European Business Must Set Aside Old Ways

To compete, Europe's next generation of executives will have to forget past cultural hang-ups and learn integration, says Peter Felix

European executives start with enormous advantages when facing the challenge of transformation: education, commercial cultures, free capital markets, and societies largely run by the rule of law. But in exploiting those advantages they must cast off the significant disadvantages of nationalistic attitudes and cultural legacy that can so easily get in the way of progress. Indeed, recent high-profile hand-wringing about the move of "outsiders" into the EU market might suggest that the European cultural legacy is putting up roadblocks to success.

For example, Indian magnate Lakshmi Mittal's bid for the European Arcelor has brought on a great deal of public fretting about what his move means for the future of European enterprises. And with that have come charges of racism and protectionism leveled at certain European institutions and players.

The worry about how "outsiders" are encroaching upon European turf is illustrated not only in the Mittal-Arcelor story. U.S. private equity firms have been accused of stripping the assets of some German industrial companies. In addition, many in Europe were not pleased by Alcatel's purchase of U.S.-born-and-bred Lucent.

TRADITIONAL VIEW.

  All these objections to European companies taking high-profile roles in the global marketplace are indications of pressure building inside many EU executive offices. Can tomorrow's European business leaders use the strength of their seasoned European business viewpoint to properly influence and drive global business?

Some believe Europe's next generation of executives is unprepared for the challenges ahead. They are rising in the ranks of a European corporation that often embodies and embraces traditional attitudes, inflexible structures, and a culture-centric view.

Failure to change to meet the challenges of a global market—not just the European market—could mean European companies will simply become divisions of global behemoths in Asia and the U.S. Tomorrow's European executives are dealing now with the impact of emerging markets. China, India, and other fast-developing economies are casting off historical and cultural legacies and exploiting their special advantages to the full. They are changing at an unprecedented rate.

INCREASED MOBILITY.

  These rising European executives must definitively transform the European Corporation so it can compete as a seamless cross-border organization that understands cultural and social diversity in its workforce, its customers, and its global partners.

There are some encouraging signs that European business leaders are changing to meet the expanded market challenges. The mobility of executive labor within Europe is gaining momentum. More and more students are studying in each other's countries. Increasingly, European executives are working abroad. English has become the lingua franca of European business—just as a common currency seals commitment and promotes simplicity, so a common language greatly helps to foster collaboration.

Even academic institutions within Europe are changing. In the past, these institutions and universities have not played a significant role in producing European (and global) executives who can think across borders and take a strategic view of world opportunity. Today, some schools are great proponents and practitioners of international thinking and cultural flexibility. INSEAD has established an international campus in Singapore, for example.

COMMITMENT NOW.

  Will the next generation be prepared to shed the legacies that have slowed progress in many parts of Europe? The further we move away from the two World Wars and the historical divisions that ravaged Europe, the sooner this will occur. Younger generations of leaders should break away from the parochialism and prejudice that are the enemy of international understanding and cooperation.

Overall prospects are encouraging but there is not a lot of time. Commitment to European business integration and the training and development of the next generation must take place now. While France, Germany, and Italy agonize over painful change, corporations must get on with the job and invest in their future leaders.

Recently, European nations that opted for action did so because they had little alternative: Britain, the Netherlands, Ireland, and Finland all have been successful in embracing change and discarding traditional attitudes, inflexible structures, and combative socio-economic relationships. The world watches with anxiety to see how not only France, but also Germany and Italy, will handle the huge challenge now that their time for action has come.

As it is with nations, so it is with corporations. Those that flourish do so because they are flexible and move with the times. Those that flounder are those that, while recognizing the need for change, do little about it. The future of European business is squarely in the hands of those that move.