#16 Speed kills. Or maybe not?
I found an interesting article on Ogilvy’s Digital Watch Blog (http://digitalwatch.ogilvy.com.cn) discussing the question why US companies fail in China. One very interesting observation is concerning speed: “If you’re running eBay China, the head of eBay China is reporting to someone who has the title of head of eBay International, who reports to someone who has a higher level title, who reports to the CEO…”. The author goes on saying that sometimes companies may take up to one week (!) for decisions in such a setting. While everybody would agree that the timeliness of decisions is of importance, I am not sure that one week would make all the difference for foreign companies entering China. Quite to the contrary, might it not be that sometimes decisions get taken too fast? One other thought I quite liked in the article was that despite all the due diligence conducted, companies tend to overlook that they set themselves up for inefficient and difficult communication in foreign markets. A comment on the blog extends this idea by saying that “… tried to squeeze water out of the proverbial rock for out of touch (and out of town) board members with visions of 1.3 billion people”. Another instance of corporate pride? And greed? And…?
January 14, 2011 @ 10:15 am
I think one reason why it takes such long periods until decisions are made, is high power distance in China. Hierarchies are very important and managers in high positions are very well respected and therefore people at lower positions are not allowed to make decisions independently. This means that top-down management is rather common than bottom-up. In China it seems appropriate if top managers drive big cars, have expensive watches etc. because they are respected for the work they are responsible for. There is no need to be jealous in the opinion of employees at lower positions as they say, people who own top positions have worked hard and so they deserve it. Although one opinion of the Western World might be that, if decisions last very long, this would need a lot of time and be inefficiently, I think time does not count as high in China compared with other countries. This could be an advantage when for example thinking about important management decisions which can affect company and staff. Chinese are highly long-term-oriented and so unlike Americans balancing and assessing risks and consequences of arbitrations much more, so Chinese try to avoid short-sighted decisions. Reasons for this can be that China is a more collectivistic country and therefore Chinese are not likely to take decisions for individual benefits but such that mean advantages for the whole group. As China is a culture with high uncertainty avoidance this is also causing long time periods until decisions are made to ensure that they are right.
Americans have low uncertainty avoidance; they tend to be more likely to taking risks than Chinese who have medium uncertainty avoidance. In addition, Americans are a high individualistic culture and therefore like to do things on their own with less care for the group as a whole.
Americans have to be careful when entering new markets as foreign cultures mean differences and attitudes which have to be taken in consideration to succeed in foreign markets. Companies who want to enter the market in China must be are aware to adapt to the needs and wants of the target group in the foreign market. It is not enough to enter markets without any knowledge, while expecting that products which sell well Europe or in USA, will do the same in China. Language and culture can mean important barriers and the only way to get through is to adapt to the common peculiarities.
January 7, 2021 @ 10:52 am
From a physical point of view speed does not kill but acceleration does. May it be by increasing speed too fast which can hurt or abruptly stopping by accident which can also be deadly. I think the same is true for business decisions as most of the time businesses want to grow faster (or actually do so) by increasing reach and expanding internationally than they substantially can as the structures cannot grow that fast e.g. a company needs the structures, the (experienced) workforce, the knowledge or even agents in foreign countries as lobbyists for them. For sure fast movers have a short-term competitive advantage but when it comes to long term strategic planning there is a potential to fail.
As a counterpart, also abrupt stopping can be deadly for a business, meaning that the processes are not efficient, competitive enough or meeting customer needs adequately which leads to fast downturn of demand or an increase in complaints from customers. If risk assessment of different business cases is not done properly, strategic planning lacks alternatives in case plan A fails or the different cultural dimensions (besides languages there is also the factor long term view in eastern countries vs. short term in western ones) are not considered at all, the business is doomed to fail bringing a painful downturn or stop to a once flourishing business. A famous example is in my opinion GE which in it’s more than 100 year history was kicked out of the Dow Jones in 2018 as the last remaining original component of the Dow. In the last decade, due to not aligning the business early enough or fast enough with the global demand for its’ products (besides the financial crisis in 2008 or the pandemic in 2020) there was a massive downturn which required the divestiture of some of its’ most profitable business segments like the biopharma business of GE Healthcare to Danaher. I want to close with one sentence which came to my mind when I heard of that divestiture, namely – and in my opinion it describes it very adequately – “GE sold its’ silverware which designates for years of mismanagement in the past”.