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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Straight from the China CEO: Advice on leading operations in the world's fastest-moving, highest stakes market. 25 top executives leading high-profile multinational companies in China, as well as seasoned and respected China-based consultants, give their front-line advice on succeeding in this market. Soaring spending power among the world's largest consumer population, radical digital transformation creating a cash-less, 'always on' society, severe generation gaps - these are just some of the factors which have completely transformed China since 2006, the year when the first volume of China CEO was published. And these are three of the main reasons the authors have again teamed up to put together this second volume - collecting entirely new content via in-depth, exclusive interviews with the heads of 25 high-profile CEOs of multinational companies in China, as well as a number of highly respected consultants who have built their careers by delivering advice on succeeding in the market. In this book, CEOs and experts share their strategies for overcoming the most pressing issues faced by business leaders in China now, including: fierce competition from strong, globalized Chinese companies; working with the powerful, complex Chinese government; and successfully attracting the nation's wealthy but fickle and tech-savvy domestic consumers. Top executives and consultants also divulge their secrets for keeping up with China's astoundingly broad and rapid digital transformation in which the nation is now leading the world in mobile payment, online shopping, social media, Artificial Intelligence, and facial and voice recognition. They also discuss trends including localization of top positions in China, the rise of female top executives in the country and the challenge of attracting the nation's highly international, purpose driven millennials. * Hear directly from the China CEOs of: ABB, AB InBev, Bayer, Bosch, Carrefour, Coca-Cola, IKEA, Korn Ferry, Lego, L'Oreal, NIIT, Mango, Manulife, Marriott, Maserati, Microsoft, Philips, Scania, SAP, Sony, Standard Chartered, Tata, Udacity, Victoria's Secret (Lbrands Int'l), Volvo, etc. * Learn from seasoned China experts at McKinsey & Co, Economist Group, and more * Written in a practical, easy-to-read format ideal for busy professionals, educators, and students China CEO II: Voices of Experience from 25 Top Executives Leading MNCs in China is an invaluable resource for any professionals seeking to work in or with China, or executives expanding their responsibilities in China, and those involved in international business, finance or executive programmes.
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Seitenzahl: 492
Veröffentlichungsjahr: 2020
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JUAN ANTONIO FERNANDEZ
LAURIE ANN UNDERWOOD
Cover design: Alicia Beebe and Wiley Cover images: Portrait and design by Alicia Beebe
Research interns: James Warren, Nikki Pinder
Copyright © 2020 by John Wiley & Sons Singapore Pte. Ltd. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.
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ISBN 978-1-119-58343-1 (paper) ISBN 978-1-119-58339-4 (ePDF) ISBN 978-1-119-58321-9 (ePub)
I dedicate this book to the China Europe International Business School (CEIBS) on the 25th anniversary of its founding. I also dedicate this book to the wonderful people at CEIBS who helped us during the work on this book. Finally, to my wife, Hanning, and my three sons, Simon, Oscar, and Daniel, who give meaning to my life.
—Dr. Juan Antonio Fernandez
China CEO II is dedicated to my family—Sydney and Schafer Wilson; Dorothy and Glenn Staley; Matthew, Larry and Sally Underwood—and to my beloved and excellent partner, Eric Desvallees. Their love provided me the power to complete this book. I am also grateful to CEIBS, my alma mater, as well as to Xi'an Jiaotong Liverpool University (International Business School Suzhou) and Sino Associates for the support of my colleagues.
—Dr. Laurie Ann Underwood
CONTENTS
Cover
Foreword
Chapter 1 Why
China CEO II
?
Introduction
China's Boom Since 2006
Who's in
China CEO II
?
Front-Line CEO Analysis: China Then and Now
Notes
Chapter 2 Prerequisites for China CEOs
Introduction
Must-Have Qualities for Foreign CEOs in China
Foreign Managers' Top Mistakes in China
Shifting from Foreign to Local CEOs
Qualities Needed for Today's China CEOs (Either Foreign or Chinese Nationals)
Summary of Tips
Chapter 3 China's Changing Talent Pool
Introduction: China's War for Talent Continues
Chinese Professional Women: Holding Up Half the C-Suite
Meet China's Millennials
Strengths and Weaknesses of China's Talent Pool
HR Strategies
Summary of Tips
Notes
Chapter 4 China's Digital Revolution
Introduction: A Global Digital Leader Rises
The Rise of China's Digital Champions
Where Digital China Dominates
Navigating China's Digitized Landscape
Digital Strategies
Summary of Tips
Notes
Chapter 5 The Transformation of Chinese Consumers
Introduction: China's High-Potential Domestic Shoppers
Profile of Today's Chinese Consumer
Strategies for Winning Chinese Consumers
Summary of Tips
Notes
Chapter 6 Competing in China
Introduction: Evolution of Chinese Competitors
Why Multinational Corporations in China Have Lost Ground
Why Chinese Players Have Gained Ground
Strategies for Facing Chinese Competitors
Summary of Tips
Notes
Chapter 7 Managing Relations with the Chinese Government and Foreign Headquarters
Part I: Managing with the Chinese Government
Government Relations Challenges
Government Relations Strategies and Solutions
Part II: Managing Relations with Headquarters
Success Factors for China Leadership's HQ Relations
Communicating with Headquarters
Summary of Tips: Strategies for Government Relations
Summary of Tips: Strategies for HQ Relations
Notes
Chapter 8 Living in China
Non-Work Challenges for the Foreign Manager
Potential Problems for the Foreign Family
“Next-Pats” in China
Positive Aspects of Life in China
Strategies for Adapting to China
Summary of Tips
Note
Chapter 9 The Future of MNCs in China
China's Economic Outlook
The Changing Role of International Companies in China
Notes
About the Authors
End User License Agreement
Guide
Cover
Table of Contents
Foreword
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Foreword
It is my pleasure to endorse China CEO II, the latest China business book produced by Professors Juan A. Fernandez and Laurie A. Underwood. Both have worked and lived in China for more than 20 years, which has given them a first-hand, front-row view of the enormous changes that have transformed this county over the past two decades. In the space of time since our year 2000 MBA and EMBA graduates entered the working world, China has moved forward to become a leading global player across many fronts at once—as the world's largest exporter (and most populous nation), with the largest consumer base and the fastest growing one in terms of spending power, and now as a global leader of the digital revolution. Although rapid, China's economic progress has been steady as the nation shifted from serving as the factory of the world to an innovation powerhouse. MNCs in today's China face highly sophisticated consumers, fiercely competitive local players across nearly all industries, and a new population of local digital heroes who are changing the world order and giving China's younger generation a new set of life goals and priorities, as well as a new sense of home-grown pride. Taken together, China's multifaceted economic and social transformation is unique in the history of the world.
This book attempts to give readers a first-hand view into this multifaceted transformation through the lens of in-depth interviews with China CEOs and various experts on China. The 25 interviewees with China CEOs share their personal insights into succeeding in the new China. As a foretaste of what you will learn from of this book, some of the key qualities that the China CEOs deemed essential to success in China include passion and energy, speed of decision-making, clear vision, a shared framework, the ability to empower local teams, and the ability to make tough judgment calls in an environment of constant change and uncertainty.
Before closing, I would like to note two important trends that can be seen when comparing China CEO II with the original book published in 2006: the new book includes an increased number of Chinese CEOs and an increased number of women CEOs. Both trends are intensely positive not only for China but for the global business arena. The rise of more Chinese nationals into the top executive positions at MNCs is a positive trend that closely matches the goals of CEIBS. Likewise, the rise of more women into top executive spots in international companies in China is another trend to which CEIBS is deeply committed.
Let me conclude by reminding readers that China's importance in the world is growing—and will continue to grow for decades to come. It is our hope that this book will serve as a bridge, closing the gap between China and the rest of the world by promoting better understanding, deeper collaboration, and more beneficial interactions with multinational companies. The goal of this book is to assist both foreigners working in China and Chinese executives working internationally to better communicate and better cooperate, to the benefit of all.
Dipak Jain, President (European) and Professor of Marketing, CEIBS
Chapter 1Why China CEO II?
China's Boom Since 2006
Who's in
China CEO II
?
Front-Line CEO Analysis: China Then and Now
Introduction
Why did we decide to write China CEO II? Following the success of our first book—China CEO—released in 2006, we have been asked why we wanted to repeat the whole exercise again 14 years later. Why again seek interviews with top executives running large-scale operations for high-profile multinational companies (MNCs) in China? Was there really a need to write a new edition of the same book?
The short answer to this question is: yes. By 2020, the time was right to embark on China CEO II for one main reason: China has changed—dramatically. And meanwhile, interest in working in or with China from the rest of the world remains as strong and vibrant as it was in 2006. Thus, the advice given by our interviewees in 2006—detailing how to lead large teams and complex operations for MNCs in China—needed updating.
What we didn't know until we began conducting interviews is whether another China CEO book was needed. Given China's high-profile and rising global presence in both the international business and political arenas during the country's 40 years of reform and opening, perhaps most non-Chinese executives working in or with China already knew how to succeed here. Maybe enough information was available—online and digitally—to offer the resources needed to close cultural gaps and to prevent business mistakes from being made.
But as soon as we conducted the first interviews for China CEO II, we confirmed another compelling reason to write this book: multinational companies still grapple with significant challenges when operating in China. Namely, foreign companies—and the executives running them—continue to face difficulties, including cultural differences between an MNC's home country and China, misunderstandings caused by geographical distance or psychological separation from a company's top executives, and problems caused by variations in standards or misalignments in business communications norms, negotiating styles, or operating procedures. After the first two interviews for the potential new book, we felt affirmed in the value of our endeavor to again gather first-hand information and advice through in-depth interviews with those holding top executive positions at selected high-profile multinational companies with large-scale operations in China. As with the first book, we interviewed only those holding the position of China CEO or the equivalent position in the language of their company. Each of our interviewees had been in his or her position for at least one year at the time of our interview. This time period was essential for us to feel that the challenges detailed and advice given had survived the test of time and that the CEOs' advice will therefore be fully useful to our readers. (Most had been in the role of leading China operations for their company for at least five years.)
“…[M]ultinational companies still grapple with significant challenges when operating in China.”
—Authors ofChina CEO II
China's Boom Since 2006
To help readers to grasp the extremely fast pace of change underway in China today, we offer a snapshot of the giant strides the nation has made in terms of both economic and societal development between the publishing of China CEO (in 2006) and China CEO II (in 2020). Consider these changes:
In 2006, China was the world's fourth largest economy (after the US, Japan and Germany).
1
In 2018, China was the world's second largest economy
2
(surpassing Japan as of 2010).
3
Some analysts project China to surpass the US as the world's largest economy by 2030 (HSBC).
4
When purchasing power parity is factored in, China has been the world's leading economy since 2016.
5
In 2006, China was the world's third-largest exporting nation (after the EU and the US) with exports of US$968 billion.
6
By 2018, China was the globe's leading exporter, with US$2.49 trillion
7
in exports.
Per capita GDP for Chinese citizens went from US$2,099 in 2006
8
to US$10,099 in 2019.
9
This places China above both Mexico (US$9,866) and Bulgaria (US$9,504) in terms of per capita GDP, and close to Russia (US$11,461).
10
And in China's first-tier cities, incomes are far higher. In Shanghai, for example, per capita GDP was over US$20,000 in 2018.
11
China's cell phone subscriptions went from 34 per 100 Chinese citizens in 2006
12
to 115 per 100 citizens in 2018,
13
reflecting that some users have more than one phone.
China's internet users jumped from 10.5% of the population (2006)
14
to 59.6% by late 2019,
15
98% of which access the internet by mobile phone.
Economic development tells only part of the story of China's transformation during the years between the writing of our first and second books. Those 14 years also saw the country gain significant clout in the international business and diplomatic circles as it changed from a developing to a developed nation.
In terms of political recognition, China also measurably gained stature on the world diplomatic stage since 2006. For example, the country moved from being invited as a Guest Developing Nation to G8 summits in 2008 to hosting the G20 summit in the city of Hangzhou in 2016. In addition, the central government's Belt and Road Initiative, launched in 2013, has caught the world's attention as an ambitious campaign for China to strengthen its diplomatic and trade ties with 64 countries located along the former Silk Road. Another example is the central government's high-profile China International Import Expo (CIIE), first held in 2018 to improve the nation's international image regarding trade practices and to promote the China market globally. Hosted by Chinese President Xi Jinping, the event featured Microsoft's Bill Gates alongside Alibaba's Jack Ma as guests and attracted more than a million attendees from 172 countries, regions, and organizations.16 And in the global arena of environmental protection, China has, in recent years, emerged as a proactive international participant. For example, immediately after President Donald Trump removed the US from the Paris Agreement in 2017, China strengthened its commitment to the accord. In the months and years that followed, China has been widely seen as stepping into the void created after the exit of the US to become the new world leader in climate change.
In all the ways mentioned above, we as authors recognize that we now live and work in a vastly different China than the one in which we published China CEO in 2006. Thus, it was high time to start a new book from scratch, interviewing a new set of current top executives of MNCs in China. Our goal, and our wish for our readers, is to present detailed, relevant, and useful advice gleaned directly from today's China CEOs regarding the most commonly experienced challenges faced by all who lead teams and manage complex operations in China today.
“...[W]e now live and work in a vastly different China than the one in which we published China CEO in 2006. Thus, it was high time to start a new book from scratch.”
—Authors ofChina CEO II
Who's in China CEO II ?
When the interviews conducted for the first and second editions of this book are compared, several very clear differences emerge. First, all 20 of the China CEOs we originally interviewed were male. Additionally, all 20 held citizenship outside China. In fact, only one of the original CEOs had been born a citizen of the PRC but had later received a US passport.
Not so for China CEO II. This time, among the 25 China CEOs included in the book—including 7 working for the same companies as the original China CEO book—8 were born in China (including the Hong Kong Special Administrative Region), although 3 of these later changed their citizenship. Meanwhile, 4 are women (all of them ethnically Chinese, and three PRC nationals).
“This time, among the 25 China CEOs included in the book… 8 were born in China… [and] 4 are women”
—Authors ofChina CEO II
The new set of CEO interviewees show more subtle but also important differences from their predecessors: Many of the 20 China CEOs interviewed in 2006 were senior executives nearing the end of their careers. They were very experienced, having worked in many countries, and China was their last step. And many were sent to China to open their company's operations or to expand them significantly. The CEO of L'Oréal China in 2006 described arriving in China with one assistant and a suitcase full of cosmetic samples. The CEO of Siemens in 2006 told us of working out of a Friendship Hotel in Beijing with one secretary. Others told of the extreme pace of expansion many MNCs experienced during the early 2000s. The former China heads of both Carrefour and Coca-Cola, for example, described to us very fast expansion throughout China during that earlier time.
Another clearly visible change is the increase in average working time in China among the new group of CEOs, illustrating the increased recognition among MNCs of the benefits of promoting an executive with extensive prior China experience into the top domestic role. While the initial group of 20 China CEOs had worked in China for an average of five years, the new batch of 25 top executives for China had worked domestically for an average of nearly 15 years (an average of 19 years for Chinese citizens, 10 years for non-Chinese).
“While the initial group of 20 China CEOs had worked in China for an average of five years, the new batch of 25 top executives for China had worked domestically for an average of nearly 15 years.”
—Authors ofChina CEO II
And finally, the new set of 25 China CEOs interviewed in 2019 were generally younger than the first set, and most were thus still building their careers. In fact, after meeting with us for this book, interviewee Stéphane Rinderknech, China CEO for L'Oréal, went on to be promoted to a global role within his firm. Shortly before our publishing date, Mr. Rinderknech was named as president and CEO of L'Oréal USA, executive vice president North America, and a member of the group's executive committee. Many of our interviewees commented that, today, the top executive role for China is not generally seen by MNCs as a final career stop for senior executives but more often as a necessary position for an executive to hold before joining a company's top global echelons. This change provides more evidence of the rising importance of China as a key market for MNCs worldwide.
As an expert in the executive recruitment field, Korn Ferry's top China executive, Charles Tseng, acknowledges this trend: “China is clearly becoming a ‘must posting' for up-and-coming CEOs. . . . Executives who go to China are on an inside track to take on bigger positions—because of the size of China market, because of the complexity and the recognition that companies and businesses have of the importance of the unique China market to their future business, and because of the tough conditions in China. Tough means that it's not a traditional classic economy. Executives who come here gain a great deal in living through this very different environment.”
“China is clearly becoming a ‘must posting' for up-and-coming CEOs.… Executives who go to China are on an inside track to take on bigger positions.”
—Charles Tseng, Chairman, Asia Pacific, China, Korn Ferry
L'Oréal's Rinderknech describes the new importance a posting in China holds for many MNCs: “For all top talents of L'Oréal, China is a must for their career-building, because this is where you learn so much.” After spending “eight fascinating years in this country,” Rinderknech leaves these words of wisdom to his successor and other incoming executives taking positions here: “You have to know China from the inside. It's not something that you can theorize. You have to live it; you have to make it work. You have to connect with the Chinese, and you have to understand the way they think. It's an absolute must. You have to go and survive this battle. China is very exciting, and it's very unforgiving.”
“For all top talents of L'Oréal, China is a must for their career-building, because this is where you learn so much.… You have to go and survive this battle. China is very exciting, and it's very unforgiving.”
— Stéphane Rinderknech, CEO, China, L'Oréal
China CEOs Interviewed
Company
HQ
Name
Title
Gender
Nationality
ABB
Switzerland
Chunyuan Gu
Chairman and CEO, China
M
China
AB InBev
Belgium
Frederico Freire
BU President, China
M
Brazil
Bayer
Germany
Celina Chew
President, Greater China
F
Australia (born in Singapore)
Bosch
Germany
Chen Yudong
President, China
M
US (born in China)
Carrefour
France
Thierry Garnier
President/CEO, China; CEO, Asia; Group Vice President
M
France
Coca-Cola
US
Curt Ferguson
President, Greater China and Korea
M
US
IKEA
Sweden
Freda Zhang
Country Commercial VP, China
F
China
Korn Ferry
US
Charles Tseng
Chairman, Asia Pacific
M
Malaysia (born in Singapore)
LEGO
Denmark
Jacob Kragh
General Manager, China
M
Denmark
L'Oréal
France
Stéphane Rinderknech
CEO, China
M
France
Mango
Spain
David Sancho
CEO East Asia and India
M
Spain
Manulife-Sinochem
Canada
Kai Zhang
President and CEO, China
F
US (born in China)
Marriott International
US
Rainer Burkle
Area Vice President, Luxury, Greater China
M
Germany
Maserati
Italy
Alberto Cavaggioni
Managing Director, China
M
Italy
Microsoft
US
Alain Crozier
CEO, Greater China Region
M
France (born in Canada)
NIIT
India
Kamal Dhuper
President, China
M
India
Philips
Holland
Andy Ho
Leader, Greater China
M
Canadian (born in Hong Kong SAR, China)
SAP
Germany
Clas Neumann
Head of Global SAP Labs; Sr. Vice President, Head of Fast-Growth Market Strategy Group
M
Germany
Scania
Sweden
Mats Harborn
Executive Director, China (also President, European Chamber of Commerce in China)
M
Sweden
Sony
Japan
Hiroshi Takahashi
Chairman and President, China (also Sr. Vice President Sony Corp)
M
Japan
Standard Chartered
UK
Jerry Zhang
Executive Vice Chairman and CEO, China
F
China
Tata Sons*
India
James Zhan
President, China
M
Hong Kong, SAR (born in mainland China)
Udacity
US
Robert Hsiung
Managing Director, China
M
Canada
Victoria's Secret / Lbrands Int'l
US
Arun Bhardwaj
President, Greater China
M
New Zealand (born in India)
Volvo Cars
Sweden
Xiaolin Yuan
President and CEO, Asia Pacific (also Sr. Vice President Volvo Cars Group)
M
China
*Holding company of Tata Group
China Experts and Consultants Interviewed
Company
HQ
Name
Title
Gender
Nationality
American Chamber of Commerce, Shanghai
US
Kenneth Jarrett
President
M
US
China Cooperation Fund (underwritten by Goldman Sachs), MTS Systems Corp, Nottingham University Business School, Ningbo
US (UK for NUBS)
Kenneth Yu
Advisor, Board Member, Advisor (respectively) (also: former President, 3M Greater China)
M
Singapore (born in Hong Kong, SAR, China)
Community Center Shanghai
China
Zhen Zeng
Executive Director
F
China
Economist Corporate Network
UK
Mary Boyd
Director, Shanghai
F
Canadian
McKinsey & Company
Global
Jonathan Woetzel
Senior Partner (also Director, McKinsey Global Institute)
M
US
Note: In some cases, the China CEOs and experts listed in the two charts changed job positions or companies after the interviews were completed. The comments and quotations in this book reflect the views they held at the time of the interview.
MINI-CASE 1
Infrastructure Improvement, China Style
When asked to share an example that illustrates the speed of change that is now the new normal in China, Kenneth Yu likes to describe how Beijing's Sanyuan Bridge was rebuilt in 43 hours in 2015. He explains: “Imagine a 200-meter-long overpass built along a six-lane highway over the ring road leading to the international airport. When the original overpass became too old, the government faced a problem: The ring road is so busy, you cannot stop it for half year to fix it.” The problem was solved with China-style speed. “You know how they did it? Go on YouTube and type in ‘Sanyuan Bridge replacement' to see it.”17 Yu promises that what readers will find will shock them. “The government replaced that whole section of bridge in less than 43 hours.” The method, Yu says, went like this: “On Friday evening, they stopped traffic. Then, they quickly dismantled the old bridge. Then they slid the new bridge in. I am talking about something that is 150 meters long, six lanes. This is humungous. What do you mean, ‘slide it in'? Actually, they built the new bridge on the road parallel to the old bridge. There were about 1,500 people working there. They dismantled the old bridge, slid in the new one, put asphalt on top, and Monday morning they started using it. Now, that's what I call speed.”
Front-Line CEO Analysis: China Then and Now
From the preceding list, one interviewee was included in both editions of the books. We were extremely pleased to include Kenneth Yu in both editions. In 2006, Yu was China CEO of 3M; in 2020, he was a board chairman and academic, business, and financial advisor to several business funds and organizations (see the chart on page 8). Given his previous and present professional roles, we chose him as an excellent source to comment on the key changes in China pertaining to successful MNCs. In the rest of Chapter 1, we recap Yu's six keys to success for executives running international companies in today's China.
The first key to success from Yu was to recognize that “both Chinese businessmen and consumers are getting much more sophisticated.” He clarifies: “I am talking about customers, about suppliers, about competitors. Chinese people are not just getting smarter but also getting a lot more sophisticated. This is one of the major changes.”
MINI-CASE 2
Air Quality Improvement, China Style
For a second example of China-style city planning that he likes to share, Kenneth Yu gives insight into the recent transformation of air quality in Beijing. Back in 2015, the city suddenly became infamous worldwide for serious air pollution levels. International news media reported on the city's “off-the-charts” levels of PM2.5 (exceeding the 600 level at times), creating “air-pocolypse” conditions that appalled the public inside and outside China.
Fast-forward to 2019, and a different scenario is seen. In March 2019, the United Nations Environment Program (UNEP) chose Beijing as a model city for other developing nations, mainly because the metropolis had reduced a range of different air pollutants by 25% to 83%. One UNEP report praises the city with these words: “In just five years, from 2013 to 2017, fine particle levels in Beijing and the surrounding region fell by 35% and 25% respectively. No other city or region on the planet has achieved such a feat.”18 The UNEP went on to recognize the city for initiatives that included industrial restructuring, restrictions on coal-fired boilers, and a shift toward cleaner domestic fuels.
For those living and working in Beijing, the change has been extremely welcomed. Says Yu: “Lately, in Beijing, the sky is blue, and traffic is not as heavy. It is hard to believe, but it's true.” To explain this remarkably speedy improvement, Yu points to ambitious government projects, such as the ongoing relocation of many industries outside Beijing. He clarifies: “In order to solve the issue of traffic jams and the pollution, the government is in the process of moving virtually all the major SOEs formerly in Beijing to the city of Xiong'An in Hebei Province—a move of 200 kilometers.” He continues: “They also moved much of the government for the city of Beijing to the city of Tongzhou, outside of Beijing.” And finally, Beijing also relocated most of the steel mills and heavy industry formerly within the city limits to outside—mainly to Henan Province and the outskirts of Hebei Province. Yu concludes: “That's the type of change that takes place in China. You cannot do this in other countries, that's for sure. In China, it's not just about speed; it's about real change.”
For MNCs, this shift in mindset creates both advantages and disadvantages. “This means more sophisticated, high-technology products can find their customers. That's nice. But don't forget that Chinese customers are no longer just buying ‘good enough' products or accepting whatever is available. They can afford to pay, but they also want to have value for the money they spend. The bottom line, my fellow MNC CEOs, is: When you come to China, don't assume there are gold nuggets waiting for you to pick them up. You gotta be good, because your competitors are good. You gotta be good to earn your bread!”
“When you come to China, don't assume there are gold nuggets waiting for you to pick them up. You gotta be good, because your competitors are good.”
—Kenneth Yu, advisor, CCF & MTS
The second critical key to success is to recognize that the main driver transforming China's business environment over the past 13 years has been the rapid rise of domestic Chinese competitors. To MNCs in China, he says: “Today, Chinese competitors are more challenging than non-Chinese competitors. In fact, they are actually creating more pressure on foreign enterprises.”He reminds MNCs that this development, in which local competitors gain ground, has previously occurred elsewhere in Asia. “This is not new. Look at Japan; look at Korea. In the 1950s and 60s, who were the tech providers in these countries? MNCs. But in Japan today, it's all Japanese. In Korea today, it's all Korean. So what we see in China is not something very new. History is repeating itself.” The challenge, he emphasizes, is that for many MNCs, China remains a key market for the company's future growth. Success, then, increasingly depends on beating newly powerful local competitors in their own home courts.
Third, Yu notes that local employees have also become “much more effective and sophisticated.” He explains the change: “They know more, they learn fast. And over these past two decades, there are many well-educated Chinese students coming from overseas and from domestic Chinese universities.” And today, Yu cautions, Chinese graduates of top domestic schools are not necessarily interested in working for MNCs. “Graduates from China's ‘Ivy League' universities are now supporting not just the MNCs but also the state-owned enterprises. And these graduates are good; they are not like 15 years ago, when the last book was written. Things have changed.” What does that mean for China CEOs of foreign companies? “MNC leadership: you have to recognize that on the positive side, there are a lot more resources for you to deploy. But on the negative side, your competitors are also getting these talents.”
Fourth, the pace of China's evolution has picked up speed over the past 13 years. Yu notes: “This one is obvious—everyone sees it but sometimes we forget it. That is, the speed of change.” He advises incoming foreign managers to observe the rampant growth and success of WeChat, of Alipay, and of China's high-speed trains, as well as studying the rapid expansion of electric vehicles. “Look at the building of highways and infrastructure in China. The country is making changes so fast and doing things so quickly that the speed often scares people.”
Yu also points to a new entrepreneurial spirit that has taken root in China since 2006. Yu calls this new mindset “the new culture of risk-taking throughout the populace.” He explains: “What do I mean by that? This is really a cultural change.” He uses himself as an example to explain the shift in thinking: “Although I was born and grew up in Hong Kong, I am ethnically Chinese. My parents and grandparents were born in mainland China. I was brought up with that influence. We were taught to be careful, to take our time.” Today, as an ethnic Chinese, he feels a new mindset taking root. “In today's world, you have to be fast. In China, the environment has created this new culture of ‘You gotta do it!' And: ‘Don't wait until everything is proven or approved. Just do it!' And: ‘If you have to make changes along the way, we'll do it later.'”
“In today's world, you have to be fast. In China, the environment has created this new culture of ‘You gotta do it!' And: ‘Don't wait until everything is proven or approved. Just do it!' And: ‘If you have to make changes along the way, we'll do it later.'”
—Kenneth Yu, advisor, CCF & MTS
Fifth, Yu says that China's new technology companies—including Alibaba, Tencent, and Baidu—follow this “just do it” mindset. “These are fantastic companies that have grown at breakneck speed because they are willing to roll the dice. They are willing to take the risk.” And following the rise of the domestic tech companies, Yu says, other private companies and even SOEs are following suit today. “It's not just them.” In fact, the culture of entrepreneurialism has roots in China's changing political environment, he says. “This culture of risk-taking probably originated from the leadership in Beijing.” Yu mentions that, under Premier Zhu Rongji, China invested heavily in expanding its infrastructure—an investment that has now paid off. Under Zhu, Yu says, the Chinese leadership had the “foresight” to fund ambitious infrastructure projects, such as Shanghai's second ring road, and expansions to the high-speed rail and maglev transportation systems. He adds: “I don't think Zhu Rongji or the central government leadership expected that Shanghai would grow to what it is now. But they were willing to take the risk.” Today, an adventurous new mindset now permeates Chinese society. He adds: “This is the ‘new normal' among Chinese entrepreneurs: they are willing to take the risk. Some fail, some collapse—no question. But if you look, there are winners all over the place.”
In his final key message to MNCs, Yu emphasizes his confidence in the continuing importance of China going forward. “The Chinese economy is growing way beyond the point of no return; there's no going back,” he comments. “As the GDP grows bigger, it would be naive to expect that the country can keep on growing at 6 or 7%. It just won't happen. But on a PPP basis, China is already the world's biggest economy. At current prices, it's number two after the US and—depending on whose prediction you look at—it's only a matter of years until the Chinese economy, even at current prices, will catch up with the US.”
His advice? Go with the flow. “Quite frankly, I don't think this is such a big deal. The US has 330 millions people; China has 1.4 billion—four times the population. Plus a track record of building the economy at a break-neck rate. So what's the big surprise? It should happen.” He advocates growing with China rather than competing against it. “I would not worry about it. On the other hand, I would think about this: What are the opportunities for MNCs?” He ends with a word of optimism for those MNC executives who do their homework, integrate well, and follow the right strategies in China: “The Chinese economy is so big—it's big enough for everyone. I am not sure whether we have enough big companies in the world to come and share with China's future economic growth.”
In this book, our goal is to present the opportunities for MNCs to share in China's future economic growth, as described to us by our China CEO interviewees. It is our deepest hope that the information we share in this book—the hard-won advice, the front-line strategies, and the detailed insights collected directly from experienced top executives for MNCs in China as well as from veteran consultants and advisors—will serve our readers well. We wish you all a fruitful read and the very best of luck in your own China adventures.
Notes
1
http://www.aei.org/publication/dynamic-graph-of-the-day-top-ten-countries-by-gdp-1961-to-2017/
.
2
https://www.weforum.org/agenda/2018/04/the-worlds-biggest-economies-in-2018/
.
3
http://www.aei.org/publication/dynamic-graph-of-the-day-top-ten-countries-by-gdp-1961-to-2017/
.
4
https://www.gbm.hsbc.com/insights/growth/the-world-in-2030
.
5
https://www.weforum.org/agenda/2016/12/the-world-s-top-economy-the-us-vs-china-in-five-charts/
.
6
https://wits.worldbank.org/CountryProfile/en/Country/CHN/Year/2006/Summarytext
.
7
CIA.
http://www.worldstopexports.com/worlds-top-export-countries/
.
8
World Bank.
http://datatopics.worldbank.org/world-development-indicators/
.
9
IMF.
http://statisticstimes.com/economy/countries-by-projected-gdp-capita.php
.
10
IMF.
http://statisticstimes.com/economy/countries-by-projected-gdp-capita.php
.
11
Shanghai City Government.
http://www.china.org.cn/business/2019-01/28/content_74416303.htm
.
12
World Bank.
https://data.worldbank.org/indicator/IT.CEL.SETS.P2?locations=CN
.
13
World Bank.
https://data.worldbank.org/indicator/IT.CEL.SETS.P2?locations=CN
.
14
https://data.worldbank.org/indicator/IT.NET.USER.ZS?locations=CN
.
15
China Internet Network Information Center (CNNIC)
https://www.chinainternetwatch.com/29010/china-internet-users-snapshot/
.
16
Devan Shira & Associates. Retrieved from
https://www.china-briefing.com/news
.
17
https://www.businessinsider.com/time-lapse-bridge-gets-built-in-43-hours-2015-11
.
18
UN Environmental Program.
https://wedocs.unep.org/bitstream/handle/20.500.11822/27645/airPolCh_EN.pdf?sequence=1&isAllowed=y
.
Chapter 2Prerequisites for China CEOs
One of my biggest learnings when I came to China was to understand that I had to relearn what I knew. I had to relearn the way I was managing because culturally, China, as compared to Europe, has plenty of nuances and differences that you need to really understand. And this takes time.
—David Sancho, CEO, East Asia & India, Mango
You need an open personality—a personality which is willing to learn. Because you will have to unlearn a lot of things and learn a lot of things in China, to be able to succeed here.
—Kamal Dhuper, President, China, NIIT
INSIDE CHAPTER 2
Must-Have Qualities for Foreign CEOs in China
Foreign Managers' Top Mistakes in China
Shifting from Foreign to Local CEOs
Qualities Needed for Today's China CEOs (Either Foreign or Chinese Nationals)
Summary of Tips
Introduction
What qualities do the current executives leading MNCs in today's China need to be successful? This was among the first questions we posed to each of our interviewees in collecting data for China CEO II. For a glimpse into the complexity of taking a top executive post for MNCs in China, Jonathan Woetzel, senior partner at McKinsey & Company, offers this summary: “Operations are still often quite profitable [for MNCs in China]. Generally speaking, multinationals are seeing the same margins in China as they do globally. But the bar to achieve that performance continues to go up.” He names several specific challenges that China CEOs tend to face, including “the high level of investment that's required, the level of localization of management needed, and the capacity to address regulatory challenges that are China-specific—whether it's data sovereignty or food safety.” Other CEOs mentioned the following key challenges: grappling with the overall speed of change in China, the size and complexity of the domestic market, and the impact of disruptive technologies. To manage in such a difficult operating environment, the China CEO needs several qualities. The rest of this chapter summarizes the qualities identified by our interviewees.
When we asked interviewees to name which characteristics are most needed to run large-scale operations for high-profile MNCs in China, significant differences emerged between the answers received earlier (for China CEO in 2006) and now (for China CEO II). There are two reasons for the difference. First, market conditions in China have evolved. Second, the characteristics of the CEOs leading MNCs in China have also changed. Consider that (as mentioned in Chapter 1) all 20 of the original “China CEOs” interviewed in 2006 were foreigners—they did not hold Chinese passports (only one among these was originally born in China but had later changed nationality). Thus, the qualities required to run large operations for MNCs in China were, by default, a mindset and skillset needed by foreigners. Among the 25 China CEOs interviewed this time, 5 are PRC nationals, and another 3 were originally PRC citizens who later changed their citizenship. Thus, the discussion has expanded to cover the skills needed by two groups of China CEOs—native Chinese and foreigners—each requiring a different skillset and mindset in order to lead large-scale MNCs in China.
Thus, Chapter 2 addresses the qualities needed by both non-Chinese and Chinese CEOs of MNCs in China, with some interesting differences identified. We start with advice for foreign top executives. The following section discusses the qualities China CEOs identified as must haves for non-Chinese business executives to be successful in leading large-scale operations for MNCs in today's China.
Must-Have Qualities for Foreign CEOs in China
Quality 1: Humility and Cultural Sensitivity
Being humble and also being culturally respectful were two of the qualities most frequently named as necessary for foreign CEOs in China. Non-Chinese interviewees for this book commented that although humility is not necessarily a quality widely exhibited by top-tier business leaders, such a mindset is needed by those running China-based operations.
David Sancho, Mango's top executive for China, voices a viewpoint represented among many China CEOs: “One of my biggest learnings when I came to China was to understand that I had to relearn what I knew. I had to relearn the way I was managing because, culturally, China as compared to Europe has plenty of nuances and differences that you need to really understand. And this takes time.” How long? “It took me more than two years to understand how things were done in China,” says Sancho.
Sancho describes his initial mindset in this way: “I came here as a young manager. I was 35 years old—pretty young, fresh, and very impatient. I was used to the European style of managing, which was: ‘I tell [you] things and you execute.'” Eventually, Sancho realized that this approach was failing in China. “At the beginning, I was thinking that they [the local team] needed to follow what I knew. This was a totally wrong approach. The best learning was to understand that I had to learn myself how the things were done in China and to adapt myself to the culture and to the country to make my managerial style successful.”
“At the beginning, I was thinking that they [the local team] needed to follow what I knew. This was a totally wrong approach.”
—David Sancho, CEO, East Asia & India, Mango
Kenneth Yu, former China CEO of 3M, agrees that the right strategy for incoming foreign managers is humbly acknowledging one's initial lack of first-hand knowledge of China, along with showing respect for and interest in Chinese culture. He advises: “For non-Chinese, another important attribute is [to] show genuine respect for diverse cultures, regardless of your own beliefs.” He warns Western executives not to show insensitivity even when values clash. “Don't insult the Chinese—not about IPR, or the one-party system. And especially not in front of their peers.” He advises Westerners to be mindful of the new—and in many ways justified—national pride that many Chinese feel today. Yu notes: “Chinese people know their country now is much better than it was. The result: we [Chinese] now have the world's fastest high-speed trains, and more electric vehicles than the US. Chinese are proud. They don't like to be looked down on.” One aspect of culture that Yu says continues to confuse Westerners is the Chinese tendency to avoid expressing disagreement or dissatisfaction directly. As he notes: “No one will tell you, but they feel it [if you insult China].” They may show their unhappiness indirectly and express unhappiness long after the original incident—leading Western managers to misunderstand.
“Chinese people know their country now is much better than it was. The result: we [Chinese] now have the world's fastest high-speed trains, and more electric vehicles than the US.
Chinese are proud. They don't like to be looked down on.”
—Kenneth Yu, advisor, CCS & MTS
Another aspect of humility, as Frederico Freire of AB InBev stresses, is the importance of listening. He notes: “Listen and understand the context before you make final decisions. This, for me, was key.” He adds: “Someone who is not really open to learn—to listen, to understand—is not going to work well in China. They will fail.” But for some top executives, this advice is not easy to take. Freire states: “It's something so simple, but it is not necessarily true that leaders listen.” Listening, he clarifies, does not indicate weak decision-making, but instead wise decision-making. “Of course, at the end of the day, we need to make the tough calls. I'm here to make the calls. But I never make the call without understanding first.”
Foreign CEO Profile: Thierry Garnier (Carrefour) on Professional Commitment to China
In this book, the foreign China CEOs interviewed agreed that leaders need to make a tremendous personal and professional investment to educate themselves on China in order to succeed in China. Regarding the amount of commitment needed to learn Mandarin, Thierry Garnier, Carrefour's top executive in China, offers an inspiring role model. He shares the sacrifice he made in order to achieve a high level of Chinese language ability: “I took four to five hours per week of Chinese class for seven years. Not for one year—for seven years.” Today, he has passed the Chinese education system's official HSK exam at level 5 and was planning (at the time of our interview) to take the level 6 exam—the most rigorous test, for which Chinese university students must prepare well in order to pass. At this level of ability, Garnier is able to deliver professional speeches and attend government negotiations held entirely in Chinese. Garnier says: “I continue to take lessons because I want to continue improving my [Chinese] characters.” He describes the level of sacrifice needed to gain a working knowledge of Mandarin as “a physical engagement.”
Garnier says mastering Mandarin has been a critical success factor in his career in China: “This is a key factor if you want to succeed as a foreigner.” Many professional opportunities have opened to him because of his Chinese skills, he says. “By speaking Chinese, I have developed a professional network. I don't spend my time only with foreigners; I try to spend a larger part of my time with Chinese.” He explains that he has developed a broad social network of Chinese friends and contacts in both his professional and personal spheres. In this way, he has made impressive connections, including developing a friendship with top executives at Alibaba and Tencent. Garnier says: “I know every retail CEO. We send each other our vacation pictures on WeChat. It's a personal relationship. It's a huge value. And this comes from speaking Chinese, from being integrated into the Chinese community.”
Kamal Dhuper, the top executive of NIIT for China, advises foreign managers coming to China to prepare to spend time and energy educating themselves on important aspects of Chinese culture. He says: “There are certain nuances of Chinese culture which most foreigners don't know. So, understanding of culture is an important first step.” And learning about Chinese culture requires an open, humble, and willing mindset. “You need an open personality—a personality which is willing to learn. Because you will have to unlearn a lot of things and learn a lot of things in China to be able to succeed here.”
“You need an open personality—a personality which is willing to learn. Because you will have to unlearn a lot of things and learn a lot of things in China to be able to succeed here.”
—Kamal Dhuper, President, China, NIIT
Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai, identifies the “ability to lead cross-cultural teams” as a critical skill for non-Chinese CEOs. “Whoever is leading the operation here would have to understand what's different about the Chinese workforce, what's different about China.” One of the biggest and most challenging differences, he adds, is that norms regarding “face” can make it difficult for top executives to solicit the views of Chinese staff members during meetings. Jarrett has noted this issue in his own organization: “I see it here: if we have a staff meeting, at the senior level, we have now expats and locals, and the expats tend to be the most talkative. Then, after the meeting, we have to go around to all of the local staff and ask them what they really think because they did not say much during the meeting.” He says not finding a way to hear from the local team is a mistake. “For an executive, it would be a mistake to overlook those informed views. You have to spend a bit extra time to hear from the local side.”
To ensure that foreign top management team members can quickly start working effectively in China, Kenneth Yu advises MNCs to choose people with prior overseas experience. This strategy goes a long way toward guaranteeing cultural sensitivity and humility: “If you are sending someone to China to be a CEO, previous experience in other international subsidiaries for international assignment—whether it is in Western Europe or South America or in other part of Asia—will help. This ensures that the person has exposure to a non-home culture—the person has already been baptized on how to adapt to a different culture.”
Quality 2: Respect “Face” and Guanxi
Among specific cultural elements to be aware of, most China CEOs mentioned the well-known but still impactful societal norms related to guanxi and “face.” NIIT's Kamal Dhuper names “face” as the most important cultural aspect for incoming foreign managers to understand. According to Dhuper: “To Chinese, losing face is very embarrassing. So, how you give feedback, how you ensure that he doesn't lose face in front of people or in front of you, is important.” While the concept of face exists in nearly all cultures, Dhuper explains that many Westerners or Asian outside China misunderstand the level of importance awarded to face in China. He advises that respecting and protecting “face” “makes a lot of difference in the motivation and morale” of Chinese team members—which can directly impact behavior. “Understanding cultural nuances is important.”
Charles Tseng, Korn Ferry's top executive for China, argues that the most important differences between Chinese and Western managers and teams today stem from basic cultural differences. He explains: “In Greek Socratic culture, it was considered a good thing to come together to argue. And the more logical, stronger argument held sway.” Tseng says this tradition runs counter to traditional Chinese societal norms. “Chinese don't have this tradition; for us, conflict is not a very good thing.” The reason has to do with protecting “face.” “We like to start with agreement and from the agreement point, we approach the areas where we disagree—to feel each other out. For a Western Judeo-Christian context, that way is too slow, too indirect, not practical. But in a Chinese environment, starting immediately with the point of disagreement and deciding that whoever can hammer it out, will win—this doesn't work.” Thus, modern business discussions are still impacted by long-standing traditional social norms. One of the biggest misunderstandings, he says, comes when Chinese remain silent during a business meeting, in order to save the face for the speaker or themselves. “Westerners will then take silence as agreement, but in a Chinese context, silence doesn't necessarily mean agreement. Chinese silence might mean: ‘I respect you, but I still have my own view.'” Mango's David Sancho is one foreign top executive who has learned the importance of face when leading his local team: “It's really important how you empower people, how you take care of your managers in China, and how you give face. In Europe, the face issue is not so common.”
“Westerners will then take silence as agreement, but in a Chinese context, silence doesn't necessarily mean agreement. Chinese silence might mean: ‘I respect you, but I still have my own view.'”
—Charles Tseng, Chairman, Asia Pacific, Korn Ferry
Frederico Freire, AB InBev's head of China, has worked to diminish one aspect of face within his China-based team by encouraging team members to voice disagreement. “It's difficult for Chinese to say no. But I have seen, in our company in the last ten years, a big transformation. What I saw ten years ago is not what I see nowadays.” As a result, he says, his discussions with his team are richer and more informative than they were when he first arrived in China. “When I first came here, everybody agreed with me. But that did not necessarily mean they would do what they said.” As a result, many misunderstandings occurred. Today, Freire has convinced his team to speak out, especially the younger employees. “I see the young talents; they are much more open to say no. . . . I see within our organization an environment in which we have debates, we have some disagreements. The Chinese employees, I do see that they are changing. This is pretty much aligned with our ‘DPC initiative'—Dream, People, and Culture principles—where we incentivize a culture of openness and informality.”
The other important cultural aspect non-Chinese should understand and respect, China CEOs said, is guanxi. As NIIT's Dhuper explains: “The second most important cultural aspect, after face, is guanxi—personal relationships. That is true at every level of a society. Interaction with your immediate team, your business partners, your customers, the government, or academics. Relationships are important.” Dhuper adds: “It takes a lot of time to develop. First you have to be genuine, you have to open up, and you have to show interest in the other side—whether it's your customer or a prospect. You have to understand what's important to them. You have to be genuine and open.” How can someone build guanxi? Dhuper recommends socializing over meals. “In Chinese culture, eating and drinking together goes a long way. If you do that more with your people, with your partners, with your customers, bonding happens, relationships get built.” He sums up by explaining that, in China, relationships can be more important than contracts because it is understood that the relationship forms a foundation for cooperation. “China is all about relationships. In business, the spirit beyond the contract is important. And that spirit behind the contract depends on how well you are able to build relationships.”
Freire agrees that building relations after hours, especially while eating and drinking, is a useful method of building guanxi. “If I could mention one big difference, it is that relationships are key in China. Relationships build the trust.” He says the way trust is strengthened in China requires more time and effort than is needed in his home country of Brazil. In China, the best method, Freire says, is to spend after work time with team members—especially over meals: “I see in China that the ways of building the relationship is different. Everything in China is at a table—over a meal, over a few beers. You need to create your connections, create your bonds, not only in the meeting room or in the work environment, but also outside the work environment. And Chinese do that with food, with beer.” He adds: “There are beer-lovers in China!” In fact, he says that part of a CEO's duties includes spending one's after-hours time with the team, building rapport and trust. “That means a lot of talks and conversations.”
“If I could mention one big difference, it is that relationships are key in China. Relationships build the trust.”
—Frederico Freire, BU President, China, AB InBev
David Sancho of Mango agrees that guanxi remains an important factor for leaders, both in leading internal teams and in managing external relations: “In China, what I learned is that you need to understand how things are done and that relationships matter—the famous guanxi. Not only with government, with other institutions, but also across the teams.” Advisor Kenneth Yu also stresses that guanxi
