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The country’s companies are good at learning and
applying tried and tested techniques
When Huawei’s new handset manufacturing complex opens in 2016 at
Songshan Lake in southern China, it will include a building modelled on
Krakow’s Wawel Castle. The former Polish royal residence was preferred over
proposals based on other European beauty spots including the palace of
Versailles, Granada’s Alhambra and Windermere in the English Lake District.
That a fast-growing telecoms group should draw inspiration for the next phase
of its assault on the 21st-century global phone market from a 16th-century
castle is not as strange as it sounds.
Since the 1980s, Huawei, Haier, the white goods maker, and other
fast-growing aspiring multinationals have been studying best practice, giving
it a Chinese twist and then using it to compete against the international
companies that developed it. The fact they are using management architecture
from the US, Europe and Japan does, however, raise the question of whether
China can develop its own management style.
Peter Drucker, the business thinker, thought it could and would. In 1997, he
forecast China would be a source of abundant new managerial insights just as
Japanese techniques had revolutionised global manufacturing in the 1980s.
I’d go further: I think a population of 1.3bn must eventually yield not just
management innovation but a Chinese heir to Drucker himself. So far, though,
there are only faint signs of either.
Corporate China may tend towards command-and-control management, but
some executives are trying to apply Chinese traditions. Victor Lang, managing
director of MMD China, a mining machinery company, is using ideas from
Buddhism, Taoism and Confucianism to instil mutual respect, social
responsibility and an ethical code in his workforce. But, according to Bruce
McKern of Shanghai-based Ceibs, who co-wrote a case study on MMD, it is
hard at this stage to tell how these ideas will affect the way its managers
operate.
Other companies have built unusual structures. Huawei is experimenting with
“rotating acting CEOs” – a trio of board members who serve set stints as the
group’s senior operating officer under founder and overall chief executive Ren
Zhengfei. Haier, in turn, is really a web of autonomous business units, which
“bid” for the right to carry out projects, such as development of a new
three-door fridge. It is probably the biggest network of self-managed teams
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anywhere and one of the most innovative management initiatives by any large
Chinese company.
But Huawei and Haier are successful not because they have come up with
interesting management ideas or novel governance concepts but because they
are shrewd and attentive students of existing techniques.
In the late 1990s, Huawei was spending up to 3 per cent of revenues on
consulting services from IBM, Accenture and others – renting access to the
wisdom the consultants had accumulated working with other clients. An
existing Huawei factory near Songshan still uses Six Sigma quality
programmes, lean manufacturing tricks from Toyota, and automation and
supply chain refinements from Germany’s Fraunhofer institute. But, having
learnt what it needed, Huawei ditched most of the consultants and set its own
strategic course.
As for Haier, its founder Zhang Ruimin is an avid reader of business literature
and a Drucker-quoting member of a management mutual appreciation society
that includes Michael Porter and Gary Hamel. IMD professor Bill Fischer,
co-author of Reinventing Giants , a new book about Haier, says the company
is “insanely curious”. But it is pursuing “revolution by accretion”, with each
new development built on the last. Even Haier’s autonomous business units
trace their roots back to Japanese quality improvement programmes that the
Chinese company adopted in the 1980s.
Does it matter that China has not conceived a big new management idea? I
think not. Huawei and Haier are good at learning and applying techniques
that have already been tested in the market by international rivals. In fact,
they are often quicker and more aggressive at implementing such initiatives,
adapting and, if necessary, discarding them.
Huawei’s “castle” will shelter a research and development centre with 6,000
staff: that is a clear sign the company’s executives have no intention of merely
sitting out a long siege from behind its ramparts.
This article is reprinted by permission from The Financial Times 2014.07.11.
was published in The Financial Times, Inc. reserves all rights. No copying or
reproduction is allowed without prior permission.
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