FT
July 8, 2013 5:21 pm
By Andrew Hill
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 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
ofReinventing
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.
Andrew Hill blogs at www.ft.com/businessblog
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