Cultural Intelligence II: Why We Need Cultural Intelligence

A young American man devoted a lot of attention to a Japanese woman visiting his community, including extreme courtesy — taking her arm to cross the street, and so on. The young woman later told her friends excitedly that she now had an American boyfriend. In fact the American, who was from the deep south of the United States where many families pride themselves on effusive courtesy, was not interested in the Japanese girl as a prospective girlfriend. He had merely tried to be polite, in a manner that came naturally to him in his own in-group. Unfortunately, the same manner of behavior practice by a member of the Japanese woman’s in-group would definitely have been evidence of a romantic interest.

from Cultural Intelligence by David C. Thomas and Kerr Inkson

Without cultural intelligence, we are just as likely as the man in the above scenario to take actions that will be interpreted completely opposite to our intent by the other parties. So what is cultural intelligence? Succinctly, it’s an individual’s ability to engage successfully in any environment or social setting with other individuals of varied cultural backgrounds. But what does this mean? It means that we have to recognize our cultural failures and overcome them.

What kind of cultural failures? The kind pointed out by Thomas and Inkson, namely:

  • our obliviousness to the key features and biases of our culture,
  • our uneasiness when interacting with those who are culturally different,
  • our inability to explain the behaviour of others who are culturally different,
  • our failure to recognize knowledge that can be transferred from one culture to another,
  • our lack of awareness when our culture is influencing our behavior, and
  • our inability to adjust when living and working in another culture.

Once we recognize these failings, we understand the need to become more culturally intelligent, to increase our CQ or cultural quotient. We can start by switching off cultural cruise control and becoming more mindful of our cultural interactions. Namely, we can:

  • become aware of our own assumptions and ideas,
  • tune into the assumptions and ideas of others by noticing what is apparent about their actions,
  • use all of our senses to perceive a situation,
  • view a scenario from multiple perspectives,
  • become aware of the context of the interaction,
  • create mental maps of the personalities and backgrounds of others to assist us,
  • seek out fresh information to correct and confirm the mental maps, and
  • develop empathy for the other person.

Once we do this, we are well on our way to becoming culturally intelligent, a state of being that we will discuss further in the next post. In the interim, I would encourage you to refer to Thomas and Inkson’s introductory text on Cultural Intelligence or their follow up on Living and Working Globally. While the first book in particular does not contain much in the way of specifics for dealing with a particular culture, it’s a great start for those of you who want to get the right mindset necessary to become culturally intelligent.

This series is edited by Dick Locke, SI’s resident expert on International Trade, author of “Global Supply Management — A Guide to International Procurement” (which was the definitive guide for almost a decade), and President of the Global Procurement Group and Global Supply Training which regularly gives seminars on International Trade and working with International Cultures.

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Webinars This Week

The Sourcing Innovation Resource Site, always immediately accessible from the link under the “Free Resources” section of the sidebar, continues to add new content on a weekly basis.

The following is a short selection of webinars THIS WEEK that might interest you:

Date & Time Webcast
2010-Oct-5

 

13:00 GMT-04:00/AST/EDT

Accelerating Recoveries and Boosting Profits: A New Approach to Profit Recovery

Sponsor: Gold Prairie

2010-Oct-5

 

14:15 GMT/WET

Embracing Change – Are You A Change Champion?

Sponsor: A2Z HR

2010-Oct-5

 

8:00 GMT-07:00/MST/PDT

Medical Products 2.0 – Sustainability Scorecards and Supply Chain Optimization

Sponsor: Supply and Demand Chain Executive

2010-Oct-6

 

16:00 GMT/WET

The Future of Service Management

Sponsor: Noventum

2010-Oct-6

 

15:00 GMT/WET

Supplier Performance Management

Sponsor: Biznet Solutions

2010-Oct-7

 

14:15 GMT/WET

How can PLM support your business?

Sponsor: Junge PLM Consulting Ltd.

They are all readily searchable from the comprehensive Site-Search page.

Auto-Classification is NOT the Answer, Part I

Today’s post is co-authored by Eric Strovink of BIQ.

Not a month doesn’t go by these days without a new spend classification / consulting play hitting the market. Considering that true spend analysis is one of only two sourcing technologies proven to deliver double digit percentage savings (that average 11%), one would think this would be a good thing. But it’s not. Most of these new plays are focusing on automatic classification, analysis, and reporting — which is not what true spend analysis is. True spend analysis is intelligently guided analysis, and, at least until we have true AI, it can only be done by a human. So what’s wrong with the automatic approach?

1. Automatically Generated Rule Sets are Difficult to Maintain

Almost all of today’s auto-classifiers generate a single level rule set that is so large that the size alone makes it unwieldy. This is because auto-classifiers depend on string matching techniques to identify vendor names or line items. But when a new string-matching rule is added, what is its impact on the other rules? There is no way to know other than to replay the rules every time. This quickly exhausts the patience of anyone trying to maintain such a rules set, and produces errors that are difficult to track down and essentially impossible to fix. Worse, what happens when you delete a rule? The process is intrinsically chaotic and unstable. We get calls all the time from users who have thrown up their hands at this.

But with a layered rule set (more on this in part II), where each rule group takes priority over the rule sets above it, the average organization can achieve a reasonable first-order mapping result with only a few hundred GL mapping rules and a few hundred vendor mapping rules, along with a handful of rules to map vendor + GL code combinations in the situations where a vendor supplies more than one Commodity (and an even smaller number of exception rules where a vendor product or service can map to a different Commodity depending upon spend or use). If finer resolution is required, map more GL codes and more vendors; or map just the GL codes and vendors that are relevant to the sourcing exercise you are contemplating. There’a a reason for the 80-20 rule; it makes sense. Mapping a vendor like Fred’s Diner is irrelevant. Mapping a vendor like IBM correctly and completely, with full manual oversight and control, is critical.

2. Finding Errors, Performing Q/A, Avoiding Embarrassment

How can a spend cube be vetted? It’s actually quite easy. Run a “Commodity Summary Report” (originally popularized by The Mitchell Madison Group, circa 1995). This report provides a multi-page book, one page per Commodity, showing top vendors, top GL codes, and top Cost Centers, ordered top-down by spend. Errors will jump out at you — for example, what is this GL doing associated with this Commodity? Does this Vendor really supply this Commodity? Does this Cost Center really use this Commodity?

Then invert the Commodity Summary Report to book by Vendor, showing top GL codes, top Commodities, and top Cost Centers. Errors are obvious again; why is this Commodity showing up under this Vendor? What’s the story with this GL code being associated with this Vendor? Then invert the Commodity Summary Report to book by GL code, showing top Vendors, top Commodities, and top Cost Centers. When you refine the rules set to the point where nothing jumps out at you using any of these three views, then congratulations: you have a consistent spend map that will hold up well to any outside examination. If someone crawls down into the weeds and finds an inaccurate GL mapping, simply add a rule to the appropriate group (probably Vendor), and the problem is solved. If the mapping tool is a real-time tool, as it ought to be, the problem can be solved immediately, in seconds.

[N.B. We encourage you to run the Commodity Summary Report on the results of your automatically-generated rules set. But please do it only if you are sitting down comfortably. We don’t want you to hurt yourself falling off the chair.]

3. Automated Analysis is NOT Analysis

All an automated system can do is repeat a previously identified analysis. Chances are that if the analysis was already done, the savings opportunity was already found and addressed. That means that after the analysis is done the first time, no more savings will be found. The only path to sustained savings is when a user manually analyzes their data in new and interesting ways that yield new and previously unnoticed patterns or general trends with outliers well outside the norm — as it is those outliers that represent the true savings opportunities. And sometimes the only way to find a novel savings opportunity is to allow the analyst to follow her hunches to uncover unusual spending patterns that could allow significant savings if normalized.

4. True Analysis Goes Well Beyond AP Data

Last but not least, it must be pointed out that the bulk of the (dozens of) spend analysis cubes that need to be built by the average large company are on PxQ (price x quantity) data, not on A/P data. In the PxQ case, classification is totally irrelevant; yet PxQ analysis is where the real savings and real insights occur. More on that in an upcoming Spend Analysis Series.

In our next post, we’ll review the final reason that auto-classification is not the answer.

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Has the Outsourcing Craze Finally Stopped?

According to a recent article in the CPO Agenda, in the recessions and its aftermath, companies are re-examining the business cases for keeping processes in-house or outsourcing them. It’s “return of make or buy”. And it’s about time.

Not that I have anything against outsourcing, if it’s the right function to the right provider in the right location at the right price point, I just have something against outsourcing everything you can put your hands on. At some point, there’s more being done outside your four walls than inside. At this point, chances are that if you haven’t already outsourced most of the value your organization produces, you’re pretty close to that point. And once most of the value is elsewhere, what reason do people have to invest and support your company?

If Back Office Boys are handling your back-office tasks, Marketing Madmen are handling all your marketing and advertising, Rocket Resellers are handling your sales and account management, Stylized Support is doing your support and CRM, Custom Manufacturing Inc is doing your product design and production, and Total 3PL is doing all of your forward and reverse logistics, what are you doing? Okay, you’re orchestrating, but how are you any different from anyone else with the same skill set? So if someone else comes along, builds the same relationships, and finds a way to produce a competing product 20% faster, 20% better, and 20% cheaper, how long are you going to last?Not long. Not to mention, if you are producing 100% custom products, or 100% (very) high volume products, there’s a good chance you can do it cheaper in-house if you build and retain differentiating expertise.

And if you have to invest capital in a supplier’s business to keep your own afloat (as 9% of CPOs in a recent survey by CPO Agenda had to do), or acquire a failing and/or strategic supplier (as 3.6% had to do), it kind of kills the argument for (going overboard on) outsourcing, doesn’t it?

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ISM’s Prediction for the Supply Chain of the Next Decade

A recent article over on the ISM site on “Globalization: An Endeavour in Fluidity” laid down some predictions for supply chains in 2010 and beyond which were pretty interesting as some of them indicate that supply chains will finally in a direction they should have moved five years ago (as regular readers of Sourcing Innovation and Spend Matters are well aware).

The six predictions made were the following:

  • Networks will be demand basedinstead of being inventory-focussed with the intention of pushing as much product into the market. Every market becomes saturated at some point. A supply network has to be demand based to be profitable over the long term. And sometimes, selling less at an optimal price point is more profitable than selling more.
  • Debt load will hinder, advance initiativesWhile many companies will still file for bankruptcy, those companies that have been aggressively working to eliminate debt will be left with more growth possibilities, which will allow them to fund new supply chain initiatives.
  • A shift in the value of innovationThe focus will start to shift away from LCCS (Low Cost Country Sourcing) to LCCI (Low Cost Country Innovation) as companies shift their focus to harvesting the innovation potential in the LCCS markets.
  • Sourcing markets become buyersAs the emerging markets gain a greater share of global purchasing power, organizations will repurpose their networks to supply these markets with goods and services in addition to sourcing from them.
  • Corporate responsibility as a competitive advantageSustainability and corporate responsibility is front and centre in the thoughts of every consumer these days. Those companies seen to be responsible now enjoy greater mindshares than their competitors, and this is leading to greater market shares as well.
  • United States a viable sourcing optionDue to the weakened dollar, the US will continue to remain an attractive location for foreign investment. Furthermore, home cost country sourcing will begin to take hold as many firms realize that it’s just as cost effective to source and produce locally, as it is to source and produce half-way around the world once you take into account rising transportation costs (as oil prices rise again), uncertainties, the weakened US dollar, and the savings from government subsidies and tax-breaks being pumped into the economy to stimulate it.

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