SCMP | How We Can Help Next Generation of Entrepreneurs

By Edward Tse

Original published by South China Morning Post on July 19, 2018. All rights reserved.

The Yabuli Youth Forum took place in Hong Kong last month. More than 200 people attended the offshoot of the idea-exchanging platform, the China Entrepreneurs Forum.

Government and business leaders from Hong Kong, the mainland and Macau – including former Hong Kong chief executive Leung Chun-ying, former chairman of the China Banking Regulatory Commission Liu Mingkang and Vincent Lo Hong-shui of Hong Kong Trade Development Council – spoke of deepening cross-border collaboration to foster innovation for growth. Other speakers included young entrepreneurs from different backgrounds and industries.

Almost as one, the speakers highlighted the strategic importance of talent in developing the Greater Bay Area. In particular, Albert Chuang, president of the Y. Elites Association of Hong Kong, suggested that Hong Kong youths should look beyond the city, to the Greater Bay Area and even the rest of mainland China, where changes are taking place at an unprecedented rate.

Indeed, though the 1970s and 1980s witnessed Hong Kong’s rapid growth, with a booming service sector and light industries, this former land of opportunity is now struggling with slower economic growth, especially when compared with the mainland. Skyrocketing property prices, a narrowing industry structure and, most critically, the lack of upward social mobility, make young people increasingly disillusioned about the future.

Source: Internet

Some politicians attribute Hong Kong’s problems to the “one country, two systems” model. However, this misses many of Hong Kong’s own pitfalls. First, people have become too Hong-Kong-centric and unwilling to better understand the outside world. There is, in general, a lack of outward-looking perspectives and foresight.

Second, although some high-end sectors, such as financial services, still offer attractive jobs, Hong Kong’s economic structure lacks diversity and remains disconnected from the new economy.

Vital industries, such as real estate, communications, transport and even food, are monopolised by cartels and oligopolies and thrive on cronyism, virtually immune from the digital transformations that are redefining businesses elsewhere in the world. As a result, the city’s talent pool is insufficient to meet the needs of the future economy.

Meanwhile, the Chinese mainland has emerged as a global innovation hub. In the prospering internet and technology sector, ranging from ride-hailing to e-commerce,robotics and artificial intelligence, entrepreneurs are getting younger and more geographically diverse.

China Youth Daily reported in 2016 that the average age of first-time entrepreneurs was below 25; another study showed that although start-ups generally prefer top-tier cities, they are also reaching inland, towards lower-tier cities such as Xian, Xiamen and Qingdao.

Source: South China Morning Post

With these dynamics on the mainland, Hong Kong’s youth needs to better understand the opportunities and take advantage of them. Such opportunities and innovation can occur purely through osmosis – that is, interaction, particularly among people and a sharing of ideas.

To encourage such osmosis, governments from both sides should seek to minimise the physical limitations on the movement of people and goods, and most importantly, ideas, which is also one of the main objectives under the Greater Bay Area scheme. The scheme promises a combined economic output of some US$1.4 trillion and, if done right, the unique complementary capabilities of Bay Area cities would generate huge synergy and create a bigger pie for all.

Second, officials should organise more multilateral interactions like the Yabuli Youth Forum and work together to pool resources, training and space to help young people start businesses with lower opportunity costs.

Third, role models are key to stimulating entrepreneurial activities in Hong Kong. The city needs more entrepreneurial examples – like GoGoVan, the on-demand logistics service and Hong Kong’s first US$1 billion start-up, and SenseTime, the world’s highest-valued AI start-up – to inspire others to turn ideas into action.

Young people are the future. To help Hong Kong benefit from the growth of China and make the Greater Bay Area plan work, it is critical that we focus efforts and resources on talent development and create “osmosis” to nurture the next generation of entrepreneurs.

Edward Tse is founder & CEO, Gao Feng Advisory Company, a global strategy and management consulting firm with roots in China. A pioneer in China’s management consulting profession, he led the Greater China operations for two major international management consulting firms for 20 years and is widely known as China’s leading global business strategist. He is author of The China Strategy (2010) and China’s Disruptors (2015).

 

GF Viewpoint | Seeking Commonalities while Maintaining Differences

By Edward Tse and Josie Tai
July 16th, 2018

On July 6th, President Trump’s tariff on $34bn of Chinese imports, ranging from water boilers and lathes to industrial robots and electric vehicles, marked the escalation of the tit-for-tat trade war with Beijing. In retaliation, Beijing immediately raised tariffs on a list of US goods that include soybeans, seafood, and crude oil.

Some analysts point to the falling trade imbalance and weakening Chinese currency, as evidence that the US has the more to gain and can weather through the short-term negative consequences of a trade war. Nevertheless, the real issue of a full-fledged trade war is not about who will gain, but that who will lose, and the answer is everyone. A brief overview of the economic history and a basic understanding of economic theories suggest that any such conflict would result in the worst disruption to the global economy. Linda Yueh, American-British economist and Adjunct Professor of Economics at London Business School, warned that trade barriers would not only damage both countries but would also disrupt global supply chains, raising prices for consumers worldwide.

Source: internet

In an ever more interconnected world, the two countries are deeply straddled in a globally intertwined supply chain, and to look at the trade relationship as merely bilateral is a gross oversimplification of its nature. Intel, for instance, carries out the most capital-intensive and technologically demanding part of its semiconductor manufacturing in the US, Ireland, and Israel;the resulting wafers are shipped to China for final testing. Even though China takes a relatively low-value step in the process, given that a number of chips from Intel or the like flow back to the US, the new tariffs will backlash against domestic companies and consumers.

In addition, American companies with operations in China are likely to find themselves in the firing line. 80 percent of products made in China by US companies were sold in the Chinese market; these companies include McDonald’s, which only owns 20 percent of its China business since the majority of its business is held by China’s state-owned conglomerate CITIC, and General Motors, which sells more vehicles in China than in any other market through joint ventures with state-owned automakers SAIC Motor and FAW Group.

Wei Zhen, head of China research at global index provider MSCI, wrote that “5.1 percent of the revenues of companies in the MSCI USA Index come from China and may be at risk as a result of a trade war. In comparison, only 2.8 percent of the revenues of the companies in the MSCI China Index come from the U.S.”

In fact, the US was actually the leading advocate of globalization that began decades ago, and in the process, it encouraged more divisions of labor across different countries according to their respective comparative advantages. The supply chain has developed through years around locations of manufacturing: while some of the most important technologies like micro-chips are largely retained in the US, China is evolving from a primitive-level world factory to a manufacturing powerhouse, and India is also picking up on software development. As a result, more and more companies are moving their operations in China to achieve maximum economies of scale.

Source: internet

After decades of the globalization experiment, however, the US is turning around the table. It is redefining the rules and beginning to set up barriers against other countries like China, in a bid to curb China’s “unfair trade practices” and “substantially reduce trade deficits”. Even though protectionism can be somewhat beneficial on the local level, based on operations research, any attempt to optimize based on local conditions without understanding the big picture will not likely produce a globally optimal, sustainable solution – and trade protection will eventually take its toll on US businesses themselves.

Avoiding a global economic disaster requires cool-headed discussions and an appreciation of commonalities from both sides. The US and China have more shared goals and responsibilities than trade disputes: building a permanent peace mechanism on the Korean peninsula, resolving terrorist threats and the refugee crisis, maintaining global economic stability and creating an international environmental regime. RAND Corporation, a US think tank, recommended in a recent report that the US should establish a comprehensive strategy and leave open the potential for cooperation to manage emerging rivalry with China.

Source: internet

The two countries also share many commonalities on the business level. Although often questioned by the West, China follows its own development model where the central government sets trajectories at the top, the grassroots entrepreneurs thrive and drive growth at the bottom, and local governments compete and collaborate in the middle. The private sector has been opening up, now supporting more than 60% of China’s GDP growth and 80% of jobs, according to statistics published by Xinhua last year.

Chinese entrepreneurs look to the West for inspiration, not only modeling their organization design on Silicon Valley but also pouring billions into US startups. Tencent Holdings, for example, holds significant stakes in high-growth American companies such as Snapchat and Tesla, becoming the second-largest foreign investor in the US tech industry. The rhetoric portraying Chinese VC investors as players of a technology transfer scheme skews the nature of and disregards the tremendous tangible benefits from these investments.

US companies can also benefit from participating in China’s thriving innovations. China’s entrepreneurs are highly driven to grab new opportunities through “multiple jumping”: they may focus on their existing core competencies at first, but when new opportunities come up, they will try to catch these new opportunities even if they don’t have all the capabilities needed to run the new business. They would collaborate with partners, and thereby building ecosystems and crossing business boundaries. For example, Meituan-Dianping, the popular food delivery app with 400 million active users in China, entered mobility service by leveraging its huge consumer database. Thus, there are still many potential benefits that American firms can capture by exploring new business models in light of the myriad of Chinese innovations.

Admittedly, a full-blown trade war is already taking shape, and it would put economic growth in both countries at risk and wreak havoc on the global supply chain. However, it is not too late for the US and China to prevent further deterioration of trade relationships. Both countries should rethink about the collateral damage of ill-conceived trade actions, establish mutually beneficial agendas and replace polarizing rhetoric with rational economic arguments.

About the Authors
Dr. Edward Tse is founder and CEO of Gao Feng Advisory Company. A pioneer in China’s management consulting industry, Dr. Tse built and ran the Greater China operations of two leading international management consulting firms for a period of 20 years. He has consulted to hundreds of companies – both headquartered in and outside of China – on all critical aspects of business in China and China for the world. He also consulted to the Chinese government on strategies, state-owned enterprise reform and Chinese companies going overseas. He is the author of over 200 articles and four books including both award-winning The China Strategy (2010) and China’s Disruptors (2015) (Chinese version «创业家精神»).

Josie Tai is a Research Analyst at Gao Feng Advisory Company. Josie is a Yale undergraduate majoring in economics and psychology, with interests in Chinese consumer behaviors, the tech industry and US-China trade relations. Her previous experience was in legal consulting, journalism and startup, and she was also trained in empirical data analysis, industry research as well as accounting and valuation.

Bernice So, Research Analyst, also contributed to this article.

 

新浪财经 | 谢祖墀:指数颠覆时代的领导力 – 有理性的狂热者

文 | 谢祖墀

在大变革的时代中,只有狂热者才能成为最具时代颠覆力的领导者。特别是创业公司或在转型中的组织,狂热者们的魅力带动整个企业,甚至整个生态系统

指数颠覆时代的企业需要什么样的领导力?

吉姆·柯林斯(Jim Collins)在2001年出版的《从优秀到卓越》一书里提出,卓越企业的领导人都是“第五级领导者”。在他的定义里,这些人作风谦虚,擅长通过他人取得成功,愿意与他人分享成功,也愿意第一个承受挫折、担当责任。他们一般较害羞和谦逊。换句话说,他们是“老好人”。

在柯林斯之前和之后,也有不少管理学家提出过不少的关于领导力的模型。当然,因管理学不是硬科学,百家争鸣,各有乾坤。

今天,所有的企业都在面临着一个巨大变革的时代:变化多端,速度特快,不确定性高,对企业领导力的要求也特别高。

我在博思艾伦咨询公司(Booz Allen Hamilton)时,我们在领导力方面做了不少研究。我当时的两位美籍资深合伙人保罗·布兰斯塔德(Paul Branstad)和查克·卢西尔(Chuck Lucier)提出了“Zealot”的概念。谷歌翻译对“Zealot”的中文翻译是“狂热者”,我想在这里翻译为“疯子”亦不为过。

“Zealot”一词最早源于古希腊语,被古代犹太民族使用。公元一世纪时,一群犹太狂热分子为了抗争强大的罗马帝国入侵而成立了“匕首党”,而“Zealots”(奋锐党,又名激进党)则是其中比较激进的一支。

当今很多出色的企业领导人都具备这种“狂热者”的特质,例如苹果公司的史蒂夫·乔布斯(Steve Jobs),亚马逊的杰夫·贝佐斯(Jeff Bezos),英特尔前CEO安迪·格鲁夫(Andy Grove)。特斯拉的艾伦·马斯克(Elon Musk)也是企业创新奇才。在国内,这样的例子也有不少。我同意李开复的观点:百亿级独角兽公司创始人的共同特点就是偏执、自信和强大。这便是Zealot的特点。

据博思艾伦的研究,这些“狂热”的企业领导者们往往非常努力,擅长为企业创造价值。他们懂得如何激发人才的潜力,发挥其最大的价值,最终把价值转化为实际的成果。他们通常是不脱离现实的愿景者,对今天取得的成果充满激情,为明天创造出色的业务,并不断为员工开拓发展机会。

在今天,这种“狂热”的特质对一个企业来说更为必要。科技的发展正在加速这个世界的改变,传统行业间的界限正在被技术越来越模糊化,去中心化已成主要驱动因素,股东和员工对其权益的期望日益增长。领导者必须对企业做出改变与转型。我认为,企业自我转型的最大原动力,来自“狂热者”。

从人格的角度,狂热者拥有独立动机,对组织的成功抱有极大的责任感。他们可以超出当前的业务范围和模式,来构思、开发和实施新的业务构想。他们不拘于现有的行业或业务范围内,积极地探寻新的机会,评估其可行性,并进行转型和跳跃。他们深知任何优势都是短暂的,没有什么可以长久地“持续”,企业应该不断地发掘和发展新的优势来源,将改变视为机遇而非威胁,才能不断地迭代和成长。他们用一种动态和前瞻性的视角去探索,并做出勇敢的决定:当看到不属于自己当前业务范围的新机会时,他们不会固守业务边界,而是积极地通过战略性的“跳跃”来扩大业务边界。即使公司本身“跳跃”的能力不足,他们仍能及时抓住这些变革和机会。换句话,“狂热”的领导者都是“战略第三条路”的信奉者。

从气质的角度来说,狂热者们往往都(至少表现出)充满活力、魅力和创造力。但他们不仅是魅力型领袖或者创意的提出者,更是创意的实施者、执行者。在做出勇敢的决定后,他们能将业务最大化地提升,以满足业务变革对业绩的要求。在进行“跳跃”、扩张业务边界时,他们会自建,或者与和合作伙伴建立生态系统的方式,以弥补自身的能力差距,保证跳跃的成功。在成功跳跃过业务能力空缺后,狂热领导者们不会就此停歇,而是对业务的成果负责到底。他们以强大的执行力和领导力,带领员工进行资源与业务重组,以最快的速度向上冲击,取得指数级的增长和长期、可持续的成功。

扁平化、赋能、清晰、严格的评估体系,具有创业家精神的合伙人体系等,都是当今颠覆时代的企业所需要具备的要素

从文化的角度,狂热者懂得自己的企业在每个阶段需要什么样的基因,文化和组织体系,用强大的执行力去执行和改造。也因此,他们的个性或风格可能显得与社会文化格格不入,但这种独特的“狂热”文化,正是推动企业不断跳跃和进步的最原始动力。在这个被科技高速颠覆的时代,狂热的领导者们也在高速地不断探索适合时代与企业背景的组织形态。扁平化、赋能、清晰、严格的评估体系,具有创业家精神的合伙人体系等,都是当今颠覆时代的企业所需要具备的要素。

他们不一定是传统意义上的“老好人”,不会创造“和稀泥”的文化,但亦不会是“神憎鬼厌”。相反他们往往受人极度的尊敬,因为他们创造了价值。他们有点独裁,但亦照顾整体利益。他们相信理想主义,但不脱实际。在大变革的时代中,只有狂热者才能成为最具时代颠覆力的领导者。特别是创业公司或在转型中的组织,狂热者们的魅力带动整个企业,甚至整个生态系统。因此他们必定是包容、利他和共赢的。他们保持着坚定的信念,领导团队包容不确定因素,在不确定中探索;他们不会墨守成规,但是也非毫无章法。

这种领导力就是“有理性的狂热”。

原文发表于《亚布力观点》(2018年6月刊)并保留所有权利

(注:本文图片均来自网络)

关于作者:
谢祖墀博士(Dr. Edward Tse)是高风管理咨询公司(Gao Feng Advisory Company)的创始人兼首席执行官。中国管理咨询业的先行者。过去的20年里,他创立并领导了两大国际管理咨询公司在大中华区的业务。外界评价他为“中国的全球领先商业战略家”和 “谢博士之于中国企业界就如大前研一之于日本企业界”。他曾为数以百计的公司(总部设在中国及其它地区)咨询过所有关键战略和管理方面的业务,涉及中国的各个方面和中国在全球的地位。他还为中国政府在战略、国有企业改革和中国企业走出国门等方面做过咨询。他已发表200多篇文章并出版了4本书,其中包括于国际获奖的《中国战略》和《创业家精神》。谢博士获得了加州大学伯克利分校工程学博士、MBA以及麻省理工学院的工程学学士、硕士。

 

南华早报 | 共同利益:中美可通过关注共同目标来避免修昔底德陷阱

文 | 谢祖墀

英文原稿于2018年6月11日在《南华早报》发表,版权归该报所有

中国与美国这两个世界上最大的两个经济体正在陷入一场修昔底德陷阱(Thucydides Trap)吗?哈佛大学教授格雷厄姆·阿利森(Graham Allison)认为美国和中国正重蹈伯罗奔尼撒战争 (Peloponnesian Wars) 之覆辙,这种类似的竞争动态也曾招致17世纪初英国和荷兰、20世纪早期德国和英国、20世纪40年代日本和美国间的战争。

中美之间一场不可避免的战争红色警示灯表面上似乎正不断闪烁。针锋相对的关税战,似乎将发展成一场全面的贸易战。美国政府对中国电子通信设备制造商中兴通讯的惩罚措施,意味着贸易冲突变得更加复杂,也揭露了一个更关键的格局背景:美国想要阻止在国际电子产业链中步步攀升的中国。

此外,南中国海的紧张局势令区域性军事冲突的可能性不可忽视。近期,美国国防部部长吉姆·马蒂斯(Jim Mattis)警告说,如果中国继续在争议岛屿进行军事部署,将面临“更严重的后果”。伯罗奔尼撒战争的结果和基础经济学都表明,任何此类的冲突都会对全球经济造成最严重的破坏。

但是,当今世界与古希腊和第二次世界大战前的世界已经截然不同。与过往相比,今天政治经济和军事的本质已经发生了根本上的改变。现代武器的巨大破坏力让大国之间几乎不可能爆发全面战争。而且,在一个相互联通的世界里,大国之间的战争对全球所造成的破坏几乎不可想象。

为了避免陷入修昔底德陷阱,中美双方可以更多地关注双方的共性,并找到解决分歧的方法。无论意识形态的差异和地缘政治摩擦如何,两国都应该共同合作开展全球治理,以应对全球共同的挑战:建立朝鲜半岛长期和平机制,寻求解决恐怖主义和难民危机的办法,帮助维护全球经济的稳定增长,并创造一个全球化的环境保护体系。

虽然特朗普政府似乎在无视某些两国甚至多边共同的挑战,中国国家主席习近平却多次强调,中国希望能够与全球各国建立一个“人类命运共同体”和实现各国共赢发展做努力。在国际治理方面,中国渴望扮演一个更积极的角色。美国智库兰德公司(RAND Corporation)最近发布的一份报告建议美国应该制定一个全面的战略,释放合作潜力,以妥善处理与中国之间正在产生的竞争。

尽管中国遵循的是自己的一种发展模式,而这种模式往往受到西方国家的质疑;不过在商业层面上,中美之间其实拥有很多共同之处。中国的私营企业一直在蓬勃发展,并推动了十多年来的国内经济增长。据新华社去年的一份报道,私企现在贡献了中国GDP增长的60%以上,并提供了超过80%的工作岗位。以电子商务和汽车出行服务业等为代表的新兴互联网经济的增长速度,是2010至2016年GDP整体增速的两倍。

中国创业和企业家们,如阿里巴巴、腾讯、小米和滴滴出行等企业的领导人,与他们的美国的创业和企业家一样,都是能够和愿意承担风险的,同时他们能够接受不确定性并积极地寻求经济回报。在建立自己的创新意识和组织形态方面,他们主要参照美国科技公司,而非中国的国有企业。

这些企业家往往通过西方国家,特别是美国西海岸来获得灵感,例如腾讯就是美国科技行业第二大非本土投资者。同时,许多美国风险投资基金,如红杉资本(Sequoia Capital)和IDG资本,在中国科技公司中的投资回报都很丰满。

预防贸易战也需要合作的意愿。前新加坡驻联合国大使基肖尔•马赫布巴尼(Kishore Mahbubani)敦促利用合理的经济论据,代替两极化的政治和简单化的意识形态,来为酝酿中的贸易战降温。将美国贸易赤字归咎于中国的冷战言辞,忽略了与中国的紧密融合为美国经济带来的巨大利益。

首先,对中国的出口,给包括美国人在内的许多人带来了就业机会。根据中美商务委员会撰写的报告,2015年美国对华的商品和服务总价值为1650亿美元,占美国出口额的7.3%和美国GDP的1%左右。由于中国已深深地融入在全球供应链中,这些数据低估了美国经济从中的获利,因为它没有考虑从其他国家向中国转口的产品,或中国邻国在其影响下购买的产品。

其次,美国投资者也受益于中国经济近年高达7%的持续增长。报告称,美国公司在中国制造的产品中有80%在中国出售; 如果这些利润重新分配给股东并在国内投资,将支撑103,000个就业岗位和119亿美元的美国GDP。同时,中国企业开始在美国投资。据估计,中国对美国和在美国的中国公司的直接投资,将支撑104,000个就业岗位和108亿美元的GDP。

第三,中国的商业创新正在突飞猛进,但总的来说,美国企业还没有充分利用这些机会和参与其中。尽管突破这些边缘可能意味着巨大的投资和回报的机会,但一般外国公司还只是倾向盲目复制他们的商业模式到中国来,缺乏足够的对中国市场的深刻了解和创新意识。

美国政治顾问罗伯特·卡普兰(Robert Kaplan)在他最近的著作《马可波罗世界的回归:战争,战略与美国利益》(MarcoPolo’s World: War, Strategy and American Interests)一书中,描述了一个将以欧亚大陆(Eurasia)为冲突中心的亚洲世纪。

虽然小规模军事冲突或贸易战争升级的可能性不容忽视,中美两国避免坠入修昔底德陷阱是有可能的。中美双方都应保持冷静,并认识到稳定互利的重要性。同时双方应遵循理性行为,和对彼此对话、合作和共同目标的认可。

我认为这是可以做得到的。

(注:本文图片均来自网络)

关于作者:
谢祖墀博士(Dr. Edward Tse)是高风管理咨询公司(Gao Feng Advisory Company)的创始人兼首席执行官。中国管理咨询业的先行者。过去的20年里,他创立并领导了两大国际管理咨询公司在大中华区的业务。外界评价他为“中国的全球领先商业战略家”和 “谢博士之于中国企业界就如大前研一之于日本企业界”。他曾为数以百计的公司(总部设在中国及其它地区)咨询过所有关键战略和管理方面的业务,涉及中国的各个方面和中国在全球的地位。他还为中国政府在战略、国有企业改革和中国企业走出国门等方面做过咨询。他已发表200多篇文章并出版了4本书,其中包括于国际获奖的《中国战略》和《创业家精神》。谢博士获得了加州大学伯克利分校工程学博士、MBA以及麻省理工学院的工程学学士、硕士。

How Corporate Innovations Work in China?

On March 15th, 2018, Gao Feng Advisory Company’s CEO Edward Tse was invited by Asia Society Switzerland to discuss China’s innovations in business. We would like to express our gratitude to Mr. Ernst Bärtschi, chairman of the Board of Directors of Conzzeta AG, for initializing the concept of this event and for orchestrating its organization. We would also like to thank the event’s host, Ms. Eunice Zehnder-Lai, member of the Board of Directors, Asia Society Switzerland, for leading the conversation.

Ms. Eunice Zehnder-Lai (EZL): Thank you, Mr. Bärtschi. Innovation is a very timely topic for all of us. Technology seems to be influencing all parts of our lives. China, as a topic, is also very relevant. Having said that, innovation in China may not come as the most intuitive topic. To many, the image of China is that of a socialist, planned economy and as a copycat nation. Not long ago, a lot of people were afraid of forming joint ventures with China, that they will steal your intellectual property, that they’re very good at making imitation and fake products, selling them at a fraction of the price and ruining your market. Suddenly, China has become a global leader in innovation. They’re one of the leaders in cashless payments, in drones, in many areas of e-commerce, and in facial recognition. How did that happen so quickly? If you count the number of unicorns in China, it is catching up with the US very quickly. If we look into history, at the end of the Cultural Revolution in the 1970s, Deng Xiaoping took over and inherited a big mess. His job was to turn the country around and he made certain decisions that really set the backdrop for this mass entrepreneurialism and grassroots innovation. Could you give us a little bit of color on the backdrop?

Edward Tse (ET): First of all, thank you. Thanks to Asia Society Switzerland for the invitation and to Mr. Bärtschi for your arrangement which is really wonderful, and Eunice for your being our host this afternoon.

I’m very privileged and I hope I can share with you some of my views and experiences. Having worked in China for over 25 years by now at some of the top and biggest consulting firms, first with the Boston Consulting Group, and later with Booz Allen Hamilton (later known as Booz & Company), I was fortunate to have helped a large number of companies, foreign and Chinese – including SOEs and private sector companies — over the years to help them develop their business and strategies.

Developing the right kind of strategy for China needs consideration of the China context. Without that consideration, the strategy would mostly fail. You cannot just copy and paste the strategy approaches that you take in Europe or in America or wherever and expect that to work in China. Sometimes it works but most often, it doesn’t because the context is very different.

Eunice, your question is very good. Many people are surprised by the speed and intensity of the changes in China. However, all of these happened for a reason.

The biggest near-term game-changer in Chinese history is the Cultural Revolution which left the Chinese disillusioned. When that was over, Deng Xiaoping returned to power. He decided to be pragmatic and tried something different: allowing entrepreneurship to come back to China.

Back at that time, the Chinese people were clueless about business because they had no exposure to the notion of business under a planned economy. However, we Chinese were innately very entrepreneurial in history. For centuries, the Chinese were trading with the Europeans, Indians and Arabs over the Silk Road. And we traded with our neighbors. It was just totally and artificially stopped by that aberration in the first 30 years of the PRC. However, after Deng lifted the ceiling, entrepreneurship started growing fast.

EZL: When we think about Chinese companies’ entrepreneurship, there are three companies that always come to mind: the “BAT” – Baidu, Alibaba and Tencent. And every time we see them, they seem to be going into a new business. And they seem to be growing horizontally in their ecosystems. Whereas in the West, the managers are taught to focus, to find out what your strengths are and what your core competency is. Do not deviate from what you’re good at, because the market will penalize you for it. It doesn’t seem to be the same in China. Why is that?

ET: You’re right. It is about management science. When I first joined consulting 30 years ago, I was in the US and was taught there were only two ways to think about business strategy. One is to form conglomerates, meaning collections of different kinds of businesses but on a random basis. The other way is to focus based on a company’s core competencies, i.e., what you are good at.

In fact, since around the 80’s, conglomeration was not considered as a good thing by the western capital market. The notion of “focusing on what you are good at” as an outgrowth of the “core competence” concept became the mainstream strategy thinking in the West till even now.

The rise of China and the prevalence of technology, in particular the creation of smart devices, have provided the context for the rapid emergence of companies like BAT. The Chinese really embrace the Internet, particularly wireless internet and its associated features like social media.

In China, while there are some companies that are conglomerates and there are some that are core competence focused, the fastest-growing companies grow by “multiple-jumping”: jump when they see new opportunities, even though they may not have all the capabilities needed to operate in the new opportunities space. They will make up for the capability gaps along the way either by themselves or through collaborations with other companies, or both. These companies may focus on their existing core competencies at first, but when they see the opportunities showing up in what we call the S-curve manner, they will try to catch these new opportunities even if they don’t have all the capabilities needed to run the new business. Managers in Western multinational companies don’t necessarily see these new upcoming opportunities in China. Even if their local managers tell them there are opportunities, most of them will revert back to a core competence focus, thinking, “if I try to stretch, I will be accused of being not focused.”

 

On the opposite, the Chinese entrepreneurs are highly driven to grab these new opportunities. If they lack the capabilities to do so, they would collaborate with partners thereby building ecosystems. Companies like BAT have developed into not just one but multiple ecosystems, turning into mega ecosystems. Today Alibaba and Tencent are already in the world’s top five by market capitalization.

By the way, leading U.S. tech companies like Google and Amazon have also grown through “multiple jumping”.

EZL: In all these mobility companies, they don’t really see themselves as transportation companies. They see themselves as data gatherers. The value is really in the data they have from having twenty million rides a day.

ET: That’s exactly right. The Chinese entrepreneurs have discovered this without knowing it actually. With the command of large user databases, they feel they can crisscross over industry boundaries. They can go into industries that they were not in before. So they can do multiple jumping.

Meituan-Dianping, the popular food delivery app, has 400 million active users in China and offers fast and convenient service. With that database, they look at mobility services as a good business to enter into. The leading mobility services company in China is a company called Didi Chuxing. Didi competed with Uber for a while until Uber pulled out from China. Didi didn’t look at the auto OEMs as competitors because they lived in different spaces – mobility solution and car manufacturing respectively. But this is not the case with Meituan-Dianping, who as a food delivery provider, has a large active user database. When Meituan announced that they would go into mobility service solutions, Didi was concerned that real competition and a real war would start. This is how competition is being defined in China’s digital space.

EZL: What other advantages do the Chinese have if you look at the very successful companies in China that are truly innovative? Do you see a common thread that goes through all of them? What are the typical characteristics of these companies compared to what you see in the West?

ET: It all started with the mindset and the leadership. In the West, companies tend to focus based on their core competencies. That is the response to a general slowdown of the economy in the 80’s and the early 90’s after the “go go years” of the conglomerates in the previous decades. So the academics and the consulting firms came up with a theory to try to explain that, which became the mainstream thinking in the West and it still is nowadays.

The Chinese came from a very different context. In the 80’s, coming out of the Cultural Revolution, they were experimenting with businesses, but had little clue because the notion of “business” didn’t even exist in China’s planned economy. Thereafter China has grown in a very different era and much faster. When opportunities came with the prevalence of technology, Chinese entrepreneurs began to develop a new and different mindset. This mindset is epitomized by the willingness to take risks and to capture new opportunities before the opportunities fully manifest themselves. Technology is a key enabler for developing new business models and new capabilities. Examples of this include not only BAT but also many others such as Ping An, Xiaomi, Geely, etc. Ping An, for example, has evolved from an insurance company into a major horizontal ecosystem. Peter Ma, its chairman, is now trying to benchmark the company against Google and Amazon.

EZL: What insight and learning would you have for our audience here? Not everybody here is involved in business in China. And even if they’re in business in China, it’s not a hundred percent in China. One could say, “Okay, all these great things are happening in China. How is it going to affect me?” How should we think about the threats and challenges of these new business models in China to the West? That’s number one. Number two are these context questions that you said about why these entrepreneurs are so successful in China, having a fast-growing market, having government support, having a lot of data, having hungry people because of their pain points that we don’t have in Switzerland. It’s a good life here and there is little competition. So what can we learn from innovation in general that is transferable to Europe?

ET: Of course, to what extent China affects you depends on your individual conditions. Some of you may be doing business with China and so China has a lot of implications for you. Some are not doing anything with China but are looking. Some may have nothing to do with China. But the Chinese may knock on your door anytime and you should be prepared for it.

China is on the verge of a new generational rise that will last for some prolonged period. Entrepreneurship and innovation are an important underpinning for that. Entrepreneurship cuts across many parts of China, and young people are going after their own dreams and pursuits. They aspire to be the next Mark Zuckerberg or Bill Gates or Jack Ma. Though only a very small percentage will succeed, a small percentage of a big number is still a big number.

Some of these young people realize that if they can be successful in China, they have a good chance of being successful in other parts of the world. I cannot predict exactly who they may be, but I know the mentality: the first step is to become number one in China; the second step is to go out to the world. The world is becoming more and more connected through technology, and globalization will prevail more than isolation.

EZL: Thank you very much.

About the host and guest

Ms. Eunice Zehnder-Lai is CEO of IPM (Institut für Persönlichkeitsorientiertes Management). Previously, she was in the financial services industry for 20 years with LGT Capital Partners, Goldman Sachs and Merrill Lynch in New York, London, Hong Kong and Switzerland. She also worked for Procter & Gamble in marketing and brand management as well as for Booz & Co. in strategy consulting. Eunice is also a member of the Board of Directors of DKSH (since March 2018), Geberit Group (since 2017) and Asia Society Switzerland (since 2016). She holds a Masters of Business Administration from Harvard Business School and a Bachelor of Arts degree from Harvard University.

Dr. Edward Tse is founder and CEO of Gao Feng Advisory Company. A pioneer in China’s management consulting industry, Dr. Tse built and ran the Greater China operations of two leading international management consulting firms for a period of 20 years. He has consulted to hundreds of companies – both headquartered in and outside of China – on all critical aspects of business in China and China for the world. He also consulted to the Chinese government on strategies, state-owned enterprise reform and Chinese companies going overseas. He is the author of over 200 articles and four books including both award-winning The China Strategy (2010) and China’s Disruptors (2015) (Chinese version «创业家精神»).

About Asia Society Switzerland

Asia Society Switzerland is an independent Swiss foundation, which is a member of the global Asia Society family. Founded in 1956 in New York, Asia Society has developed into a thought leader on Asian issues, and a vibrant community of decision makers around the world.

As the first Center in Europe, Asia Society Switzerland – founded in 2016 – provides a unique opportunity to become part of this global community, and to contribute to a meaningful dialogue that could shape our future. Asia Society Switzerland is committed to exploring Asia’s role in a multilateral world and to advancing the dialogue and strengthening partnerships among individuals and institutions in Switzerland and Asia.

About Gao Feng

Gao Feng Advisory Company (www.gaofengadv.com) is a pre-eminent strategy and management consulting firm with roots in China coupled with global vision, capabilities, and a broad resources network. We help our clients address and solve their toughest business and management issues — issues that arise in the current fast-changing, complicated and ambiguous operating environment. We commit to putting our clients’ interest first and foremost. We are objective and we view our client engagements as long-term relationships rather than one-off projects. We not only help our clients “formulate” the solutions but also assist in implementation, often hand-in-hand. We believe in teaming and working together to add value and contribute to problem solving for our clients, from the most junior to the most senior.

Our senior team is made up of seasoned consultants previously at leading management consulting firms and/or ex-top executives at large corporations. We believe this combination of management theory and operational experience would deliver the most benefit to our clients.

Our name Gao Feng is taken from the Song Dynasty Chinese proverb Gao Feng Liang Jie. Gao Feng denotes noble character while Liang Jie refers to a sharp sense of integrity. We believe that this principle lies at the core of management consulting – a truly trustworthy partner who will help clients tackle their toughest issues.