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Homegrown giants and their challenges abroad
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NEARLY a third of the companies that make it onto Boston Consulting Group’s annual list of 100 global contenders to watch are from China; hardly a surprising result, given the speed with which that nation’s economy has grown over the past three decades.
Legendary Chinese corporate leaders like Ren Zhengfei at Huawei, Liu Chuanzhi at Lenovo, Zhang Ruimin at Haier, Ma Yun (Jack Ma) at Alibaba and Ma Huateng at Tencent have led their companies on to the international stage.
The founders of all five companies emphasized quality from the very beginning. When Zhang Ruimin took charge of Haier, he gave a sledge hammer to his employees and asked them to destroy 76 defective refrigerators — even though these could have been easily sold. Ren ensured that Huawei’s products were made to international quality standards, even for the domestic market.
Another important competence that the five companies invested in was customer-centricity. Ma Huateng spent hours at Tencent personally testing how his company’s offerings would be experienced by users. Simulating user experience allowed the company to make speedy adjustments to its products.
All five companies benefited early in their development from imitating the ideas and capabilities of their Western competitors. Alibaba took its cues from Amazon; Tencent from WhatsApp, Twitter, and Facebook; Huawei from Ericsson and Cisco; Haier from its German partner Liebherr; and Lenovo through its acquisition of IBM’s laptop business.
However, sustained success on the international stage calls for innovation.
Lenovo restructured its organization in 2012 to force R&D teams to face end-users directly. Its innovation teams were also granted greater autonomy. In a break with tradition, the company chose not to pre-install new software on its PCs, but rather offer it only via app stores. This provided faster user feedback, allowing features that had low user acceptance to be killed quickly. This is an important initiative but Lenovo will have to do a lot more to successfully navigate the many changes in the PC industry.
There is also a growing appetite for external collaboration to drive innovation. In 2014 Haier officially launched the Haier Open Partnership Ecosystem (HOPE) to promote open innovation. This focus on innovation is an encouraging trend but will require persistence and patience; investments in R&D do not have sure payoffs, especially in the short run.
Achilles’ heel
The biggest challenge ahead for all five companies is to ensure leadership continuity. The approach that these companies have chosen has worked well in the past because of a powerful leader at the top — the One Big Brain who single-handedly shaped the destiny of the firm.
Finding such an omniscient leader is not easy. Moreover, leading a global company is not a one person task. Addressing the problems of a global company requires a leadership team that is rich in diversity.
Here, Lenovo and Alibaba are ahead of the pack. Lenovo has already witnessed leadership transition. In 2015 Alibaba announced that the company will be led by the post-70 generation.
The new leadership team in all of these companies has its work cut out. It has to provide a sharper vision for the company; help build the missing competencies that are needed to serve high-end international customers; and build an organization that can truly leverage the diverse skill base provided by the company’s international operations.
Getting on to the world stage is commendable; but staying on it as a true global contender is the real test.
Bala Chakravarthy is professor of strategy and international management at IMD business school. Shanghai Daily condensed the article.
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