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canada competes

Relationships between businesses anywhere are inherently personal relationships, and should be treated as such, says Mark Satov, head of Satov Consultants of Toronto.Luke MacGregor/Reuters

Canadians can be smug about their nation's rate of passport ownership: 67 per cent of the population holds a valid passport, according to the government's figures, compared with 34 per cent of Americans. The question is, are Canada's executives and entrepreneurs using their passports often enough? More to the point: Are business leaders travelling as much as they should to build and maintain meaningful relationships in the world's most dynamic economic zones?

The answer appears to be no, or not yet. According to a recent Canadian Council of Chief Executives (CCCE) report, for example, Canada's public and private sector employees have not been sufficiently aggressive about establishing links in the region that's expected to generate 33 per cent of global economic growth between 2010 and 2025.

"Canadian businesses lag their rivals from other OECD countries in making inroads into Asia: only half of Canada's largest companies have operations there, whereas all of the top American companies do," write the authors of "A Canadian National Economic Strategy For Asia," published last month. "Not surprisingly, many Asian business leaders see Canada primarily as a link to the United States. Canada has less brand visibility there than smaller countries such as Switzerland or the Netherlands."

Anecdotally, one Canadian management consultant, who asked not to be named, says he routinely meets business executives from Australia, Britain, Korea, Japan and Europe, but far less often runs into Canadian executives abroad.

His theory about why Canadian firms are underrepresented in Asia and elsewhere is that business leaders have been spoiled by U.S.-Canada trade and the formerly robust American market. Conducting business overseas means adapting to foreign customs and languages, and leaving behind the comfort of a fairly homogenous North American business culture. Indeed, among the many suggestions offered in the CCCE report, the need for increased travel and personal interaction is a common thread.

Technology doesn't close psychic distance

Relationships between businesses anywhere are inherently personal relationships, and should be treated as such, says Mark Satov, head of Satov Consultants of Toronto. That means handling certain discussions in person. It's a management rule some executives need to rediscover, and one that may be foreign to the youngest Canadians in business, those who see digital formats – e-mail, Google Talk, and instant messaging – as primary, often exclusive, platforms for connection.

"Many conversations are just not as effective if you're having them over the phone," Mr. Satov says. "When you have a meeting, you want to read the other person's body language and vice versa. When a meeting goes beyond an hour, you get tired of being on the phone; you start interacting with people differently." Relying too heavily on e-mail can lead to misunderstandings, lost time and even anti-social behaviour. Video-conferencing, he points out, is productive only when everyone is on screen.

Outside of North America, he adds, business culture remains focused on face-to-face communication. Although Chinese culture's emphasis on guanxi, or interpersonal relationships, is widely acknowledged, it's not only the Chinese who need that social fix with economic transactions. "Americans don't need to have dinner with someone to have a business relationship with them. But if you go to Europe and you sit through the first 15 minutes of a meeting, you'll see they're very social. People want to find out something about you. They want to find out about your lineage, or the history of your company, how you got to where you are," Mr. Satov says.

If anything, digital connectivity and social media have only enhanced the need for face-to-face follow-up, he says. You're making more virtual connections and you need to make them real. Others agree: In a 2009 poll by Harvard Business Review Analytic Services and sponsored by British Airways, 95 per cent of more than 2,000 respondents felt that in-the-flesh meetings were key to long-term relationships, and especially important for wrangling important contracts, sizing up candidates for senior positions and understanding important customers.

Knowledge exchange requires face-to-face meetings

On a deeper level, the intangible benefits of meeting in person become most apparent in conversations beyond strict agenda items, says economist Paul Romer, a professor at New York University's Leonard N. Stern School of Business. He believes that personal contact is the most effective way to create the necessary conditions for true creative brainstorming and idea-sharing.

Dr. Romer, who has also taught at Stanford University's Graduate School of Business, is among a group of economists who say the future of commerce belongs to a knowledge-based economy, where ideas are currency and cities are the dominant marketplaces. "If geography matters, it matters because it dictates who you interact with daily, face-to-face," Dr. Romer says. "There are some places where a lot of people flock, and if a lot of people flock there, they have a chance to interact with other people. ... That's a sign that face-to-face interaction, and random interaction, lead to successful knowledge interchange."

The exact source of the chemistry that leads to creativity and problem-solving is something Dr. Romer says he spends a lot of time thinking about. Recalling a scholarly conference he attended in Italy this summer, he explains, "At the end of the conference, we were commenting on what it took to get to a point where we were really trading ideas with each other, because we didn't know each other and we all had different backgrounds.

"We found that a key part of this vague notion is trust. It takes a while before you're willing to openly share ideas, openly listen to some feedback, and you're confident that someone won't be overly critical, or that your ideas won't be used against you."

Trust is built, he says, on the foundation of an emotional connection, "a certain respect, empathy with and affection for a person." Such are bonds formed in face-to-face meetings.

"It may be the case that someday you can have that kind of exchange through electronic media, but none of the data we've looked at says that we're even close," he explains.

Choose your target markets and use travel strategically

To be sure, jet-setting around the world to hold personal meetings has its downsides. Travel is costly, time-consuming and flies in the face of many corporate sustainability policies. Besides, executives who are exhausted from time zone changes may not perform well, cancelling out the benefits of one's efforts. Ideally, experts say, firms will find the right blend of in-person and virtual interaction to suit a company's ambitions and resources.

Amar Varma, head of Extreme Venture Partners in Toronto, says where a person goes should be dictated by sector trends. "If your company is in media, you want to be in New York or Los Angeles. If you're in tech, you have to have some kind of presence in the Silicon Valley," says Mr. Varma, who spent the early part of his career in the Bay area. "I go often. I have a network that I've been establishing for years, and our co-founder lives there."

To his company, he adds, being there "means being front-of-mind when conversations come up." It also means staying in the know about gossip in your field. "If you're not aware of what the competition is doing, if you're not working smarter, harder, faster than anybody, you will get crushed," Mr. Varma says. "So if you're not going to live there, stay there. Go and stay on a 'very often' basis." Otherwise, he says, "you risk living in your own bubble."

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