Why Countries and Companies Fail

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Returning from Shanghai, I’ve been sharing with friends and colleagues, my analysis of why China is on the rise, based on my experiences in China and my analysis of what’s happening in American politics.  This weekend, I caught up on a book by Amy Chua to get her perspective. What struck me is how her framework actually applies to many companies in the US.

In Day of Emplre: How Hyperpowers Rise to Global Dominance – and Why They Fall,  Ms. Chua speaks not about great powers or even great powers, but hyperpowers – world dominant powers. This includes the Great Persian Empire Imperial Rome, China’s Tang Empire, the Great Mongol Empire, pre-Enlightenment Spain, the Dutch Republic, the British Empire and the United States. She addresses the problems that The United States is experiencing on the world-stage as China grows and may soon challenge for supremacy.

Her belief is that these hyperpowers grew because of their culture or tolerance. If the Empire grew by conquering nations or opening its door to immigrants, these hyperpowers tolerated religious and ethnic differences of the nations they absorbed and even allowed the people the ability to into their culture. Think of the United States: the great American dream has been that we’re a melting pot in which anyone can rise based on effort and hard work.

What’s interesting is her thesis of why these Empire fall: they lose the tolerance for differences and become defensive as citizens protect their turf.  Think about the current world scene: Iraq had a chance in the past few years to develop a society that accepted its different sects (Shiite, Sunni, and Kurds) as part of one society; instead, they are fighting one another. Many believe the great success of America has been that it’s openly accepted many immigrants and today our politicians who agree we need to reform our immigration laws, can’t even meet together to hammer out an agreement.

The question to consider is how this approach applies to companies who grow through expansion: are they being tolerant of new members and encouraging them to identify with and transform the corporate culture for the future, or not. Today’s “flat world†means that global companies are incorporating people from different cultures – how well are they being integrated into the society and allowed to grow to the top echelons?  A wider variation of generations now populates the workforce than ever before; are they joining forces to grow the company or fracturing into distinct groups?  Through mergers and acquisitions, many companies have grown successful for years – such as Cisco – by effectively incorporating all new members into the growing firm. On the other hand, those who have not been able to bridge the gap – such as SprintNextel – have suffered.

How tolerant to diversity is your company when you take a serious look at employees and the culture you’re promoting? What stage are you at – “rising†or “failingâ€? If you’re not sure, now is the time to take a serious look and answer the question.

Please share your thoughts with us on this issue!