In Business, Parochialism Doesn’t Sell : Industry: Globalization requires going for the best, even if it means bringing foreign talent into the executive suite.
Occasionally, watershed events signal major change, like the opening of the Berlin Wall, which sounded the death knell for communism in Eastern Europe. In the business world, we’ve had one of those watershed events in the battle between General Motors and Volkswagen over J. Ignacio Lopez de Arriortura, a Basque who eventually defected to VW after both sides upped the ante. This fight over a foreign manager in an obscure position shows that localism is dead; globalism is winning.
It’s about time second-level executives like Lopez got the star treatment usually reserved for CEOs. But there is even more significance in the Lopez affair than its reminder that it takes a teamful of talent to steer an industry.
The first lesson from Lopez is that the marketplace for talent and ideas is now truly global. General Motors was traditionally one of the most parochial American companies, about as Detroit-centric in its view as could be imagined. And Volkswagen, though striving to become a world company, was dominated by German pride in German engineering and technology. Now this quintessentially American company and quintessentially German company were in a public tug-of-war over an engineer from the Iberian peninsula.
So much for parochialism. Country arrogance--the notion that our people or our technology is the best--has to give way to a worldwide search for all the centers of excellence popping up in obscure places. As part of my research on globalization, I recently visited the award-winning Turkish subsidiary of a North American telecommunications company. For years, the Americans sent people to Istanbul to teach the Turks. Now the Turks are sending engineers back to teach Americans. It was a hard sell at first, but the objective performance of the Turkish venture made it difficult for local prejudices to reject advice from engineers trained at a Turkish school, instead of MIT.
Some American companies and managers still don’t get it. Humbled by Japanese competition, they might understand that there is technology expertise in Japan or Germany. But it is a shock for them to discover that their skills don’t match up to those of managers from a range of other countries. An American executive forced out after his company was acquired by a French firm confessed sadly that the foreign parent was right to replace him and others because the French simply out-classed the Americans in that industry.
For all the buzz about creating “learning organizations,” many American companies are unaccustomed to learning across borders. They do not even always value local knowledge and local relationships. While the “ugly American” image is rare overseas, the “ignorant American” is not. When one successful American company began to bid for contracts in Eastern Europe, it sent people with expertise in the technology but none with interest in building local relationships and tapping local knowledge; they earned themselves a reputation as “a bunch of cowboys”--and went home empty-handed.
In contrast, a Swedish executive running a rapidly growing global technology venture attributed his success at getting the best from a network of international partners to his origins in a small country with the population of New York City. “We never assumed we had all the knowledge within our borders,” he said, “and because English was our second language, we learned to listen to wisdom from people who spoke with funny accents.”
The second Ignacio Lopez lesson: the increasing importance of relationships outside the company’s traditional boundaries. Lopez, formerly head of GM’s European unit, went to Detroit last year to overhaul the purchasing function, historically an obscure corporate backwater.
Parochial companies like GM are known for their cavalier treatment of suppliers. The pressures of global competition, however, have made companies re-examine their external relationships. Lopez was tough on suppliers, renegotiating contracts to save GM close to $2 billion. But he also deployed teams to work closely with suppliers to improve their efficiency and quality, bringing their relationship with GM closer to partnership.
This signals the decline of another kind of parochialism. Companies now recognize that their external relationships--with suppliers, venture partners, distributors or major customers--are an important asset. One midsized instruments company even lists suppliers along with internal departments in its annual report. And instead of focusing inward, giving the high pay and power to managers with huge internal empires, excellent companies are increasingly rewarding managers like Lopez, who manage a network of external partners.
Anyone who doubts that the fight over Lopez was a bellwether for American firms’ broadening of perspectives as we shift to a world marketplace has only to look at who was Lopez’s No. 2 man at at General Motors: a New Zealander.
