Many companies are of course doing business in China or are contemplating doing so. But how many are approaching the challenge in the optimal manner? How many companies have businesses in China that perform on par with their Western markets? How many new entrants will enter the market well-armed and knowledgeable of the challenges and approaches that will succeed?
On the other hand, how many are still seeking to apply their techniques proven through years of application in Western markets? How many think that their global segment or market leadership, their technology or other competencies will translate into success on the ground in China?
Ask yourself, “How is my company performing in the region relative to my other regions in terms of…”
• Market-share
• Profitability
• Revenue from new products
• Innovation
• Quality
• Retention of staff
• Development of new best-practices
If you are at all like most companies we talk to and work with, your China numbers are lagging the performance of your Western regions.
In our experience this is almost always NOT related to structural factors or other nearly immovable barriers but to basic misunderstanding of cultural factors that limit business development as well as create, in many cases dramatic, under-performance in terms of a variety of internal measures.
To be sure, strategy is critically important – getting strategy right builds the foundation for success. But after strategy comes execution. At Rain8 we spend a LOT of time on strategy, but this series will focus on the fundamentals of execution that is in fact the area in which we see so many companies falling down relative to doing business in China.
Dr. Stephen Covey referred to a situation in which one finds oneself pointing fingers at others in response to a problem or failure. He advised us that before pointing fingers we should stop and examine the fact that three other of our own fingers will be pointing back toward ourselves. Let’s examine what those three fingers may be hinting at relative to the subject of success in China.
What Worked in the Past
One, we may be assuming that what has worked so well for us in the past will surely work as well in China.
Overconfidence
Two, we may be approaching the situation with an overabundance of confidence. Relative to corporate executives, success tends to breed success. Successful executives are often offered new opportunity to incrementally grow and expand skills and capabilities. Strong and supportive management teams with a wealth of experience that they may turn to for advice or who will freely offer advice and direction also often surround them. In the case of entering such a different and challenging new market, this support may not be available as the normally supportive team may simply have little to offer in the way of experience and advice.
Culture
Three, frankly, in the West, we assume that culture is trivial, superficial and has little to do with the execution of business – in other words, “which fork to use for salad.” This is because our cultural values are deeply ingrained (as cultural values are everywhere) – so deeply ingrained that we take little notice of them. Secondly, Westerners by and large descend from a relatively uniform cultural background, therefore it is of little value spending time making ourselves more acutely aware of our cultural values.
Western Methods Don’t Work as Well in Confucian Cultures
The lessons from these three points are that first, what has worked so well for us in Western business environments does NOT work well at all in MANY regards in China. This means quite simply we must develop fundamentally new approaches that WILL work.
New Surroundings
Second, we must cast off overconfidence in our own abilities developed through experience in Western markets and recognize that we are operating in a fundamentally new environment and very often one in which we lack the experience and advice of our management teams. Much as a soldier finding himself surrounded and alone deep in enemy territory, we must become acutely aware of our new surroundings, reading tiny signals and accurately interpreting them to ensure our survival.
Culture Matters
Third, culture matters. Culture influences and, in fact, controls nearly ALL of people’s significant behaviors and communications. Lou Gerstner, former chairman and CEO of IBM, was quoted in 2002 in Business Week as saying,
“Culture isn’t part of the game it is the game.”
Chinese culture is SIGNIFICANTLY different from Western culture. This difference is because China has been for millennia geographically isolated from the West by long overland and sea routes and for centuries by Chinese government policy.
A final note…This series will be primarily about understanding cultural differences and how to optimize both business development and internal management of operations in China in view of the profound cultural differences. The cultural root we speak of dates to around 500BC and is referred to as Confucian culture (named after the developer of this school of thought, Confucius). So rather than referring to Chinese culture, I’ll refer to Confucian culture and in some cases make specific reference to “Chinese culture” or “China” where the points apply most appropriately to China. Much of the cultural heritage of Korea and Japan (and to a certain significant extent extending southward into SE Asia including, for example, Taiwan, Thailand, Vietnam, and so on) is Confucian, therefore much of what is discussed can be applied almost equally as well in these regions.
In this series we’ll explore Confucian history and elements including discussions of guanxi and mianzi. In later posts I’ll attempt to bring these background elements into practical application.
