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China Conquers Covid-19 the Way Its Companies Conquer Market: What Lessons Should Global Leaders Learn From It?2020/03/08
Co-written by Sandrine Zerbib and Aldo Spaanjaars – China veterans and experts of “Dragon Tactics”.
· The comparison between the way the COVID-19 crisis is handled in China and in the Western world is a case study that can help global business managers better understand Chinese businesses key success drivers.
· Chinese speed and efficiency come from a different approach to the command chain and organizational structures.
In a speech this past Sunday, President Xi Jinping made a strong statement that China would ultimately succeed in beating back the COVID-19 outbreak. He made it clear the situation is dire, but that concerted efforts are succeeding and that “China will ultimately win out.”
This begs the question of what has China’s response been to this crisis and, as the pathogen slows down in China and ploughs forth around the world, how are other countries reacting? We argue that the comparison is an essential exercise for today’s global business leaders. By delving into the COVID-19 case study, global managers can more deeply understand how Chinese businesses behave and they can learn a new set of “best practices”.
In his address, President Xi referred to China’s ability to respond effectively to challenges by mobilizing “every sector of society.” To an outsider, that’s political rhetoric, “hyperbole” strategically employed to instill confidence against a backdrop of widespread uncertainty and fear. But to the “China-insider” however, “mobilizing every sector of society” literally means “everything;” every nook and cranny of the vast land, every government agency, every residential compound, all industries, all apps and all people.
Chinese public and business “chain of command is indeed a tight-knit system of communications, a powerful bond between “the leaders” and “the led.” Decisions come from the very top and then get executed down the ranks. The central government decides, passes the decree down the chain to municipal governments, then to district authorities until it arrives at neighbourhood committees that make sure that the information and instructions are clear at the lowest levels. Residential compound security guards even join in on the action as final points of control to ensure rules are followed.
The Chinese command chain has struck the world with its efficiency in times of crisis. It works because it is based on a very strong sense of the collective interest which enables citizens to accept not only a certain level of reduced freedoms but also imperfections in the command chain, such as inconsistency in implementation at the lowest levels. Some neighbourhoods will quarantine people that shouldn’t have been, but you will never see outcomes the other way around because the whole dynamic is glued together by respect for authority and fear of sanctions.
This is very much similar to what can be observed in Chinese companies:
Most Chinese private companies show a Confucian preference for simple organizational structures, with everyone reporting to the top.
Quite often Chinese founders have as many direct reports as possible; thus taking the idea of flat structures to the extreme. This usually favors improvisation and speed, at least at the top as there is no need, nor time for long consensual decision-making processes.
In this kind of flat, yet top-down organization, each team is given enough authority and ownership of its part of the business, yet quite a number of decisions still have to pass the founder, whose level of decision-making power and “involvement in the details” may seem unusual to Western eyes.
Nothing wrong with micromanagement: consistency does not come from guidelines and processes but from the top of the organization that makes decisions in an ad hoc manner.
The most-sought-after employees are entrepreneurial, ready for the rough-and-tumble, and well rewarded for their loyalty. The rest of employees would be let-go with not too much concern about high turnover.
Does it all apply to Western organizations – public or businesses? Probably not. It is not unreasonable to fear that the Coronavirus outbreak might boost mass surveillance. And Western business culture values more consensual decision-making processes. However, today’s business success in China – and increasingly outside its borders – is based on a new set of management beliefs and practices which are particularly suited for our rapidly digitizing societies and their inherent increase in scale, speed and complexities. Some of these practices, we argue, should be an inspiration for Western businesses. We call them “Dragon Tactics”.