Cultural Intelligence is the enabler of a firm’s global innovation strategy, says Shirish C Srivastava.
According to Ang and Van Dyne (2008), Earley and Ang (2003)*, “cultural intelligence refers to an individual’s ability to function effectively across cultures—national, ethnic, organizational, as well as other types of culture.” This aspect assumes more relevance as organizations focus more on innovation to succeed in global markets.
The last decade has brought with it, perhaps, more change and development than the past fifty years combined. It is no longer enough for an organization to be sustained only through business taking place within its home market. Increasingly, companies of all sizes are faced with the need to share their products and services with an international audience.
With that has come the need for companies to be present in the global markets. Modern cross-border business involves companies setting up satellite offices overseas, or engaging a global workforce who, thanks to modern technology, can work remotely from their homes regardless of their location, communicating instantly with their colleagues as if they sat in the next cubicle in the office.
Though the technology certainly exists, and is affordable enough for the vast majority of companies to employ, simply securing the means to connect with colleagues across the globe does not automatically guarantee success. Managers face a greater challenge in effectively communicating with dispersed colleagues, clients, and customers from diverse nations and cultures, and finding ways to connect such individuals to the company, to each other, and to the world around them.
Unsurprisingly, cross-cultural management is a top priority for organizational leaders looking to leverage the full potential of their global teams and make an impact in a new market. Developing a greater ‘cultural intelligence’ (CQ) can be an effective method for helping such professionals bridge the discontinuities between them.
CQ, a theory popularized by management experts and organizational psychologists, pertains to the capability of a person to function effectively in situations characterized by cultural diversity (Ang et al, 2006; Earley & Ang, 2003). It suggests that truly appreciating an individual’s cultural background in an intelligent way is vital for both individual and organizational success in an unfamiliar environment.
The development of CQ is conducted across four areas (Ang & Van Dyne, 2008):
■ CQ motivation: focusing on building a person’s interest and confidence in functioning effectively in culturally diverse settings
■ CQ cognition: which builds a person’s understanding of different cultures and how this can impact business relationships, processes, language, and behavior
■ CQ metacognition: concerning how to build an effective strategy keeping in mind the cultural sensitivities at play and
■ CQ behavior: which focuses on a person’s ability to act, and be flexible in adapting her approach, their behavior, and own language in line with the above areas, to best ensure business success
There are, of course, plenty of instances where a lack of CQ has been a contributing factor to a failed business or product. A particularly well-known example comes from car manufacturer General Motors, which in the 1980s suffered embarrassment when attempting to launch the new Nova car in Spain, without taking the time to get to know the market first. If they had, the executives at GM might have discovered that the word ‘nova’ when translated into Spanish literally means ‘not going’—not exactly a ringing endorsement for a vehicle. Expectedly, the Spanish market remained unconvinced.
Cross-cultural management is a top priority for organizational leaders looking to leverage the full potential of their global teams and make an impact in a new market.
CQ is best developed through exposure, which is why, in October, I accompanied a team of executives from European IT services corporation ATOS to visit Mumbai and Pune, as part of an executive education programme provided by HEC Paris business school. The aim was to enable them to engage directly with local business leaders and gain a first-hand perspective on the realities of conducting business in a wildly diverse, fast-moving, and increasingly important economy.
It is not just the operations inside of organizations which have changed in the last decade, but also the business landscape they are required to work within. Emerging economies such as India’s have disrupted the global order as they grow in prominence and continue to do business on their own terms. It is no longer commonly accepted that the only way of doing global business is to follow the structure set by the West. The companies emerging from markets which may well prove to be the established global powers of the future have upset the status quo for even the most secure of Western multinationals.
Managers from Europe and the US must experience and understand the nuances of diametrically opposite cultures. India offers a unique opportunity to those from the West in understanding, absorbing, and internalizing the dynamics of these differences because of the vast cultural distance that exists. And also because of the potential opportunities that exist in India—not only as a resource provider for skilled talents but also as a dynamic and growing market.
This enhanced quality of CQ could also help businesses tackle another vital element for success on the global stage—innovation.
As the playing field becomes ever more global, the blurring of geographical lines means greater levels of competition for all who come to the table. Therefore, organizations must not only offer a valid product or service to their customers, but also be able to tailor their strategies for innovation and growth beyond their immediate geographical locations, to better target a global audience.
Prior research on innovation has shown that global teams spanning across different cultures have the potential to be highly creative because of the diverse viewpoints and perspectives they bring to the table (Shirish et al. 2015). However, though cultural differences amongst such team members can indeed foster high levels of creativity, such diversity can also deter the smooth flow of communication across them. Recent reports from international agencies such as the Economist Intelligence Unit (EIU) reveal that more than 70% of international team projects fail due to seemingly unsurpassable cultural differences among members.
A solid CQ can prove instrumental in both fostering and salvaging innovation because of the enhanced understanding it provides on how culture can influence the innovation mechanisms at play in different parts of the world. It can also aid organizations in designing a holistic global innovation strategy (Srivastava et al. 2013; Srivastava 2016) by helping them understand what potential customers in a new market really need to receive from their services.
When it comes to getting a new innovation off the ground, for organizations operating in, or looking to set up within an emerging economy, price is often the key determinant for success or failure. Developing economies with large populations typically face significant constraints on resources when their companies attempt to expand their operations, making the prospect of innovation seem out of reach for many. Until relatively recently, the influence the rest of the developed world held over the global business landscape meant innovation was viewed as a means for creating new state-of-the-art products and services—
India offers a unique opportunity to those from the West in understanding, absorbing, and internalizing the dynamics of these differences because of the vast cultural distance that exists.
something which required a level of expenditure that businesses in such economies simply could not match.
In response, innovators in the developing world began looking for alternative routes to growth, developing new products and services at an affordable price and with a quality that could compete with better resourced global giants (Srivastava and Shainesh 2015). Such frugal innovations have, over time, enjoyed such success that the process has been adopted by larger firms in their efforts to penetrate emerging markets.
A key example, cited by The Economist in an article exploring frugal innovation, concerns General Electric which, despite creating cutting-edge intensive care tools and body scanners at its healthcare centre in Bengaluru, counts a far simpler device amongst its greatest innovative successes. The Mac 400—a hand-held ECG device— transformed what had previously been a bulky machine into a small, lightweight tool with only the very necessary functionality. The smaller, much cheaper device was widely adopted across India as it significantly improved access to healthcare and check-ups for a financially limited population by reducing the cost of an ECG test to as little as $1.
Similarly, Tata Steel became the lowest cost producer of carbon steel in the world by taking the time to research lower cost, slightly lower quality raw materials for production from India, rather than sourcing more expensive materials overseas, and used these to manufacture steel, which both met safety regulations and was affordable to local developers. The move enabled them to access a wider market, as well as turn a profit and help to support the local infrastructure in more ways than one.
This non-linear culture of innovation better connects the company to the customer by taking a backwards approach, first considering the needs of the customers they aim to serve and working from there. Often, this process employs intuition and emotion—senses developed through a well-defined CQ. To do this, executives must be present on the ground, experiencing a business culture first hand and gaining a perspective that technology, for all its advancements, simply cannot provide. Opportunities for global professionals to leave the confines of their offices to get to grips with business at a grassroots level, as the executives of ATOS have done through executive education, should always be embraced.
As much as global organizations can be looked to by smaller organizations as a robust case study for growth and success, such organizations have, arguably, just as much to learn from the developing world in order to tailor their management and innovation strategies to better fit the emerging markets of the future. Above all else, the ability to communicate and collaborate will ultimately determine business success or failure. ■ References * The Clute Institute The Impact Of Metacognitive, Cognitive And Motivational Cultural Intelligence On Behavioral Cultural Intelligence (International Business & Economics Research Journal –Third Quarter 2017 Volume 16, Number 3) Ang, S. and Van Dyne, L. (2008) Conceptualization of cultural intelligence: definition, distinctiveness, and nomological network. In Handbook of cultural intelligence: Theory, measurement, and applications (Sharpe ME, Ed.), (pp. 3–15). New York, New York: M. E. Sharpe. Ang, S., Van Dyne, L. and Koh, C. (2006) Personality correlates of the four-factor model of cultural intelligence. Group & Organization Management 31(1), 100–123. Earley PC and Ang S (2003). Cultural intelligence: Individual interactions across cultures. Palo Alto, California: Stanford University Press. Shirish, A., Boughzala, I., & Srivastava, S. C. (2015). Bridging cultural discontinuities in global virtual teams: Role of cultural intelligence. Proceedings International Conference on Information Systems, Dallas. Srivastava, S.C., and Shainesh, G. (2015). Bridging the Service Divide through Digitally Enabled Service Innovations: Evidence from Indian Healthcare Service Providers. MIS Quarterly, 39(1): pp. 245-267. Srivastava, S. C., Mithas, S., & Jha, B. (2013). What is your global innovation strategy?. IT Professional, 15(6), 2-6. Srivastava, S. C. (2015). Innovating for the future: charting the innovation agenda for firms in developing countries, Journal of Indian Business Research, 7(4), pp.314-320. The Economist, “First Break all the Rules”, published April 15, 2010: http://www.economist.com/node/15879359
The ability to communicate and collaborate will ultimately determine business success or failure.