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Roots schmoots

A generation of globalised, jet-set MBAs are just starting to take over family businesses. But if they ignore the importance of place, they’ll lose something very valuable indeed.

Step into a McDonald’s in Japan and, if you are American, you might get a bit of a surprise. While the branding will be familiar, the menu will be subtly different. Teriyaki McBurgers and green tea milkshakes feature prominently. In India, on the other hand, you might be tempted by a McAloo Tikki Burger. In the Nordic countries, a burger on rye bread. And during Ramadan, fasting customers who slip beneath the Golden Arches across the Islamic world can nibble on dates and sip milk. McDonald’s, once seen as the epitome of faceless global homogenisation, has adapted its products to suit local tastes.

This is a perfect example of “global place”, as defined by a book called All Business Is Local, by John A Quelch, the dean of the China European International Business School, and consultant Katherine E Jocz. They define six types of place in the book, aiming to show that even in a global marketplace the local matters. For example Real Madrid, the world’s most profitable football club, borrows some Madrileno grandeur and glamour. Even a product as placeless as Google is touched by freewheeling Silicon Valley hip. Place matters.

This surely chimes with many family firms, which are often rooted in specific places. For example take Bob Rich, chairman of Rich Products, a food business based in Buffalo in New York state. Rich says that he has been approached many times by other states trying to tempt him to relocate, offering lower taxes. But his is a Buffalo business and he stays put.

British beer

Then there’s British brewer Shepherd Neame, which has been making beer since 1608, and makes much of being from Kent, where it runs 250 pubs, uses 1,500 local suppliers and employs 4,500 people. Many Italian luxury goods firms wouldn’t dream of asking Chinese workers to make their products. An endless number of firms in the US, Germany and other family business-heavy economies can tell the same story.

These businesses have roots. Of course, they sometimes use that in their marketing – especially Italian luxury firms – but these roots are not just a glossy illusion. Their rootedness gives them something valuable, if intangible. Firstly, businesses with roots often use local suppliers and know that their fates are intertwined. Secondly, they know their workforce – often by name – and are part of local life. This allows these businesses to achieve their wider aims of nourishing communities and helping people to work in businesses they can be proud of. Their roots give them soul.

Roots are a good thing, but roots are under threat. The modern generation of international MBAs who are coming into positions of power at family firms often do not have the same connection to place as their ancestors. That’s not surprising. Fifty years ago their grandfathers probably never worked abroad – maybe never even went abroad.

They grew up in the town or city where the business was based and often felt that their destiny was intimately entwined with their factory, their plant, their home. Their grandchildren, in contrast, probably speak at least two languages fluently, studied at the world’s best schools and feel equally at home lounging in an infinity pool in Dubai, a New York skyscraper, or a shiny new factory in Shanghai. They can’t possibly feel as rooted as their forebears did.

So are businesses losing their roots, and with them their soul? We might be starting to see the first hints. Fiat Industrial, the heavy vehicles arm of the Italian-as-salami Fiat empire, which is controlled by the Agnelli family, recently said that it will list its business in the US. A secondary listing is planned for Europe, but Italy is not the default choice. Fiat insists that it will never leave its native country, but Italian eyebrows were raised.

Ancestral pull

It’s possible that John Elkann – the 36-year-old head of the Exor holding group which controls Fiat and who has worked in England, Poland, France and the US – doesn’t feel quite the pull of his ancestral soil as previous generations did. Fiat is a long way from losing its Italian identity, but it is no longer unthinkable.

Then there is German publishing group Bertelsmann, soon to come under the control of 46-year-old Christoph Mohn. He worked in New York from 1992-94 at the BMG record label, then was a management consultant at McKinsey before founding the Lycos internet group. He sits on Lycos boards in Italy, Spain, the Netherlands, Armenia and the UK. Bertelsmann recently sunk €50 million into a company that supplies online education in BRIC countries. It’s thought that it will increasingly focus on web publishing.

There are benefits to being an internationalist. For American and European businesses, growth these days means international growth. The new breed of next gens are trained for that. But if they lose their roots they will lose something else too.

It’s tempting to say that we now live in a frictionless, networked world where all you need for success are a command of English and an MBA. But roots have their benefits. Roots give you something that can’t be replaced by any amount of cheap Chinese labour. Even in the silicon-powered, outsource-crazy twenty-first century, you gotta have soul.

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