What we can learn from Chinese bosses when it comes to chaos management

© Ellie Foreman-Peck | Financial Times

This column was previously published in L’Express on 15th september

An industrialist from a CAC40 company told me that, during the first quarter of 2022, he had seen monthly fluctuations of 30–40% in the volume of business for activities that normally showed variations of 3%-4%. “Unmanageable chaos!” he lamented. Private entrepreneurs in China are more used to this situation, having been subjected for 40 years to deep political, regulatory and commercial uncertainties in their country. This is well described in the essay Dragon Tactics*, which should be compulsory reading for any Western bosses seeking to prepare themselves for the worst chaos our generation will have ever seen.

Its authors, Sandrine Zerbib and Aldo Spaanjaars, are the architects of the incredible success of the Adidas launch in China. This experience has enabled them, over the last 20 years, not only to observe the boom in the the Chinese private sector — a real catalyst in the country’s economic take-off — but also to understand the underlying causes.

A flexibility totally different from our rigid strategies based on skills

The long list of qualities shown by these entrepreneurs should make Western business leaders question their managerial approach. First of all, an extraordinary degree of observation, accepting paradoxes rather than hanging on to fixed beliefs. Secondly, a vision formed on the basis of seizing opportunities by means of an adaptability and a flexibility totally different from our rigid strategies based on skills. Thirdly, the ability to implement, prioritizing agility and speed rather than the quest for perfection. But also a permanent obsession with innovation, including launching imperfect products in order to leave room for incremental improvement, whereas the West prefers disruptive innovation.

Another basic quality is the ambition to think big from the very start. This is facilitated by the size of the home market and by the absence of marginal cost in digital business models. One can also see incredible resilience, whose strength seems to come from the suffering endured by the previous generation during the Cultural Revolution. There is also pragmatism, adept at compromise and so different from the rigidity of Anglo-American procedures. Finally, the speed of decision-taking, still often remaining in the hands of the company founders, who have little taste for the wide-ranging management committees of our Western head offices.

All this helps us understand how Haier has become the world leader in electronic consumer goods; how the West, because of its intellectual arrogance, has let China take the lead in the sectors of the future such as electric batteries, and solar and wind turbine power; how the carmaker BYD has, in the space of a few weeks, become the leading manufacturer of masks in the world; and how the Anta group has overtaken Nike and Adidas in sports equipment. We can also see how large Western companies have been so successful in China, like L’Oréal, which, a few years ago, exchanged its byword of Excellency — a past symbol of Western arrogance — for that of Agility, directly inspired by what it observed in China.

It remains to be seen how these qualities will adapt in order to deal with the economic changes that have taken place since 2021

It remains to be seen how these qualities — that the West would do well to learn from — will be able to adapt to the economic changes that have taken place in China since the summer of 2021. The considerable economic slow-down, increased government control, the bursting of the real estate bubble, and the rise to power of female executives — all these will, in their own way, test the ability of the Chinese private sector to deal with chaos management. In particular, it will be fascinating to test their limits in speeding up internationalization, not only in emerging countries but also in the markets of our developed countries. This is even more of a crucial issue given that, in the coming years, China — just like Germany — will have to face a serious succession problem for those individuals who founded their companies in the 1980s.

This is one more paradox to add to others in China. Now that China’s political leaders have chosen the route of closing up the country, it would be in the best interests of our Western business leaders to make up for their disquieting lack of knowledge of the Chinese private entrepreneurial sector.

* Dragon Tactics. How Chinese Entrepreneurs Thrive in Uncertainty, by Sandrine Zerbib and Aldo Spaanjaars (Bis Publishers, 2022).

French version : Dragon Tactics. Les tactiques des entrepreneurs chinois pour mieux diriger dans l’incertitude, Par Sandrine Zerbib et Aldo Spaanjaars (Dunod, 2022)

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David Baverez

Business angel / demon. Based in Hong Kong since 2011. Columnist, author of “Paris-PekinExpress”, “Beijing Express” and “Génération Tonique”.