Thursday, December 3, 2015

That’s Not How Business is Done in China!

By Jack Wood, Professor of Management Practice at CEIBS

Senior business executives doing business in China face the risk of getting derailed in their strategy if they believe the many myths floating around out there.  So it’s very important to debunk these misperceptions. I also have a few ideas about the teaching methodologies that are particularly effective in developing strategies for doing business in China.

First let’s address the myths:

Myth Number 1:
All you need to do is have a brilliant strategy to succeed in China. 
This is false: strategy is not enough. 

Myth Number 2:
Technological innovation will solve your problems. 
This is false: lack of access to technology is not why businesses fail in China or anywhere else. 

Myth Number 3:
The Chinese way of doing business is significantly different from the Western way of doing business. 
This is false: business is business and people are people.

Myth Number 4:
Leadership in China is different. 
This is false: leadership is leadership, and leadership is the same as it has always been and always will be, in China or anywhere else.

My take on:

The business landscape in China, as elsewhere in the world, is littered with brilliant strategies gone awry.  Companies – and countries – fail not because they don’t have great strategies, or because they don’t have state-of-the-art technology, or because they are presented with inscrutable ways of doing business.  Companies fail because of failures in leadership – because of an insufficient awareness of the deeper currents of human behaviour – of the deeper psychological similarities and differences that influence human life.

My uncle, Milton Barnett, was a professor of anthropology at Cornell University until his death.  During WWII he had learned Mandarin in the American army, and had planned on doing his field research for his doctorate in China after the war – this was around 1949.  But after the revolution, he was unable to visit China until the 1980s.  He was in a Chinese university classroom and the students eagerly asked him for some advice: tell them what to do so that China could catch up with the West.  They wanted solutions.  They wanted what the West had.  My uncle asked the class: “You want what the West has?  You want the solutions?  Do you want the technology that Einstein had?”  They nodded vigorously.  He picked up a piece of chalk and walked to the blackboard and wrote in Chinese characters: “This is what Einstein had!”  All the technology in the arsenal of the United States could not bring victory in Vietnam in the 1960s and 1970s.  All the technology in the hands of the Western allies has not made the Middle East a safer and more secure place – on the contrary.  We have a fascination with technology that belies its risks and unintended consequences.  Just look at the news.

Doing Business in China
The fundamental manner of doing business in the West and in China is similar.  Commerce is commerce.  Whether you are bartering for a bracelet or fashioning a franchise, the essential text of doing business is the same wherever you are.  But you have to know the subtext.  There are some differences in subtext between Western and Chinese cultures – but then again, there are differences in subtext among European and among Asian cultures too.  The differences are primarily political and legal in origin, not technical.  One principal difference is level of ‘maturity’ – of the economy as a whole, of the business environment, of consumer sophistication, and of the political pragmatism (or ideological straightjacket) of various governments and agencies.  Governance is a major problem.  There are problems in China that need attention – food and environmental safety, health, product quality, and the opaqueness of markets.  But these are not specifically Chinese problems – they are mostly the manifestation of a ‘young’ and relatively immature, fragmented, and compartmentalized economy with (hopefully) developing organisations of governance, both political and corporate. 

Leadership is a central organising principle in human life – regardless of country or culture.  Companies and countries fail not because they lack money or technology – they fail because of failures in leadership.  The essential elements of leadership are universal – there are no significant cultural differences when it comes to the exercise of leadership.  Leadership occurs at all levels in all social systems – whether the social system is a group, an organisation, or an entire country – leadership does not only occur in the ‘upper’ levels of a social system.  Dominance is not leadership – and individuals, groups, companies, and countries that overlook the distinction between dominance and leadership will ultimately provoke resistance and fail.  Dominance serves simply to force compliance on unwilling followers.  There is a difference between ‘a leader’ and ‘leadership’ – the first is a social role (formal or informal) but the second is a social process.  Leadership cannot really be understood unless it is examined behaviourally – i.e., psychologically. Examining leadership behaviourally means ‘thinking psychologically’ – i.e., addressing two distinct levels at the same time (the overt and the covert levels), reading the text of a situation and reading the subtext.  The difference between leading and following is indistinguishable in advanced, highly developed social systems.  Virtually all organisational leadership is exercised in the context of the small ‘decision-making’ group.  

Given the myths and the importance of leadership for organizational success, I would hasten to add that leadership cannot be taught.  Reading a book or having a lecture or another case discussion about leadership will not help you become a better leader – in China or anywhere else.  It is said that medicine and law are a ‘practice’, so is leadership, and while it cannot be taught, it can be learned, by creating the opportunity in which one’s capacity to exercise leadership can be developed.  One has to practice – as with any skill, be it skiing, golf or football. 

Any strategy or technology or pedagogical approach that does not address the deeper psychological currents in the exercise of leadership will ultimately fail.  To understand how to do business in China, you need to understand how to do business elsewhere, and you need to develop the capacity to work psychologically – to work with the ‘soft’ stuff that determines whether companies and countries will ultimately succeed or fail.  This cannot be learned in a classroom.  It can only be learned by getting out of the classroom and into the experience by working in groups – to learn about oneself, others, and how groups and organizational systems really work.

So what’s effective in developing strategies for doing business in China? Providing the right environment for practicing leadership skills, a thorough understanding of the depth of psychology underneath it all, and the capacity to appreciate the subtext and nuances that are such an important part of doing business in any culture.