There is a tradition dating back at least 3 decades in the Western world that technical innovation on its own is rarely the make or break thing in the competitive advantage of a business.
The Economist Paul Geroski, for instance, studied 440 United Kingdom companies in the period between 1972 and 1982 only to conclude in a 1995 paper that: “…the observed direct effects of innovation on [corporate] performance are relatively small.”. And professor Geroski, mind you, was an innovation enthusiast.
All the farcical suits over patents day in and day out in the West might convince some to believe in the rising value of technical innovation, because, after all, the higher the value of an asset the more companies fight to protect it. All you have to do though is look closely and another thought emerges: successful copying has become so easy that technical edge, even in the vaunted area of user experience design (UX), has ceased to be the predictable differentiator it once was.
For those companies passionate about staying ahead, western business experts have tended to emphasise a focus on “culture”. In a detailed review of the state of knowledge in 1986, Professor Jay Barney then of UCLA argued that a strong corporate culture has been shown to be “vital for improving a firm’s financial performance”.
In an increasingly info-porous world, it is easy to understand why a business would want to bank its hopes on the hardest to copy intangible assets it has in its portfolio.
Since organisational culture is by definition very hard to replicate successfully, the richest source of performance advantage is probably cultural innovation. That is to say, how successful a company is in taking on board superior iterations of a proven cultural advantage over time.
The preceding description becomes particularly important when corporate culture is defined as the “set of non-material competences” a company has for resisting variability forced on it by changes in the broad market. Cultural innovation in this sense must refer to a company’s success in coming up with new ways of reinforcing its culture in the face of change.
That seems to me a fair summary of an entrenched wisdom in the West regarding culture and business performance. The key problem I see is how easily the model can be caricaturised into a premise for marginalising external culture and focussing all the attention on internal culture.
While a company may be able to get away with such an attitude for quite some time in a fairly homogenous regional market, the implications for that company’s global aspirations can be dire.
As western-style companies (this category also includes Global South companies built on Western norms) continue to look at expanding in emerging and frontier markets as a major competitive or anti-competitive strategy, I am of the view that, in Africa at least, building effective responses to market variability and its pressures cannot be premised on a lack of respect for the cultural nuances of the company’s host market.
In the following short pieces, I have compiled a list of observations I have made in a number of African countries in connection with this subject. It is possible that some of these insights are applicable to a wider range of non-Western countries. It is best however not to get too hanged-up about a particular “cultural element” or a specific country, so I have used broad headings and generalised their geographical relevance. The purpose of the list below is to increase awareness about some common attitudes to external culture, especially as exhibited by Western-trained business folks in non-western business environments.
1. The Cult of Precision
A common complaint I have heard business partners and employees of global (“˜westernised’) companies in Africa often make is that the latter are too obsessed with exactitude. The more “formalisation” has pervaded corporate planning, and gone the way of the Daniel Prajogos and the TQM cult, the more frontline managers have retreated from the “cultural whirl” of the emerging marketplace, to borrow a phrase from the Anthropologist Ulf Hannerz, in order to focus on serving simplifications of the market to headquarters.
MNCs issue a constant stream of demand for forecasts and blueprints and other such formal and quantitative perspectives from their Global South underlings. No one doubts that the cult of precision has made western-style management science a formidable tool for wealth creation. But in cultures that emerged not too long ago from traditional society, certainty and logical precision are not the absolute virtues they are in the west, simply because in traditional economies flux was a constant feature of economic decision-making: the rains sometimes came late, the snake serum that had been potent for so long suddenly failed, or some smart trader from the Coast stopped taking cowries without warning and started insisting on gold.
The best performers in traditional societies were rarely those most skilled in making rigorous-looking forecasts, but those best in taking advantage of the flux. In some ways, “smart fudging” and “flux adaptation” may not be as risky as sometimes supposed, and more valuable than often realised. The past decade saw many of the smartass-models glorifying certainty in the West fail miserably in serial financial crises and other mishaps.
No one is saying a business shouldn’t plan and aim for rigour, but there is some wisdom in not seeing a reticence about over-relying on firm forecasting as laziness and sloppiness hiding behind cheap philosophy.
Even if you are the super-analytical type who can’t sing a song except when the lyrics are laid out in a spreadsheet you still have to acknowledge that the studies do not vindicate an over-reliance on formal forecasting, even in the quantity-obsessed West. As Wharton’s Scott Armstrong pithily observed in 2001 after his extensive review of the principles underlying corporate forecasting in the West: “forecasters often ignore common sense”, a clear end-result of the emphasis on formal tools, necessarily internal to the business’ groupthink, and the marginalisation of the external cultural swirl.
The challenge this poses to Western thinkers is summed up in various chains of paradoxes in the thought of gurus like the MIT’s John Sterman who after gamely acknowledging that: “all models are wrong and humility about the limitations of our knowledge. Such humility is essential in creating an environment in which we can learn about the complex systems in which we are embedded…”, moves straight on to propose “formal models” and “scientific inquiry” tools as the surest paths to addressing the fundamental uncertainties confronting future planning, gleefully glossing over the tension
It does not surprise me that the work of Wharton’s Katherine Milkman and others continue to expose the psychological underbelly of the frequent inaccuracies we see in market forecasting today. Or that the Journal of Business Forecasting routinely reports over 55 percent dissatisfaction with forecasting accuracy in respondent companies.
2. CSR is Dead
There is a very deceptive paradox in the fact that in many African countries conversations around CSR tend to be hopelessly archaic while at the same time the way CSR is done can still be quite unconventional. Proof that you don’t always need jargon to be sophisticated.
Words like “social enterprise”, “social innovation”, and “triple bottom-line” etc. induce little more than bafflement in the African boardroom. Corporate foundations and plain vanilla corporate philanthropy have however long enjoyed recognition. When you look closely however you will discover a serious fatigue about these age-long activities. The media is tired of it; communities are sceptical of corporate intent; and employees are completely detached from it, even more so than the West.
In a just-ended survey of American businesses in West Africa – carried out by a think-tank in the region – less than 1 percent of employees considered philanthropic volunteering as worth their while.
This was the context when a telecom company in Ghana decided to spend its CSR dollars supporting, nurturing and profiling successful already active social enterprises in Ghana. The television series they launched has been a massive hit, and they are seen to have completely outshone their rivals. People are tired of shedding tears of gratitude in the so-called developing world. There is a flood of the aspirational wherever you look. If you are going to spray a bit of shareholders’ cash around to pull some cred, better to go with the flow.
3. Don’t Confuse “Culture” with “Structure”
This is hard. There is a long-running battle in the social sciences about which worldview – the cultural or the structural –best explains a wide range of social phenomena. You are not going to solve it by putting a “˜tiger team’ together. But at least try and be cautious about jumping to the conclusion, usually negatively, that a particular conduct is cultural and therefore hopeless to reform.
The influence of the Hymer school (in reference to Canadian Economist, Stephen Hymer), with its emphasis on structural factors over cultural factors, has however constrained understanding amongst Western-type firms about how to do business in Africa. No wonder then that foreign direct investment (FDI) in more complex, higher value-adding, economic activities that require greater integration into the host economy, appear clearly to be in decline on the continent. In fact, a 2010 study of investment trends in Africa from 1996 to 2006 by UNCTAD revealed that the share of FDI in manufacturing has dropped from 41percent to 28 percent. Given that the manufacturing sector is already shrinking, the pace of retreat by foreign companies in an area where they should enjoy the advantages of technology and capital is very telling.
However, there are INDEED structural problems.
If someone told you that it is cool for people to be late for meetings in Nigeria, as a random example, they are a joker. One of the qualities fast gaining universal credibility is punctuality. But the truth is that in Nigeria, as in many parts of the developing world, road transport looks like the Augean stables. Traffic is completely unpredictable, and there are rarely support systems when things go wrong. These ARE structural matters, and THEREFORE resolvable with planning. I am often amazed at how little attention some business visitors pay to things like deciding on meeting points or back-up for electronic and power systems. Those extra 3 emails understanding the movements of your partner on the meeting day and taking advice about alternative routes can save the deal.
4. Sentiment Matters
It is not always a sign of rudeness for someone to barge in without an appointment. Sometimes it is a simple sign of affection. It is fine to come out shake their hands, smile, and explain that there are a group of biggies in the room with you and it is going to take all-day, so: “why not let’s try next week?”
I am reminded of yet another telecom company and its stiff CEO. Some bigshot from the City Council who was visiting another officer had decided to pass by and “say hello” to the CEO. The CEO’s harried secretary scampered into his suite to find an excuse, but before the door could close Mr Stiff-CEO had already started shouting: “I’m not seeing anyone without an appointment!”. The City Council man left immediately. When I heard two months later that several gleaming offices of the company had been padlocked by grinning town-guards over a delay in settling municipal rates (blamed by the company on an “˜accounting misunderstanding’) I shook my head sadly, knowingly.
5. Courtesy Should be a Line Item
So I had dinner with an African country chief of one of the world’s top 5 most recognisable brands. And in the course of conversation he confided in me that his relationship-building efforts in the country are being hampered. He can’t take folks out to lunch and pick up the tab as often as is necessary. Everyone knows that a meal is an important “cuddle factor” in African business.
Great business feuds have in the past been resolved over meals…well, a few. My CEO buddy lamented to me that every time he did this he had to go through a labyrinthine rigmarole of trying to claim back the $35 or so using a ERP process that seemed designed solely to frustrate. Both of us agreed that it would have been so much more the wiser had his superiors in the US simply created a line item in the budget to take care of these things. And normal accounting rules need not be sacrificed.
Discussing this subject, I am reminded of an intriguing case study reported in 2005 by Wharton’s Jivendra Singh and others. A US computer manufacturer asked to rank its processes according to their value in order to decide which ones were safer to offshore promptly highlighted “invoice verification” and “expense reporting”.
Funny that these are also the functions western HQ executives constantly fail to keep an open mind about when dealing with their African managers.
Bright Simons is a Social Entrepreneur and Public Interest Researcher. He invented the mPedigree anti-fake drugs system (www.mPedigree.Net), and is a Fellow at IMANI, a think tank in Ghana.