Made in China: smarter companies?

2011

Made in China: What does it mean to you? Low costs? Fast response? Good enough quality? Would you believe me if I told you that "being the smarter competitor" was becoming the objective of a number of aspiring Chinese global players?

Not so long ago, I was speaking with a European country-head of a major global telecoms network operator who was enthusiastically endorsing Huawei as a value-chain partner. I, instinctively, suspected that this was all about pricing and/or speed, but the reality was far more surprising.

Instead, my friend spoke about Huawei as being "the best listeners" that he had ever worked with. As a customer, he was delighted with not only the attention that Huawei gave to him, relative to his more familiar Western suppliers, but also their willingness and ability to respond quickly and completely to his needs. In his own words: "they listen better".

Or what about the fabled Chinese white-goods manufacturer Haier, which is legendary for their ability to get closer to their domestic Chinese customers? Haier is perhaps best known for the story of how, in the mid-1990s, they unexpectedly recognized the use of their washing machines by peasants in Sichuan province to make their fruits and vegetables cleaner and more attractive for the newly emerging free markets. In response, Haier developed softer agitators to deliver on that need.

Today, Haier has grown into the world's largest major consumer appliance brand, with a 6.1% global market share in 2010 (compared to 4.9% for Whirlpool, and 4.8% for LG). But not content to rest on this success, it is now involved in a major effort to completely "reengineer" its organizational culture in order to be more market-focused. Not willing to accept "customer listening" as an art-form, Haier is structurally readjusting its reporting relationships, hierarchy, measurements and even its resource allocation, to serve customer needs more effectively.

While Huawei, Haier, and Lenovo, are currently the best-known global Chinese players, there are others who are quickly emerging as well. One of these is UnionPay, operator of China's only electronic retail payment settlement network, which is now beginning to be seen around the world with a variety of credit and debit card services.

Recently, for example, the Financial Times reported on the installation of 75 UnionPay machines in London's Harrods department store, which have increased by 40% the spending by affluent Chinese shoppers. What's particularly interesting about UnionPay is their attention to learning as a competitive advantage.

I recently had the opportunity to visit UnionPay in Shanghai and listen to Mr. Chai Hongfeng, Director and Executive Vice President, speak about the company. He is an urbane, sophisticated, cosmopolitan executive, who could have stepped off of the cover of Forbes, and he summarized the company's managerial needs with four words (and my own interpretation for each):

Study: to increase their ability to learn from the established global bankcard companies (Visa, MasterCard, and American Express) and from foreign payment system experiences (Europe's migration from magnetic strip cards to intelligent chip cards, and, in his words: "The American market is a very attractive market; there is a lot to learn from it.")

Standards: in a very fast-moving business, there is always the need to establish sufficient standardization to move quicker. Sina.com has recently reported that UnionPay's NFC mobile payment solution (13.56MHz) will most likely be adopted as the standard solution across China.

Cooperation: the ability to find value-chain and geographic partners to help UnionPay move into new fields (mobile-phone payments, for example) or new markets. In the last few months, UnionPay has announced partnerships with a diverse set of value-chain actors, such as PayPal, PingAn Insurance, and both China's major mobile phone network operators and handset manufacturers, to ensure that it keeps up with possible disruptions to its traditional credit/debit card business.

Innovation: the desire to be more than a fast-follower: along with the partnerships noted above, there are rumours that UnionPay is developing it's own version of "Square's" approach to mobile payments.

"Study, Standards, Cooperation, and Innovation": this is not about price. Nor is this the image of the traditional State-Owned Enterprise dinosaur. What this is, instead, is a recipe for learning more and faster than their competitors. This is all about building a smarter organization.

Some 16 years ago, Peter Drucker, the management gurus' guru, predicted that the next big managerial innovation would come out of China. We're still waiting. But perhaps, somewhat unexpectedly, might that innovation just be the ability to listen better in an effort to construct faster-learning organizations?

In the spirit of that sentiment, my good friend William Keller, the former CEO of Roche China, and a long-time Shanghai resident, has observed that in the competition for learning about how to do business in this brave new world of globalization, Western firms travel the world telling others "how to do it", while Chinese firms travel the world "listening to the lessons of others."

Keller asks: "Who do you think will learn faster"? Granted "listening" is not necessarily the same as "learning", nor is either a guarantee for building an effectively "smarter" competitor. But, listening and learning do strike me as excellent starting points for competing in the ideas business.

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About The Author

Bill Fischer
Bill Fischer

Bill Fischer is Professor of Technology Management at IMD, the leading global business school based in Lausanne, Switzerland.