed to call centre and coding) to India is on the rise: currently it’s $9.35 B and it’s expected to reach $ 21.4 B in the next 4 years
- R&D spending in India is fueled not so much by cost savings, but by India as an emerging market: local development can more successfully target the local industry
- India will however not surpass the Valley anytime soon, since there is still more VC money invested in the Valley than in India
Up to a certain point the numbers speak for themselves. In addition to the numbers, and the obvious conclusions we may draw from them, the following should be noted:
- Engineering/ coding / etc. is becoming a way out of poverty for people there. Also, it is as “fashionable” as law is in the States. These drivers hardly correspond to an “inner vocation” that is the prerequisite for leadership in any domain, including the technical one. This is obvious to anybody who has already dealt with a lawyer in the States
- Innovation in particular, quality in general does not come from numbers. Quantity delude quality! Even though execution capacity may increase, the quality of execution will inevitably decrease. This is painfully clear to everybody who managed IT outsourcing projects with Indian companies. The reasons for early stage outsourcing were purely quantitative: cost and lack of people back home. The expectations for quality were unfounded and naïve from the start.
- True: returning expats may help India become more competitive on the innovation front; as long as they bring perspective that’s necessary for integration. Question is, if they do have any perspective.
- Speaking about perspective: the amount of investments provide quality returns (e.g. innovation) only, if they fit into a well founded perspective. Breeding more engineers is not a well founded perspective (India). The Valley is a different question. I believe that at the time true innovation is stagnating at best.
The CEE situation
- Historically, the CEE is an innovation hotbed.
- The numbers are decreasing on all fronts: population, expertise, etc. This creates a very particular situation: the CEE can’t play numbers’ games
- The CEE perception about quality differs greatly from the USA’s and India’s perception about quality…for now.
- Money alone does not breed innovation. But in the CEE, where it already exists on the level of potentialities, smart money (money plus required commercialization expertise) does play a significant role.
- Current systems that are meant to foster innovation, don’t work. They are based on flawed principles. New systems, new initiatives are needed.
communications crisis
Laszlo Kövari
It is clear that the terms “communications skills” and “language skills” are not necessarily mutually inclusive.
Somebody may have a flair for languages while he is unable to appropriately structure his thoughts, make decisions in context about what’s important, and to make the appropriate points in the appropriate time and in the appropriate style.
In addition to the above somebody with good communications skills is also very sensitive to the situation itself, which could be:
- a discussion or debate (which should serve as an emotionless problem solving tool, thus not at all what it is typically today),
- a conversation (mostly easy topics)
- easy talk (here there is no intention to solve anything, it is just about producing something interesting; raising points and leaving them in the air)
- a dialogue (this deserves a study by itself) and of course
- fooling/joking around.
All of these are necessary for a healthy, diverse and well balanced lifestyle.
There are nuances and overlaps; some of these maybe more valuable than others, depending on the point of view. An easy talk for example may solve big problems, fooling around may resolve conflicts, while a conversation may end up in a discussion in the conventional (wrong) sense of the word, etc.
And now about language skills.
In Europe, especially in Western Europe it is quite typical that there are many people speaking more languages. It is conspicuous how often the word “perfect” is used (especially in the CEE, where –since they always learn but rarely speak foreign languages- they ideologize the langue skills of westerners) to describe the level of language skills. It is obviously the English language that suffers most of the insults.
Naturally the fact that somebody can chat about everyday topics or EVEN ABOUT BUSINESS does not mean that he or she is speaking a language well. I had to emphasize “even about business”, because people tend to think that business is the real proof. If somebody do well there, he must really be perfect in a particular language.
Nothing is farther from the truth. Most managers and top managers communicate incredibly poorly in the second (and even more so in the third or fourth, etc.) language.
This causes a lot of misunderstandings even in such simple things as setting up a meeting, not to mention price negotiations, discussing terms and conditions, etc. These topics could be very simple but in actuality they are never so. One of the main reasons of this is that people of different nationalities think with completely different temperament about money, commitments, about social hierarchy, about each other, and about a million other things. They can express the most minor nuances about these things IN THEIR OWN LANGUAGE…but not at all or at least in a very distorted way in the second or third, etc. language.
The distortion happens when the speaker literally translates something. This may actually work, if the negotiation partner was aware about the distortions. But this is not so: not only is he not aware, but he is further distorting the communication by perceiving the already distorted information through the lens of his own language, temperament, opinion, etc.
A simple example: a third party wants to organize a meeting between two parties. The number of participants is 5.
Everybody is busy, everybody’s schedule is changing all the time. The proposed meeting should take place in approximately two weeks. The third party, the mediating one, is in a difficult situation, since the time that works today may not work a week from now.
There are specialists (like the production leader in a factory) among the players, who are completely insensitive to such factors, and there are integrators (like the ceo of the other manufacturing company), who are fully aware of these and who exhibit (and expect) a high level of flexibility.
For the production manager it is a real problem to understand that the meeting is scheduled only with “pencil” right now, meaning that it has to be confirmed. He already said that it works, so as far as he is concerned, it’s done, what’s the big discussion about this anyways?!
Then he’s asked about possible alternative times. At this point the production manager thinks that everybody’s crazy.
After all these, he gets an sms requesting confirmation that 4 30 pm on Thursday is still good for sure?…since the other party just confirmed that it’s good for them.
At this point he doesn’t even answer the sms. He said it’s good, so what‘s there to confirm?
So since he didn’t respond, he gets a call from the organizing party: you didn’t respond! Everything’s still good, has something come up??
Messages are being evaluated through four filters: through that of the specialists, of the integrating specialists (managers), of the specialized integrators and the (main) integrator.
The integrator understands all the other levels, the specialized integrator all the levels below him, etc. The specialist only understands his own level…and this has consequences on protocol.
Such problems are multiplied by inefficient language skills. If the language of conversation is English, and it is conducted between people, who never lived in an English speaking environment, and everybody dedicated the same amount of time to the language, and are on the same level (it is of course obvious that there is no such thing as same level), the communication would still not work because of the four different kinds of filters.
The adherence to communications protocols may provide a surprising easy solution to such problems in a business setting. But there is never such a thing in place.
In times past the formal way of addressing people, social interactions governed by protocols (introductions, etc.), the significance (and rarity) of travel obviously eliminated the possibility of (the majority of) misunderstandings.
Today there are plenty of business transactions that went awry because of the lack of language and communications skills and there are business relationships also, which are based on misunderstandings.
These are contributing factors to a general communications crisis in the CEE region and will increasingly become so in the Middle and Far East, where in addition to the language deficiencies, the cultural differences (between European and American people and the Middle and Far Eastern people) are even larger than within the EU… at least for a short while.
Could CEE be the answer to the innovation crisis of the USA?
Laszlo Kovari
Brief Context:
Knowledge is content and today the context for knowledge is also: knowledge.
Cut off from context, which could generate true knowledge, content is proliferating and specialization is getting out of control.
If no integration happens hand in hand with specialization, disintegration takes place.
Since the “knowledge worker” finds himself in ever narrower fields and he identifies with what he knows, his perspective is getting narrower.
Leadership is fundamentally an integrating reality that horizontally enables the integration of specialists (management), vertically aligns management along the context which, ultimately generates valuable, true, as opposed to second, 3rd, grade proliferated knowledge: i.e. commodity.
If the education system only adapts to this disintegrating market reality it only contributes the proliferation of knowledge, which results in people (specialists) focusing on the accumulation of knowledge (quantitative process), as opposed to enabling the emergence of leaders, who focus on context/thinking/integration/innovation: qualitative process.
Situation
Historically the US has focused on specialization as opposed to integration and when this escalated into offshoring, outsourcing, etc. it financed other countries that will compete against her in the game of specialization.
If the US wants to get back into the game and compete against India and China on their own turf, it has to find a way to own the CONTEXT, or to work with countries who do.
The solution will not come from known sources: C level (specialists), (specialized) academia, and (specialized) consultants/advisors.
It will come from an effort of integration.
The US at this moment can’t innovate.
This may sound shocking in the land of the Valley, but there is a lot of truth to it. It is of course leading on the consumer/social-communications front (like social networks), but that is more of a natural unfolding of social patterns, where the States is just a passive “leader”, rather than break-through innovation.
Most innovators from the States have already gone back to home (India, China) and continue with break-through innovation there.
The States is a sales/marketing/project management/financing machine that is increasingly running empty now. It is looking for new markets in India and China: it needs to sell stuff that surprises the hell out of the people on these emerging markets.
Could it be that innovation that will produce such break-through stuff will come from Central and Eastern Europe?
Example for a possible scenario:
American VCs or Sovereign Funds investing money in CEE countries that are typically under funded (there is hardly any VC activity there), but historically are great innovators/thinkers and instead of exiting here, bringing the innovation back to the States, commercialize it, and exit there. The synergies would be good: there is no sales/marketing/project management/financing experience in the CEE region, but there is everything else.
There would be of course some integration problems to be solved, (eg. cultural integration), but these could be overcome and to some degree even solved.