Think local, act global

By Tarun Khanna

Much of my academic work has focused on institutional context. With my colleague Krishna Palepu, I’ve explored the idea that developing countries typically lack the “specialised intermediaries” that allow new enterprises to reach a broad market: courts that adjudicate disputes, venture capitalists that lend money, accreditation agencies that corroborate claims and so on. Over time, these voids are filled by entrepreneurs and better-run governments, and eventually the country “emerges” with a formal economy.

Contextual intelligence requires moving far beyond an analysis of institutional context into areas as diverse as intellectual property rights, aesthetic preferences, attitudes toward power, beliefs about the free market and even religious differences. The difficult part is differentiating between universal principles and their specific embodiments, and being open to new ideas.

Businesses that have achieved success in one market invariably have tightly woven operating models and highly disciplined cultures that fit that market’s context — so they sometimes find it more difficult to pull those things apart and rebuild than other companies do. Shifting into a new context may be straightforward if just one or two parts of the model need to change.

In addition, executives rarely understand precisely why their operating model works, making reverse engineering all the more difficult, even for highly successful companies.

From “Contextual Intelligence”