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Best Business Books 2002: New Europe

One Market, Many Cheeses

(originally published by Booz & Company)

The launch of the euro marked for many the emergence of a new Europe. In fact, it was simply the most outward and visible sign of a long-term process of integration in the region. Since 1992, reforms undertaken by the European Union (E.U.) have been aimed at creating a single market — united by common regulation, taxation, tariffs, and the free movement of goods and people across national borders. Global businesses have (often) worked toward the same ends, rolling technologies and brands across borders and building pan-European organizations to manage them.

Capitalism, a major force of change in Europe, which brought about the rise of former U.K. prime minister Margaret Thatcher and the fall of the Berlin Wall, is a less tangible but probably more powerful and pervasive influence than single-market political and economic reforms. True, state-owned industries have been privatized and protected industries opened to competition. But the effect of unfettered market competition is even broader. As Richard Roberts and David Kynaston write in City State: How the Markets Came to Rule Our World (Profile Books, 2001), their history of the last 20 years of London’s financial markets, political debate has given way to “‘market populism,’ the axiomatic assumption that the will of the people and the will of the market are identical.”

On the surface, the new Europe that has resulted from all these changes looks more like the U.S. than it ever has before. Witness: a single market, a single currency; public regulation and private capital; individual initiative and personal responsibility. Shops, newsstands, and television programs are full of names familiar to Americans. Communication is quick and cheap. Credit cards are accepted, and cash is available from ATMs. The English language can be used for most transactions in most countries.

But appearances are deceiving. Europe is, in reality, anything but a single market. And it certainly isn’t the U.S. From a distance, one can forget that (with the notable exception of France) most European states are federations: Germany, Switzerland, Italy, Spain, Belgium, and the United Kingdom. Hugo Young writes in This Blessed Plot: Britain and Europe from Churchill to Blair (Overlook Press, 1999), his history of the E.U. seen through British eyes, “Nationalism remains a force, perhaps the strongest force among people who were given any encouragement to express it.”

The rise of the E.U. and the end of East–West tensions have diminished the role of traditional political boundaries, allowing this regionalism and nationalism to resurface. Even within more homogeneous countries, regional differences translate into distinct values and cultures, and Europe has neither the internal migration nor the national media that stir America’s melting pot. From biscuits to boardrooms, distinct local tastes influence every aspect of business.

Managing Complexity
The challenge of managing in the new Europe is to come to terms with its growing complexity — its increasing fragmentation at all levels: political, social, and cultural. An American executive, even the most ardent Europhile, cannot hope to understand all of Europe’s rich diversity. The key is to understand that it is diverse and then to create and lead the businesses and organizations to succeed in that diversity.

No one has written the definitive guidebook to managing in the new Europe. It’s probably impossible, as the dual forces of integration and populism are still reshaping the markets. It’s also unnecessary. A growing number of executives are trained to operate regionally or globally by the world’s leading business schools. And English has long been the lingua franca of the worlds of science and technology. Only accounting and human resources/labor relations remain arcane national arts requiring an expert native guide. To be sure, no book can prepare you for the subjective judgments of German reserve accounting or the mind-numbing complexity of dismissing Italian staff members. Still, any number of recent books collectively present a variety of guidance on developing strategy and managing in the new Europe. Some are quite literary, presenting vivid portraits of individual country cultures; others offer more practical advice about managing in them.

As always, history is one of the best guides to the future. In The Living Company: Habits for Survival in a Turbulent Business Environment (Harvard Business School Press, 1997), former Royal Dutch/Shell Group of Companies executive Arie de Geus studied organizations that have endured for centuries and concluded they “combined sensitivity to their environment with a strong sense of identity.” This allowed them to engage with and adapt to local markets. Indeed, micromarketing — appealing to distinct subcultures and addressing segments of one — is the mantra of the modern marketer, which is certainly as true in Europe as it is in the U.S. (See “Arie de Geus: The Thought Leader Interview,” s+b, Second Quarter 2001.)

De Geus’s conclusions are confirmed by recent cautionary lessons. MTV initially launched an American-dominated European channel, only to lose share in Germany to VIVA, the local offer. Euro Disneyland was denounced by the French as a “cultural Chernobyl.” Despite its popularity with consumers, McDonald’s is reviled as the ugly face of globalization. Monsanto’s field trials of genetically engineered crops are still being challenged as a threat to the English countryside.

By combining sensitivity and identity, MTV and Euro Disneyland have recovered. MTV now has an effective blend of local and global; it’s unmistakably German, Italian, and British, as well as unmistakably MTV. Euro Disneyland was relaunched in 1994 as Disneyland Paris (and is now called Disneyland Resort Paris), with wine and better food available in the now-popular park.

Hugo Young’s This Blessed Plot captures the complex interaction of forces and personalities that shaped today’s political Europe. What is more important, he argues, is that the forces for integration are actually fading. At its start, European integration was “the product of external influences … Moscow driving Western Europe together for its security, Washington encouraging this process as a precondition of the Marshall Aid that rescued Europe’s economies.” Politicians, whose motives ranged from military stability to personal achievement, carried it forward. Local considerations were as important as the grand design. Among many, but not all, there was a genuine desire for cultural and social as well as political and economic integration. However, with the end of the Cold War, “Europe, with the fiery exception of EMU [European Monetary Union], looked as though it was cooling down to an atmosphere dominated by compromise and endless, boring, relatively uninflammatory pragmatism.” The grand design of the single market is being worked out in the details of regulation and harmonization, and the E.U. budget is mired in the politics of local agriculture. In short, modern Europe is becoming a single administration, not a single nation or a single market.

Global Influences 
The cultural changes — and the changes in the cultures of business — are much greater in the U.K. than on the Continent. Great Britain has always been ambivalent about Europe. From Churchill onward, its politicians have tried to straddle three worlds: the Continent, the Commonwealth, and the Atlantic alliance. As the City of London became the world’s top international financial center, it moved sharply away from the Continent and the Commonwealth. The English language and a history of global trading were important advantages, but the revolution was triggered by deregulation, free exchange, and limits on the power of unions, as well as improving communications and transportation. Walter Wriston, the former Citicorp chairman and CEO, is quoted in City State, “Money only goes where it is wanted, and only stays where it is well treated.” And it was treated better, sooner in London than anywhere else in Europe.

The City is changing Britain. At one level, it has made London one of the most global of cities. Roberts and Kynaston write, “The foreign ownership of much of the City has given rise to comparisons with the Wimbledon championship: a tournament hosted by Britain but dominated by foreign players.” At a deeper level, the commitment to market populism and the acceptance of its implications are changing the very fabric of the nation, they argue. “There have been social, cultural and even moral ramifications: upon welfare and social harmony; upon outlooks and horizons; and upon values and ambitions.” (It is this sort of insight that makes City State my book of the year for anyone seeking to understand the new Europe.)

These changes are distancing Britain from Europe, socially and culturally as well as politically. Adam Gopnik explains in Paris to the Moon (Random House, 2000), “by 1995 … London, of all places, had become the town where people went to see new art and taste new cooking. For the first time in modern history it was actually possible to live in Paris for comfort and bourgeois security and travel to London for food and sex.”

Gopnik’s Paris to the Moon, a modern-day Innocents Abroad, is a good beginner’s guide to the practical realities of cultural differences. But it also shows the response to globalization of countries that are highly protective of their culture. His experiences, both in daily life and in reporting on France’s politics, confirm that “in the last five years of the century, as the world has become, by popular report, more ‘globalized’ than it has ever been before, France has become more different…. From the kind of sympathy that labor unions get from their public to the length of time you take to eat lunch, the way it’s done in Paris now is not the way it’s done in Adelaide or Toronto or Los Angeles or Tempe or Hong Kong.”

While the writing is lovely, the judgmental tone and emotional distance of Paris to the Moon leave it unsatisfying. In contrast, Tim Parks’s A Season with Verona: Travels around Italy in Search of Illusion, National Character, and ... Goals! (Arcade Publishing, 2002) is neither distant nor judgmental. Parks simply immerses himself in Italy and describes what he sees. Having lived and taught there for 20 years, he spent a full year following Verona’s football (i.e., soccer) team as it fought to stay in competition. His is a fan’s-eye view of Italy: the small tight community of fans in the curva; the cities’ historical animosities and linguistic distances; the interplay of politics, religion, business, and sport. In particular, he wrestles with the issues of identity, immigration, and racism, the new highly volatile forces in European politics. But the author is most useful to business readers because he takes us out of the homogenized global culture of international finance where most CEOs live.

Although a new and different Europe is emerging, the challenges of managing cultural diversity remain the same. Fons Trompenaars and Charles Hampden-Turner are the acknowledged masters of understanding and managing the impact of cultural differences, and Riding the Waves of Culture: Understanding Diversity in Global Business (McGraw-Hill, 1997) is a fine introduction to their thinking. Their thesis is simple: “There are, indeed, many products and services becoming common to world markets. What is important to consider, however, is not what they are and where they are found physically, but what they mean to the people in each culture.… If business people want to gain understanding of and allegiance to their corporate goals, policies, products, or services wherever they are doing business, they must understand what those and other aspects of management mean in different cultures.” Trompenaars and Hampden-Turner characterize cultures in terms of attitudes toward relationships, time, activities, nature, and humanity. Having categorized and embraced these fundamental differences, they devote the bulk of the book to practical tips on how to reconcile the seemingly unresolvable differences along these dimensions.

The authors conclude that there is no single way to do business and that successful organizations recognize and adapt, ending where Arie de Geus began. As fewer companies work in environments they control, de Geus argues, “continuous, fundamental changes in the external world — a turbulent business environment — require continuous management for change in the company. This means making continuous fundamental changes in the internal structures of the organisation.” Every successful company “managed to effect its dramatic changes without sacrificing its corporate identity or corporate life in the process” (author’s emphasis).

Politics and Pastimes
A food guide might not seem like essential reading for a global manager, but there are two reasons to recommend Patricia Wells’s The Food Lover’s Guide to France (Workman Publishing Co., 1987). First, she addresses the basic questions of Europeanization. “I searched for answers to two basic questions.… How, in this homogenized world, has France managed to retain its undisputed role as the maker, the shipper, the ruler of Western cuisine … [and] can all this continue?”

With a journalist’s rigor, she records in detail France’s regional differences and how passionate individuals reflect them in local cuisine. In doing so, she also makes clear France’s emotional commitment to the local farmer and artisan producer — which continues to cause difficulties for the E.U.’s common agricultural policy.

The second reason to read Wells’s book is much more important. In more than 25 years of doing transatlantic business, I’ve never seen an American executive succeed who didn’t enjoy Europe or find pleasure in simply being here. I’ve known such businesspeople to climb mountains, visit bookshops, attend operas, or, most often, eat and drink. These interests draw them out of their hotels to engage the local milieu. And their excitement is transmitted to the organization. Wells’s prose will lure you into a patisserie in Provence or a fromagerie in Normandy, making the diversity of France come alive.

But no single book can capture the many markets and cultures in Europe. The best volumes span politics, society, and management. For each discussed here, there is another equally good one, addressing the same issues in another country. Just as Patricia Wells is a wonderful guide to French food and culture, Marcella Hazan has a mouth-wateringly informative perspective about Italy. And Adam Gopnik’s Paris to the Moon is no more or less revealing than Hubert Védrine’s France in an Age of Globalization (Brookings Institute Press, 2001). Tim Parks’s A Season with Verona uses sports (specifically soccer) as a window into culture and society. Nick Hornby’s Fever Pitch (Victor Gollancz Ltd., 1992), Jimmy Burns’s Barca: A People’s Passion (Trafalgar Square, 1999), and Simon Kuper’s Football Against the Enemy (Orion Books, 1996) use the same sports vehicle to provide insights into the U.K., the Catalan region of Spain, and the whole of Western Europe, respectively.

The wide variety of books about Europe’s many subcultures is ultimately just another affirmation that even with forces of unity, the new Europe is not, nor will it ever be, a single Europe. (The euro may, in retrospect, be seen as the high-water mark of integration.) Jean Monnet, the founder of the European Community, may have anticipated this. He is quoted by Fons Trompenaars as saying, “If I were again facing the challenge to integrate Europe, I would probably start with culture.” However, the creators of the E.U. did start with politics, leaving culture an unchecked, equally powerful force shaping a Europe that is richer for retaining its diversity.  

Reprint No. 02407

David Newkirk,
David Newkirk is a senior vice president of Booz Allen Hamilton based in London, where he specializes in strategy and organizational issues for multinational clients. Mr. Newkirk has worked with industry leaders on all aspects of strategy, organization, marketing, technology, and operations.
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