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The
European
Business
Review
Internationalisation
in Online Retailing
Guanxi Matters in doing

Business with China
What Stones Can

Teach Us About
Technology Innovation
Market Makers
Innovate your market,
then innovate your
business
March - April 2016

europeanbusinessreview.com
Why Robots May Not Be

Taking Your Job
at least, not in the next 10 years
Page 15
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The European
Business Review
MARCH - APRIL 2016
Change Capability Building, p34
Innovation
8
17
20
26
Why Robots May Not Be Taking Your Job

How organisations can embrace automation
Leslie Willcocks
Market Makers
Innovate your market, then innovate your
business.
Peter Fisk
Why Guanxi Matters in Business

Relationships with China
Bang Nguyen and David De Cremer
Leadership
Powerful Leadership Wins Employees Hearts
+ MindsGains Customers
Suzanne Kelly
52
3 Key Leadership Habits Every Leader Must Have

Brad Lomenick
M&A
54
Change Capability Building

David Miller and Audra Procter
40
Empowering Women through the

Transformative Power of Coaching
Managing People in Mergers and Acquisitions

Part 1: Reasons and Reality
Guido Stein and Marta Cuadrado
Marketing
62
Internationalisation in Online Retailing

Moritz Hahn and Niccol Pisani
66
Why You Need to Localise

Christina Comben
Transformation
34
The Transformation Imperative Collaborative

Leadership is Key For Future Success
John Mattone
48
Industry 4.0: How Businesses in Aargau

are Mastering Technological Change
International Business
30
44
Hey, You, Get Off of My Cloud

What Stones Can Teach Us
About Technology Innovation
Christopher Surdak
Workplace
69
Counterwork Behaviours
Adrian Furnham
Event
74
Tech for Britain
Production & Design: Angela Lamcaster, Cathryn Trinidad Print Strategy: Stefan Newhart Production Accounts: Lynn Moses Editors: Elenora Elroy, David Lean Managing Editor Europe & Americas: Yetunde
Olupitan Group Managing Editor: Jane Liu Editor in Chief: The European Business Review Publishing Oscar Daniel READERS PLEASE NOTE: The views expressed in articles are the authors' and not necessarily
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From the Editors

Just deserts!
t was Joseph de Maistre who said,

"Every country has the government it
deserves", and In a democracy people
get the leaders they deserve." People often
YRWHIRUWKRVHZKRUHHFWWKHLUYLHZVZKR
echo their concerns and say what they want
to hear. So when the British people were
whipped into a frenzy about immigration
and anti Europe sentiments, Cameron in
order to secure the next election, promised
the British people that he would renegotiate the UK-EU contract, so that European
immigrants are no longer entitled to claim
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RRGLQJDFURVV%ULWLVKERUGHUVWRUREQLFH
British people of their jobs. And to top it, he would give them an in/out referendum if they voted for him. He said what they wanted to hear. They voted him in.
Until he went to Europe with his list of demands, it appeared to the British
SHRSOHWKDW0U&DPHURQZRXOGEHDVNLQJIRUDIRXU\HDUEDQRQEHQHWVLQFOXGLQJLQZRUNEHQHWVWR(8PLJUDQWVUHGXFWLRQLQ(8UHJXODWLRQVDQGUHSDWULDWLRQ
of some regulatory powers from Brussels such as working time directive, and legislation on human rights, a UK opt-out from ever closer union, protection for noneuro countries and sovereignty of national parliaments to block proposed EU legisODWLRQ(8LPPLJUDWLRQZDVGHQLWHO\WRSRI WKHOLVWDVWKHSXEOLFZHUHXSLQDUPV
DERXW(8LPPLJUDQWVFODLPLQJEHQHWVLQWKH8.%\WKHWLPH0U&DPHURQJRW
WR(XURSHKLVGHPDQGVKDGEHHQUHQHGDQGZKDWKHOHIWZLWKZDVUHQHGHYHQ
more. For the Euroceptics, what Mr Cameron returned with cannot be described as
DQHZVHWWOHPHQWEHFDXVHDOOWKH(8OHJLVODWLRQVWLOOUHPDLQLQSODFHWKH(XURSHDQ
LPPLJUDQWV ZLOO VWLOO FRQWLQXH WR FODLP EHQHW DQG VHQG PRQH\ EDFN KRPH DOEHLW
with some minor concession. What Cameron has secured has not changed the
status quo, what he has secured are words of comfort, a plaster over the wound.
Cameron said what the voters wanted to hear and he got their vote! Delivery is
another thing, maybe another Tory parliament.
As the US presidential campaign heats up, one should therefore not be surprised
that Donald Trump is racing ahead, Trump is obviously saying what the American
Republican voters want to hear, erecting a wall on the Mexican border, stopping
0XVOLPVIURPYLVLWLQJWKH8QLWHG6WDWHVHWF$WWKLVUDWHWKH$PHULFDQVZLOOGHQLWHly get the leader they deserve!
www.europeanbusinessreview.com
Innovation
Hey, You, Get Off of My Cloud

What Stones Can Teach Us
about Technology Innovation
BY CHRISTOPHER SURDAK
In their 1960s hit song, Get Off of My

Cloud, Mick Jagger and the Rolling Stones
lament about others around them ruining
their otherwise perfect sense of reality. Many
of todays business leaders are dealing with
the same sense of malaise, caused by outside
forces beyond their control. However, unlike
the intrusive neighbours or loud TV pitchmen in the song, the force that is ruining
these leaders sense of tranquility is business disruption brought about by technology innovation. In this essay, we will discuss
how disturbing and disrupting stones can
bring about the end of empires.
f you have read any of my previous articles
for TEBR you may have noticed that the
themes of technology, disruption, and social
change are near and dear to me. The more I get
into these topics with people around the world,
the more certain trends begin to reveal themselves. Top amongst these changes is the accelerating need for us to embrace change, and our apparently increasing tendency to resist it. Most of
us have a well-developed resistance to change.

This is a survival skill that humanity developed
over the millennia as a necessary counterbalance
to our innate wanderlust.
As a result, I am not terribly surprised when I
run into leaders who are presently faced with the
need to make dramatic changes in their organisations yet fail to acknowledge the reality that
surrounds them. Indeed, legend has it that when
1DWLYH $PHULFDQV UVW VDZ (XURSHDQV VDLOLQJ
VKLSV RQ WKHLU KRUL]RQ WKH\ FRXOGQW DFWXDOO\
see the ships themselves, as their eyes and their
brains had never experienced such a site before.
In our present world driven by the Digital
Trinity of Mobility, Social Media and Advanced
Analytics, there is hardly a corner of our society
that is not being driven to embrace change.
Nonetheless, most organisations fail to do so.
Instead they continue to try to wring value out
of old technologies, old processes, old rules and
old constraints as a matter of course, comfort
and convenience.
The path of least resistance and change is seductive to those with a vested interest in the present.
In our present world driven by the Digital Trinity

of Mobility, Social Media and Advanced Analytics,
there is hardly a corner of our society that is not
being driven to embrace change.
The Innovation Imperative

It is no secret that old technologies and techQLTXHV QHFHVVDULO\ EHFRPH REVROHWH 7KDWV WKH
process we call innovation and when combined
with fear and wanderlust it forms the core of
our humanity. We reach for new horizons, and
Christopher Surdak
Engineer, Juris Doctor,
Strategist, Tech Evangelist,
VP of Data Analytics for
Oracle and author of Data
Crush
The European Business Review March - April 2016
then fear the implications of the new things that

ZH QG %XW ZH LQQRYDWH ZH SRNH DQG SURG
and we come up with new, exciting, scary, invigorating insights, and we continue to advance
as a species. Innovation is necessarily disruptive,
DV LWV KDUG WR OHW JR RI VRPHWKLQJ LQ \RXU OLIH
that you previously depended upon. We often
call our resistance to change and disruption,
healthy skepticism.
But, one wonders, at what point does
healthy skepticism of new technologies become
self-destructive hubris, over-conservatism, or
merely denial, in the face of inevitable change?
6RPHWLPHV LQVLJKWV LQWR XQGHUVWDQGLQJ WRGD\V
problems are all around us; we need merely
change our point of view and our context. In
trying to understand how new technologies
create substantial, disruptive and permanent
change to human societies and culture, we need
simply to look under the soles of our shoes. The
very dirt and rocks that we walk upon can give us
all kinds of insights into the process of technology disruption, if we only ask the right questions.
Join me, for the next little while, in an exploration of the past. We are about to understand the
human process of innovation, technology disruption and our fears and desires that stem from
it, all by studying the rocks beneath our feet.
known as knapping.1 Stone knapping involves

hitting the surface of an appropriate stone in
such a way that pieces break off, leaving a sharp
edge on the remainder. There are many types of
VWRQHZKLFKDUHDPHQDEOHWRNQDSSLQJZLWKLQW
chert and obsidian being global favourites. Once
the innovation of knapping took hold all manner
of tools were invented or substantially improved.
Spears, arrows, axes, knives, needles, hoes, and
Knapping Your Way To The Top
scythes were among the vast array of edged
,WVHDV\WREHOLHYHWKDWWKHFUHDWLRQDQGXVHRI devices made more effective through knapping.
stone tools was necessarily a primitive art form.
As humans spread out across the planet
However, there is more subtlety to this tech- they brought knapping technology with them.2
nology than we might assume. After all, not all .QDSSHUVZRXOGQGDPRWKHUORGHRI VRXUFH
stones are created equal, and for ancient cultures material, work the rocks with knowledge passed
QGLQJWKHULJKWVWRQHIRUDSDUWLFXODUWDVNZDV down through the generations, and the result
critical to survival.
would be the tools that allowed their groups to
Some stones were good for grinding food, thrive. In societies where stone tools were the
others for making shelters. Some were good for pinnacle of technological achievement, knapretaining heat for hearths, still others created SHUV ZHUH WKH %LOO *DWHV 6WHYH -REV RU (ORQ
VSDUNV WR OLJKW WKH UHV KHOG LQ WKRVH KHDUWKV 0XVNVRI WKHLUGD\DQGWKHWRROVWKDWWKH\SURThere were stones that were good for pound- GXFHG ZHUH WKH KLVWRULF HTXLYDOHQWV RI WRGD\V
ing and others that were good at slicing and iPad, Google Glass, drones and Tesla Model S.
dicing. This last class of stone was arguably the
game-changer for human society. Once we had Better Living Through Volcanos
sharp tools that could cut, slice and kill more While there are roughly 1,500 volcanos distribeffectively than sticks, bones or antlers humans uted all over the world it may be surprising to
were well-positioned to dominate the planet.
QG RXW WKDW QR WZR YROFDQRV DUH WKH VDPH3
The art of turning stones into edged tools is The chemical composition of the lava coming
The art of turning stones

into edged tools is known as
knapping. Stone knapping
involves hitting the surface of
an appropriate stone in such
a way that pieces break off,
leaving a sharp edge on
the remainder.
PHOTO COURTESY:
Wessex Archaeology
https://flic.kr/p/dZujpr
Innovation
(preferably obsidian glass), forming them into

tools, and getting the results into the hands of
farmers, carpenters and warriors was critical to
the successful growth of each of these cultures.10
Stone tools were such a critical technology
and so important to society that entire economic structures were built around their production. There were crafts guilds with masters and
apprentices. There were merchants with price
lists and regulators who applied tariffs. There
were discount tools of barely-adequate utility
and others that were masterful works of art, reserved for the nobility. Over thousands of years
out of each volcano is unique, and changes with a transcontinental knapping and stone-working
time. When lava from a volcano cools, the types industry was formed across the Americas.11
of rocks that result depend upon the chemical
We know this because of the uniqueness of
composition of the lava as it freezes. From light, volcanos. Archaeologists have found obsidiporous pumices to hard, dense, heavy basalts to an tools in sites throughout the Americas, and
raw diamonds, the results all depend upon the they can trace each of these tools back to their
YROFDQRV FKHPLVWU\ $V ZLWK DOO FKLOGUHQ WKH source. By analysing these artifacts scientists
FKDUDFWHULVWLFV RI D YROFDQRV RIIVSULQJ DUH GH- KDYHFRQUPHGWKDWWKLVWUDQVFRQWLQHQWDOWUDGH
termined at the moment of their conception.
existed in the Americas long before the Spanish
Some volcanic rocks have a high degree of arrived. Obsidian blades, arrowheads and spear
silica in their composition. Silica is basically points have been found hundreds or even thouglass, and when lava with a high enough pro- sands of kilometers from the volcanoes that
portion of silica hardens it forms volcanic glass; produced them. From this evidence, it is clear
known as obsidian.4 Like most glass, obsidian WKDWWUDIFNLQJLQREVLGLDQJODVVWRROVUDQJHGIDU
has some very useful properties. It is extremely and wide across the hemisphere.12
hard and relatively light. It is brittle, and when
Back in the day, if you happened to live near a
it breaks (as with knapping) it forms very sharp JRRGVRXUFHRI REVLGLDQJODVV\RXGKDYHDVRXUFH
edges. Fortunately for humanity volcanic glasses of income. If you also knew how to turn that glass
are somewhat common, and can be found in into tools, you lived comfortably. If you managed
abundance around volcanos with the right local WKHWUDIFNLQJRI WKRVHWRROV\RXZHUHZHOORIIDQG
chemistry. Obsidian was the best of these vol- if you controlled access to and the use of those
canic glasses, and was highly prized for its me- tools, you were wealthy. Finally, if you managed
chanical properties.
to control the whole process, you were royalty.
)RUVWRQHDJHFXOWXUHVQRW\HWXHQWLQWKHODQ- We may like to think that industrial empires and
guages of chemistry and metallurgy, obsidian was capitalism are a recent outcome of the Western
WKH PHWDVWDEOHSKDVHVKLIWLQJFDUERQEHUVXSHU- Industrial Revolution; but perhaps our perspective
conducting-Buckminster-Fullerine of its day.5 6 7 8 9 is a little bit jaded by our modern conveniences.
PRE-COLUMBIAN AMERICAN CULTURES, SUCH

AS THE MAYAN, THE AZTECS, THE INCAS AND
THE NORTHERN TRIBES NEVER DISCOVERED
BRONZE- OR IRON-BASED METALLURGY. AS
SUCH, STONE KNAPPING WAS THEIR BEST TOOL
BUILDING TECHNOLOGY AND IN EACH OF
THESE ADVANCED CULTURES KNAPPING WAS A
HUGELY-IMPORTANT INDUSTRY.
Rock And Roll In The Americas

Pre-Columbian American Cultures, such as the
Mayan, the Aztecs, the Incas and the Northern
Tribes never discovered bronze- or iron-based
metallurgy. As such, stone knapping was their
best tool building technology and in each of
these advanced cultures knapping was a hugelyimportant industry. Finding the right stones
10
Black Wednesday
At 2 am, on Wednesday, 12 October 1492
Rodrigo de Triana looked up from his night
watch on the deck of the ship La Pinta, and
saw something on the horizon.13 That something was the landfall that he, his shipmates,
and his captain had hoped and prayed for over
the prior month at sea. On that day Rodrigo
and his captain, Christopher Columbus, landed

VRPHZKHUHLQWKH%DKDPDV7KH\ZHUHWKHUVW
Europeans known to return to the hemisphere
LQ DOPRVW YH KXQGUHG \HDUV $QG XQOLNH WKH
Vikings who preceded them by half a millennia,
&ROXPEXVDQGKLVFUHZGLGQWFRPHDVH[SORUHUV
and settlers, they came as conquerors.14 Over the
next two hundred years they proceeded thusly.
While the Aztecs, Mayans, Incas and Northern
Tribes outnumbered the Spanish by hundreds of
thousands to one, the Spanish had what noted
author Jerad Diamond called Germs, Guns, and
Steel. While the germs were perhaps unintended hitchhikers, the guns and steel (and horses)
were brought with the most serious of intentions.
These technologies far outpaced the stone tools
of the locals, and the Conquistadores used their
technical advantages to defeat the vast numerical
superiority of the native population.15
In retrospect, that Wednesday was a fairly bad
day for the transcontinental knapping industry.
Not that they initially saw it that way. To the
contrary, once the Spanish began their wars of
conquest, demand for stone tools and weapons
skyrocketed. After all, it took many more arrows,
spears and macuahuitl (wooden swords with obsidian edges)16 to defeat a gun-and steel-armed,
horse-mounted enemy than one who used the
same technology, and the battles that resulted
consumed much larger quantities of the older
technology in an attempt to keep up.
Once Spanish guns and steel arrived, knapping as a relevant technology and obsidian glass
as a technology product had seen their end.
As soon as Europeans arrived on their shores
WKH$PHULFDQVREVLGLDQWRROVZHQWIURPEHLQJ
iPads, Google Glasses and Drones to being the
Walkman, DVDs, Blackberrys, and OS/2 Warp.
In the absence of the ability to match the
QHZWHFKQRORJ\LQWVZHUHEHWWHUWKDQQRWKLQJ
$QGLQQRYDWLRQLQLQWNQDSSLQJDFWXDOO\ZDV
valuable, at least for a short time. But, adherence to the same old way of doing things
merely ensured failure in the face of the new,
disruptive technology.
from the European colonisation of the Western

Hemisphere. Many of these lessons come directly from what we have learned from the rocks
that survived from that era. Perhaps some of
these may seem relevant to you, in the changes
that you are facing.
1. To See A Forest, You Need The Trees
If you were an Aztec, Mayan or Incan warrior
facing down the Conquistadores it would be easy
to wish that you too had a gun, or steel arms and
armor. Indeed, if you managed to obtain one
of these weapons from your enemy you would
likely use that new weapon, rather than those
that you were used to.
When introduced to new innovations and
technologies it is easy to get wrapped up in the
end results and miss all of the innovations reTXLUHGWRFUHDWHWKDWRXWSXW7RJKWWKH6SDQLVK
on equal footing the natives needed guns and
swords. But to do this, they FIRST needed to
develop metallurgy, chemistry, blacksmithing
and mining. They needed to identify sources of
sulfur, saltpeter, and iron. They then needed to
train miners, smiths and chemists.17 Thereafter
they needed to train instructors to train the solGLHUVZKRZRXOGWKHQEHDEOHWRSXWXSDJKW
New technologies almost always leverage and
build upon a host of others. While a certain innovation, like the gun or the iPhone, may appear
to be a singular innovation they always stand
While the Aztecs, Mayans,

Incas and Northern Tribes
outnumbered the Spanish
by hundreds of thousands to
one, the Spanish had what
noted author Jerad Diamond
called Germs, Guns,
and Steel.
Letting Go Of Your Past While There Is Still Time

There are many lessons about technology, disruption and social change that can be learned
11
Innovation
upon the shoulders of other, more mundane

advancements. In order to take advantage of
a bright, new, shiny innovation, you must also
come to terms with all of the other innovations
that made it possible.
In contemporary business, established
companies are trying to stave off the dramatic changes all around them. They are moving
to the cloud, or they are, embracing Social
Media. Perhaps they claim to be leveraging
contingent workforces, or Uberfying what we
do. No matter what the latest trend or technical disruption, existing organisations believe
that pronouncing the introduction of a Tiger
Team to Look into it, is the same as actually
embracing and owning a new technology. This
all makes for good marketing copy, but it also
rings hollow. An Aztec warrior could readily
SLFNXSD6SDQLVKPXVNHWRQWKHEDWWOHHOG%XW
once he ran out of ammunition, his martial abilities and marksmanship mattered very little.
Nokia and Research In Motion both had
smartphones before there was such a thing.
Then Apple came along with the iPhone and annihilated both of them in just a few years. Was the
iPhone just that much better? Not really. What
made the iPhone and iPad dominant technologies
was all of the supporting technologies around
them. The iPhone took off because of iTunes,

the App Store and the rest of the ecosystem that
Apple deployed BEFORE the iPhone. These
were the mines, the blacksmiths and the chemists that were necessary to create the shiny new
end-product; like the gun or the sword.
Indeed, the failure of Microsoft to win in the
smartphone arena is not because they cannot
PDNH D JRRG VPDUWSKRQH 5DWKHU LWV EHFDXVH
they keep trying to make a palm-sized laptop
instead. No matter how hard they try, a musket
made out of obsidian is a one-shot proposition,
as lethal to the shooter as it is to the target.
Similarly the Tesla Model S is such a revolutionary electric car because Tesla took the
time, money and energy to develop the supporting technologies FIRST (like rapid-charging,
long-lasting, high-capacity batteries)18 and then
made a game-changing car. Other auto manufacturers simply tried to electrify their existing
designs, with relatively limited success. Similarly
the Incas could have tried to create a cavalry out
of their llamas and alpacas, but their livestock
MXVWZDVQWXSWRWKHWDVN
The lesson here is that no matter how seductive the cheap and easy path of adopting a
new technology at its end point may be, if you
KDYHQW HDUQHG WKDW QHZ WHFKQRORJ\ WKH KDUG
ZD\\RXQHYHUUHDOO\RZQLW$WEHVW\RXUHHLWKHU
borrowing a musket until it runs out of ammuQLWLRQ RU \RXUH SXWWLQJ D KRUVHV VDGGOH RQ D
llama in a way that merely punctuates just how
PXFK\RXUHPLVVLQJWKHSRLQW
2. Kill Your Old Strategies And Tactics,
Before Your Opponent Does It For You
In pre-Columbian warfare, most Americans
followed a fairly standard set of strategies
and tactics in warfare. A battle would normally start with both sides lining up just out of
arrow range. Both sides would begin yelling and
screaming, blowing horns and beating drums
in an attempt to intimidate each other before
WKH JKWLQJ EHJDQ 7KLV ZDV FRPPRQ SUDFWLFH
What made the iPhone and iPad dominant technologies was all of the supporting
technologies around them. The iPhone took off because of iTunes, the App Store and
the rest of the ecosystem that Apple deployed BEFORE the iPhone.
12
in most pre-gunpowder societies.19 As husband

to a champion Scottish Bagpiper, I have some
familiarity with the use of loud musical instruments as weapons of intimidation.
2QFH ERWK VLGHV ZHUH VXIFLHQWO\ MXLFHG
up they would begin to slowly close in on one
another. Once in range arrows and slingshot
were launched at the enemy. Then the best,
strongest and bravest warriors would rush in to
VWULNHWKHUVWEORZVRQWKHHQHP\VEHVW%HLQJ
in front was a place of glory and honor, and only
the elite warriors were allowed to begin a battle.
Once the superstars were engaged everyone else
poured in and a melee ensued until one side or
the other was victorious.
While these strategies worked great against a
foe with the same technologies, they were disastrous against the Conquistadores. Standing out of
arrow range and performing their war displays
VLPSO\ DOORZHG WKH 6SDQLVK WR UH DQG UHORDG
WKHLUUHDUPVXQPROHVWHG7KHQRQFHWKHQDWLYHV
began to close the distance their best and bravest
ZDUULRUV ZHUH WKH UVW WR EH FXW GRZQ E\ WKH
6SDQLVKYROOH\V,I WKLVZDVQWHQRXJKWRXQQHUYH
WKHOHVVHUQDWLYHJKWHUVDWWKLVSRLQWDIHZGR]HQ
four-meter-tall, half-horse-half-man monsters
(known as cavalry in Europe) would rush in from
WKHLUDQNVDQGNLOOPHQHQPDVVH20
The only chance that the remaining warriors
had was to get in close to the Spanish, quickly.
But then wood and stone swords were no match
against steel, nullifying much of the talent, skill
and bravery of the remaining warriors. From
top to bottom, the strategies and tactics that
work under the umbrella of one set of technologies fail completely in the face of a new set.
7KDWVZK\ZHFDOOLWGLVUXSWLRQ
On the rare occasion that the natives changed
their tactics, they managed to have some success.
Rather than holding a pre-battle dance party,
the warriors would ambush the Spanish. They
ZRXOGVHQGLQORZHUZDUULRUVUVWWRDEVRUEWKH
UVW YROOH\ RI JXQ UH DQG WKHQ UXVK LQ ZLWK
all hands to engage in close combat before the
enemy could reload. However, these tactics
ran so counter to their established norms and
customs that the native warriors simply could
not change their approach fast enough to save
their societies.
To survive the introduction of a disruptive

WHFKQRORJ\ \RX UVW PXVW UHFRJQLVH WKDW \RXU
whole world view could be, and likely is, wrong.
All of the methods and approaches that you
have used in the past, all of the skills you have
honed, all of the rituals that you have embraced
as part of how you operated are almost certainly going to work against you in the new world
around you. If you keep to your same old tactics,
\RXUHOLNHO\WRIDLODVVSHFWDFXODUO\DVDVRFLHW\
that had a many-thousands-to-one numerical superiority over their opponents.
To survive the
introduction
of a disruptive
technology
you first must
recognise that
your whole
world view
could be,
and likely is,
wrong.
3. Better Knapping Is Not The Answer

In the face of the threat posed by the Spanish,
the leaders of the native societies looked to
WKHLUH[LVWLQJH[SHUWVWRQGDVROXWLRQWRWKHLU
SUREOHP:KHQIDFHGZLWKEDWWOHHOGORVVHVWKH\
asked their existing generals to troubleshoot
their failed tactics. When faced with an enemy
DUPHGZLWKUHVWLFNVDQGLQYLQFLEOHVZRUGV
they asked their best obsidian knappers how to
defeat these new weapons. Those generals and
knappers dipped into their life-long expertise in
ZKDWWKH\GLGLQDQDWWHPSWWRJXUHRXWKRZWR
do what they did, only better.
The problem with this approach is this; the
best obsidian knappers may seem like the best
gun makers, but this is not necessarily so. They
are deeply vested in their prior art; indeed this
is what made them experts. There are strong
dis-incentives for them to discount their own expertise by innovating themselves into oblivion.
Hence, the deeper their knowledge of past technologies, the deeper the hole they must climb
out of to learn something new. It is a natural
tendency to look to the masters of an old technology in order to answer the threats of a new
RQHEXWWKLVLVW\SLFDOO\DQH[FHSWLRQDOO\GLIFXOW
thing for them to do.
Modernly, organisations frequently ask their
best, most experienced experts in old techniques
and technologies to create responses to new
ones. Then, they are surprised when those same
experts completely fail to innovate themselves
out of a job. Realistically, no amount of innovating the process of knapping was going to make
an obsidian arrowhead better than a musket.
If the native knappers improved their output
13
Innovation
of spear points by 2 percent every year, their

armies still were not going to win those battles.
And if the knappers made their sword blades 10
SHUFHQW VKDUSHU WKDQ EHIRUH WKH\ VWLOO ZRXOGQW
penetrate Spanish armor plate.
In this light, will asking your existing experts to
beat new technologies and innovations through
doing the same old thing, only faster, cheaper
or more emphatically likely yield success? If
regular taxi drivers drive faster, smoke less, and
talk less on their mobile while driving, are they
likely to stave off Uber? Similarly, if your existing staff of administrators, managers, accountants, and analysts generate the same old reports
or metrics, just faster and more accurately are
they really going to save your business from a
FRPSHWLWRU WKDW GRHVQW HYHQ UXQ UHSRUWV"
Partner with innovators to capture what is

left of the old way of doing things, at least
until the old way inevitably dies.
I would offer that your best strategy is to take
people who know enough about your existing
technologies and processes such that they understand their strengths and weaknesses, but
who are also not so vested in the present way of
GRLQJ WKLQJV WKDW WKH\YH ORVW DOO SHUVSHFWLYH DQG
give them what those more vested in the past
would believe is an impossible goal. That is, after
all, how your new competitors are doing to you
what they are doing, is it not?
4. Partner, Dont Purchase
While the Conquistadors had a big advantage
in technology over the Native Americans, they
also faced a massive numerical disadvantage.
Archaeologists and anthropologists believe that
the population in the Americas before Columbus
was around 50 million, and perhaps as high as
100 million.21 Conversely, the early Spanish invaders were hard pressed to number over one
thousand. Rather than hoping that their technology would make up the difference the Spanish
followed a much more pragmatic strategy.
Throughout the Americas there were many
societies that were secondary to the Aztecs,
14
Mayans, Incas, and so forth. They constantly

warred with these larger groups in an attempt
to gain power for themselves. When attacking
the main power in a territory the Spanish joined
with these second-tier powers in an alliance
of convenience. The native allies provided the
numbers necessary to nearly match their opponent, and the Spanish used their technology
WR WLS WKH RGGV LQ WKHLU DOOLDQFHV IDYRU ,Q WKLV
way, the impact of a relatively small number
of Conquistadors could completely change the
outcome of a battle.22
Today, many organisations have lost their
ability to innovate as they reach the end of their
'LVFRYHU ,QOWUDWH ([SORLW ',( OLIHF\FOH ,Q
order to reinvigorate themselves, they believe that
acquiring fresh, new companies with fresh, new
talent and technologies will help them survive in
WKHIDFHRI GLVUXSWLRQ,PQHYHUVXUSULVHGZKHQ
WKHVHFRPSDQLHVODWHUQGWKDWWKHLULQYHVWPHQWV
GRQWSD\RII7KHLUSODQVRI EX\LQJWKHLUZD\WR
innovation, rather than earning it, fails to pan out,
and generally every one of the innovators that
created the purchased company or innovation are
gone as soon as their retention contracts expire.
Of course, this outcome should have been completely predictable. The Spanish could never train
and arm an entire army of Natives in the use of
WKHLUWHFKQRORJ\7KHUHZDVQWWKHWLPHDELOLW\RU
pre-disposition. But, by setting their innovations to
make up for the weaknesses of an also-ran of the
old guard, disruptive outcomes became assured.
The lesson here is this: if you are vested in
old technologies and approaches you cannot buy
your way into innovation. Bringing new ideas or
technologies in-house almost always kills the innovation. But, you can partner with innovators
to capture what is left of the old way of doing
things, at least until the old way inevitably dies.
5. Invest In Your Own Death
As mentioned earlier, when the Conquistadores
UVWODQGHGLQWKH$PHULFDVGHPDQGIRUNQDSpers and obsidian edges actually increased, and
the cost of production, distribution, et cetera,
began to go down. There had to be SOME response to the threat caused by the invaders, and
in the absence of innovation, more of the same
old technology is the only available response.
These factors of ever-declining costs, increased

production and apparent increases in demand
are, in fact, a great indication that your business
is going to be disrupted.
As such, you need to reorient your strategy to
recognise and embrace your impending demise.
Go ahead and keep innovating in your knapping,
but with only roughly 20% of your total investment capital. With this 20%, you should be seeking
ways to drive the commoditisation death spiral
of your products or services EVEN FASTER.
<RXZDQWWRRRGWKHPDUNHWSODFHZLWKREVLGLDQ
blades. You want your native warriors dressed head
to toe in obsidian armor, and to shoot ten times as
many stone-tipped arrows as ever before.
You want to fully exploit every possible niche
of use for your obsolete technology as is possible;
including those which were underserved before
due to relative scarcity or relative expense. You
want to be Dell, merging with EMC in the face
of Amazon Web Services or Marriott acquiring
Starwood in the face of Airbnb. You want to be
Fiat acquiring Chrysler in the face of Tesla Motors.
Capture what is left, for as long as you still can, but
prepare to put yourself out of business, fast.
The remaining 80% of your investment dollars
should be focused on embracing disruptive technology. You should invest in understanding it and
reorienting towards it. But, you must not just get
caught up in the shiny end point. Do not invest
in the gun, invest in the gunpowder. Invest in the
forge. Invest in metallurgy and blacksmithing and
chemistry. With time and effort you may combine
your existing knowledge with new insights, and
end up making a maxim machine gun, rather than
a copy of a musket.
You Cant Always Get What You Want
After contemplating this history of stone, you
may be thinking to yourself Time is on My
Side%XW,DVVXUH\RXZLWKWKLVPLQGVHW\RXUH
Playing With Fire. In the face of technology
disruption you may be saying Gimme Shelter,
but Wild HorsesFRXOGQWFDUU\\RXDZD\IURP
the changes that are coming. Facing the reality
of the situation is hard, and you may wish that
you could just take Mothers Little Helper
in order to avoid your Nineteenth Nervous
Breakdown. Your Tiger Team of old-school
H[SHUWVOLNHO\ZRQWVROYH\RXUSUREOHPHYHQLI
they beg you to Start Me Up, like some Beasts
of Burden. Adapting to rapid technology
change requires that you disrupt yourself, before
VRPHRQH HOVH GRHV RWKHUZLVH \RXOO QG WKDW
you Cant Get No Satisfaction out of your
same old way of doing things, and your own
empire may be coming to an end.
In that end, maybe Mick and the boys were
right all along.
80%
of your investment dollars
should be focused
on embracing
disruptive technology
About the Author

Christopher Surdak is an Engineer, Juris Doctor,
Strategist, Tech Evangelist, 2015 Benjamin
Franklin Innovator of the Year, and Honored
Consultant to the FutureTrek Community,
Beijing, China. He has recently accepted a new
position as the Vice President of Data Analytics
for Oracle Corporation. He is also the author of
Data Crush: How the Information Tidal Wave is Driving
New Business OpportunitiesZKLFKLV*HW$EVWUDFWV
International Book of the Year for 2014.
References
1. https://en.wikipedia.org/wiki/Knapping
2. http://www.nature.com/news/2011/110127/full/news.
2011.55.html
3. http://www.volcanodiscovery.com/volcanoes.html
4. http://geology.com/rocks/obsidian.shtml
5. http://www.engineering-dictionary.org/Materials-Scienceand-Engineering-Dictionary/metastable
6. http://advantage-environment.com/framtid/phase-shifting
-materials-save-energy-and-money/
KWWSVHQZLNLSHGLDRUJZLNL&DUERQEHUUHLQIRUFHGBSRO\PHU
8. http://www.superconductors.org/
9. http://www.chm.bris.ac.uk/motm/buckyball/c60a.htm
10. https://suite.io/tony-dunnell/3v442j7
11. https://www.gilderlehrman.org/history-by-era/american
-indians/resources/cultures-americas-1200-bc%E2%80%93ad-1600
12.https://books.google.com/books?id=cS0qA
AAAYAAJ&pg=PA10&lpg=PA10&dq=obsidian+
glass+trade+in+americas&source=bl&ots=Us
5I50TF*[ VLJ I[[/ZGG\$,BJF)'
EMiuOLw&hl=en&sa=X&ved=0ahUKEwiSusapqXLAhX
MlYMKHXpXAh0Q6AEIPDAF#v=onepage&q=
obsidian%20glass%20trade%20in%20americas&f=false
KWWSVHQZLNLSHGLDRUJZLNL&KULVWRSKHUB&ROXPEXV
14. http://www.smithsonianmag.com/ist/?next=/history/
the-vikings-a-memorable-visit-to-america-98090935/
15. http://www.sjsu.edu/faculty/watkins/theconquest.htm
1 6 . h t t p : / / a r ch a e o l o g y. a b o u t . c o m / o d / m a m e t e r m s
/a/Macuahuitl.htm
17. http://firearmshistory.blogspot.com/2010/05/barrel-makingearly-barrel-making-in.html
18. https://www.technologyreview.com/s/516961/how-tesla
-is-driving-electric-car-innovation/
KWWSZZZDQFLHQWHX$]WHFB:DUIDUH
20. http://latinamericanhistory.about.com/od/theconquest/a/
09armsconquest.htm
KWWSVHQZLNLSHGLDRUJZLNL3RSXODWLRQBKLVWRU\BRIB
LQGLJHQRXVBSHRSOHVBRIBWKHB$PHULFDV
22. http://www.oupress.com/ECommerce/Book/Detail/554/
indian%20conquistadors
15
Future of Work
Why robots may not be taking your job

How Organisations Can

Embrace Automation
BY LESLIE WILLCOCKS
In this article Professor Willcocks discusses the reality of robots, what they
mean for human jobs and how organisaWLRQ DQG ZRUNHUV FDQ WDS LQWR WKH EHQHWV
of automation.
he Encyclopaedia Britannica GHQHV D

robot as "any automatically operated machine
that replaces human effort, though it may not
resemble human beings in appearance or perform functions in a humanlike manner."
,W VHHPV WKH UVW KDOI RI WKLV GHQLWLRQ LV WKH
part that futurologists, industry experts and organisations the world over have chosen to focus
on when it comes to discussing how robots will
impact organisations. Reports by the likes of
Berkley Group last year or, more recently, by the
World Economic Forum have predicted that,
ZLWKLQ WKH QH[W GHFDGH DV PDQ\ DV YH PLOOLRQ
KXPDQ MREV ZLOO EH SHUIRUPHG E\ URERWV D
number that will only increase over time.
The consequence of such predictions has
been mass speculation (and a good deal of
scaremongering by the media) on the role

human workers will play in the industries of the
IXWXUH RU ZKHWKHU LQGHHG ZHOO KDYH D UROH DW
all. Undoubtedly the past 20 years or so have
borne witness to the greatest technological advancements, from something as seemingly every
day as connecting over a billion people to the
internet at any time virtually anywhere, to the
development of humanoid machines such as
+RQGDV $6,02 ZKLFK FODLPV DUWLFLDO LQWHOOLgence by mimicking human movement, sounds
DQG DFWLRQV RU ,%0V VXSHU FRPSXWHU :DWVRQ
But I believe these predictions need to be
challenged by an alternative, more nuanced,
and perhaps more realistic perspective on
what the future holds for both the human and
the automated worker.
First we must establish the reality of what
a robot is. Impressive though humanoids may
be, they currently exist as one-of-a-kind prototypes programmed for limited functions.
And Watson is, so far, a long way off the caSDELOLWLHV RI 'RXJODV $GDPV 'HHS 7KRXJKW
A recent report by World

Economic Forum has
predicted that, within the
next decade as many as five
million human jobs will
be performed by robots a
number that will only increase
over time.
For the majority of businesses, robots currently exist as software or hardware which
can automate routine service tasks to greater efficiency than human staff, transferring
and organising data from multiple input sources to internal recording systems.
17
Future of Work
in providing us with the answer to life, the

universe and everything. Both lack the capability for free-thinking intelligence and
independence.
For the majority of businesses, robots currently exist as software or hardware which
can automate routine service tasks to greater
HIFLHQF\WKDQKXPDQVWDIIWUDQVIHUULQJDQG
organising data from multiple input sources
to internal recording systems.
My own research, conducted in partnership
with my colleague Mary Lacity focuses on the
impact Robotic Process Automation (RPA) has
had on organisations thus far, and attempts to
provide perspective on the bigger picture of automation and the future of work.
By surveying more than 100 organisations, conducting in-depth client case studies,
formal interviews, and obtaining written contributions from clients, providers, and advisors of RPA systems our research also seeks
to help business leaders and workers alike
understand how to integrate automation into
WKHLUEXVLQHVVHVVXFFHVVIXOO\DQGWKHEHQHWV
of doing so.
18
The possibilities
for automation
and robotics are
set by human will
and imagination
something
which artificial
intelligence is
a long way off
replicating
ensuring humans
remain in control
of the workplace.
RPA is set to be the biggest game-changer

for organisations for 2016 and beyond. The
software is now mature enough to be easily
and cheaply adopted, it is non-invasive so will
not disturb existing tech systems, and needs
no great level of specialist know-how from
VWDII WRFRQJXUHDQGPDQDJH0RYLQJEH\RQG
basic screen-scraping, RPA collates data in line
ZLWK DQ RUJDQLVDWLRQV VWUXFWXUH DQG FDQ EH
scaled to become a virtual workforce, running
PRVW LI QRW DOO RI DQ RUJDQLVDWLRQV EDFN
RIFHLI VRGHVLUHG
2XU UHVHDUFK KLJKOLJKWV PXOWLSOH EHQHWV
RI LQWURGXFLQJ53$LQFOXGLQJVLJQLFDQWFRVW
savings, faster processing (a study of an orJDQLVDWLRQZLWKLQ/RQGRQVLQVXUDQFHPDUNHW
showed what previously took two days to
process, needed only 30 minutes using RPA),
higher quality, less error and better regulatory compliance. It can also massively increase
output. A prime example is UK mobile communications provider Telefnica O2, whose
deployment of more than 160 robots to
process between 400,000 and 500,000 transactions each month yielded a three-year return
on investment of over 650%, with only four

trained staff.
Though this sounds like a recipe for headcount reduction, the other key finding of our
research is that, in order to integrate such
systems effectively, RPA must be guided by
human intelligence. The possibilities for automation and robotics are set by human will
and imagination something which artificial intelligence is a long way off replicating
ensuring humans remain in control of the
workplace.
Far from depleting workforces, humans and
robots are most effective when working together. Instances of doing so have produced
DQLQX[RI JURZWKSURGXFWLYLW\DQGPRVWLPSRUWDQWO\ VDWLVHG FXVWRPHUV DQG HPSOR\HHV
With RPA handling those repetitive un-stimulating data processing tasks which provide
little-to-no job satisfaction, employees can
focus on the human-intensive roles that robots
cannot undertake innovation and creation,
meaningful customer contact, building investor relations, running teams and departments
all whilst overseeing the work of their robotic
colleagues.
The biggest challenge business leaders will
face is merging human and automated roles
and responsibilities effectively, and providing
human employees with opportunities to apply
WKHLU RZQ QDWXUDO VNLOOV &RQWUDU\ WR WRGD\V
worst fears, robotics could facilitate the rise,
not the demise, of such knowledge workers.
But managers would do well to prepare staff
for the unavoidable changes to their current
job roles, enabling them to upskill, specialise
and re-train where necessary.
The unprecedented explosion of data from
the combinatorial effects of advances in cloud
computing, big data, the Internet of Things,
mobile connectivity and social media demands automation to help organisations cope.
RPA will increase productivity in the face of
rising workloads.
We certainly did not envision the industries
that would be born of the invention of the steam
engine, electricity, computers or the internet, but
with hindsight those new technologies led to disruption, transition and prosperity. Can we assume
THE BIGGEST CHALLENGE BUSINESS

LEADERS WILL FACE IS MERGING
HUMAN AND AUTOMATED ROLES
AND RESPONSIBILITIES EFFECTIVELY,
AND PROVIDING HUMAN EMPLOYEES
WITH OPPORTUNITIES TO APPLY THEIR
OWN NATURAL SKILLS.
the same will hold for automation? Most RPA
adopters we studied have promised their employees that automation would not result in layoffs,
but perhaps it is too early to say. Extrapolating
forward with our sample companies, we found
for every 20 jobs lost through advanced technologies, 13 new ones would be created. We
also found it more sensible to talk about work
DQG DFWLYLW\ WKDQ VSHFLF MREV DV MREV DUH DOZD\V
changing. We found technologies to change 25%
DW OHDVW RI HYHU\ MRE LQ WKH QH[W YH WR VHYHQ \HDUV
Businesses will struggle where they do not
UHDFK IRU WKH UHDO EHQHWV SUHVHQWHG E\ DXWRPDtion. As for workers, those who can adapt to the
changes caused by technology, through educaWLRQ DQG WUDLQLQJ ZLOO QG PRUH VDWLVI\LQJ ZRUN
in the future. But we must hope that the imaginations of their managers can expand as rapidly
as their automation toolkits.
According to the author's

research, for every 20 jobs
lost through advanced
technologies, 13 new ones
would be created.
About the Author

Leslie Willcocks is Professor of
Work, Technology and Globalisation
in the Department of Management
at the London School of Economics
at Political Science. He is a leading
global researcher on technology at work, globalisation and ITCs and innovation and is a recipient of the PwC/Michael Corbett Associates
World Outsourcing Achievement Award.
Professor Willcocks has recently co-authored
Service Automation: Robots and the Future of Work
with Professor Lacity published by Steve
Brookes Publishing.
19
Innovation
MARKET MAKERS
Innovate your market,
then innovate your business.
BY PETER FISK
Peter Fisk
Global business thought
leader on growth and
innovation, customers
and marketing. He is also
bestselling author, expert
consultant and keynote
speaker
Peter Fisk explores how the next generation

of businesses innovate from the future back,
DQG RXWVLGH LQ 7KH\ VWDUW E\ QGLQJ WKH EHVW
opportunities for future growth, then shaping
WKHVH PDUNHWV LQ WKHLU RZQ YLVLRQ GHQLQJ
the space and rules, practices and value perceptions, to their own advantage. Then they
set about designing the right business model
and customer experience to win on their
terms. They are the market makers.
he best opportunities for business to

QG QHZ JURZWK WR HQJDJH FXVWRPHUV
more deeply, to stand out from the crowd,
WR LPSURYH WKHLU SURWDELOLW\ LV E\ VHL]LQJ WKH
opportunities of changing markets. The best
way to seize these changes is by innovating not
just innovating the product, or even the business
itself, but by innovating the market.
7RGD\V PRVW VXFFHVVIXO EXVLQHVVHV IURP
Airbnb to Tesla, Apple to Uber innovate the
market what it is, and how it works.
In the old world we accepted markets as a
given the status quo and competed within it,
with slightly different products and services, or
most usually by competing on price. Most new
products were quickly imitated, leading to declining margins and commoditisation. Most companies now receognise that this is not a route to
long-term success in a rapidly changing world.
Fast-changing markets demand fast-changing businesses.
Winning in this new world requires a bigger
ambition to change the game, not just play the
game. Winners recognise that markets are malleable, geography is irrelevant and categories are
outdated, that boundaries blur and new spaces
emerge, and that practices and perceptions can
be shaped to your advantage.
These Market Makers innovate their
market, and then innovate their business with
exponential impact like WhatsApp creating
$19bn in three years and Uber $60bn in 5 years.
They start from the future back, making sense
of change, seeing the new patterns and possibilities, harnessing the power of ideas and digital
networks to win in new ways. This requires new
leadership thinking, and for the whole business
to innovate.
10x not 10% better
It all starts with an idea indeed, you could
Market Makers start from the future back, making sense of

change, seeing the new patterns and possibilities, harnessing the
power of ideas and digital networks to win in new ways.
20
VD\ ZH QRZ OLYH LQ DQ LGHDV HFRQRP\0DUNHW

Makers typically have really big ideas not ones
that can be quickly copied by others. Most ideas
are incremental, and most ideas in business are
usually around product functionality. They are
more audacious. They think about making things
10 times better, not just 10% better. They think
beyond the product, to the service and channel,
the business model and customer experience.
And ultimately how the market works.
But of course, ideas are not enough. You
need to make them happen. That is an equally
creative process, and certainly unlimited by internal capabilities, or the models which made
you successful in the past. Once you have a
GLUHFWLRQ LWV DERXW FROODERUDWLQJ ZLWK FXVWRPers and business partners to make new ideas
happen using concepts such as design thinking to explore deeper, lean innovation to implement faster, co-creation to engage people more
closely, and new business models to ensure they outsmarted Intel in recent years by thinking
differently. Whilst Intel was wedded to progenerate superior returns.
ducing leading-edge yet standardised chips for
computers, ARM set about designing chips for
Market Maker Example 1Aeromobil,
WKHZRUOGVVPDUWSKRQHVDQGPRELOHGHYLFHVD
the Worlds First Flying Car
Searching for examples of market makers, I found much faster growing market. ARM works with
myself in Bratislava, Slovakia. Stefan Klein, a each business customer to develop more releretired Volkswagen car designer also has a pilots vant, distinctive solutions, and then engages an
licence. He had a vision to combine his exper- ecosystem of partners to develop and produce
WLVHDQGSDVVLRQDQGVHWDERXWFUHDWLQJD\LQJ them under license. The relatively small team
car. After 7 years, his third version of Aeromobil in Cambridge has transformed how the market
scooped the top prize at Vienna Motor Show. On works, and in so doing has become the world
the road, it is a two-seater roadster. But when it leader in an incredibly fast-growth market.
arrives at the airport, driving onto the runway,
WKH GRRUV EHFRPH ZLQJV DQG .OHLQ FDQ \ IRU Market Maker Example 3Nespresso is All
400km at 220kmph. With investment (and more about the Pods
importantly technical expertise in production) Swiss food giant Nestl, recognised that the
from Boeing and NASA, Aeromobil will soon future is much more about aspirations and exbe production ready, with a price points around periences than products and needs. Nespresso
Euro 200,000 and ready to create a new category is single-handedly responsible for increasing
IRUSHRSOHZKRZDQWWRDYRLGWUDIFMDPVRUMXVW (XURSHV DQQXDO KRXVHKROG VSHQG RQ FRIIHH
by over Euro 800. It does this through allowget one up on their neighbours.
ing people to make great coffee. Inspired by
George Clooney, of course, and enabled by
Market Maker Example 2How ARM
its exclusive machines, made under license by
outsmarted Intel
Whilst market-making might seem more suited .UXSV2QFH\RXYHERXJKWWKHPDFKLQH\RX
to entrepreneurs, it is large companies who MRLQ/H&OXEDQGVXEVFULEHWRDUHJXODURZRI
FDQ UHGHQH PDUNHWV ZLWK PRVW LPSDFW $50 pods delivered directly to your door. Compare
the UK-based semiconductor business, has this to other business models for coffee. The
Stefan Klein's third version

of Aeromobil scooped the
top prize at Vienna Motor
Show. Aeromobil will soon be
production ready, with a price
points around Euro 200,000
and ready to create a new
category for people who want
to avoid traffic jams or just get
one up on their neighbours.
21
Innovation
low cost machines available through retailers

are accessible to everyone, but then the direct
VXEVFULSWLRQ PRGHO LV LQFUHGLEO\ HIFLHQW DQG
SURWDEOH
Tesla gave away much of their

IP to encourage competitors
to grow the market with
them, and with their sister
business Solar City, they are
creating the worlds largest
electric charging network.
Market Maker Example 4Teslas

Supercharger Network
Think about electric cars. The challenge for
Elon Musk and his team as innovators was not
simply to create a great electric car, but to create
the market for the car too. This means creating
demand, competition, and infrastructure. Tesla
works hard to create a vision that engages people
HPRWLRQDOO\LQWKHEHQHWVRI FDUERQIUHHWUDYHO
as well as the love for their brand. They started
with a high-end niche roadster to build aspiration, then introduced mid and lower-end models
IRUWKHPDVVWLJHPDUNHW
Tesla gave away much of their IP to encourage
competitors to grow the market with them, and
with their sister business Solar City, they are creDWLQJWKHZRUOGVODUJHVWHOHFWULFFKDUJLQJQHWZRUN
In the future, says Musk, we will choose to join
his Supercharger network as the default solution to better driving. Of course, Tesla could just
have waited for somebody else to do this. But
WKH\ ZDQWHG WR FUHDWH D QHZ JDPH ZKLFK WKH\
could shape. They wanted to create the future of
DXWRPRWLYHLQWKHLURZQYLVLRQDQGWRGHQHWKH
rules (the infrastructure, the standards, the expectations) to their own advantage.
Rethink Everything
0RVWFRPSDQLHVOLNHWRIRFXVRQWKHZKDWWKH
product, service and experience). This is where
they have conventionally succeeded. They seek
to innovate within the existing game. Most of
their solutions are similar to competitors small
differences to design and functionality, and small
differences in prices. Eventually, focus on the
what, leads us to sameness to commoditisation,
WRSULFHGLVFRXQWLQJDQGGLPLQLVKLQJSURWV%\
UVWWKLQNLQJDERXWWKHZK\DQGWKHQWKHKRZ
\RXFDQUHIUDPHZKDW\RXDUHDERXWWRUHGHQHWKHPDUNHWRQ\RXURZQWHUPV
This is what Apple did with the personal computer market. This is what Dyson did with the
KRPH FOHDQLQJ PDUNHW 2U )LQODQGV 6XSHUFHOO
GLG LQ WKH JDPLQJ PDUNHW 2U 6SDLQV 'HVLJXDO
in the fashion market. They stopped to think,
to think bigger and smarter. Right now you can
VHHPDUNHWPDNHUVLQHYHU\HOGDQG0HLQ
healthcare, SpaceX in space travel, OneWeb in
global internet. DJI in drone delivery. New ideas
for new markets.
&RPSHWLWLYH DGYDQWDJH LQ WRGD\V IDVW DQG
crowded markets is not about being slightly
better, or slightly cheaper, it is about having a
better vision, a better view of the market, and
KRZ\RXFDQPDNHSHRSOHVOLYHVEHWWHU0DUNHW
0DNHUV RXWWKLQN WKH FRPSHWLWLRQ ,Q IDFW
this is what innovative business leaders have
always done Akio Morita, Steve Jobs, Richard
Branson. They are visionaries, but also revolutionaries to challenge, to disrupt, to create in
order to leap forwards.
Beyond Products
5HGHQLQJ WKH PDUNHW LV DERXW PRUH WKDQ
ODXQFKLQJ D QHZ SURGXFW LWV DERXW FUHDWLQJ D
new demand and a new future. Once you have
UHGHQHG KRZ WKH PDUNHW ZRUNV WKHQ \RX DUH
in a position to create a long series of products
to succeed in it. Apple is the obvious example.
By creating a new market model, supported by a
new business model, it was able to create multiple
successes. In the beginning, iTunes was the real
innovation, more than iPod. This changing the
PDUNHWDQGZDVGLIFXOWWRFRS\6LPLODUO\L3DG
and iPhone have become so successful, because
RI WKH$SS6WRUH$JDLQGLIFXOWWRFRS\
22
At the same time, there is a brand story that

keeps moving. For Apple, this is about humanising technology, combining the emotion of great
design, with simplicity of intuitive technologies.
Building a brand that people trust, and ultimately where all the products work together and
become something much bigger. This is perhaps
where Asian technology companies have been
less successful so far.
You can see the same approach at Nike, at
Pixar, at Tesla. It is all about horizon planQLQJZKHUHE\\RXFUHDWHDEROGDQGDXGDFLRXV
YLVLRQZRUNLQJIURPWKHIXWXUHEDFNDQGWKHQ
plan how the journey will unfold. It is hard and
soft yin and yang, if you like. It is a functional journey of technology and functionality, but
also an emotional journey of trust and desire.
THE MOST POWERFUL STRATEGIC TOOL IS

TO REDEFINE THE CONTEXT IN WHICH YOU
SEE YOUR MARKET, AND YOUR BUSINESS.
BY FRAMING YOUR MARKET AROUND
CUSTOMERS, YOU HAVE MORE OPPORTUNITY
TO BE RELEVANT AND DIFFERENT.
and get the shoes free, like in banking. Or pay

SHUXVHRUE\VXEVFULSWLRQOLNHLQJDPLQJ'RQW
be obsessed with competitors, look to what your
consumers are doing, and liking, in other places,
WKHQFRS\DGDSWSDVWH
Strategic Framing The most powerful
VWUDWHJLFWRROLVWRUHGHQHWKHFRQWH[WLQZKLFK
you see your market, and your business. Most
Where to Start
Market making is a strategic challenge, for the SHRSOH GHQH WKH VDPH SOD\LQJ HOG DV FRPwhole business. It requires the full engagement petitors, and so end up playing the same game.
of business leaders, as well as people with exper- By framing your market around customers, you
tise and imagination in all parts of the business. have more opportunity to be relevant and differThese creative techniques are particularly useful HQW%UD]LOV%HDXW\LQFRPELQHGIRRGDQGGULQN
in opening up our range of thinking, whilst ZLWKFRVPHWLFVWRGHQHDQHZFDWHJRU\RI DOLalso building courage and commitment to make metics which they could shape and grow. Time
:DUQHU UHGHQHG WKHPVHOYHV DV DQ HQWHUWDLQthem happen:
Design Thinking Deep diving to under- ment, rather than communications company,
stand the needs and aspirations of customers and saw an instant jump in share price.
The innovation process is about creativity (dimore deeply not just for existing products,
EXW WR UHGHQH WKH SUREOHP DQG RSSRUWXQLW\ vergence) and commercialisation (convergence)
to make their lives better. This means spending to turn big ideas into exponential impact. This
more time with people, exploring their worlds should actually be core to the strategic thinking
one by one, solving real problems in new ways. of the business, not something to be delegated
This is far more insightful than the old ways of RUGRQHRQFHWKHVWUDWHJ\LVGHQHG
doing mass-market customer research that was
limited by the questions asked, and the statistical Fast and Agile
analysis of which resulted in average solutions 7RGD\VHQWUHSUHQHXULDOPLQGVHWLVWRVWDUWIDVW
for average people. The new approach to is to be make mistakes and learnand then as you gain
PRUHLQVLJKWDQGH[SHULHQFHSLYRW\RXUEXVLmore selective, more intuitive and exploratory.
Parallel Worlds Most good ideas are ness to where you really see the best opportualready out there, but often in different places. nity. It requires a speedboat mentality - to stay
The same consumer who buys your sports small and fast, rather than trying to build a sushoes, also buys food, cars, phones, games, travel SHUWDQNHU JRLQJ LQ RQH GLUHFWLRQ 7KH ZRUOGV
DQGPXFKPRUH/RRNDWRWKHUSDUDOOHOPDUNHWV largest white goods company, Haier, is actually
to see how the same people are responding to D FROOHFWLRQ RI VSHHGERDW FRPSDQLHV
ideas in other sectors. If they sign-up to annual each incredibly entrepreneurial. Similarly GE
contracts for their phones, maybe they would do has adopted a lean FastWorks model of test
similarly for sports shoes. Or pay for the gym and learn.
23
Innovation
Market making
requires agility
the ability to
act quickly, be
prepared to
change direction,
and to live
without certainty.
24
As examples of agilty, Pinterest started life as

Tote, helping people to explore online retailers
and sending them updates about prices and availability. It realised users were mainly using the site
to build and share ideas lists, and soon shifted
course to focus on pinning. Groupon began
as a platform for social action called The Point,
before reinventing itself in the crowd-based local
coupon business. Ushahida started as an African
elections monitoring service, before growing
into a crowdsourced new aggregator. Twitter
emerged out of a mediocre podcasting concept
called Odeo that was outshone by iTunes.
Market making requires agility the
ability to act quickly, be prepared to change
GLUHFWLRQ DQG WR OLYH ZLWKRXW FHUWDLQW\ ,WV
like climbing a mountain, set out your vision
the mountain peak you want to get to and
then choose your path, whilst recognising you
may well have to change your path depending
RQZKDWLWVOLNHWKHZHDWKHUFRQGLWLRQVDQG
much more. You might sometimes even want
to aim for a different peak, when you realise
that the initial one is no longer appropriate.
vision, rather than living in the shadow of

others. Think how you can shape the future to
your advantage, to make sense of change, and
GHQH\RXURZQGHVWLQ\
Don't just play the game, change the game.
About the Author

Peter Fisk is a global business thought leader
on growth and innovation, customers and marketing. He is a bestselling author, expert consultant and keynote speaker, helping business
leaders to develop innovative strategies for
business and brands. Having trained as a nuclear
physicist he went on to work with brands from
Coca Cola to RedBull, Virgin to Vodafone, is
Professorof Strategy at IE Business School,
Madrid, and is the founder of GeniusWorks,
his own innovation company based in London.
Peter features on the Thinkers 50 radar of best
business thinkers.
3HWHU )LVNV ODWHVW ERRN
is Gamechangers: Creating
Innovative Strategies for
Business and Brands.
Explore more ideas,
articles and case studies,
Change the Game!
7RGD\V ZLQQHUV H[LVWLQJ FRPSDQLHV VHHNLQJ videos and toolkits, blogs and more at Peter
WR QG D EHWWHU IXWXUH RU VWDUWXSV ORRNLQJ )LVNV ZHEVLWH www.theGeniusWorks.com Or
for their space, create the future in their own email: SHWHUVN#SHWHUVNFRP
Excellent market access

due to its position in
Switzerlands business
center.
Effective networking
due to high numbers
of businesses.
Variety of location
options due to an attractive
portfolio of real estate.
Greater chance
of success due to
below-average
production costs.
Building the future together

www.aargauservices.com
Telephone: +41 62 835 24 40
Innovation
INDUSTRY 4.0:
HOW BUSINESSES IN AARGAU ARE
MASTERING TECHNOLOGICAL CHANGE
Businesses operating in Switzerland are
particularly exposed to global competition.
High production costs and the strong Swiss
franc mean that they are forced to constantly optimise their business processes. The
fourth industrial revolution presents an additional challenge. The high-tech Canton
of Aargau offers companies an attractive
location for doing business, active support
and extensive technological expertise in
Industry 4.0.
Water influenced Aargau's

industrial history. Limmat
woodbridge in Baden agis.
26
he Canton of Aargau is the fourth-largest

canton in Switzerland and has a strong
high-tech industry. Aargau is an excellent
location in terms of its transport connections
as it is situated at the heart of Switzerland's
VWURQJHVWHFRQRPLFUHJLRQ%XVLQHVVHVEHQHW
from attractive property and land prices,

below-average taxes, moderate salary costs
and liberal employment laws. Aargau is also
home to world-class research institutes and
educational establishments. The canton is rated
$$$E\6WDQGDUG 3RRU
VUHHFWLQJLWVJUHDW
attractiveness as a location.
Pioneers in industrial history
Aargau has always been one of the technological frontrunners in Swiss industrial history.
)RXU RI WKH YH ODUJHVW ULYHUV LQ 6ZLW]HUODQG
converge in Aargau. Water has had a
VWURQJ LQXHQFH RQ WKH FDQWRQ
V HFRQRPLF
GHYHORSPHQW DQG LPSRUWDQFH $W UVW ZDWHU
served as a means of transportation. Later,
it was used as a way of producing energy. It
therefore provided the basis for some major
technological advances.
Resourceful entrepreneurs in Aargau recognised the potential of new technologies
early on. These pioneers laid the foundations
for the success that Aargau's high-tech
industry now enjoys. To give some examples:
The oldest water supply structure in
Switzerland is in Aargau: the water pipeline
from Hausen to Vindonissa dates from Roman
times and still exists today.
6ZLW]HUODQG
V UVW UDLOZD\ OLQH RSHQHG LQ
1847, went from Zurich to Baden in Aargau.
Many Swiss and international travellers took
the Schweizer Nordbahn to enjoy the healing
springs in the spa town of Baden.
A milestone was reached in 1891 when
Charles Eugene Lancelot Brown and Walter
Boveri founded the BBC (now known as ABB
Feature
Schweiz AG) in Baden. This led to the creation

of today's unique cluster of energy and electrical
engineering companies in the east of Aargau.
Industry 4.0: the fourth industrial revolution
A new technological change is on the horizon
with the digitalisation of industry. The term
Industry 4.0 is used to describe the organisation and management of the entire value chain
throughout the product life cycle. The Internet
of Things involves networking production machines with one another and thereby designing
HQWLUHPDQXIDFWXULQJSURFHVVHVPRUHHIFLHQWly. It is based on real-time availability of all the
relevant information as a result of networking
all parts of the value chain together, and on
the ability to use the data to devise the optimal
value stream at any time.
This development offers a range of different opportunities:
,W FDQ VLJQLFDQWO\ LQFUHDVH FRPSHWLWLYHness, with forecasts suggesting productivity
increases of 2.6% a year.
Real-time information can be used to reduce
inventory costs and expenditure on staff,
logistics, quality control and production.
Businesses can only remain competitive if
the complexity of the value chain is successfully managed.
Optimising communication and transparency throughout the value chain helps
businesses to plan and implement their
products more effectively.
Innovative business models and services
are now possible, particularly for small and
medium-sized companies.
Industry 4.0 also presents some major
challenges.
Digitalisation of production involves generating, collecting, analysing and interpreting data. Such data is critical for businesses,
and it is important to protect it.
Systems all have to speak a comprehensible and consistent language so that they
can communicate with one another and exchange information.
Human interaction and the skills of your
workforce also play a vital role in digitised production.
The government
of Aargau places
great stock in
research and
development
Support in the form of experts and
as well as the
research funds
Aargau is the place to be for innovative companies. transfer of
Due to its proximity to renowned research knowledge to
institutions such as the Swiss Federal Institute
SMEs.
Independently operating machines and
'smart' software take decisions that affect
humans. Who is responsible for these decisions and what are the potential legal
consequences?
of Technology (ETH Zurich), the University

of Applied Sciences Northwestern Switzerland
(FHNW) and the Paul Scherrer Institute (PSI),
FRPSDQLHV DUH FHUWDLQ WR QG VWURQJ 5 '
partners. The government of Aargau places
great stock in research and development as well
as the transfer of knowledge to SMEs. For this
reason, the Cantonal Executive Council launched
the "Hightech Aargau" programme four years
ago. Hightech Aargau promotes exchanges and
collaboration between SMEs, universities and
research institutes, as well as large international
corporations.
27
Innovation
To ensure that local and newly settled businesses in Aargau are ready to face the chalOHQJHVRI ,QGXVWU\YHUHQRZQHG$DUJDX
organisations offer a number of services,
some of which are free of charge.
In the context of "Hightech Aargau", the
institution Hightech Zentrum Aargau was
founded in 2012. This high-tech consulting
centre makes it easier for resident SMEs to
gain access to know-how, technology, universities and industry partners. It performs
innovation check-ups, analyses innovations,
and looks for solutions, appropriate innoYDWLRQ SDUWQHUV DQG QDQFLDO VXSSRUW 7KH
Hightech Zentrum Aargau AG offers initial
consultations on issues regarding Industry
4.0. It guides and supports businesses from
all sectors as they introduce innovation proFHVVHV HVSHFLDOO\ LQ WKH HOGV RI QDQR DQG
energy technology, engineering, life sciences,
medical technology, information and communication technology, and micro and environmental technology.
This helps SMEs in a number of different
ways. On the one hand, they can reduce the
28
The Hightech
Zentrum Aargau
AG offers initial
consultations on
issues regarding
Industry 4.0.
It guides and
supports
businesses from
all sectors as
they introduce
innovation
processes.
risks that the innovation process poses to the

business and thereby save on the costs of innovating. On the other hand, they spend less
time looking for the knowledge, technology
and partners required, and conduct their own
initial analysis. Companies can also take advantage of an active network of public and
private research facilities and technology providers. The Hightech Zentrum Aargau also
SURYLGHV DFFHVV WR QDQFLDO VXSSRUW DW HLWKHU
cantonal, national or EU level. The centre also
organises several practitioners' groups. The
key concept here is speed to market.
The University of Applied Sciences
Northwestern Switzerland (FHNW) and
WKH 2IFH IRU ,QQRYDWLRQ DQG 7HFKQRORJ\
Transfer (FITT) offer surveys, feasibility
studies and strategies, either via inexpensive
student projects or Bachelor's and Master's
dissertations. The Industry 4.0 Competence
&HQWUH KDV DFFHVV WR DOO WKH ODWHVW QGLQJV
from applied research and helps to link businesses with experts at the FHNW. It facilitates
Swiss and European subsidies and organises
specialist events and workshops.
Feature
From left to right:

Campus of the University of
Applied Sciences in BruggWindisch Ren Rtheli;
Power Electronics Advanced
Research Laboratory in
Dttwil, Aargau ABB;
PARKinnovAARE, the Swiss
Innovation Park in Aargau
Hornberger Architekten.
The Aargau Chamber of Commerce and

Industry (AIHK) offers various specialist
events and workshops on Industry 4.0 in collaboration with FITT. As well as advising on
exporting, its Industry 4.0 consultancy services focus on providing legal advice.
PARK innovAARE, the Innovation Park
Being home to the PSI, the largest research
centre for natural and engineering sciences in
Switzerland, Aargau offers even more opportunities for innovative companies. The PSI is
a strong advocate of applying research results
to the development of new industrial products
and procedures. A collaborative project of the
canton of Aargau and the PSI is PARK innovAARE, a high-tech business location. It will
be located right on the doorstep of the PSI in
Villigen. Businesses that settle at PARK innoY$$5(ZLOOSURWIURPWKHLQVWLWXWH
VWRSLJKW
research and unique infrastructure. Companies
WKDWVHWWOHWKHUHEHQHWIURPWKHSUR[LPLW\DQG
direct access to the PSI's unique large-scale research facilities, its experts and specialists and
their particular and detailed know-how.
Starting up and growing the local network

To help companies and their employees settle
and grow in Aargau, the Economic Promotion
Department of the canton of Aargau Aargau
Services provides a network of valuable
industry contacts. The organisation acts as
a direct link to both cantonal and federal
authorities, easing the administrative burden of
moving to a new location. There are teams to
deal with migration, tax and trade registration
issues, as well as consulting partners such
as lawyers and tax advisers. Aargau Services
networks entrepreneurs with the key trade
associations, research institutes and business
partners involved in Industry 4.0, and helps
WKHPWRQGSUHPLVHVIRUUHVHDUFKDQGGHYH
lopment, production and administration.
Please get in touch with us for more information on
how you can take advantage of these services.
Aargau Services Economic Promotion
Rain 53, CH-5001 Aarau / Switzerland
Telephone: +41 62 835 24 40
aargau.services@ag.ch www.aargauservices.com
29
WHY GUANXI MATTERS

IN BUSINESS RELATIONSHIPS
WITH CHINA
BY BANG NGUYEN AND DAVID DE CREMER
Business relationships between China and

Europe have existed for quite some time
and with the a renewed focus on the Silk
Road Economic Belt and the 21st Century
Maritime Silk Road initiatives, this relationVKLS LV OLNHO\ WR RXULVK HYHQ PRUH $V VXFK
guanxi is an integral part of both personal
relationships and business conduct in China
DQG VRFLHWLHV LQXHQFHG E\ WKH &KLQHVH
around the world.
n light of this development the renewed

focus on the Silk Road Economic Belt and
the 21st Century Maritime Silk Road initiatives it is crucial to understand what makes
EXVLQHVV WLFN LQ &KLQD 6SHFLFDOO\ HQJDJLQJ
in business in China, like everywhere else,
knowing the right people and building relationships with them will get you ahead. One important peculiarity in the Chinese context is that
a personal connection between two individuals
will be bounded by an implicit psychological
contract to follow the social and cultural norm
of guanxi.
Guanxi is the informal obligation that everyone is expected to follow in China, regardless of
their cultural background or nationality, because
it relates to the social standard when building
30
and maintaining a relationship or social network

with the Chinese. As such guanxi is an integral
part of both personal relationships and business
FRQGXFW LQ &KLQD DQG VRFLHWLHV LQXHQFHG E\ WKH
Chinese around the world.
Guanxi stems from Confucianism and is
D FXOWXUDOVSHFLF QRWLRQ WKDW FRPHV IURP
aspects of collectivism and the relational
culture. It is characterised as the close-knit ties
between individuals (and among networks of
actors) that are established through social interactions and resource exchanges. The practice of guanxi manifests itself in the networks
of relations and is commonly conceptualised
as interpersonal ties built around mutual commitment, loyalty, and obligation. Between the
contact of two parties and through numerous
interactions, quality guanxi involves self-disclosure, dynamic reciprocity, and long-term equity
principles, which result in mutual trust and
closer bonds.
In business conduct, guanxi represents a
UPV LQWHUDFWLRQV ZLWK WKH EURDGHU HQYLURQment including the norm and social characterLVWLF LQ ZKLFK LQGLYLGXDOV UPV DQG JRYHUQments draw on a web of connections to secure
favours in personal and organisational relations.
*XDQ[L KDV LPSOLFDWLRQV IRU UP SHUIRUPDQFH
Guanxi stems from

Confucianism and
is a cultural-specific
notion that comes
from aspects of
collectivism and the
relational culture.
LQ&KLQDLQWKDWLWDIIHFWVWKHRZRI UHVRXUFHV
from key stakeholders, such as the government.
,WLVZLGHO\UHFRJQLVHGWKDWZHVWHUQUPVQHHG
to understand and engage in guanxi in order to
develop and improve their business relationships with the Chinese counterparts.
Although business and academic synergies
have devoted great efforts to understand guanxi
due to its growing importance in business over
recent decades, with especially the academic crowd witnessing an explosion of research,
guanxi is often considered as one concept and
not expressed as a notion that involves multiple aspects. Unless guanxi is seen as a multidimensional concept, understanding and embod\LQJLWZLOOEHFRPHPRUHDQGPRUHGLIFXOWIRU
businesses. For example, few actually know that
when it comes to business relationships guanxi
consists of several individual guanxi dimensions, such as ganqing (emotional attachment),
renqing (reciprocal favour exchange), and xinren
(interpersonal trust).
The Basic Principles Of Guanxi
Several underlying principles characterise the
notion of guanxi:
Reciprocity. Guanxi is often established and
nurtured through a reciprocal exchange of
favours. Individuals practicing guanxi are tied
together through an unwritten code of reciprocity and equity in which the exchanges of
giving and receiving further strengthen the
guanxi ties. An individual would be seen as
untrustworthy if s/he refused to return a previously granted favour. Failure to respect such
a reciprocal commitment substantially hurts
their reputation and will lead to a humiliating
loss of prestige or face as well as exclusion
from further guanxi exchanges.
Trust*XDQ[LWLHVUPO\GHSHQGRQDIRXQGDtion of mutual trust that is established between
the involved actors. This means that guanxi takes
time to advance and often requires several episodes of interactions and exchanges since trust
cannot be easily judged based on shallow observations. Over time, and over longer-term evaluations, guanxi is established. Typically, guanxi
that is developed over longer periods of time is
seen as more secure and reliable. In such cases,
3 BINDING
GUANXI PHILOSOPHIES
an individual is dependent on and can be called

upon when needed.
Middle man. In the early stages of a relationship, when trust is not yet present, a middle man
may establish guanxi on behalf of two parties.
That is, new guanxi may still come in useful for
some, if the involved parties are introduced
through a common ground (a middle man),
who acts as the transferable medium that links
all parties together. Understanding the middle
PDQVUROHPD\KHOSDOOHYLDWHWKHFRQFHUQWKDW
PDQ\ZHVWHUQUPVKDYHZKHQWKH\PLVWDNHQO\
believe that the middle man is taking advantage
of their position.
Friendship. Although guanxi has a strong utilitarian perspective based on the social exchange
RI EHQHWV LW VWLOO LQYROYHV D ODUJH HOHPHQW
of friendship and affection that is preserved
through the giving and receiving of favours.
7KHUHIRUHFRQLFWDQGSHUVRQDOGLVDJUHHPHQW
between individuals is generally frowned upon
GXHWR&KLQHVHVFXOWXUDOSUHIHUHQFHIRUDPRUH
harmonious atmosphere during interaction,
and bonding via friendship is an integral part
of guanxi.
Three Binding Guanxi Philosophies
According to the research of Dr. Dorothy Yen,
a professor at Brunel University, guanxi should
be divided into individual aspects that involve
the philosophies of ganqing, xinren and renqing.
For many these aspects remain little known:
1. Ganqing refers to the emotional side and
feeling (affect) of a social exchange between
WZR SHRSOH RU WZR RUJDQLVDWLRQV DQG UHHFWV
the mood of a social relationship, as well as
the level of emotional attachment that exists
among parties of a network. Written as in
&KLQHVHWKHUVWFKDUDFWHUVLJQLHVIHHOLQJDVD
verb and the second character refers to affection, emotion, and sentiment.
It describes the degree of emotional understanding, connections and the sharing of feelings such as happiness or fears alike. Ganqing
develops emotional bonds via communication
and the sharing of experience during social interactions. Thus, when people have the chance
to gain further understanding of each other,
ganqing is developed and perpetuated.
31
Guanxi creates
major benefits for
firms as it helps
them initiate and
develop important
connections, such
as partnership
firms and
government
offices.
32
2. Xinren refers to the trust between individuals and underlines how secure the guanxi is
established at the interpersonal level. The word
xinren combines two Chinese characters -
7KH UVW FKDUDFWHU DFWV DV D YHUE PHDQLQJ
to trust and to believe in, and the second character represents the heavy responsibilities that a
person can carry.
Different from trust in the west, xinren can
only be established between individuals, rather
than between two organisations. In the guanxi
context, a person would only have xinren with
another person, when the other party is judged
as having good xinyong. This somewhat similar
word xinyong LPSOLHV D SHUVRQV WUXVWworthiness and indicates their reliability, credibility and sincerity. Hence, a person should only
trust someone who is trustworthy.
3. Renqing refers to the informal social obligation to exchange favours with the other
party and to engage in actions such as lending
a helping hand, doing errands, going the extra
mile to deliver the necessary outcomes, and so
on. Written as WKHUVWFKDUDFWHUUHIHUVWR
human being and the second character means
feeling, affection, and sentiment (the same as the
second character of ganqing).

Renqing emphasises the obligation to nurture
the social exchange relationship in order to
develop a guanxi network and to use the
QHWZRUNIRURQHVRZQDGYDQWDJHV,WLVDIRUP
of social capital that provides leverage in interpersonal exchanges in which reciprocity shapes
how favours should be exchanged to perpetuate renqing. When invoking a guanxi relationship,
renqing returning is obligatory. Hence, through
the act of taking turns to give favours, the action
requirement of renqing facilitates the social
bonding within the network.
The Managerial Relevance Of Different
Guanxi Aspects
*XDQ[L FUHDWHV PDMRU EHQHWV IRU UPV DV LW
helps them initiate and develop important conQHFWLRQVVXFKDVSDUWQHUVKLSUPVDQGJRYHUQPHQWRIFHV%HFDXVHJXDQ[LRSHUDWHVDVDFRPSOHPHQWDU\ PHFKDQLVP WR FLUFXPYHQW &KLQDV
LQVWLWXWLRQDO EDUULHUV UPV FDQ JDLQ DFFHVV WR
LQVLGHULQIRUPDWLRQGHFRGHJRYHUQPHQWSROLF\
intents, and open up needed resources that are
otherwise and often unavailable.
The long-term viability of guanxi depends
RQ WKH PHPEHUV FRPPLWPHQW WR UHFLSURFDWH
However, compared to western networks,
where two parties exchange roughly equivalent
values to induce fairness, the Chinese guanxi
exchanges often consider across ranks. Often
times the lower or weaker power party may not
get a reciprocal favour of equal value, however,
this does not deter them from invoking guanxi
and they still choose to continue the guanxi exchange because remaining in the guanxi network
enables them to maintain their competitiveness.
Approaching guanxi from the perspective
of its individual dimensions can create a more
nuanced and systematic approach to developing
a guanxi network. Ganqing, which focuses on
emotional attachment and is the affective side
of guanxi, raises awareness of the importance
of bonding and empathy in business transactions. For example, a company representative
should be encouraged to host and participate in
social networking activities so they can increase
their interaction and bonding with their Chinese
counterparts.
XinrenZKLFKHPSKDVLVHVWUXVWLQDSHUVRQV
credibility and reliability and represents the cognitive side of guanxi, highlights that only once
a Chinese representative has placed an acceptable level of trust towards the other party can
business be conducted. Therefore, the importance of being credible and reliable is of utmost
importance. Finally, renqing, which refers to the
reciprocal exchange of favours and said to be
the conative component of guanxi, stresses the
drive of favours. In practice, it calls for the representatives to go the extra mile to lend a hand
to initiate and engage in the exchange of favours
between the involved parties.
As China continues its growth and

turbulent market developments,
guanxi has become even more
imperative as a management tool
for firms to master in order to gain
the resources necessary to increase
business performance.
Although the engagement of reciprocal
favours is often criticised for being unethical,
especially by western standards, the give and
take employed in daily negotiations between
buyers and sellers in China is a well-established
and acceptable practice. However, individuals
QHHGDOVREHDZDUHRI DFRPSDQ\VUHJXODWLRQV
as to whether such an act is encouraged and
consider how it is perceived from an ethical
standpoint.
When operating in China and dealing with
Chinese counterparts, interaction gradually increases ganqing. Over time, the opportunity to
HYDOXDWHDSHUVRQVLQWHJULW\DQGWUXVWZRUWKLQHVV
is possible and xinren can be established. By observing the reciprocal renqing behaviour during
various social occasions, the guanxi is successfully invoked. Thus, once emotional bond and
personal trust have been placed on a person in
the guanxi network, that person accepted to be
part of business relationship that is enduring.

Meanwhile, since guanxi cannot be built over
QLJKWIRUPDQ\QHZUPVWKHPLGGOHPDQKROGV
great control. The middle man will try to keep
this position for as long as possible and care
should be taken not to feel the need to move
away from the middle man because they are also
part of the guanxi network. Hence, the middle
man is always around, however frustrating that
might be, albeit their role will diminish over
WLPH1HYHUWKHOHVVGXHWRWKH&KLQHVHVFRQFHUQ
for face, having a middle man can at times be
very useful to smooth any potential issues that
may arise during intense business transactions
and relationships. Therefore, the bigger picture
should be kept in mind.
As China continues its growth and turbulent market developments, guanxi has become
even more imperative as a management tool
IRU UPV WR PDVWHU LQ RUGHU WR JDLQ WKH UHsources necessary to increase business performance. The philosophies of ganqing, xinren,
and renqing should give business executives
and representatives the knowledge to develop
guanxi further. Once established, guanxi can
reduce market uncertainties and external risks,
ensuring greater success and sustainable competitive advantage.
About the Authors
Bang Nguyen is Associate
Professor of Marketing at the East
China University of Science and
Technology, Shanghai, China. Prior
to moving to China, he was a
Marketing Educator at Oxford Brookes
University, Oxford, UK. He is the author of the
book Ethical and Social Marketing in Asia.
David De Cremer is the KPMG
Professor of Management Studies
at the Judge Business School,
University of Cambridge, UK, and
an honorary professor at Wenzhou
University, China. Before moving to the UK, he
was a Professor of Management at China
Europe International Business School in
Shanghai. He is the author of the book Pro-active
Leadership: How to overcome procrastination and be a
bold decision-maker.
33
Transformation
CHANGE
CAPABILITY
BUILDING
BY DAVID MILLER
AND AUDRA PROCTER
David Miller
CEO and Founder of
&KDQJHUVW
The volume and complexity of change

that organizations are facing continues to
increase, and they cannot risk the negative
impacts of not executing their business
critical changes. Whether focused on cost
reduction, process redesign, mergers,
restructuring or a large IT implementation,
LWFDQEHGLIFXOWIRURUJDQL]DWLRQVWRFDSWXUH
the full value from their change activities.
A
Audra Procter
Board Member and Director
of Research & Development
DW&KDQJHUVW
34
2008 IBM survey Making Change

:RUN LGHQWLHG DQ DYHUDJH JDS
between the amount of substantial
change an organization expected and an organi]DWLRQVVXFFHVVDWDFWXDOO\FKDQJLQJ7KHUHPD\
be a number of causes of this gap; it could be
that these organizations are pursuing inappropriate strategies, or it could be that they are in
UDSLGGHFOLQHDQGXQDEOHWRPXVWHUVXIFLHQWUHsources. It could even be that they simply lack
WKHSURFHVVHIFLHQFLHVWKDWFDQGULYHUHDOEXVLness change. However, we would conclude that
the core reason for organizations failing to
H[HFXWHDQGUHDOLVHEHQHWVIURPWKHLUVWUDWHJLHV
LV WKH GLIFXOW\ JHWWLQJ HPSOR\HHV WR HPEUDFH
the change with each new initiative.
This is the realm of change management
helping people adopt new behaviours, accept and
take ownership of change, instead of resisting
it. Successful project implementations rarely

come from purely technical project plans that
do not take into account these human dynamics
of change. The qualitative impacts of poorly
managed change can be seen and felt by many
and effective change management is known
to increase the likelihood of achieving project
objectives and return on investment (ROI). The
issue is how best to make change management
happen in your organization.
Key questions
Should you rely on external consultants and
interim managers, or should you seek to build
internal capability?
Should you build capability focused on
VXSSRUWLQJDVSHFLFSURMHFWGHOLYHU\RUWKH
VSHFLFQHHGVRI GLIIHUHQWUROHVLQFKDQJH"
How does an organization remain agile to
VXUYLYHDQGWKULYHLQWRGD\VFRPSHWLWLYHFOLPDWH"
In this chapter we explore how organizations
can make change their business, with a change
capability up, down and across the organization,
which is commensurate with the volume,
magnitude and pace of change the organization
faces. We introduce our Change Maturity Model
(CMM) as a way to measure the size of the gap
between current capability levels and what is
required for success. We consider how quickly
Feature
that gap can be closed to support successful

change delivery, and the best ways to ensure that
this investment yields sustainable results.
Agility is critical in todays environment
Nearly 90% of UK executives surveyed by the
Economist Intelligence Unit, in the 2009 report
Organizational agility: How business can survive and
thrive in turbulent times, ranked organizational
agility as vital for business success. The same
report also highlights the research conducted
at the Massachusetts Institute of Technology,
ZKLFK VXJJHVWHG WKDW DJLOH UPV JURZ UHYHQXH
IDVWHU DQG JHQHUDWH KLJKHU SURWV WKDQ
non-agile companies. Organizations that lack
DJLOLW\ DQG FDQW DGDSW WR FKDQJH FDQ VXIIHU PRUH
than ever before from:
more adaptable competitors dominating the
market
business performance deteriorating rapidly
and when deterioration occurs recovery is
tougher than ever before
the engagement of employees becoming
PRUH GLIFXOW
WKH WHUP FKDQJH IDWLJXH EHFRPLQJ SDUW RI
regular conversations inside the organization
So, how can organizations become agile,
able to deliver change at the volume, speed and
accuracy required?
In a recent survey of over 50 organizations,
we asked more than 2,000 change leaders what
they believed was the most effective way to help
their organization implement change in the
current environment. The vast majority 86%
- said that internal teams were the best way to
implement change.
Earlier supporting data published in a
McKinsey Quarterly article [Helping employees
embrace change, LaClair and Rao, November 2002]
demonstrated a direct linear relationship
EHWZHHQ DQ RUJDQL]DWLRQV FKDQJH PDQDJHPHQW
capabilities and the value it captures from
projects. They found that the organizations
with high levels of available internal change
management capabilities had collected, on
average, 143% of the value they originally
expected from their projects.
,W LV DJDLQVW WKLV EDFNGURS WKDW &KDQJHUVW
believe that organizations should be re-assessing
Figure 2.1 Organizational Life-cycles

Renewal
Harvest
Inflection Point
Decline
Grow
Time
their reliance on external consultancies and

interims to drive major business change. Further,
we believe that if an organization is to become
agile; able to transform effectively through the
life-cycles (see Figure 2.1 above) rather than
go into decline, and able to deliver change at
the volume, speed and accuracy required; it
needs more than a small number of project or
OD (Organizational Development) specialists
trained in change management
Rather it takes the building of change
management capabilities across the entire
organization, ensuring that key processes are
effectively applied on all projects and business
critical changes. It is this enterprise-wide perspective
of capability building that is the bedrock of
organizational agility and is called Enterprise
Change Management (or ECM for short).
Enterprise Change Management (ECM)
ECM is the term used to describe the discipline
and process of deploying change management
up, down and across an organization; ensuring
it can be applied to each project, and individuals
have access to requisite skills to build their own
personal change competency.
It comprises:
A common change language that is used
throughout the organization
A shared set of change processes and tools
that can be applied to different projects and
in different parts of the organization
Strong change leadership competency at all
levels of the organization
Role-based training and coaching to build
The organizations with high

levels of available internal
change management
capabilities had collected,
on average
143%
of the value they
originally expected
from their projects.
35
Transformation
Table 2.2: Change Management Maturity Levels

Level Stage
Description
Enterprise
Executive sponsors manage the overall

change capacity of the organization.
Organizational
Change management has been tailored to

align to other organizational processes. It
is applied consistently on all major projects.
Tactical
Change management is applied

inconsistently across projects.
Rudimentary
Project implementation contains little

change management beyond basic
communications and training support.
Technical
Change is seen as a technical process

where people will comply with the
requirements of the change.
Each of the Change Management Maturity levels has its own

standards which must be achieved to master that stage of maturity
and embed new skills and techniques.

An organizational mind-set that supports the
effective implementation of strategic change*
* Note: this would include, but is not limited to
change capacity being assessed before projects
are initiated, executives proactively managing the
portfolio of change and a change management
scorecard being established and reviewed.
Key Benefits
In our experience, taking an ECM approach to
change management ensures:
WLPHLVQRWZDVWHGUHLQYHQWLQJWKHZKHHOIRU
each new project
continuous improvement of the approach,
as well as the tools and training that support
the approach
consistent application on all major projects
senior leaders are managing the overall
change capability
36
The Change Management Maturity Model (CMM)

The successful introduction of ECM requires
a level of change management maturity, which
UHTXLUHV D VLJQLFDQW LQYHVWPHQW RI WLPH DQG
HIIRUW IRU PDQ\ RUJDQL]DWLRQV &KDQJHUVW
developed a Change Management Maturity
Model, with four levels as shown in Table 2.2
(see table 2.2 on right), to help an organization:
assess their current maturity level
determine the gap towards being able to
support ECM
build a development roadmap for a more
agile organization
Rudimentary Level
At this level, there is a strong focus on
the technical aspects of projects. Project
implementation contains little or no change
management beyond basic communications
and training.
Resistance is the normal
outcome at this level and usually is seen as
DQWLRUJDQL]DWLRQ (PSOR\HH HQJDJHPHQW
is seen as putting forward a rational case for
change, and compliance is viewed as successful
implementation of a change. The bottom line is
that workplace productivity drops more than it
should during change.
The key leadership mind-sets observed at this
level are:
People are rational and will do the right
WKLQJ ,I WKH\ GRQW WKH\ KDYH WR FRPSO\
anyway.
All this change stuff is a bit soft and unnecessary.
Appropriateness to business situation.
This level of maturity only functions if
change is slow and incremental in scope. We
would say that there are actually no maturity
standards worth noting at this level.
Tactical Level
At this level, we observe change management
being applied inconsistently across projects.
Usage is typically a reaction to problems
experienced during projects delivery, such as
employee resistance, rather than built into
the original project plan. Senior sponsors are
usually active in supporting change management
as an idea, but are more inclined to rely on
Feature
external change management consultants for

more strategic advice than the tactical support
required to drive and sustain change in local
areas. At best, change management is driven by
D FRDOLWLRQ RI WKH ZLOOLQJ D VPDOO JURXS RI
enthusiastic early adopters working on projects.
Key leadership mind-sets at this level are:
/HWV WU\ WR JHW SHRSOHV EX\LQ EXW LI QRW
WKHQ ZHOO PRYH WR FRPSOLDQFH
Change management is good stuff, but not
as important as a detailed technical plan.
:HOO GR FKDQJH PDQDJHPHQW LI ZH KDYH WKH
time and money.
This level of maturity may be a strong
W LI WKHUH DUH D QXPEHU RI VLJQLFDQW
change initiatives focused on improving
ways of operating i.e. there will be notable
consequences if the business case in not
achieved. There are some standards at this level,
namely; different change models are available
and there is often a generic change management
education process in place that people can
DFFHVV +RZHYHU WKLV LV VHOGRP D QHHGVEDVHG
RU MXVWLQWLPH DSSURDFK
Organizational Level
This maturity level is characterised by change
management being tailored to align to other
organizational processes, and being applied
consistently on all major projects. The
organization agrees on the need for a single
change management methodology on major
projects, and project delivery communities
such as IT, Six Sigma and HR feel a strong
sense of ownership of the change management
methodology. There is an increase in the
number of change management roles, and
just-in-time workshops, rather than generic
training seen as a way to help people learn and
apply change management skills and processes
WR SURMHFWV $W WKLV OHYHO ZHYH REVHUYHG WKDW
external consultants are less used for change
management assignments. Instead there is likely
to be a core group of skilled change agents
in place, plus appropriate training for local
managers, and even employees, to allow them to
play their active part in change.
Key leadership mind-sets at this level are:
We will be successful if we have project
plans with a strong people component.

6HFXULQJSHRSOHVFRPPLWPHQWDQGKHOSLQJ
them to shift their behaviour in support of
the change are essential to success.
This level of maturity is essential for
environments where there is an agenda of
FKDQJHZLWKDVWURQJYLVLRQVXIFLHQWFDSDFLW\
and resources. The level of complexity is high
but not unmanageable using project planning
and change management methodologies. There
DUH GHQLWH PDWXULW\ VWDQGDUGV DW WKLV OHYHO
with change management being integrated
into other organizational processes and change
management checkpoints being measured in
the same way as other project checkpoints. At
this level executive sponsorship and review
processes are established, supported by a
change management community of practice
with a clear mandate.
The successful
introduction of
ECM requires a
level of change
management
maturity,
which requires
a significant
investment
of time and
effort for many
organizations.
Enterprise level
This maturity level is not just characterised by
change management being adopted through the
organization, but also by executive sponsors
managing the overall change capacity of the
RUJDQL]DWLRQ ,WV QRW MXVW DERXW GRLQJ FKDQJH
ULJKWUVWWLPHEXWDOVRDERXWGRLQJWKHULJKW
FKDQJH ([HFXWLYHV VSHQG WLPH DVVHVVLQJ WKH
37
Transformation
ORGANIZATIONAL TRANSFORMATION
REQUIRES ENTERPRISE-WIDE CHANGE
CAPABILITY BUILDING ENSURING THAT
KEY PROCESSES CAN BE EFFECTIVELY
APPLIED ON ALL PROJECTS AND
BUSINESS CRITICAL CHANGES, AND
IT IS THIS THAT WE CALL ENTERPRISE
CHANGE MANAGEMENT.
demand for change as a whole and the level of
capacity the organization possesses. Change
management is built into the culture it
EHFRPHV WKH ZD\ ZH GR WKLQJV DURXQG KHUH DQG
change agents build continuous improvements
into change management.
The leadership mind-sets observed at this
level are:
Managing change effectively is a core
competency in the organization.
$VVHVVLQJ SHRSOHV FDSDFLW\ DQG OLPLWV
to change is a core part of strategic
decision-making.
This level of maturity is essential for
organizations with a transformational agenda.
There are a large number of changes and
GLIFXOW SULRULWLVDWLRQ GHFLVLRQV PD\ KDYH WR EH
made. Maturity standards at this level include
change capacity being assessed before initiating
projects, plus a change management scorecard
is established and reviewed at all project review
meetings. Change management is included in
project and programme charter mandates and
associated skills are seen as an integral part of
management development programmes.
At the Enterprise maturity

level, change management
is included in project and
programme charter mandates
and associated skills are
seen as an integral part of
management development
programmes.
38
Summary
The volume and complexity of change that
organizations are facing continues to increase,
and they cannot risk the negative impacts of not
executing their business critical changes. The
qualitative impacts of poorly managed change
can be seen and felt by many and effective
change management is known to increase the
FKDQJH VXFFHVV DQG EHQHWV UHDOLVDWLRQ 7KH

issue is how best to make change management
happen in your organization, helping you to
UHPDLQ DJLOH WR VXUYLYH DQG WKULYH LQ WRGD\V
competitive climate.
In this article we explored how organizational
agility to effectively transform our organizations
needs more than a small number of project or
OD specialists trained in change management.
Rather it requires enterprise-wide change
capability building ensuring that key processes
can be effectively applied on all projects and
business critical changes, and it is this that we
call Enterprise Change Management.
Excerpted with permission from Enterprise Change
Management: How to Prepare Your Organization
for Continuous Change, by David Miller and Audra
Proctor (Kogan Page, April 2016)
7R QG RXW PRUH DERXW &KDQJHUVW RXU 3&,
People Centred Implementation methodology
RU H&KDQJH our cloud based, end to end change
management solution please contact info@change
UVWFRPRUYLVLWRXUZHEVLWHZZZFKDQJHUVWFRP
About the Authors

David Miller is the CEO and Founder of
&KDQJHUVW 'DYLG KDV KHOSHG RUJDQL]DWLRQV
successfully implement major change for over 30
years, as a senior executive in a global company
and subsequently through his work with
&KDQJHUVW'DYLGVUVWERRNSuccessful Change is
a culmination of working with major clients and
includes practical anecdotes and examples that
illustrate how you can successfully implement
change. His second book Enterprise Change
Management How to prepare your organization for
continuous change will be launched in April 2016.
Audra Proctor is a Board Member and Director
RI 5HVHDUFK 'HYHORSPHQW DW &KDQJHUVW
For the last 20 years Audra has been helping
global organizations to develop capabilities and
improve their productivity to execute business
FULWLFDO FKDQJH LQLWLDWLYHV ,WV KHU VWURQJ EHOLHI
that change is far more sustainable when critical
skills, processes and tools are transferred inside
an organization, to people who then control and
deliver their own changes.
ENTERPRISE
CHANGE
MANAGEMENT
How to Prepare
Your Organization
for Continuous Change
One of the biggest challenges facing
organizations today is the ability to deliver
the necessary change to sustain competitive
advantage and adapt to economic and market
environments. However, the gap between
what organizations would like to deliver and
their capabilities to do so is getting increasingly
wider. Enterprise Change Management provides
a practical roadmap for bridging this gap to help
organizations build the sustainable capabilities
to implement a portfolio of changes.
AVAILABLE
RD
ON 3 APRIL
By David Miller & Audra Proctor
THE CHANGE MANAGEMENT HANDBOOK

EVERYONE MUST READ.
IRSTS
F
CHANGE
K SAVE
20%
2ND BOO
Currently available for pre-order readers can save 20%

when they order Enterprise Change Management
with discount code HRECMEBR from www.koganpage.com
changefirst.com
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by copyright laws. Copyright Changefirst Limited 2016. All rights reserved.
+44 (0) 1444 450777

info@changefirst.com
Feature
Coaching
Empowering Women through the

Transformative Power of Coaching
Coaching has long been lauded as one of the
most transformative learning interventions,
and research indicates that women derive a
KRVWRI EHQHWVIURPSDUWQHULQJZLWKDFRDFK
t the start of the new millennium, the

UN set out aspirations for a 15-year
journey for the development of civil
society. A top three goal was the empowerment of women that focussed on the development of women in emerging economies, taking
a bottom up approach with equal rights and
education as the key drivers. In the rest of the
world, concern over the lack of women in senior
decision-making positions appeared endemic
with many countries introducing various forms
of positive action, legislation or quotas.
In the millennium year, only the USA regularly monitored the proportion of women on top
corporate boards. In 2015, at least 12 countries
were regularly reviewing the gender balance of
their top boards. France, Norway, Spain, Iceland
and Finland have taken a legislated route. By
March 2016 the goal for French companies is
20% female directors within three tiers and 40%
within six. Private and unlisted companies have
nine years to reach the 40% mark.
The US, Australia, Denmark, Germany,
Sweden, Poland, Canada and Austria have taken
alternative action to achieve the same goal. In
2010, a Commission was set up in the UK under
the Chairmanship of Lord Mervyn Davies to
address the issue and report on progress. At
that time women made up 12.5% of the top UK
company boards. A goal of 25% of female directors on top company boards (FTSE 100) by
2015 was set, effectively doubling the number.
$FFRUGLQJ WR WKH 8. &RPPLVVLRQV
report, women were now 23.5% of the directors on the boards of UK FTSE 100 companies. However, as the report notes, these are
primarily non-executive directors; only 8.6%
of executive directors are women. Addressing
the pipeline of women in senior management
remains an imperative.
The same report shows that growing the
talent pipeline involves myriad company initiatives to identify and invest in talented women.
These programs are designed to support talented women in large and small businesses and
organisations keen to improve gender diversity
at senior levels.
Coaching has long been lauded as one of
the most transformative learning interventions: the 2014 Chartered Institute of Personnel
and Development Learning & Development
(CIPD L&D) Survey found that three quarters
of organisations now offer either coaching or
mentoring to employees, and believe it offers a
particularly impressive ROI. At Barclays Bank
to actively support women moving into senior
OHDGHUVKLSUROHVWKHRUJDQLVDWLRQVVHQLRUH[HFXtives work with individuals to provide feedback
on development areas, advise on skill building,
and offer coaching, as well as guidance on the
promotion process. They assist in promoting
candidate visibility and connecting them with
other senior leaders. Between 2013 and 2014,
By March 2016 the goal

for French companies is:
20%
female directors
within three tiers and
40%
female directors
within six tiers
Survey found that three quarters of organisations now offer either coaching
or mentoring to employees, and believe it offers a particularly impressive ROI.
41
Coaching
RESEARCH INDICATES THAT WOMEN DERIVE

A HOST OF BENEFITS FROM PARTNERING
WITH A COACH. BY NURTURING STRONG
COACHING CULTURES, ORGANISATIONS CAN
ENSURE THAT WOMEN HAVE ACCESS TO
COACHING WHEN AND WHERE ITS NEEDED.
WOMEN'S GOALS
FOR COACHING
ENGAGEMENTS:
optimising
work performance
increasing
self-confidence
expanding
career opportunities
managing
work/life balance
42
the programme contributed to over 140 promotions of women to Director and Managing
Director levels.
Research indicates that women derive a host of
EHQHWVIURPSDUWQHULQJZLWKDFRDFK$FFRUGLQJ
to the 2014 Global Consumer Awareness
Study commissioned by the International
Coach Federation (ICF) and conducted by
PricewaterhouseCoopers LLP, women bring a
variety of goals to coaching engagements, including optimising work performance, increasing selfFRQGHQFH H[SDQGLQJ FDUHHU RSSRUWXQLWLHV DQG
managing work/life balance. By nurturing strong
coaching cultures, organisations can ensure that
women have access to coaching when and where
LWVQHHGHG
Creating a strong coaching culture takes
more than just good intentions. Senior coaching leaders from the BBC and Visa Europe have
explained how they have made coaching an integral part of their organisations.
.QRZ ZK\ \RXUH FRDFKLQJ DFFRUGLQJ WR
&ODLUH0ROLQVHQLRUPDQDJHULQ9LVDVRUJDQLVDtional development and design team. You need
to be very clear about the reasons you are doing
coaching. Every organisation will be very different in style and that includes how well coaching
will sit within it.
At the BBC there are 80 coaches available at
any one time to offer both leadership and career
coaching. The broadcaster will soon trial coaching for parents returning to the workplace, and
would like coaching capabilities to be recognised
more formally in the appraisal process.
According to Magdalena Mook, Chief
([HFXWLYH 2IFHU DQG ([HFXWLYH 'LUHFWRU RI
,&) :HYH ORQJ NQRZQ WKDW FRDFKLQJ LV D
powerful modality that helps individuals unlock
their personal and professional potential. Now
a growing body of evidence demonstrates that

coaching can be equally powerful at the organisational level. Building a Coaching Culture,
a benchmarking research study from ICF and
the Human Capital Institute, shows that organisations with strong coaching cultures report
higher revenues and employee engagement
rates than peer organisations without strong
coaching cultures.
The ICF/HCI study suggests that, although
coaching takes hold in organisations thanks to
the buy-in of a well-respected senior leader who
participates in the coaching relationship, the ultimate goal should be to provide coaching across
all levels of the organisation to individuals of all
ages and both genders.
Organisations with strong coaching cultures
have achieved their goals by using a combination
of external coach practitioners, internal coach
practitioners and managers and leaders across
the organisation trained to use coaching skills
as part of their management role. With external
coach practitioners, rigorous hiring practices are
essential. Familiarity with and understanding of
the culture of an organisation, or knowledge of
an industry sector, may be important in selecting
a coach. So, too, is the assurance of the stanGDUGVWKDWDUHSDUWDQGSDUFHORI ,&)DIOLDWLRQ
ICF members must complete at least 60 hours
RI FRDFKVSHFLFWUDLQLQJDQGSOHGJHWRXSKROG
a stringent code of ethics. ICF-credentialed
FRDFKHVIXOODGGLWLRQDOULJRURXVHGXFDWLRQDQG
experience requirements.
7KHUHLVQRHVFDSLQJWKHPD[LP,I \RXFDQW
PHDVXUHLW\RXFDQWPDQDJHLW0DNHDVWURQJ
investment and measure the returns. Being clear
about the expectations for coaching outcomes is
only the start. Developing a coherent means of
measuring coaching effectiveness is as essential
as communicating the goals for coaching across
the organisation.
Fifteen years on, the bottom up approach of
the Millennium Goals for empowering women
meets the top down approach for increasing the
numbers of women on corporate boards and in
senior executive management positions. It is a
junction where support to leadership through
coaching is the pipeline to achieving and changing the goal.
Transformation
THE TRANSFORMATION IMPERATIVE

COLLABORATIVE LEADERSHIP IS KEY
FOR FUTURE SUCCESS
BY JOHN MATTONE
In this article, John Mattone discusses how

progressive leaders in the business world are
moving away from a conventional leadership
culture and embracing a collaborative approach to heading up their organisations.
he business world is shifting fast, and

progressive CEOs see that they have no
choice but to transform. Attempting
to cope, they apply their best thinking to the
structures, systems, and processes they need to
compete. Conventional wisdom says that the
right business structures will provide the right
HIFLHQFLHV DQG DJLOLW\ WKDW WKH\ QHHG WR VXFFHHG
and achieve meaningful longevity. But behind
closed doors, senior leaders are speaking a different truth. Conventional wisdom? Throw it
out the door.
Increasingly, companies are questioning the
incessant reorganising, reengineering, and restructuring. Strategies and plans that should work
fall apart, yielding less-than-expected results.
Operational decisions that once were clear-cut
are becoming more complicated and ambiguous.
Worse, many top executives and teams struggle to agree on outcomes or even common
ground for moving forward. This is because
many talented individual leaders with impressive
WUDFN UHFRUGV IDLO WR FROODERUDWH 7KH\ GRQW NQRZ
A shift in focus is required from development of

the individual, heroic leader, to the realisation
that leadership is a collective activity.
44
KRZ WR ZRUN WRJHWKHU WR XQGHUVWDQG GLIFXOW

challenges, much less to resolve them. Instead,
they continue to operate in silos and default to
traditional boundaries and turf battles.
In short, organisations are stuck; many are
failing. Frustrated executives work harder and
longer. People at every level are overwhelmed,
guarded, and cynical.
Whats the Problem?
Inadequate leadership ability is a huge part of
WKH SUREOHP :KHQ , VD\ OHDGHUVKLS LWV QRW
just a reference to the individual leader. A shift
in focus is required from development of the
individual, heroic leader, to the realisation that
leadership is a collective activity.
Through my research and coaching I have
IRXQGWKDWWKHYHPRVWLPSRUWDQWVNLOOVDQGFDpabilities needed by organisations (and leaders)
of the future are among the weakest competenFLHVRI WRGD\VLQGLYLGXDOOHDGHUV/HDGHUVRI WKH
future need to be strong in their overall people
DJLOLW\ VWUDWHJLF SODQQLQJ DELOLW\ WR LQVSLUH
commitment, capacity to learn, and ability to
lead and manage change.
7KHVH QGLQJV VXJJHVW WKDW RUJDQLVDtions should prioritise creating more balance
between developing leaders through individual
competencies and fostering the collective capabilities of teams, groups, networks, and organisational leadership.
Understanding the Hierarchy of Leadership Culture
Organisations, like people, tend to evolve
DORQJ D SDWK IURP UHOLDQW WR VHOIVXIFLHQW WR
interconnected. Each level is characterised by

a set of beliefs, behaviors, and practices. Each
successive culture is more sophisticated and can
respond more successfully to deeper challenges. The core reason? They can think, learn, and
respond to challenges faster and better.
Reliant leadership cultures only hold the
people in positions of authority responsible for
leadership. Authority and control are held at the
top. Success depends on obedience to authority
and loyalty. Mastery and recognition of work operates primarily at the level of technical expertise.
Self-suicient leadership cultures assume that
leadership emerges from a variety of individuals,
based on knowledge and expertise. Authority
and control are distributed throughout the
UDQNV 6HOIVXIFLHQW FXOWXUHV YDOXH GHFHQWUDOised decision-making, individual responsibility
and expertise, and competition among experts.
2WKHU FKDUDFWHULVWLFV DVVRFLDWHG ZLWK VHOIVXIcient cultures include:
Individual performance as an important
source of success and status
An emphasis on taking calculated risks
Open disagreement
Independent actions within functions or
work groups
Interconnected leadership cultures view leadership as a collective activity requiring mutual
inquiry, learning, and a capacity to work with
complex challenges. Authority and control are
shared based on strategic competence for the
whole organisation. This mindset tends toward
collaborating in a changing world so that new
organisational orders and structures can emerge
through collective work. Other characteristics
associated with interconnected cultures include:
The ability to work effectively across organisational boundaries
Openness and candor
Multifaceted standards of success
Synergies being sought across the whole
enterprise
Matching the Culture to the Need
One of the most crucial aspects of implementing effective change initiatives is the need to
match the leadership culture to the operational
need. Asking a command and control (reliant)
culture, for example, to implement an innovative, agile strategy is a recipe for disaster. In contrast, an interconnected organisation is better
poised to handle a high caliber of complexity
DQG FKDOOHQJH $V D PRUH XLG RUJDQLVDWLRQ LW
will be able to draw on individual talent, connect
effectively across boundaries, and adapt as
needed. Developing leadership culture is about
growing leadership talent. To break through the
current capability ceiling, organisational leaders
must take time to connect two critical factors.
First, you have to know where, in the hierarchy of cultures, yours sits. The way leaders
engage with each other and with others in the
organisation will depend on the leadership logic
that dominates. Knowing what your current
culture is capable of will save dollars, and more
importantly, time. You might leap to implement
WKH QH[W QHZ WKLQJ RQO\ WR QG RXW \RXU DSproach was off the mark. Instead, understand
where your leadership culture is today to develop
feasible change plans.
Second, you must understand the drivers
and core capabilities needed for your business
strategy to succeed. What future level of leadership culture is needed to support the business
strategy? It is the job of leadership to ensure
intelligent strategies are wisely implemented.
This is possible only when the culture of beliefs
45
Transformation
LEADERS WHO CREATE A CULTURE THAT

VALUES PAUSING AND REFLECTION AT
KEY TIMES FOR LEARNING, DIAGNOSIS,
AND DIALOGUE ALMOST ALWAYS CREATE
POWERFUL, POSITIVE MOMENTUM.
and the focus on readiness to develop capability to implement is real. By choosing the right
level of culture that your organisation requires
for its future, your leadership as a collective can
advance to new levels of organisational capability, securing success. When the level of leadership culture aligns with your business strategy,
your performance will be stellar.
Collaborative Leadership Means Being Thoughtful
More and more executives tell us they need increasingly collaborative leadership for working
effectively across boundaries inside their organisations and across their value chains. In
fact, my executive research shows that it is their
highest need and yet least effective organisational capability.
If an interconnected culture is needed, but a
FRPSDQ\ LV RSHUDWLQJ DW WKH UHOLDQW RU VHOIVXIcient level, how does the senior leadership team
start to change culture? How does the senior
team start to work more effectively across business and functional boundaries? In a counterLQWXLWLYH PRYH WKH\ QHHG WR SDXVH DQG UHHFW
more much more.
3DXVLQJ DQG UHHFWLRQ DUH YLWDO UHTXLUHPHQWV
IRU OHDGLQJ FKDQJH %\ H[SORULQJ UHHFWLQJ DQG
understanding the sometimes hidden values and
beliefs that drive behavior and culture, executives help the organisation to be more nimble
and agile in the future.
:KHQ OHDGHUV DQG WHDPV SDXVH DQG UHHFW HIfectively, real communication begins to happen
that then drives better problem solving and decision-making. Instead of focusing on speed,
the emphasis is on learning. Better solutions and
more frequent right answers arise. Everyone inYROYHG LV DEOH WR UHHFW RQ DVVXPSWLRQV XQGHUstand problems more clearly, and integrate the
perspectives of others.
46
Leaders who create a culture that values

SDXVLQJ DQG UHHFWLRQ DW NH\ WLPHV IRU OHDUQing, diagnosis, and dialogue almost always
create powerful, positive momentum. This,
in turn, creates accurate, focused, valuable
decisions. Time lost on the front end translates into speed further along in the process.
3DXVLQJ DQG UHHFWLRQ KHOS UHGXFH RUJDQLVDtional missteps (both large and small) due to
poor communication, hasty decision making,
and the faulty assumptions and beliefs that
drive them.
3DXVLQJ DQG UHHFWLRQ LV DOVR D SRZHUIXO FXOtural change marker. The behaviour in itself
signals to everyone that transformation is not
only needed but valued.
In Conclusion
Different leadership cultures serve different
purposes. However, as companies face change,
they need to invest intentionally in a leadership
culture that will match the unfolding challenge.
The beliefs that drive leadership behaviours
need to align with the operational business strategy. Without that alignment, painful gaps appear
in the individual leadership skill set as well as the
RUJDQLVDWLRQV FROOHFWLYH OHDGHUVKLS FDSDELOLW\ ,Q
contrast, when executives change their leaderVKLS FXOWXUH WKH\ DUH UHZDUGHG ZLWK VLJQLFDQW
sustainable outcomes.
Thoughtful and deliberate attempts to foster
and sustain the appropriate, relevant leadership culture given the current and anticipated
demands and challenges your organisation faces
will, in the end, determine your transformation
success or failure.
About the Author
John Mattone is an authority on
leadership, talent, and culture. An
acclaimed speaker and executive
coach, he advises Fortune 1000
senior leaders on how to create cultures that drive superior operating results. He is
the author of eight books including Cultural
Transformations, Talent Leadership, and Intelligent
Leadership. John is the creator of numerous
business assessments, including the Mattone
Leadership Enneagram Inventory.
SWEETPOP.SE
SUSTAINABLE THINKING
IS WORKING TOGETHER
Almost everybody agrees that the key to a brighter future for the
environment is cooperation. If we can set new standards for how
we solve problems together we can really make a change.
hat is exactly what we have been doing for decades in the
Swedish process industry.
Working together to solve common problems. It is proven to
be an efective strategy and we call it the ssg way. But you could
also call it sustainable thinking.
Leadership
Powerful Leadership Wins

Employees Hearts + Minds
Gains Customers
BY SUZANNE KELLY
This article explores how to use effective leadership strategies to win hearts and minds of employees to improve the bottom line. It draws attention to
Gallups most recent statistics on the state of employee engagement, both in the US and worldwide,
and outlines the three different types of engagement.
To attract and retain top talent, leaders must take
an active role in inspiring employees with authentic
leadership.
ichard Branson is a wonderful role model and powerful example of a leader who successfully wins
hearts and minds. He has over 50,000 employees
throughout the world and has been voted Britain's most
DGPLUHG EXVLQHVV OHDGHU RYHU WKH SDVW YH GHFDGHV LQ D SROO
of top bosses.
Since your employees are your best asset and happy employees equals
happy customers, it is essential that you do your best to optimise hiring
success. Improving your talent selection provides the best opportunity to
improve your business, thus increasing odds for success.
Gallup received more than 25 million responses to its
latest employee engagement survey and reported some disheartening statistics:
Of the approximately 100 million people in America
who hold full-time jobs, 30 million (30%) are engaged
and inspired at work. At the other end of the spectrum
are roughly 20 million (20%) employees who are actively
disengaged. The other 50 million (50%) are not engaged.
7KH\UHMXVWNLQGRI SUHVHQWLQVSLUHGE\QHLWKHUWKHLUZRUN
nor their managers.
48
Three Different Types of Employee Engagement

1. ENGAGED employees work with passion and feel a profound connection to their company. They drive innovation
and move the organisation forward.
2. NOT-ENGAGED employees are essentially checked
RXW7KH\UHVOHHSZDONLQJWKURXJKWKHLUZRUNGD\SXWWLQJ
time but neither energy nor passion into their work.
3. ACTIVELY DISENGAGED HPSOR\HHV DUHQW MXVW
XQKDSS\DWZRUNWKH\UHEXV\DFWLQJRXWWKHLUXQKDSSLQHVV
Every day, these workers undermine what their engaged
co-workers accomplish.
The study found that engaged employees come up with
PRVW RI WKH LQQRYDWLYH LGHDV FUHDWH PRVW RI D FRPSDQ\V
new customers, and have the most entrepreneurial energy.
Engaged employees are the best colleagues. They cooperate
to build an organisation, institution, or agency, and they are
behind everything good that happens there. These employees
are involved in, enthusiastic about, and 100% psychologically
committed to their work. They know the scope of their jobs
and look for new and better ways to achieve outcomes.
Imagine how doubling the number of great managers
and engaged employees in your company would impact
your business.
11 Effective Leadership Strategies to Win Hearts + Minds
1. Lead by Example. This is the most powerful gift you
FDQJLYHDVDOHDGHUDQGJURXQG]HURIRUHVWDEOLVKLQJLQXence. Leadership is about winning hearts and minds through
engagement and inspiration. By walking the talk, you become
the person others want to follow, earning you the trust and
respect needed to inspire others to follow you.
2. Hire Top Talent. Your company is only as

extraordinary as your people. Identify top talent
and realise employees are the business. A successful business is a group of people bound together by a common purpose and vision rather
than the service or product it sells. In the case of
9LUJLQ$WODQWLFWKH\\WKHVDPHSODQHVDVWKHLU
competitors. It is the employees that separate
them from the competition.
3. Select the Right Managers. The best
managers understand that their success and
that of the organisation relies on employees'
achievements. Great managers care about
their team's success. They seek to understand
each person's strengths, ideas and opinions
and empower each employee to use them at
work. It takes talent to be a great manager and
selecting people who have this talent is essential to success.
4. Practice Active Listening. Listening is a
prerequisite for understanding, and understandLQJLVHVVHQWLDOIRUDOHDGHUWRPRWLYDWHDQGLQXence others. Research has found that by listening
effectively a leader can obtain more information
from team members. The result is increased
WUXVWDQGUHGXFHGFRQLFWDOORZLQJWKHOHDGHUWR
gain a better understanding of how to motivate
SHRSOH7KRVHZKRKDYHWKHPRVWLQXHQFHRYHU
others tend to be powerful listeners.
5. Be Authentic. Leaders who are self-aware,
genuine, and exercise integrity are seen as authentic. Their approach to leadership emphasises honest relationships built on an ethical
foundation. Authentic leaders not only lead with
their minds, they lead with their hearts. They are
aware of their strengths, emotions and limitations, and do not hide their mistakes and weaknesses. They are in pursuit of results, not power,
money or ego.
6. Connect with Your Team. Great leaders
have an infectious way of bringing out the
best in people. Connection happens when you
invest the time to learn about others, understand
their unique personalities, and then coach and
mentor. Demonstrate your attention through
words and back it up with actions that validate
your interest and commitment to making your
people successful.
7. Empower Employees with the authority to
make decisions about their work. The more they

feel they have the authority to make work-related decisions, the more engaged they become
in the company. Allowing them to act and take
action will build trust and respect for others
in the workplace, leading to greater collaboration, sharing of ideas and ultimately increased
performance.
8. Engage with participation in the decision
making processes. Data from Gallup shows that
only 13% of people worldwide are engaged at
work, meaning they are emotionally invested in
creating value for their organisations. Despite
PDQ\ FRPSDQLHV EHVW HIIRUWV WR DGGUHVV WKLV
problem, that number has barely budged since
2010. Long-term satisfaction is less about compensation and more about being on the team and
part of something important. Employees need
to know they can feel good about participating
and contributing ideas. The key is recognising
the need to engage and consciously creating the
opportunity to make this happen.
9. Encourage employees to be open.
Acknowledge their skills and achievements.
Take Richard Branson for example, rather than
focusing on mistakes, his philosophy is to catch
someone doing something right every day. Part
RI %UDQVRQVFXOWXUHLVWRIRVWHUHPSOR\HHGHYHOopment through praise. If recognition starts at
the top, it will go far toward stamping out the
employee fear of failure that can stunt a business.
Great managers
seek to understand
each person's
strengths, ideas
and opinions and
empower each
employee to use
them at work.
49
Leadership
Richard Branson's Favourite

Leadership Quotes
Innovation distinguishes between a leader and a
follower. Steve Jobs
Tend to the people, and they will tend to the
business. John Maxwell
A lot of people have gone further than they
thought they could because someone else
thought they could. Zig Ziglar
You manage things; you lead people. Admiral
Grace Murray Hopper
Leaders think and talk about the solutions.
Followers think and talk about the problems.
Brian Tracy
Leadership is the art of giving people a platform
for spreading ideas that work. Seth Godin
Leadership is the capacity to translate vision into
reality. Warren Bennis
Great leaders are almost always great simpliers,
who can cut through argument, debate and doubt
to ofer a solution everybody can understand.
Colin Powell
Sir Richard Charles Nicholas
Branson is an English business
magnate, investor, and
philanthropist. He is best
known as the founder of
Virgin Group, which comprises
more than 400 companies.
Remember that
clarity leads
to effective
communication,
which is vital
for success in
every business
and requires
an intentional
approach.
50
When mistakes happen which is inevitable

you have to learn from them, not dwell on what
went wrong.
10. Appreciate and Recognise. A pat on the
EDFNLVQWHQRXJKWRVDWLVI\VRPHRQHZKRSXWV
their heart and soul into their work. Take the
time to be grateful and give credit. Effective
OHDGHUV QRWLFH XQLTXH DQG VSHFLF FRQWULEXtions and let people know, and that's a critical
attribute of a leader. The two simple yet powerful words thank you, along with sharing
positive recognition, makes people feel valued
and is a strong indicator that you care. Think
of this quote from Richard Branson. People
DUH QR GLIIHUHQW IURP RZHUV ,I \RX ZDWHU
RZHUV WKH\ RXULVK ,I \RX SUDLVH SHRSOH
WKH\RXULVK
11. Communicate with Clarity and
Consistency. Offering clear feedback to employees is essential to improving performance.
Be open about your expectations, successes, and
failures. Remember that clarity leads to effective
communication, which is vital for success in every
business and requires an intentional approach. Be
crystal clear about what you want to accomplish
as a result of your communication.
Leadership is the ability to hide your panic from

others. Lao Tzu
The smartest thing I ever did was to hire my
weakness. Sara Blakely
7KH DUWLFOH ZDV UVW SXEOLVKHG RQ /LQNHGLQ 3XOVH

September 2015.
About the Author
Suzanne Kelly is the Founder of
Acquisition Intelligence (www.
acquisitionintel.com). Her mission
is to help companies hire individuals
who are better aligned with their
culture, more productive, and less likely to turn
over. She believes every great hire has a story, and
she gets the story by facilitating candid interviews
with professionals who know the prospective
hire best. Her methodology, Talent 360, helps
FOLHQWV KLUH ULJKW WKH UVW WLPH DURXQG PLQLPLVLQJ
costly and disruptive hiring mistakes.
Prior to Acquisition Intelligence, Suzanne
spent over 20 years working in talent management, partnering with companies such as
Bridgewater Associates, Glencore, and Millward
Brown Digital.
Perfect teamwork is a skill that comes with

knowledge and practise.
Rowing in the same direction helps too.
Strategic Resource are specialists in assessing and
developing senior teams and have been for 20 years.
T. +44 (0) 15394 31945
info@strategic-resource.co.uk
www.strategic-resource.co.uk
Leadership
3 Key Leadership Habits

Every Leader Must Have
BY BRAD LOMENICK
Leadership is more than hard work; it is

habitual work. And the path to becoming
a better leader begins with building better
habits. In this article Brad Lomenick talks
about the three key leadership habits every
leader must have.
Every leader should
remember these
three words:
52
very year I was at Catalyst, a new crop of

interns would arrive on the scene, wideH\HG DQG HDJHU 7KHLU QHUYRXVQHVV UHHFWHG WKH VHULRXVQHVV RI WKHLU WDVN 7KH\G EHHQ
handed an opportunity to make their mark with
the largest network of young Christian leaders
in America.
, JDWKHUHG WKHP LQ P\ RIFH IRU DQ RULHQWDtion of sorts where I laid out the philosophy
of our organisation and the eight essentials of
D &DWDO\VW OHDGHU $IWHU , QLVKHG DQG EHIRUH
they began work, I always gave them the opportunity to ask me any questions they might
have. Most years, one of the bolder and more
aggressive of the bunch would raise his or her
hand and ask the one question I knew would
be coming:
What do we need to do to become the kind
RI OHDGHU \RXUH GHVFULELQJ"
Without hesitation, I always replied,
Remember three words: humble, hungry, hustle.
Leaders will develop a variety of habits
throughout their lives, but these three words
divide them into categories that help answer
three of the most important questions every inXHQFHU PXVW DVN
HUMBLE: Who am I?
HUNGRY: Where do I want to go?
HUSTLE: How will I get there?
This alliterated trio has become my personal
life mantra over the last decade because it encapsulates the philosophy that undergirds what I
believe it takes to become a change agent in the
PRGHUQZRUOG/HDGLQJLVGLIFXOWDQGDQ\RQH
ZKRKDVEHHQLQDSRVLWLRQRI DXWKRULW\RULQXHQFH IRU YHU\ ORQJ NQRZV WKLV ,WV KDUG ZRUN
But leadership is more than hard work; it is habitual work. It is worked out every day in the tasks
we complete, the ways we approach our work,
and the rhythms we nurture in our lives. It hangs
on the hooks of the patterns we create, not just
the success we may stumble upon.
In my experience, too few leaders recognise
the importance of habits in life. One researcher
at Duke University, for example, found that more
than 40 percent of the actions people formed each
GD\ZHUHQWDFWXDOGHFLVLRQVEXWKDELWV:KHQ\RX
rise in the morning, nearly half of your day will
EHGHWHUPLQHGE\WKHSDWWHUQV\RXYHHLWKHULQWHQtionally created or passively allowed.
,YH KDG WKH SULYLOHJH RI ZRUNLQJ ZLWK WKH
best and most respected leaders in America,
and almost all of them share a common set of
characteristics. They are principled and passionate, courageous and capable, called and
collaborative, hopeful and authentic. But that
leaves us with a lingering question: How did they
get there? The path to being a better leader is
paved with the asphalt of the habits we develop.
7KHUHVQRDYRLGLQJLWWKHSDWWHUQVZHFXOWLvate shape the person we each become.

8QIRUWXQDWHO\PRVWSHRSOHDUHQWLQWHQWLRQDO
DERXWWKHKDELWVWKH\UHGHYHORSLQJ
As I always told our interns, the characteristics of a Catalyst leader are vital. But so are
their patterns. Better traits are the desired destination, but better habits are the road map. As
a leader, you are responsible for putting these
pieces into place, and making them sustainable.
%HFRPLQJ D EHWWHU OHDGHU SHUVRQDOO\ GRHVQW
happen on a whim. Or by accident. You have
to work at it.
6LQFH\RXUHUHDGLQJWKLV,VXVSHFW\RXUHOLNH
the interns I sat down with every year. You may
not be a recent college graduate who is willing
to work for an hourly rate that borders on crazy,
EXW \RXUH HDJHU WR VXFFHHG <RXUH ZLOOLQJ WR
learn and committed to doing whatever it takes
to be a good steward of the calling you believe
God has given you.
,I WKDWV \RX UHDOLVH WKDW EHFRPLQJ D EHWWHU
leader begins with building better habits.
Let the transformation begin.
Adapted from the brand new book H3
Leadership: Be Humble. Stay Hungry. Always
Hustle, which released in September 2015, and
is available where all books are sold. To order

visit amzn.to/1K350Iz and to check out more
info on the book, along with special offers, visit
H3Leadership.com or bradlomenick.com.
About the Author
Brad Lomenick is a renowned
speaker, sought-after leadership
consultant, author and longtime
president of Catalyst, largely credited with growing the organisation
into one of the largest and most recognised
leadership brand and gathering that it is today.
For over 10 years, Brad led the Catalyst
Conference and garnered the reputation as a
FRQYHQHURI $PHULFDVPRVWUHVSHFWHGOHDGHUV
including John Maxwell, Jim Collins, Malcolm
Gladwell, Seth Godin, Mark Burnett, Tony
Dungy, Marcus Buckingham and Rick Warren,
among many others. In 2013, he published his
UVW ERRN The Catalyst Leader, and his second
book, H3 Leadership: Be Humble.
Stay Hungry. Always Hustle., released in September of 2015. He
has been featured in TIME,
Washington Post, Fast Company,
Business Insider, CNN.com,
Religion News Service, and others.
Better traits are the

desired destination,
but better habits
are the road map.
Becoming a better
leader personally
doesnt happen
on a whim. Or by
accident. You have
to work at it.
53
M&A
Managing People in
Mergers and Acquisitions
Part 1: Reasons and Reality
BY GUIDO STEIN AND MARTA CUADRADO
In Part One of this article we will address a

number of issues related to mergers. First,
we will look at the key reasons why companies decide to pursue them and the reasons
why many fail. Second, we will consider the
inevitable realities associated with mergers.
Part Two is available in the next issue.
Take the right steps; take them quickly enough; prepare
people to live with the problems that will remain
- P. Pritchett
he following statement is attributed to
Warren Buffet:
Our method is very simple. We just try
to buy businesses with good-to-superb underlying
economics run by honest and able people and buy
WKHPDWVHQVLEOHSULFHV7KDWVDOO,PWU\LQJWRGR
The aim of this article is precisely to consider the human dimension of mergers and
acquisitions and the way these processes impact

SHRSOH,QWKHVXEVWDQWLDOERG\RI VFLHQWLFOLWerature that exists on this topic, authors discuss
the rules and magic formulas that lead to a
successful acquisition, grounding their arguments in empirical evidence.1 2QH RI WKH UVW
conclusions that can be drawn from examining this literature is that the authors cite a wide
variety of empirical evidence in each case, and
that this evidence serves to support different,
and even contradictory, theses concerning the
key aspects and elements of company acquisitions. Rationalisations are made a posteriori and
seek to offer rules, or something close to that.
They should be taken as broad approximations,
but do point in the right direction. As a result,
they are perhaps more useful for those whose
work involves taking action than they are for acDGHPLFVFRQFHUQHGZLWKVFLHQWLFULJRU
In Part One of this technical note we will
address a number of issues related to mergers.
First, we will look at the key reasons why companies decide to pursue them and the reasons
why many fail (Sections 1 and 2). Second, we will
consider the inevitable realities associated with
mergers (Section 3). Part Two is available in the
next issue.
Acquisitions affect everyone involved to one
degree or another. They are not neutral transDFWLRQVLQDQ\VHQVHQRWIURPDQDQFLDOWD[
legal, operational or commercial perspective,
and especially not in terms of how they impact
the people in both companies involved and
other stakeholders (shareholders, suppliers,
54
customers, etc.).
For many companies, mergers by acquisition
have become a recurrent strategy for dealing
with competition, gaining market share, or
simply ensuring their survival. Their impact on
stock markets is noted within hours, but their
consequences for the people who live through
WKHPDUHUDUHO\UHHFWHGLQWKHPHGLD
In tackling these issues, we will draw on the
experience of managers who have gone through
merger processes and ground our discussion in
WKHVFLHQWLFOLWHUDWXUH
Exhibit 1: Empirical Evidence on Mergers
1. Mergers and Acquisitions: Why Do Firms

Undertake Them?
A merger is the creation of a new company that
is formed by combining the assets and liabilities
of the merged companies. According to various
UHSRUWVLVVXHGE\PDMRUFRQVXOWDQF\UPVRYHU
60% of mergers end up failing in the long term,
which results in the companies involved losing
ground in terms of their positioning in the
market, losing business, and even disappearing
in some cases.
The most basic reason for undertaking a
PHUJHU LV WR KHOS WUDQVIRUP D FRPSDQ\V EXVLness operations by incorporating new products,
services or talent. In other cases, the aim is to
expand certain operations in economies undergoing rapid growth and take advantage of the
opportunity they present. Mergers may look
like an attractive option since achieving similar
results by other means would take more time
and effort. In many cases companies also see
mergers as a way to increase their market share.
:KHWKHU PHUJHUV DUH VWUDWHJLF QDQFLDO RU
operations-related, the reasons that most frequently impel companies to undertake them can
be summed up as follows:
1. Pursuit of market leadership: the speed at
which certain sectors are evolving leads companies to seek new partnerships in order to
acquire customers and avoid being shut out
of the market.
2. *HRJUDSKLFGLYHUVLFDWLRQWRWHVWWKHFDSDFLW\
of their business model by gaining access to
different sales channels and emerging markets.
3. )LQDQFLDOUHDVRQVWRLQFUHDVHFDVKRZLPSURYH
capital structure, or reduce the cost of debt.
4. As a means of increasing capital in order to

ZULWHGRZQDVVHWVDQGLPSURYHWKHFRPSDQ\V
solvency ratio by integrating complementary
products and services.
5. Pursuit of production-related synergies (cost
UHGXFWLRQ LPSURYHG LQFRPH IURP SURWV
HWFRUQDQFLDOV\QHUJLHVWD[EHQHWVORZHU
cost of capital, etc.).
6. Access to new ideas, technologies and talent.
7. Pursuit of opportunities to increase the welfare
and security of shareholders in times of crisis.
8. Personal motivations (ego, achieving
power or a higher salary) or speculation by
company leaders.
20 days
before
announcing
start of
negotiations
Start date
for
negotiations
Day after start

date for
negotiations
to final
announcement
Date of final
announcement
of success or
failure to reach
agreement
From day
after final
agreement to
240 days
later
NS
13.3
NS
NS
NS
6.2
1.3
-7.2
-
Unconsummated mergers
Acquiring company
NS
NS
-6,2
NS
-9.6
Seeling company
11.7
-8.1
-6.4
-8.7
Succesful mergers
Acquiring company
Seeling company
Source: P. Fernndez and A. Bonet, Fusiones, adquisiciones y control de las empresas,

Arbor: Ciencia, pensamiento y cultura 523-524 (1989): 39-60.
2. Reasons Why Mergers and Acquisitions Fail

According to Professor J. R. Pin, merger
mania is the excessive use of mergers and
acquisitions as a means of achieving business
growth and expansion.4 As we indicated in the
preceding section, excess cash balances and an
interest in pursuing continued growth are some
of the reasons that drive companies to acquire
other organisations. But are such deals always
SURWDEOH"'HVSLWHWKHH[SHFWDWLRQRI UHVRXQGing success that prevails during the negotiation
process, the answer is no.
A merger is seen as having failed when in
the short term the value of the company has
actually decreased rather than increased. The
VWDQGDUG JXUH JLYHQ IRU WKH ORVV RI EXVLQHVV
after a merger ranges from 5 to 10%, though
in some cases it is even higher (see Exhibit 1
above). Why are due diligence5 investigations
and other pre-merger reviews unable to foresee
such losses?
55
M&A
0HUJHUVDQGDFTXLVLWLRQVHQWDLOKLGGHQFRVWV
RU JUH\ DUHDV $FFRUGLQJ WR VRPH H[SHUWV LQcluding Shippee,6 these costs arise because the
human element what Shippee calls the X
factor is overlooked. The people who make
up the organisations involved can play a key role
in streamlining the process and mitigating any
traumatic effects, helping to tip the scales that
measure the success of a merger one way or the
other. The right kind of behaviour increases the
chances of achieving success in the long term.
The traumatic effects experienced are
XVXDOO\LGHQWLHGDVPHUJHUV\QGURPH7KH\
include mixed feelings anxiety, frustration,
disappointment and uncertainty as well as
tension between individuals and groups in
the organisations undergoing the merger. The
emotional impact of the change process leads
to a slow trickle of key people leaving the
company, adversely affecting its day-to-day acWLYLW\ ,Q D FOLPDWH PDUNHG E\ LQWHUQDO QRLVH
lack of motivation, and a sense of unease,
people focus on protecting their jobs rather
than, for example, taking care of customers.
These behaviours result in a loss of business
(mainly customers and suppliers) and talent.
At the same time, because they are afraid of
making mistakes, those responsible for the
merger stop taking decisions that, though they
entail a degree of risk, are likely to be in the
FRPSDQ\VEHVWLQWHUHVW
People often forget that mergers involve
more than just acquiring assets or technology, increasing market share, or incorporating another
FRPSDQ\V WDOHQW :KDW PDNHV WKHVH SURFHVVHV
so complex is the need to integrate two organisational structures and make them work, and to
combine different styles, workforces, processes and cultures. This is where the human dimension of the merger becomes so important.
When a merger is undertaken, the aim is to

generate sufficient synergies to present the
market with a clear, concise argument as to
why the merged entity will be more productive
and deliver better results in less time.
56
Leaving aside that a merger may fail because the

company acquired has not been entirely truthful,
a study on mergers and acquisitions carried out
by KPMG7LGHQWLHVWKHPDLQFDXVHVZK\VXFK
deals fail, emphasising that a cultural mismatch
EHWZHHQ WKH UPV LQYROYHG FDQ EH RQH RI WKH
fundamental reasons. Other causes include lack
RI GHQHG OHDGHUVKLS SRRU LPSOHPHQWDWLRQ RI
the merger plan, resistance to change, lack of employee motivation, poor communication, and loss
of key talent. When a merger is undertaken, the
DLPLVWRJHQHUDWHVXIFLHQWV\QHUJLHVWRSUHVHQW
the market with a clear, concise argument as to
why the merged entity will be more productive
and deliver better results in less time. Synergies of
this kind are oriented towards cost savings, and
due diligence reviews focus on identifying such
synergies. Consequently, people and factors with
a more qualitative component aspects that take
longer to evaluate and manage and whose economic impact is less apparent in the short term
are not given enough consideration. Capital
markets seem to lack the time and patience
needed to take these issues into account.
7KH UHHFWLRQV RI WKH RSHUDWLRQV PDQDJHU
of a service company that was acquired by a
construction company in 2012 illustrate this
problem. Though his view is a subjective one, it
points to a very real situation:
Incorporating a service company involved
in systems maintenance (X), with quite a lot of
technological support, in a company with a purely
concrete-and-bricks philosophy is a process
which, if not handled properly, can turn into a
real train wreck. In X we built a close relationship with our customers (agencies responsible
for managing the infrastructure maintained by
FLW\ FRXQFLOV 6SDLQV DXWRQRPRXV FRPPXQLWLHV
and government ministries). These relationships
were developed through area representatives and
highly specialised teams of technical personnel, organised to deal with both periodic checks
and breakdowns in the various systems. I was in
charge of the systems for three shifts set up to
ensure 24-hour service in every city where we opHUDWHG,I WKHFRQWUROOHUIRUWKHWUDIFOLJKWVDWD
particular intersection fails, the problem needs to
EHGHDOWZLWKXUJHQWO\DQGHIFLHQWO\7KHVDPHLV
WUXHZKHQWKHUHVDQLQFLGHQWLQYROYLQJWKHVWUHHW
lighting in a city or lighting in a tunnel.

The two companies had very different
ZRUNLQJ SKLORVRSKLHV 7KH FRQVWUXFWLRQ UP
ZKLFK GLGQW KDYH D WHFKQRORJ\ GHSDUWPHQW
IRFXVHG RQ WKH SURWDELOLW\ RI HDFK LQGLYLGXDO
project. Its philosophy was based primarily on
the skill of its construction managers in obtaining concrete and other building units at the
best price and with the shortest possible leadWLPH$IWHUWKHPHUJHU;VDUHDUHSUHVHQWDWLYHV
real sales reps who were very engaged with their
DUHDVZHUHUHSODFHGE\WLJKWVWHGFRQVWUXFWLRQ
managers with an authoritarian leadership style.
This had a series of immediate consequences: a
VWULNH E\ WHFKQLFDO VHUYLFHV QHV DQG SHQDOWLHV
imposed by government agencies due to poor
VHUYLFH EUHDNGRZQV WKDW ZHUHQW GHDOW ZLWK LQ
a timely manner), unmotivated employees, dismissals, the taking on of replacement technical
personnel with little talent and know-how, obsolete control systems for control rooms due to a
lack of investment in R&D, and so on.
Human and cultural factors only start to
become the focus of attention when the case for
the synergies to be obtained from a merger has
been made to the market (and this shift of focus
does not occur in all cases). Yet these are the
factors most likely to cause deals of this kind to
fail. Why are these issues generally not addressed
LQDQDSSURSULDWHDQGWLPHO\PDQQHU"/HWVVHH
what the technical director of an IT multinational has to say:
After completing three acquisitions my
company was itself acquired. All this happened in three years. The point that generated
D ORW RI FRQLFW ZDV WKH GLIIHUHQFH LQ WHUPV
and conditions of employment between the
two structures. When we were acquired, the
incoming company had a collective agreement
with more advantageous terms for employees,
including better working hours, more vacation time, higher salaries, and so on. We lived
with these differences for months and months,
which prolonged the agony because it was a
FRQVWDQWUHPLQGHUWKDWZHZHUHWKHRQHVZKRG
been acquired. It made us feel like second-class
employees. I think the teams could have been
integrated more quickly and effectively if, right
IURPWKHHDUO\VWDJHVWKH\GPHUJHGWKHZRUNV
Figure 1
Example of an Integration Committee

General Manager
Merger committee
leader
Finance
Sales/
Marketing
Operations
Human
Resources
Communication
Technology
Source: Own elaboration.
councils of the two companies and established

a collective agreement with the same terms
for all staff. It seems obvious that this was
the right thing to do, but the fact is that they
allowed this distinction between employees to
go on for a very long time.
Understanding how employees view the new
context should not be complicated. However,
despite the tools at their disposal, companies
tend to:
carry out due diligence reviews that do not
LQFOXGHVXIFLHQWDQDO\VLVRI FXOWXUDODQGRUganisational factors;
pursue complex strategies that slow down
SURFHVVHV DQG KLQGHU WKHLU GHQLWLRQ DQG
communication;
delegate management of the process mainly
WRH[SHUWVIURPWKHQDQFLDODUHDDQGVSHFLDOists in legal and tax matters;
lack the information needed to make operational decisions that contribute to shaping the
new corporate structure.
2.1. Can a Merger Be Made More Efficient?
,W LV GLIFXOW WR GHWHUPLQH WKH H[DFW SURSRUWLRQ RI WDOHQW WKDW LV ORVW DIWHU D PHUJHU )RU
one thing, the loss of talent cannot be understood simply in terms of the number of people
who voluntarily leave the resulting organisation
during or after the process. One also needs to
consider the talent that has been the victim of
the synergies and, most importantly, the unmotivated and disgruntled talent that stays on that
is, people who, though they feel their careers
57
M&A
have been derailed and their expectations frustrated, decide for one reason or another not to
leave the company. This is a hidden cost and
often one that nobody wants to estimate. The
following sections offer some suggestions for
managing the merger process.
2.1.1. Set Up a Full-Time Interdisciplinary Merger
or Integration Committee
This team, made up of representatives from the
main areas involved, should serve as a forum
where participants can contribute diverse viewpoints. The purpose of the committee, oriented
towards implementing the merger, is to focus attention on decisions that provide stability within
the company and help create opportunities. To
reinforce its authority, the committee should be
RYHUVHHQ E\ D JXUH XVXDOO\ IURP WKH DFTXLULQJ
company) whose leadership is undisputed. Its
role is to ensure that decisions are made on objective grounds and safeguard the interests of all affected parties (see Figure 1 on the previous page).
Committees of this kind should seek to:
communicate what they know as soon as they
know it;
recognise unknowns and set time limits for
making decisions;
treat people fairly and with respect;
act swiftly to integrate processes;
EROVWHU WKH FRPSDQ\V YLVLRQ LWV YDOXHV DQG
the goals to be achieved.
Subcommittees for related areas composed
Figure 2
Basic Focus on Due Diligence Process
Surprise now
Knowledge
Analysis
Checks
Data
collection
Surprise later
Limited focus
Broad focus
Source: Own elaboration.
58
of the most talented individuals from the two

UPVDQGUHSRUWLQJWRWKHFRPPLWWHHVKRXOG
also be set up. Subcommittees should manage
key information, focusing on matters such as
the criteria to be followed after the merger in
GHDOLQJ ZLWK VSHFLF FXVWRPHUV DEVRUEHG LQWR
WKH SRUWIROLR RI WKH DFTXLULQJ UP DQG KRZ
to ensure service is not affected; what human
and technical resources are strategically important and necessary; and how to lead teams in
an integrated way. The primary objective is to
prevent decisions and actions that lead to conLFWV WKDW EHFRPH LQFUHDVLQJO\ LQWUDFWDEOH DV
the merger progresses.
2.1.2. Conduct a Comprehensive, Integrative
Analysis Before the Merger
The deal should be prepared with enough time to
maximise the chances of success and minimise
GDPDJLQJ HIIHFWV ,Q DGGLWLRQ WR IRFXVLQJ RQ nancial, commercial, systems-related and operational aspects, adequate time should be devoted to
VWXG\LQJ WKH IROORZLQJ SRLQWV LQ VXIFLHQW GHWDLO
The mission and values. It is advisable to put
these principles into writing, see how they differ
from those of the acquired company, and plan
short- and long-term actions that will facilitate
the transition from one culture to the other.
The new structure and organisational chart. To
the extent possible, plans should specify who management wants to put in each position. It is helpful
to have a Plan B for each position and contemplate
DGLJQLHGH[LWIRUWKRVHZKRZLOOEHOHIWRXW
Another aim of these preliminary processes is
to analyse possible scenarios and identify hidden
costs well before the closing date for the deal.
The idea is to carry out a mature, balanced examination of what each company does best in order
to subsequently put on the table the operational,
business and cultural aspects that lie behind the
integration (see Exhibit 2 on next page).
These analyses need to go deep enough to
detect the kind of anomalies that are generally
only diagnosed (and their negative effects noted)
after arrangements for the merger have been
QDOLVHG )LJXUH VKRZV KRZ WKH LQWHQVLW\ RI
FRQLFWVDQGWKHQXPEHURI LQFLGHQWVLVLQYHUVHly proportional to the breadth and depth of the
UHYLHZFDUULHGRXWVHHJXUHRQOHIW
2.1.3. Intensify Downward Communication

Communication is a key aspect of any
merger. If handled properly, it can have
a positive impact on the number of jobs.
As soon as rumours of a merger begin
to circulate, employees and managers
tend to start thinking about questions
such as How will my job be affected?
and Will there still be a place for me?
Communication and human resources departments should therefore take
coordinated action that focuses mainly
on affected individuals, time frames,
the message conveyed and its tone. The
same kind of work needs to be done with
other stakeholders, including the media,
customers, and so on. The communication plan should seek to explain the objective, the stages of the merger, and the
circumstances and context for the deal.
It should also address the risks involved
in a positive way and set out the steps
that will be taken to mitigate them. The
aim is to reduce the uncertainty due to
lack of information that inevitably exists
in any merger by acquisition. Particular
attention should be given to messages
communicated to the customer service
department given its key role in ensuring
that the merger does not lead to a decline
in sales and the loss of customers.
The worst thing about communication problems is that they tend to have
a knock-on effect. To ensure the effectiveness of communication during the
merger process, the following principles
should be taken into account:
Communication should be quick,
honest and frequent.
Use all available communication
channels. Manage online rumors
and reactions.
Choose subjects with care: omitting
is also a way of informing.
Messages should focus on change
and progress.
Involve employees in the process:
ask for feedback and use it to make
improvements.
Exhibit 2: Due Diligence Process: Main Areas of Assesment

Strategy
Analyse the strategies of both companies.
Develop a vision that focuses on the drivers of the acquisition.
Set nancial expectations and a timeframe for results.
Dene operational principles and critical success factors.
Organisation
Dene the organisational structure.
Decide where the headquarters will be and the physical layout.
Think of a new name for the company and work out its legal structure.
Develop processes, policies and procedures.
Study the cultural diferences and design a strategy to integrate the companies.
Workforce
Dene a set of key policies.
Prepare a plan to retain key people for the company.
Provide technical and other kinds of training for employees.
Clarify roles, responsibilities and expectations.
Communication
Identify the main stakeholders.
Develop communication strategies for each group.
Use diferent communication channels.
Repeat messages and revisit key topics.
Integration Committee
Use surveys to nd out what employees are thinking.
Provide employees with training on:
- teamwork
- survival skills
- awareness in relation to the merger.
Identify the main challenges and develop appropriate plans.
Monitor the results achieved for the rst hundred days and act accordingly.
Source: Adapted excerpt from T. A. Daniel, Between Trapezes: The Human Side of Making Mergers and
Acquisitions Work, Compensation & Benets Management 15 (1999): 19-37.
Do not hide the fact that problems

will arise. Let people know that problems will be tackled with the help of
everyone involved.
2.1.4. Facilitate Internal Mobility
Outplacements can be a way to mitigate
the most dramatic effect of mergers:
dismissals. In the right circumstances, internal selection processes can be
part of the solution. It is advisable to
perform an assessment of employees
and an analysis of the organisational
structure to identify alternative ways
of dealing with the overlaps bound to
result from the merger. In carrying out
this process, the departments involved
in the restructuring must also take

into account other issues of concern
to employees and be able to answer
the question What do I get out of
the merger? For affected employees,
the following issues will need to be
addressed:
Position
Role in the organisation
Job title
Boss
Team of colleagues/collaborators
2IFHZRUNSODFH
Pay
%HQHWV
Career
Future
59
M&A
The Human
Resources
departments
role is to act as
an intermediary
between the
company and
employees and
forestall the
emergence of
a winners and
losers mentality.
2.1.5. Support and Rely on Human

Resources Management
A merger is a real test for the human resources
department. Its level of involvement and performance will show whether or not it is able to
ULVH WR WKH RFFDVLRQ 7KH GHSDUWPHQWV UROH LV
to act as an intermediary between the company
and employees and forestall the emergence
of a winners and losers mentality. This can
be accomplished by applying objective decision-making criteria and proven tools for
promoting integration and avoiding arbitrariness. Such criteria help people understand the
reasons for the most complex decisions that
need to be taken.
3. The Reality of a Merger (by Acquisition) Process
Productivity suffers in so far as people are
unclear about their future and must therefore
move out of their comfort zone to learn and
put into practice new ways of doing things.
While it is normal for performance to be adversely affected early on, it is important to act
60
expeditiously and take a realistic approach to

managing the situation.
Reality One: Theres Always a Winner.
While the proponents of a merger argue, communicate and insist that both organisations
come out ahead, the reality is usually quite different: there are, in fact, no mergers of equals,
only acquisitions. The acquiring company generally imposes its policy, values, culture and
rules. However, it is the acquirer that loses the
most by taking this kind of approach: there is
always a price to be paid for this kind of ethnic
FOHDQVLQJ LQ WHUPV RI WKH PDUN LW OHDYHV RQ
those who remain.
Reality 2: Pain is Inevitable. Nothing Will
Be the Same. Redundancy leads to outplacements, reduction of the workforce, and labour
force adjustment plans. Sometimes efforts to
DYRLGLQLFWLQJSDLQWXUQRXWWREHXVHOHVVDQG
simply delay the realisation of cost synergies and
improvements to processes. Although the new
company may end up creating jobs in the long
term, in the short term there are bound to be
dismissals. Change at the personal and organisational level leads to uncertainty and generates
a sense of disorientation, a situation that often
only improves with the passage of time.
Reality 3: Success Depends Largely on
Middle Managers. Assessing key managers should be a focus of attention for senior
PDQDJHPHQWDQGRQHRI WKHUVWLWHPVRQWKH
agenda for human resources during a merger by
acquisition. It is middle managers who manage
the change while also running the business.
Their involvement is essential for a merger to
be effective. If they are on board, everything
will go better.
Reality 4: Works Councils and Unions
Will Be Against the Process. Unless something is done to change the situation such as
entering into negotiations with them before
the process even starts works councils and
unions will be part of the problem, not part of
the solution. Effective negotiation depends on
understanding their position on the personal
level and at the level of the group they represent. Their critical needs must be recognised
and gradually met in exchange for them providing adequate support for the progress of the
merger. Finally, if a deadlock is reached, they
VKRXOGEHRIIHUHGDGLJQLHGH[LW
Reality 5: Cultural Integration Isnt
Achieved Only Through Friction. The
people involved in managing a merger by acquisition usually assume that once people from
the two organisations are working together in
the same place cultural integration will happen
RYHUWLPHDQGZLWKDFHUWDLQGHJUHHRI IULFWLRQ
However, it is not just a matter of time: companies must fully engage in the process, and management must take action based on rigorous,
straightforward procedures. If the leaders of a
merger act with integrity, this reduces uncerWDLQW\ DQG SDLQ OHDGLQJ WR DQ LQFUHDVH LQ HIciency (see Figure 3 above).
Reality 6: The Best People Have
Opportunities Elsewhere. The best people
also tend to take the bull by the horns; they
do not wait for events to unfold before negotiating with other companies. If the goal is to
keep them in the company, it is important to
act quickly.
Figure 3
Merger Committee
Due diligence
Preparation stage
Post-integration
Integration
60 days
90 days
120 days
KNOWLEDGE
DESIGN
INTRODUCTION
IMPLEMENTATION
Source: E. Beaudan and G. Smith, Corporate Culture: Asset or Liability,

Ivey Business Journal (March/April 2000).
*Part 2 of this article will be available in the May/

June 2016 edition of The European Business Review
About the Authors

Guido Stein is Professor in the
Department of Managing People in
Organisations at IESE Business
School, Spain. He is partner of
Inicia Corporate (M&A and
Corporate Finance).
Marta Cuadrado, Research Assitant at IESE
Business School.
References
1. A good example is the map offered by Paine and Power in
Merger Strategy: An Examination of Druckers Five Rules
for Successful Acquisitions, Strategic Management Journal 5
(1984): 99-110.
2. P. Fernndez and A. Bonet, Fusiones, adquisiciones y
control de las empresas, Arbor: Ciencia, pensamiento y cultura
523-524 (1989): 39-60.
3. N. Zozaya, Las fusiones y adquisiciones como frmula de
crecimiento empresarial (Direccin General de Poltica de la
PYME, 2007).
4. J. R. Pin, El lado humano de las fusiones y adquisiciones:
el modelo antropolgico frente al culturalista, FHN-208,
IESE Business School, Barcelona, 1990. Available on IESEP
(only in Spanish).
5. Due diligence is the preliminary analysis or audit performed
WRDVVHVVDFRPSDQ\VDVVHWVDKHDGRI DSRVVLEOHDFTXLVLWLRQ
6. KPMG (2011), Whitepaper on Post Merger People
integration,
7. https://www.kpmg.com/IN/en/IssuesAndInsights
/ArticlesPublications/Documents/Post%20Merger%20
People%20Integration.pdf.
61
Marketing
Internationalisation
in Online Retailing
BY MORITZ HAHN AND NICCOL PISANI
Moritz Hahn
Senior Vice President at
Zalando SE
Niccol Pisani
Assistant Professor of
International Management
at the University of
Amsterdam
the case of Zalando, the largest pure-play online

fashion retailer based in Europe.
Online retailing is clearly on the rise. This
pattern is recognisable across all world regions.
Despite a recent impressive growth observed
in Asia, the North American and European
markets still report the largest online retail sales
JXUHV1 In 2013 online retailing reached $262
ure-play online retailers have, at least in ELOOLRQLQWKH86DJURZWKRI RYHUV
principle, an unlimited trading space that $231 billion.2 In Europe it peaked at 142 billion
spans beyond the borders of the country a rise of 16% over 122 billion reported in
where they are headquartered. Webpages and 2012.3 Albeit this remarkable annual growth rate
mobile applications can be accessed from any- (steadily maintained over the 2009-2013 period),
where in the world, orders processed online, the web penetration is still relatively limited in
DQGSURGXFWVHIFLHQWO\VKLSSHGDFURVVQDWLRQDO the retail market. The above-mentioned 2013
boundaries. To internationalise the operations JXUHV FRUUHVSRQG LQ IDFW WR UHVSHFWLYHO\
of pure-play online retailers may appear relative- of the total retail value in the US and 5% in
ly easier when compared with traditional compa- Europe. Other regions report an even lower
nies, as there is no need to rely on investments in level of online penetration in the retail industry
brick-and-mortar retail spaces in foreign coun- LQ $VLD3DFLF DQG LQ /DWLQ $PHULFD
tries to attract local customers. Yet, to expand suggesting that we are still in the early days in
DEURDG LQ WKH RQOLQH VSDFH LV DV GLIFXOW DV LQ terms of adoption of this new channel.
more traditional marketplaces. In this article we
While many products are sold online, three
aim to offer a snapshot of the current status of categories are most relevant: the so-called
online retailing and provide some insights on fashion market (whose three main product
how differences between countries play a fun- classes are apparel, footwear, and accessories),
GDPHQWDOUROHLQVKDSLQJUPVLQWHUQDWLRQDOLVD- consumer electronics, and computer hardware.4
tion in the online space. In particular, we focus In 2013 the total sales value of the apparel and
on the apparel and footwear online market and footwear online retailing market (which accounts
Online retailing is clearly on the rise. In

this article the authors offer a snapshot
of the current status of online retailing
and provide insights on how differences
between countries play a fundamental role
LQVKDSLQJUPVLQWHUQDWLRQDOLVDWLRQLQWKH
online space.
In 2013 online retailing reached $262 billion in the US a growth

of 13% over 2012s $231 billion. In Europe it peaked at 142 billion a rise of 16% over 122 billion reported in 2012.
62
for about 85% of the total fashion market) was

$37.3 billion in the US ($20.6 billion in 2008)
and 29 billion in Europe (15 billion in 2008).
In Europe this corresponded to approximately
20% of all online retailing and 7% of the total
fashion market.5 Not surprisingly, companies like
Amazon have taken fashion very seriously in the
last few years, recognising the untapped potential
of this market in the online environment.6
Given this strong and steady growth, the
question arises whether online fashion retailers
are expanding abroad more aggressively than
WUDGLWLRQDO FRPSDQLHV LQ RUGHU WR EHQHW IURP
this trend across countries. To grasp the extent
to which online fashion players are international
today we collected publicly available information relative to the geographic distribution of
sales of the 4 largest online fashion retailers in
Europe (i.e., Otto Group, Amazon, Zalando, and
eBay) and compared it with the average internaWLRQDOLVDWLRQ GHJUHH RI WKH ZRUOGV ODUJHVW FRUporations included in the 2014 Fortune Global
500 (FG500) list.7 The results of our analysis
VXJJHVW WKDW RQOLQH UHWDLOHUV GRQW EHKDYH YHU\
differently from traditional companies when exSDQGLQJDEURDGVHHJXUHRQULJKW
The study that one of us (Pisani) recently undertook with Prof. Pankaj Ghemawat, a leading
expert on globalisation, showed that companies
listed in the 2014 FG500 have a clear propensity
to locate the bulk of their activities at home.8
The results of our comparison reveal that such
bias is maintained among the largest online
fashion retailers. While they show a relatively
greater internationalisation degree than FG500
companies, they have an almost equivalent predisposition when it comes to expand beyond
WKHKRPHUHJLRQ7KXVWKHRQOLQHVSDFHKDVQW
UHDOO\ UHYROXWLRQLVHG FRPSDQLHV LQWHUQDWLRQDO
paths. Why is it so? One may think that the
reliance on the online channel would facilitate
IRUHLJQ H[SDQVLRQ +RZHYHU RXU QGLQJV LQdicate that even the largest online players tend
to be as dependent on home revenues as more
traditional companies.
The reality is that distance between countries
still matters, not only in traditional brick-andmortar markets but also in the online environment. Countries differ among themselves and
this creates additional challenges for internationalising companies. Failure to evaluate the impact
RI FURVVFRXQWU\GLVWDQFHFDQMHRSDUGLVHUPV
foreign expansion. This equally applies to pureplay online retailers. To illustrate this notion, we
focus on the case of Zalando, the largest pureplay online fashion retailer based in Europe. In
the last 5 years Zalando has expanded its operations to 15 European countries and its webpage
is currently the most visited fashion website in
the western world, with a monthly average of 21
million unique visitors.9 The foreign expansion
undertaken by Zalando provides insightful examples on the importance of a careful appraisal
of cross-country distance for the international
success of pure-play online retailers. Building
on the CAGE framework introduced by Prof.
Ghemawat to evaluate differences between
countries, distance can manifest itself along
four basic dimensions: cultural, administrative,
geographic, and economic.10 In the following
SDUDJUDSKVZHZLOOEULH\GHVFULEHHDFKRI WKH
dimensions and provide examples of their relHYDQFHEDVHGRQ=DODQGRVH[SHULHQFH
Cultural Distance. Differences in languages,
religious beliefs, ethnicities, and social norms
create cultural distance between two countries.
:KLOH ODQJXDJH GLIIHUHQFHV DUH HDVLO\ LGHQWLable, dissimilarities in social norms the customary rules that govern behaviour in a country
FDQEHH[WUHPHO\GLIFXOWWRJUDVS2QHFRXOG
argue that social norms are relatively similar
within Europe, especially vis--vis the US. Yet,
Failure to
evaluate the
impact of crosscountry distance
can jeopardise
firms foreign
expansion. This
equally applies to
pure-play online
retailers.
63
Marketing
SDWWHUQV RI EHKDYLRXU DUH VLJQLFDQWO\ GLIIHUent across European countries. Failure to recognise and appropriately respond to such local
QXDQFHV FDQ FRPSURPLVH RQOLQH SOD\HUV LQWHUnational success.
$W D UVW JODQFH SD\LQJ PHWKRGV LQ RQOLQH UHtailing appear relatively standardised, with major
credit cards (e.g., Visa) and online payment
systems (e.g., PayPal) being the most commonly
adopted methods. This said, widely accepted
norms associated with monetary transactions
can radically differ across countries, even within
Europe. In Italy for example there is a strong
Distance between
propensity to use cash to settle payments. When
countries
still matters
=DODQGR UVW HQWHUHG WKH ,WDOLDQ RQOLQH UHWDLOLQJ
and can manifest
space, it offered the possibility to choose among
itself along four
the most popular online payment methods, but
basic dimensions:
not cash-on-delivery. Still, the conversion rate
customer orders divided by unique customer
checkout visits was substantially lower compared with other major European markets. In
August 2011, Zalando introduced the possibilcultural
ity to pay cash-on-delivery for Italian customers.
In the two weeks following the introduction of
this new payment method the conversion rate
increased by nearly 25% and the higher rate
administrative
achieved has been maintained ever since.
Administrative Distance. The administrative
or political distance can result from the usage
of different currencies, the adoption of distinct
policies to regulate commercial activities, or the
geographic
reliance upon dissimilar political frameworks. In
general, absence of trade arrangements between
WZR FRXQWULHV DPSOLHV WKHLU DGPLQLVWUDWLYH GLVtance. While the establishment of the European
Union can be regarded as a major effort to mieconomic
nimise this type of distance between member
countries, online retailers still need to account
for a variety of administrative issues when crossing borders within Europe.
For instance, conventional wisdom would
suggest that Germany and Austria are rather
similar markets from an administrative point of
view, especially for an online retailer. However,
=DODQGRV H[SHULHQFH SURYHV WKDW WKHUH H[LVW
several differences when operating in the online
space of these two countries. In Germany
for example it is necessary to adopt a double
opt-in procedure when asking customers for
2
3
4
64
their consent to receive a newsletter, while in

$XVWULD D VLQJOH RSWLQ SURFHGXUH LV VXIFLHQW
This means that German customers need to tick
a previously un-ticked checkbox and then also
FOLFN RQ D FRQUPDWLRQ OLQN UHFHLYHG YLD HPDLO
before they can receive any promotional material whereas Austrian clients need to formalise
their permission only once. This difference has
obvious implications for marketing strategies, as
the use of tailored newsletters cannot be equally
adopted across markets.
Geographic Distance. The physical distance
between home and host country, the lack of a
common border and differences in climate, size,
and topography contribute to the emergence of
geographic distance. Climate for example has
a major role in determining what people shop,
especially in relation to the apparel and footwear market. This creates the need for a locally
adapted product portfolio and equally applies to
brick-and-mortar and pure-play online players.
Differences in the topography also matter, for
instance in relation to the selection of logistic
partners for product deliveries. While global
providers can guarantee presence in all countries and count on superior scale economies,
local providers rely on deeper roots in the territory and this at times turns into a more capillary coverage of isolated provinces. To this end,
Zalando has 11 local logistic partners in order to
secure a timely delivery of products across all 15
European countries served.
Economic Distance. Variation in consumer
incomes is the most relevant factor contributing
to the creation of economic distance. Countries
differ in their wealth per capita and this has
REYLRXV FRQVHTXHQFHV RQ FRQVXPHUV FKRLFHV
and purchasing habits. Pure-play online retailers
need to consider such local idiosyncrasies as they
KHDYLO\LQXHQFHKRZWRVXFFHHGLQDFRXQWU\
In the context of the online fashion market,
the cross-country analysis of Zalando consumHUVEX\LQJSDWWHUQVVXJJHVWVDSRVLWLYHUHODWLRQship between the average net basket size (calculation is made at the net of returned articles)
and the GDP per capita of the country where
the consumer is located. Net basket sizes therefore tend to be smaller in Spain and Italy than
in Germany and even smaller than in Sweden
and Norway. This has major implications for

Zalando and the way it competes across Europe.
Marketing expenditures have to be adjusted as
WKHDYHUDJHFXVWRPHUVKRSVVLJQLFDQWO\OHVVLQ
certain countries. Discounts and promotions
QHHGWREHWDLORUHGWRORFDOFRQVXPHUVSXUFKDVLQJ KDELWV DQG WKXV UHHFW FURVVFRXQWU\ HFRnomic distance between countries.
Distance between countries still exists and
continues to matter. Pure-play online retailers
need to carefully consider cross-country distance when internationalising their activities.
7KH RQOLQH VSDFH KDVQW FRQYHUWHG WKH ZRUOG
into a homogenous space. Failure to recognise
differences between countries can lead online
retailers to major mistakes, even when conventional wisdom suggests that home and host
country are similar. Recent research shows that
RQOLQH VKRSSLQJ KDVQW DOVR KRPRJHQLVHG FRQVXPHUV QHHGV11 Customers continue to make
online purchases based on where they interact
RILQHUDWKHUWKDQRQZKDWWKH\VHHRQOLQH7KLV
IXUWKHUHQKDQFHVWKHLQXHQFHRI WKHORFDOHQvironment in online competition. Thus, the accurate evaluation of all dimensions associated
ZLWKFURVVFRXQWU\GLVWDQFHLVQRWDVXSHUXRXV
exercise for pure-play online retailers; it is rather
their only route to international success.
About the Authors
Moritz Hahn is Senior Vice President at Zalando
SE, where he leads all markets across all categories. Prior to joining Zalando SE he worked for
over 6 years at McKinsey & Company. He holds
a Ph.D. in Economics from Ludwig-Maximilians
Universitt Mnchen. During his Ph.D., he was
visiting scholar at the European Central Bank as
well as New York University. His research has
appeared in peer-reviewed journals as Review of
Financial Studies.
Niccol Pisani is Assistant Professor of
International Management at the University of
Amsterdam. He holds a Ph.D. in Management
from IESE Business School. His research is
mainly focused on the international strategies
of multinational enterprises. He regularly presents his studies in leading international conferences and his research has appeared in peerreviewed journals as Journal of Management and
practitioner-oriented outlets as Harvard Deusto

Business Review and the digital edition of Harvard
Business Review.
References
1. In China value sales in the online apparel and footwear retailing
market reached $32.5 billion in 2013 while they were only $0.2 billion in
2008. Source: Euromonitor International, 2014.
2. S. Mulpuru and M. Gill, US Online Retail Sales To Reach $370B By
2017; 191B in Europe, April 14, 2013, available at <www.forbes.com>.
3. Euromonitor International, Apparel and Footwear Retailing in the
Digital Era (Part 2): Regional Trends, 2014.
4. S. Mulpuru and M. Gill, US Online Retail Sales To Reach $370B By
2017; 191B in Europe, April 14, 2013, available at <www.forbes.com>.
5. Fashion market includes apparel, footwear, and accessories (i.e., bags,
luggage, watches, and jewelry). Source: Euromonitor International, 2014.
6. P.-E. Gobry, Amazon's Endlessly Fascinating Push Into High-End
Fashion, February 19, 2015, available at <www.forbes.com>; W. Loeb,
Amazon.com New High Fashion Push Is Aggressive and Will Encroach
on Department Stores' Turf, May 9, 2012, available at <www.forbes.com>.
7. The largest player (Otto Group), although primarily focused on e
commerce, is technically a multichannel retailer. The other 3 compa
nies are pure-play online retailers (Amazon, Zalando, and eBay). In
2013, these 4 players accounted together for approximately 25% of the
29 billion fashion retailing market in Europe. Source: Euromonitor
International, 2014.
3*KHPDZDWDQG13LVDQL7KH)RUWXQH*OREDO,VQW$OO7KDW
Global, November 4, 2014, available at <www.hbr.org>.
9. Data for the 12 months ended in June 2014 and refer to average
monthly unique visitors. Nike had 15 million and H&M 14 million when
considering the same time period. Source: comScore.
10. P. Ghemawat, Distance Still Matters: The Hard Reality of Global
Expansion, Harvard Business Review, 79/8 (2001): 137-147.
11. D. Bell, Location Is (Still) Everything, (New Harvest, 2014); D. Bell,
J. Choi, and L. Lodish, What Matters Most in Internet Retailing, MIT
Sloan Management Review, 54 (2012): 27-33.
Pure-play online
retailers need to
carefully consider
cross-country
distance when
internationalising
their activities.
The online space
hasnt converted
the world into
a homogenous
space.
65
Marketing
Why You Need to

Localise Now
BY CHRISTINA COMBEN
optimal user experience, getting an impressive

SERP, adding catchy CTAs, and ensuring impressive site speed And then they ask their
German friend or French speaking employee to translate their website for a sweepingly
generalised French or German market.
7UDQVODWLRQRI \RXUZHEVLWHDSSOPRU
YLGHRJDPH VKRXOGQW EH DQ DIWHUWKRXJKW $
Why You Need to Localise Now
If your company does business on a global ZHDNO\ WUDQVODWHG YHUVLRQ RI \RXU EUDQGV
scale and you compete in international marketing message will make your internaPDUNHWV\RXYHSUREDEO\KHDUGDORWDERXWOR- tional clients feel like second class citizens.
calisation.1 While you almost certainly already And no one likes to be second best. Enter
adapt your products or services to meet the new markets without speaking to your prosrequirements of local markets, local legisla- pects in their local language and you may as
tion, tastes and habits; have you asked your- well be speaking Double Dutch. French in
self how you can localise your website, soft- 1LJHULDRU&DQDGDLVQWWKHVDPHDV)UHQFK
ZDUH RU PRELOH DSS WR LQFUHDVH \RXU EUDQGV LQ )UDQFH <RX QHHG WR PDNH VXUH \RXUH
appeal to clients in different cultures across a using local keywords, local vocabulary and
taking into account local cultural nuances
varied demographic?
and beliefs.
Capture More Clients
5HJDUGOHVV RI ZKDW LQGXVWU\ \RXUH LQ IURP Be More than Just Available
education to entertainment, if you compete Capturing clients globally is about more than
JOREDOO\WKHQ\RXOOQHHGGLIIHUHQWODQJXDJHYHU- being globally available. Announcing your
VLRQVRI \RXUZHEVLWH$QGZKLOHWKDWVDJRRG SUHVHQFH LQ D QHZ PDUNHW LV RQO\ WKH UVW
VWDUW LWV RQO\ WKH EHJLQQLQJ 6R PDQ\ FRPSD- VWHS DIWHU FDUHIXOO\ UHVHDUFKLQJ DQG SUROnies, large and small, dedicate huge portions of ing your audience2 of course); making sure
their budgets to sales and marketing. Creating an that your app, advertising campaign, software
Capturing clients globally is about more
than being globally available. In this article,
Christina Comben discusses how you should
be localising your marketing message to
your target audience to be able to compete
in international markets.
A weakly translated version of your brands marketing message will make your
international clients feel like second class citizens. And no one likes to be second best.
66
and website are globally ready is quite a different

story. Essentially, beyond cultural differences
and languages, people are still people wherever
you go. We share the same hopes, fears, dreams
and emotionsbut we have markedly different
ways of expressing them.
What does that mean? It means that if you
have a successful product, service, and brand
approval in the UK, then you have every possibility of achieving equal success in other
parts of Europe, America, Africa, and Asia.
But ignore local customs and cultures at your
peril. Failure to localise is like planning for
failure. You need to create an equally engaging, target-driven localised message that actually resonates with your foreign customers on a
local level; not one that they simply (or hardly)
understand. If you can make your customers
EHOLHYH \RXYH GRQH \RXU UHVHDUFK \RXU FRQversion rates will soar.
YOU NEED TO CREATE AN EQUALLY

ENGAGING, TARGET-DRIVEN LOCALISED
MESSAGE THAT ACTUALLY RESONATES
WITH YOUR FOREIGN CUSTOMERS ON
A LOCAL LEVEL; NOT ONE THAT THEY
SIMPLY (OR HARDLY) UNDERSTAND.
Avoid International Lawsuits

If you deal in products, especially pharmaceuWLFDOV WKHQ \RXOO DOUHDG\ NQRZ WKH ORFDO OHJislation and requirements for ensuring compliance. But make sure you research the same
when it comes to advertising and promotion.
Localisation? You got it. While comparative
advertising is commonplace in the US and becoming gradually more acceptable in the UK;
Dont Make Costly Errors
in certain parts of Europe, not only is it seen
7KHUHVSOHQW\RI URRPIRUHUURULQWUDQVODWLRQ DV GLVWDVWHIXO DQG PLVOHDGLQJ EXW LWV DFWXDOO\
And not just in translation; if I told you that illegal.5 Tread carefully here and research thormy colleague was as crook as a Rockwood, would oughly before you become associated with un\RX NQRZ ZKDW , ZDV VD\LQJ" ,WV knackering derhand practices or landed with a million-eucontemplating all the regional language vari- ro lawsuit.
ations,3 slang, nuances, beliefs and idioms. So
KRZGR\RXPDNHVXUH\RXUFRPSDQ\VPDUNHW- Build Respect
ing message, website, newsletter or corporate The thing about respect is, you have to earn it.
LPDJHKDVQWEHFRPHWKHORFDOMRNHLQ*HUPDQ\ Building up alliances, link building, getting articles written about your company and recomor worse, an unthinkable insult in Iran?
mendations from respected sources takes time.
%XWWKHUHVQRWKLQJOLNHDQHQGRUVHPHQWIURPD
Get Your Message Right
Cultural taboos exist in all societies. Find out reputable source to give your product or service
what they are where you do business. Be sen- clout. Find out who the movers and shakers are
sible and work with the budget that you have. in these local markets, approach popular blogs
If you can visit the places your prospective and sites that complement but not compete
consumers live, then great. If you can hire ZLWK \RXU SURGXFW RU VHUYLFH :KLOH \RXUH
ORFDO H[SHUWV SHUIHFW ,I \RX GRQW KDYH WKH building respect and social approval for your
means to do either of these, then have your EUDQG \RXOO EH LQFUHDVLQJ WUDIF WR \RXU
team research your buyer personas4 as thor- website. Two birds with one stone.
oughly as possible. Some universally accepted
symbols, for example (such as the thumbs Optimise Your Online Marketing Spend
up sign), might not be as universal as you Search is local, so you need to use local keythink; in some parts of the Middle East, stick- ZRUGVDQGNQRZ\RXUORFDOVHDUFKWHUPV,I ,P
ing your thumb up is one of the most vulgar looking for a coffee shop in Manchester, for
H[DPSOH WKH QHVW WKDW 0LDPL KDV WR RIIHU LV
insults you can make.
67
Marketing
hardly relevant to me. Remember that Canadians

wear toques and Australians and Brits go on
holiday not vacation. Customers in these
regions therefore, will have different ways of
searching for the same things.
Also, while Google may be your go-to search
engine, some local markets prefer local search
engines. Find out what they are and make sure you
use them. Search Engine Optimisation (SEO)
DQG ZKLOH ZHUH DW LW $SS 6WRUH 2SWLPLVDWLRQ
(ASO) are vital to your digital marketing strategy. You need to make sure that your marketing
team or SEO agency are equipped to optimise
your site or app globally, and that they have the
localisation knowledge to correctly target the
right audience.
Localisation (when carried out correctly) not
only ensures that the right message is delivered
to the right people, but also optimises your
content for search engine or app store results
by careful selection of exact, targeted local keywords that will improve your ranking, conversion and download rates. Increase your international presence, build a loyal global client base
DQG UDPS XS UHYHQXHLVQW LW WLPH IRU \RX WR
get local?
68
Localisation also
optimises your
content for search
engine or app
store results by
careful selection
of exact, targeted
local keywords that
will improve your
ranking, conversion
and download rates.
About the Author

Christina Comben is a freelance
copywriter specialising in B2B
website content, marketing materials, article writing, and blogging.
0XOWLOLQJXDO DQG TXDOLHG WR 0%$
level, Christina has produced investor guides
and economic reports in developing countries
for Spanish newspaper ABC and currently
works as Head of Content at Day Translations.
Contact @christinacomben
References
7UDQVODWLRQDQG/RFDOL]DWLRQ:KDWVWKH'LIIHUHQFH
Between the Two? https://www.daytranslations.com/
blog/2015/10/translation-and-localization-whats-thedifference-between-the-two-6906
2. Jayson DeMers, Why Knowing Your Audience Is
The Key To Success http://www.forbes.com/sites/
jaysondemers/2014/09/03/why-knowing-your-audienceis-the-key-to-success/#373c810d6104 Sep 3, 2014
3. British Accents http://dialectblog.com/
british-accents/
4. What is a Buyer Persona http://www.buyerpersona.
com/what-is-a-buyer-persona
5. Misleading advertising http://ec.europa.eu/
FRQVXPHUVFRQVXPHUBULJKWVXQIDLUWUDGH
IDOVHDGYHUWLVLQJLQGH[BHQKWP
Workplace
COUNTERWORK
BEHAVIOURS
BY ADRIAN FURNHAM
Counterwork behaviours CWBs include

fraud, misconduct, and work avoidance cost
organisations billions every year. In this
article, Professor Furnham discusses the
psychology behind CWBs, and how an organisation can reduce instances of counterwork behaviours.
eople nick stuff at work. They take part

in the unauthorised appropriation of
company property for personal use, unrelated to the job. They steal from their employer, their boss and their customers. It is all
too common and can be costly.
We have a range of words to disguise the
issue: pilfering and shrinkage, nicking and liberating
stuff. Many people think that taking home a few
SHQVDQGHQYHORSHVGRHVQWFRXQW
There is a long list of what are called counterZRUN EHKDYLRXUV &:%V 7KH\ LQFOXGH GHFHLW
espionage, fraud, sabotage, substance abuse and
whistle-blowing. There are, for the politically
correct, other things such as low personal stanGDUGV ZRUN DYRLGDQFH DQG LQGROHQFH
CWBs include
Antisocial behaviour; usually restricted to
the workplace.
Blue-collar crime; everything from theft,
property destruction and record fabrication
WR JKWLQJ DQG JDPEOLQJ E\ VHPL VNLOOHG
often non salaried staff.
Counterproductive Workplace Behaviour;
any behaviour at work that goes counter to
the short and long term interests and success
of all stakeholders in an organisation.
Dysfunctional Work Behaviour; intentio-
nal, unhealthy behaviour that is injurious

to particular individuals who do it either to
themselves or to others.
Employee Deviance; unauthorised but intended acts that damage property, production
or reputations.
Employee Misconduct; the misuse of
resources, from absenteeism to accepting
backhanders.
Non-performance at Work; both not performing that which is required, while also
performing acts not at all desirable.
Occupational Aggressive Crime Deviance;
negative, illegal, injurious and devious behaviours conducted in the workplace.
Organisational Misbehaviour; behaviour
There is a long list

of what are called
counterwork
behaviours (CWBs).
They include deceit,
espionage, fraud,
sabotage, substance
abuse and whistleblowing.
69
Management
that violates societal and organisational norms.

Organisational Retaliative Behaviours;
this is deliberate organisational behaviour
based on perceptions of unfairness by disgruntled employees.
Political Behaviour; self-serving, nonsanctioned, often illegitimate behaviour
aimed at people both inside and outside of
the organisation.
Unconventional Work Practices; simply
odd and unusual, but more like illegal and
disruptive, behaviours.
Workplace
Aggression,
Hostility,
Obstructionism; personally injurious behaviours at work.
Unethical Work Place Behaviour; behaviour that deliberately and obviously infringes
the accepted ethical/moral code.
COUNTERWORK BEHAVIOURS ARE

MULTI-FACETED SYNDROMES THAT
ARE CHARACTERISED BY HOSTILITY
TO AUTHORITY, IMPULSIVITY, SOCIAL
INSENSITIVITY, ALIENATION AND/OR
LACK OF MORAL INTEGRITY.
Academics have tried to classify these misbehaviours into various categories: intrapersonal
(drink and drugs), interpersonal (physical and
verbal aggression), production (absenteeism, lateness), property (theft, sabotage, vandalism) and
political (whistle-blowing and deception).
The term Counterproductive Workplace
Behaviour (CWB) is often used synonymously
with anti-social, deviant, dysfunctional, retaliative and unethical behaviour at work. It costs
organisations billions every year and many of
them invest in ways to prevent, reduce or catch
those who are most likely to offend. There are
many different words to describe CWBs, such
as: organisational delinquency, production and
property deviance, workplace deviance. It is a
multi-faceted syndrome that is characterised by
70
hostility to authority, impulsivity, social insensitivity, alienation and/or lack of moral integrity.
People feel frustrated or powerless, or unfairly
dealt with, and act accordingly.
CWB, however, is intentional and contrary to
the interests of the organisation. CWB may not,
LQWKHVKRUWWHUPEHUHHFWHGLQFRXQWHUSURGXFtivity which is the ultimate cost of CWBs. The
essence of a CWB is wrongdoing. Thus, taking
sick leave when not sick may be a common occurrence, indeed the norm, yet it is still a CWB.
Cheats at Work
In a series of books and papers the anthropologist
Gerald Mars showed that much cheating at work
was a consequence of how jobs were organised.
+LV LQLWLDO IRFXV ZDV RQ WKH VRUWV RI UHZDUGV
people get at work. These he divided into three
categories: RIFLDO, formal rewards, both legal
(wages, overtime) and illegal (prostitution, selling
drugs); XQRIFLDO, informal, legal (perks, tips) and
illegal (pilfering, short-changing) rewards; and
alternative, legal, social economy rewards (barter)
and illegal rewards (moonlighting).
When people cannot easily increase their formal
rewards at work they may try to increase the other
two types of reward, which may then come to conWULEXWHVLJQLFDQWO\WRWKHLUWRWDOLQFRPH)XUWKHU
it is the nature of the job that dictates the number
and type of informal and hidden rewards.
Thus, in the hotel and catering industry,
waiters will receive basic and formal pay in the
form of wages and overtime payments. This
will be supplemented by informal rewards of
WLSVDQGWKHSHUNVRI IUHHPHDOVDQGSRVVLEO\
IUHH DFFRPPRGDWLRQ 7KH\ PD\ ZHOO DOVR EH
allowed to indulge in pilfered food or be afIRUGHG D ZLQNHGDWIDFLOLW\ WR VKRUWFKDQJH RU
short-deal customers.
Mars noted four types of cheats at work.
First Hawks, who thrive in occupations that
emphasise individuality, autonomy, and competition. The control that members have over
RWKHUV LV JUHDWHU WKDQ WKH LQGLYLGXDOV RZQ
control. Occupations for hawks emphasise enWUHSUHQHXULDO EHKDYLRXU ZKHUH WKH LQGLYLGXDOV
freedom to transact on his own terms is highly
YDOXHG,QGLYLGXDODLULVDWDSUHPLXP6XFFHVV
is indicated by the number of followers a person
FRQWUROV 5HZDUGV KHUH JR WR WKRVH ZKR QG

new and better ways of doing things and where
the drive for successful innovation is paramount.
Hawks are individualists, inventors, small busiQHVVPHQ7KH\DUHKXQJULO\RQWKHPDNH
Hawks are typically entrepreneurial managers, owner-businessmen, successful academics,
pundits, the prima donnas among salesmen and
the more independent professionals and journalists. Hawkish entrepreneurial activity is also
found in waiters, fairground buskers and owner
taxi drivers. Alliances among hawks tend to
shift with expediency and a climate of suspicion
is more common than one of trust. They are
loners, individualists.
Second, Donkeys are characterised by both
isolation and subordination. Donkeys are in
the paradoxical position of being either or both
powerless and powerful. They are powerless if
they passively accept the constraints they face.
They can also be extremely disruptive, at least
IRU D WLPH 5HVHQWPHQW DW WKH MREV LPSRVLtions on the employee is common and the most
typical response is to change jobs. Other forms
RI ZLWKGUDZDO IURP ZRUN VXFK DV VLFNQHVV
and absenteeism, are also higher than normal.
Where constraints are at their strongest, sabotage is not infrequent as a response, particularly
where constraints are mechanised.
Third, Wolves, who thrive in those tradiWLRQDO UDSLGO\ GLVDSSHDULQJ ZRUNLQJFODVV RFcupations, such as mining. Wolves are found in
occupations based on groups with interdepenGHQW DQG VWUDWLHG UROHV IRU H[DPSOH JDUEDJH
FROOHFWLRQFUHZVDHURSODQHFUHZVDQGVWUDWLHG
groups who both live and work in total instiWXWLRQV VXFK DV SULVRQV KRVSLWDOV RLO ULJV DQG
some hotels. Where workers do live in or close
to the premises in which they work, group activities in one area are reinforced by cohesion in
others. Such groups then come to possess considerable control over the resources of their individual members. Once they join such groups,
individuals tend to stay as members.
Fourth, Vultures. Vultures are found in jobs
that offer autonomy and freedom to transact,
but this freedom is subject to an overarching
bureaucratic control that treats workers collectively, and employs them in units. Workers in
Gerald Mars noted

4 types of cheats
at work
HAWKS
thrive in occupations that
emphasise individuality,
autonomy, and competition.
DONKEYS
are characterised by both
isolation and subordination
WOLVES
thrive in jobs that ofer
autonomy and
freedom to transact
VULTURES
thrive in jobs that
ofer autonomy and
freedom to transact
these occupations are members of a group of

co-workers for some purposes only and they
can act individually and competitively for others.
They are not as free from constraint as hawks,
but neither are they as constrained as donkeys.
The group is also not as intrusive and controlling as the wolf packs.
Vulture jobs include sales representatives and
travellers of various kinds, such as driver-deliverers, linked collectively by their common employer, common work base and common task,
but who have considerable freedom and discretion during their working day.
These different types of cheats at work form
their own ideology, view of the world and values.
They make sense of their particular situation and
their values then follow from this. Thus wolves
value control, discipline and order. Hawks value
autonomy, freedom and independence. Vultures
tend to be suspicious outsiders.
The crucial point that Mars is making is
that the job itself largely dictates what sort of
corrupt behaviours are possible and preferred.
Further, that some of these are done effectively
in groups with co-ordinated team work.
Justice at Work
Many CWBs can be seen as a form of restorDWLYHMXVWLFHJHWWLQJRQHVRZQEDFNRQYDULRXV
individuals or institutions. People do not all have
similar codes of justice; and they can differ in the
sensitivity and reactivity to injustice. Nevertheless,
one of the most constant, powerful and persuasive reasons people give for vengeful counterproductive behaviours at work is to re-establish
distributive justice. Certainly the concept of
fairness is at the heart of much dark-side CWB.
People can feel it is fair to steal to compensate
them for their inequitable pay; sabotage pays
EDFNRWKHUVIRUZKDWWKH\GLG
If people believe they (their parents, group,
ancestors) have been unfairly treated (their
land taken away; their mobility blocked; victimised generally) they are motivated to correct the
balance and restore justice. Justice restoration can
occur via propaganda or force or CWBs. It
may involve punishing the perpetrators or their
heirs or simply changing the balance of things.
7KXVLI \RXUODQGZDVVWROHQWKHPRWLYHWRJHW
71
Workplace
it back will drive people to various acts until that

is achieved. Inevitably people perceive the just
or unjust situation very differently, furthermore
some restitution acts are driven by guilt where
people see their (privileged) position as being
unfairly acquired (say through inheritance).
Justice, fairness, honour, rights and reconciliation are the motives here. The more these
words occur in the speeches, writings of individuals or groups the more the justice-motive
should be considered important. As we shall
see people have used equity theory to explain
theft as sabotage at work. Certainly the concept
of justice and fairness which is at the heart of
equity theory is for all people a powerful motivator. Being thought of as unfairly treated is a
primary motivator to achieve revenge.
0RUHWKDQDQ\RWKHUFDXVHRI PLVEHKDYLRXU
at work, is the issue of people feeling unfairly
dealt with and taking vengeance for, or trying
to restore justice in the face of injustice. Case
DIWHUFDVHRI LQVLGHUGLVKRQHVW\FLWHV)DLUQHVV
Researchers in this area called Organisational
Justice have, for 40 years, done research on the
economic and socio-emotional consequences of
perceived injustice. In doing so, they have distinguished between four related types of justice:
Four Types of Justice

Distributive Justice
The allocation of outcome rewards in accordance with implicit or explicit
norms like equality and equity
Procedural Justice
The consistency accuracy, lack of bias, correctability and representation
in all decision making processes at work
Interpersonal Justice
The way people are treated (i.e. with respect, sensitivity, dignity) while
justice procedures are enacted
Informational Justice
The accuracy, timing and comprehensiveness of explanations for all justice
procedures and distribution.
Although there are, or should be, general context-independent criteria of fairness, there are
always special cases. All employees are concerned
with interactional justice, which is the quality of
interpersonal treatment they receive at the hands
72
of decision-makers. Two features seem important

here: social sensitivity, or the extent to which people
believe that they have been treated with dignity
and respect, and LQIRUPDWLRQDO MXVWLFDWLRQ, or the
extent to which people believe they have adequate
information about the procedures affecting them.
Procedures matter because a good system can
lead people to take a long-term view, becoming tolerant of short-term economic losses for
long-term advantage. Research has demonstrated many practical applications or consequences
of organisational justice. Using fair procedures
HQKDQFHVHPSOR\HHVDFFHSWDQFHRI LQVWLWXWLRQDO
DXWKRULWLHV )XUWKHU VWDIQJ SURFHGXUHV SHUceptions of fairness of selection devices) can
have pernicious consequences.
People at work often talk of particular types
RI LQMXVWLFH XQMXVWLHG DFFXVDWLRQEODPLQJ
unfair grading/rating and/or lack of recognition for both effort and performance; and violations of promises and agreements.
$QXPEHURI IDFWRUVUHODWHWRSHRSOHVUHDFWLRQV
to injustice. These include the perception of the
motives/state of mind of the wrong doer (did they
do it intentionally and with foresight of the conVHTXHQFHV$OVRWKHRIIHQGHUVMXVWLFDWLRQDQG
apologies play a role along with how others reacted
to the unjust act. The relationship between the
harm doer and the victim is also important as is the
public nature of the injustice. Victims of injustice
ZDQWWRUHVWRUHWKHLUVHOIHVWHHPDQGHGXFDWHWKH
offender. Usually they retaliate by either withdrawDORUDWWDFN:KDWLVFOHDUKRZHYHULVWKDWSHRSOHV
perception of fairness and justice at work is a powerful motivator and demotivator and often a major
cause of negative retaliation behaviours.
There have been studies that have examined
HPSOR\HH UHYHQJH DV D FRQVHTXHQFH RI ZKDW
they see to be unjust behaviour. In one American
study the authors were interested in what predicted workers to complain that they had been
ZURQJIXOO\WHUPLQDWHGDIWHUEHLQJODLGRII7KH\
hypothesised that how fairly workers felt they had
been tested during the course of their employment and in the termination predicted the type
of complaint they made. In addition they tested
such claims because complaining is related to the
perception that termination of employment is
the employers fault. Further that the relationship
between complaining and blaming is stronger in

WKRVHUHGUDWKHUWKDQPHUHO\ODLGRII7KHLUVWXG\
showed that three factors were directly relevant to
whether people considered they would complain:
fair treatment at termination, their expectation
of winning the case, and their perception of fairness/justice while at work.
They agreed that the results of this study
which involved interviewing 996 employed
adults has clear practical implications for all
organisations which include: Treat employees
fairly throughout their employment and foster
the impression that the organisation is interested in justice (procedural and distributive); When
terminating people be honest and treat them
with dignity and respect; Being honest about the
causes of unemployment results in a legal saving
of around 10,000 per person; The dignity and
self-respect of those terminated can be enhanced by such things as providing transitional
alumni status, symbols/gifts of positive regard
and offers of counselling; Attempts at litigation
control through lobbying and particular settlement practices have only limited success.
So what to do
Consider the common problem of theft.
Researchers in the area recommend the following.
First, let people know how uncommon it is.
It is NOT the norm: everybody is not at it. It is
DPLQRULW\ZKRGGOHOLNHWKLV*LYHVRPHVWDtistics. Thieves, for that is what they are, are the
exception and a group that will not be tolerated.
Second, explain the consequences of being
FDXJKW ZLWK VRPH FDVH VWXGLHV EXW GR QRW
JR RYHU WKH WRS 6SHOO RXW WKH UVW ZDUQLQJ WR
sacking sequences. Beware the possibility of unintended consequences where making the punishment so severe that it simply makes people
take bigger risks with the amounts they claim.
Third, explain the systems and methodology
by which people are caught. Let them know that
there are reliable and fair methods in place that
will show up those trying to beat the system.
Fourth, conduct a few in-house programmes
where employees at all levels discuss the comSDQ\V FRGH RI HWKLFV DQG KRZ ZKHQ DQG ZK\
fraudsters should be dealt with. Get all people
involved: let them know the fraudsters are
Treat employees fairly throughout their

employment and foster the impression
that the organisation is interested in
justice (procedural and distributive).
costing everyone who works for the company.
)LIWK UHYLHZ FRPSHQVDWLRQ DQG EHQHW SURgrammes that look at internal and external equity
PHDQLQJ KRZ SHRSOH VWDFN XS DJDLQVW RWKHUV
in the organisation as well as those working in
VLPLODU MREV LQ GLIIHUHQW RUJDQLVDWLRQV 'RQW
allow expense fraud to be seen as a way of reconciling proper pay differentials. Some supervisors turn a blind eye to it because they feel
unable to reward staff in ways they think equitable and just.
About the Author
Adrian Furnham is Professor of
Psychology at University College
London. He has lectured widely
abroad and held scholarships and
visiting professorships at, amongst
others, the University of New South Wales, the
University of the West Indies, the University of
Hong Kong and the University of KwaZuluNatal, and in 2009 was made Adjunct Professor
of Management at the Norwegian School of
0DQDJHPHQW+HKDVZULWWHQRYHUVFLHQWLF
papers and 57 books including 50 Psychology Ideas
you really need to know (2009) and The Elephant in the
Boardroom: The Psychology of Leadership Derailment
(2009). Professor Furnham is a Fellow of the
British Psychological Society and is among the
most productive psychologists in the world.
References
1. Furnham, A. (2014). Backstabbers and Bullies. London:
Bloomsbury
2. Furnham, A. & Taylor, J. (2011). Bad Apples. Basingstoke:
Palgrave MacMillan
3. Greenberg, J. (1993). Stealing in the name of justice:
Informational and interpersonal moderators of theft reactions
to underpayment inequity. Organizational Behavior and Human
Decision Processes, 54, 81-103.
4. Mars, G. (2006). Changes in Occupational Deviance. Crime,
Law and Social Change, 4455 (4), 283-296.
5. Mars, G. (1984). Cheats at Work. London: Unwin.
73
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About the Author

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