As China loses the labor advantage that has propelled its economy for the past three decades, will the country's entrepreneurs be able to compete in world markets?
I wonder. With wage inflation already eroding China's ability to compete on labor costs, I don't see much evidence that Chinese entrepreneurs are capable of generating profits through core competencies, as companies in mature economies do.
Chinese entrepreneurs tend to hold the view that they shouldn't follow in the footsteps of foreign multinationals, that they should pursue a "Chinese" way of doing business. That mindset is due partly to the obvious advantages of China's huge labor force and partly to Chinese businesspeople's sense of their country's unique history.
Exactly what defines the Chinese way is a matter of debate, but it's based on the idea of a collective, as opposed to an individual, culture. To oversimplify, people from individualistic cultures tend to think of themselves primarily as individuals and as distinct from others. People from collective cultures consider it a primary obligation to look out for those who are connected to them by family, home town, or employer. In most Chinese companies, employees from the CEO down to the lowest-paid factory worker believe that harmony and loyalty should be maintained and confrontation avoided. Disagreeing with a colleague's or boss's opinion in a meeting or in public is out of the question.
A collective culture is great for rapidly building an organization from scratch. But too often, companies with collective approaches continue to disempower individual employees and devalue their intellectual contributions.
Ren Zhengfei, the hard-driving founder and president of Huawei, is one of China's best known and most influential entrepreneurs. He's also the man primarily responsible for the telecom maker's "wolf culture," in which individual aspirations are explicitly subverted to the needs of the corporation as it relentlessly pursues the Western corporate lions. In the company's early days, R&D workers often kept rolled-up mattresses under their desks because of their notoriously long hours. Ren seems intent on maintaining this corporate culture indefinitely: In their race against other multinationals, he said, "Huawei people, especially the leaders, are destined to work hard for a lifetime and to devote more and suffer more than others."
Considering Ren's celebration of managerial suffering, it's perhaps ironic that he is also a great admirer of IBM and its founder, Thomas J. Watson. He has said that Huawei must respect and learn from IBM and carry on its work. True, IBM was and is a highly focused, highly competitive corporation, but its "Think" culture is a paradigm of individual empowerment. Watson once said that among his company's founding principles, the most important is respect for individuals — employees as well as customers. The company has always placed great importance on the staff's ideas and opinions, trusting employees to make the right decisions.
Not only has the IBM way built one of the world's great companies, it has also won converts across the world, spreading throughout thousands of businesses. In the 1980s, when so many were lauding Japanese executives and their management style, American managers were surprised to discover that the Japanese way of managing had grown out of the IBM think culture. The core of Toyota management, for example, is "improvement," a policy that stresses the value of employees' ideas, not just their willingness to spend their nights under their desks.
While China is unquestionably different from other labor and business markets, Chinese entrepreneurs shouldn't be lulled by the idea that they can succeed over the long term in the global economy through practices that stress the value of mere hard work. The ethos of relentless effort, captured in the folk tale "Yu Gong Moving Away Mountains," is an important part of Chinese culture, but it shouldn't be overemphasized at the expense of encouraging employees to think for themselves. Without an independent-minded workforce, Chinese businesses will struggle to keep up, because corporate performance ultimately depends as much on employee creativity as on operational prowess.
I recently read a quote from former UK Prime Minister Tony Blair: "I don't remember how many times people from this country or that country have told me, 'The situation that I face is different, and this country is unique' " (my own translation from the foreword of the Chinese edition of Blair's memoir). In other words, everyone thinks his or her country and situation is unique — but that's not true. In the long run, universal business principles prevail.
IBM's think culture, stressing individual dignity and independence, is a universal business principle — a blueprint for success in the modern age. And it will ultimately outperform the Chinese way.
Ruxiang Jiang is the principal of Zion Consulting, based in Beijing.
Thanks to Ruxiang Jiang / Blogs HBR / Harvard Business School Publishing