Busienss Book: The Chinese Tao of Business

Question 1: Drs. Haley and Dr. Tan, you all have published numerous books and articles on business issues in developing markets and in Asia, what brought you to come to write your new book “The Chinese Tao of Business”? Also, what is your target audience and how would you like the reader to utilize your book?

Answer: China forms one of the most important markets in the world and exports from China are shaping global business and economic environments. What makes the Chinese business environment different? What can we transfer from management models in Asia, and other emerging markets for success in China and elsewhere? As strategic management is undertaken at the very top of any organization, it was also important to have in-depth access to CEOs and other senior managers in Asia, Europe, and the USA who had attained business success in China. The topic and scope of this project was vast, and the authors divided up the work. George Haley contributed his expertise on Chinese history, philosophy, economic and legal environments to the book, as well as his understandings of forecasting and strategic decision-making in emerging and industrial markets; he also interviewed all the Western senior managers and CEOs for the book, including Elmar Stachels of Bayer, and several Chinese CEOs, including Li Ka-Shing of Hutchison Whampoa. Usha Haley contributed her knowledge of international strategy, risk management and Chinese/Asian business environments to the book, as well as all the case studies and statistical data; she interviewed several Chinese CEOs, including Edward Zeng of Sparkice. Chin Tiong Tan contributed his knowledge of the Overseas Chinese who have invested heavily in China, and several interviews with CEOs from this influential community, including YY Wong of WyWy Group. The target audience for this book consists of managers, researchers and students – indeed any one either operating in China or doing business with the Chinese, or who wonders what it takes to do business successfully in that country. Chinese managers, who wish to expand their operations to the West, should also benefit from this book. Finally, the book should interest anyone who wants to understand China and the Chinese. For updates on the book, including press coverage, media interviews and reviews, please visit ChineseTao.com at http://www.ChineseTao.com

Question 2: In the first portion of your book, you discuss the Tao Te Ching written by Lao Tzu and also the writings of Confucius. I am sure that most readers not familiar with China would consider these writings to be largely irrelevant to business in China today. You have a quite different view, could you please explain this?

Answer: A culture’s underlying dominant philosophy creates the context in which people interpret and interact with their world, including their business and economic environments. The living, vibrant Chinese culture seeps through every aspect of social and economic life in China. Despite the toll taken by the Cultural Revolution, the underlying cultural concepts and beliefs have survived with little modification over the last several thousand years. Consequently, to understand China’s modern business and political environments, businesspersons and researchers should understand its roots. The first section of this book elicits meaning from cultural concepts as well as their modern-day ramifications.

Question 3: In addition to the above writings, you also note that Chinese moral, social and legal philosophy also varies vastly from Western thoughts and that this creates a chasm that westerners and easterners both must learn to cross if they are to effectively do business in China. Could you elaborate on this?

Answer: We expand on the Civilizational Chasm and the methods to cross it in our Adaptive Action Road Map for strategic success in China and other emerging markets. Guanxi provides an easy avenue to capture this Civilizational Chasm: Westerners often characterize the gift-giving elements of building Guanxi as bribery; yet, Easterners see appropriate and timely gift-giving as important elements in the process of building relationships. Nevertheless, all gift giving does not contribute to Guanxi. Other more complex examples from business and government span the book.

Question 4: You further note that a better understanding of the economical and ethical roots of Chinese strategy can help Western managers better steer through the complexities of doing business in China. Could you describe some of these roots and how they affect business in China today?

Answers: The economic and ethical roots of Chinese strategy draw on Confucian and neo-Taoist philosophies, as well as China’s unique history of development. Indeed, as we indicate in the book, Maoist bureaucracies, which have seeped into present-day China, borrowed their frameworks, systems and inspiration directly from the Imperial bureaucracies. The economic implications stem in part from a network-based economy built on basic, personal concepts such as trust rather than impersonal legal institutions. Additionally, the contextual nature of Confucian ethics continues to hold sway within the multiple Chinese networks. Western businesspersons must understand these unique facets of the Chinese business environment to explain differences between the Chinese and the former Soviet communist models (which dominated perceptions of Communist systems), and between universalist and contextual perspectives.

Question 5: The legal system in China varies vastly from that found in the west. Could you discuss some of these differences and what they mean today?

Answer: The legal environment in China draws on the country’s culture and history, as it does in the West. However, through its own history, the West has some familiarity with public law systems such as they exist in China – although most industrialized, Western countries no longer use these systems. Chinese codified laws have originated only in the last century; consequently, Chinese governments and bureaucracies, as well as culture, have not fully assimilated these laws. Significant problems exist in interpretation and implementation.

Question 6: You write that counterfeiting and the lack of intellectual property protection are key issues for doing business in China. In fact you note that China is in a class of its own with respect to both issues. Further, you are less optimistic that things necessarily will improve in the short term despite China’s entry into the WTO. Could you discuss this and explain why you feel as you do?

Answer: Usha Haley’s prior research on copyright violations and intellectual property protection in China, provided a great deal of the background and bases for these issues. The interviews with CEOs of companies buffered our conclusions. We base our conclusions on China’s legal codes and cultural history of copyright violations (see response to question 5 above), as well as the economic and political basis for the violations. Yet, we do offer some recommendations on how to navigate the minefields of Intellectual Property protection in China – and prosper. China is a large and complex country – not a city-state. Things take time.

Question 7: In your book you discuss networks and the importance of “uprightness” to Chinese. Many westerners throw around the term “guanxi” but as you point out networks in China are multi-faceted and more complex that most westerners would seem to understand. Could you elaborate on the components of networks for Chinese business and also discuss further the concept of “uprightness” and how it relates or doesn’t?

Answer: In an extraordinary interview for the book, Edward Zeng elaborated for us the three networks that currently operate in China and that businesses have to navigate for success. The networks span business, government and clans. Several other CEOs that we interviewed, corroborated this fresh understanding of the networks. Networks in China have more complexity than anywhere else in Asia, and as we indicate share characteristics with networks from Mexico, India, and medieval Europe. Staying abreast of the networks requires considerable skill and adroitness. Uprightness refers to knowing the proper conduct within each individual relationship that one has within the network. Uprightness involves facets of trust that do not exist in Western ethics, and so Westerners have difficulty understanding the concept or its importance.

Question 8: You point out the unreliability of statistics in China, noting the Chinese figures on GDP and many other statistics are in some cases vastly overstated and in other cases, perhaps understated. Statistics and good market information are the basis of western business planning. You write that Chinese and some Westerners resort to a “gut feel” for decision making? This seems contradictory and somewhat dangerous but you don’t seem to feel so, could you explain this?

Answer: Traditional Western planning does not recommend “gut feel” as the preferred mode for sound strategic decisions. In Western, information-rich business environments, companies can draw on reliable data regarding consumers, competitors and business trends. Yet, these data often prove misleading in turbulent and fast changing markets such as China. In markets such as China, experiential knowledge that contributes to gut feel may provide more valid information and sounder decisions than quantitative and statistical data.

Question 9: You note Chinese strategy has changed over time and now is characterized by hands-on experience; lateral transfers of knowledge; reliance of qualitative information; holistic information-processing; action-driven decision-making; and, emergent planning, you note this strategy has both strengths and weaknesses. Could you describe both briefly and give some examples as to how they play out in business?

Answer: Our original assumption that the Chinese would make business decisions like the Overseas Chinese did in Southeast Asia proved erroneous. Some similarities did exist between the Overseas and Mainland Chinese decision-making styles; yet, these similarities also appeared to resemble what occurred in other emerging market, including Mexico and India. Indeed, the unique Chinese business environment, called for many amendments to strategic decision-making styles. More importantly, as China changes, in order to stay successful in the country, and drawing on our research, we propose a new strategic management model that calls for a convergence of traditional decision-making styles from industrialized and emerging markets.

Question 10: In your book you use both short case studies, interviews with successful and well known Asia business people, graphs and graphics. I found the mix highly interesting and particularly felt some of the short case studies plus most of the insights by CEOs and others were excellent. Were you satisfied with how the book actually came out and are there things you would do differently and things you felt didn’t work as well as you would have like in retrospect and if so what?

Answer: We are very satisfied with how the book came out. We have received very gratifying feedback from our readers, both experienced China hands as well as novices. The book has also received a great deal of attention from businesspersons, academics, policymakers and the press. However, it required enormous effort, extensive research, and much more time than we had originally imagined. Indeed, George and Usha spent considerably more time than they had planned to write and research the book, after the initial interview data from CEOs and senior managers had been collected – much to the consternation of our publisher, John Wiley & Sons. However, like all good research, the in-depth interviews with senior managers, that few researchers have obtained, had answered many questions, but also opened up others. We owe much to the patient support and encouragement of our publishers. Researching and writing a book that spanned history, philosophy, current and future business strategy in a critical, volatile and fast-growing market, and culminating in what the Wall Street Journal labeled “a veritable textbook”, proved an exhausting, though fruitful, undertaking.

Question 11: Late in your book you state on page 256 “However, to establish strong, profitable market positions in China, Western companies will have to adopt strategic-planning systems that have proven effective in these information-scarce markets.” You also not the concept of “convergence”. Could you discuss this further?

Answer: Many researchers propose that strategic planning as developed in industrialized Western democracies provides the foundation for successful strategic decision-making. Yet, environmental differences create significant perturbations and noise that distorts the results obtained from traditional Western planning developed for stable and mature economies. Success in the volatile, rapidly changing business environments of China, and other emerging markets such as India, Southeast Asia and Mexico call for planning systems, with different capabilities than what we use in the West. We propose one in the Adaptive-Action Road Map (ARM).

Question 12: In your final chapter you introduce the ARM – The Adaptive-Action Road Map as a model for successful business strategy in China. Could you discuss what the ARM is and how it might be utilized by western business executives seeking success in business in China today?

Answer: The ARM draws on our interview data with CEOs of large companies operating in China, archival research and our business experience in China and other emerging markets such as Mexico, India and Southeast Asia. The ARM does not merely look backwards at what was; it also looks forward and makes predictions for strategic success in China, as well as in other emerging and high-growth markets. Western and Eastern businesspersons will note that it specifically deals with strengths that their companies currently possess – yet also highlights areas in which they may lack expertise and in which they should make investments to succeed. As we note in the book, with the increased globalization of markets, the ARM and the research we reported in this book, has implications for successful management around the world. For example, Western managers may use the ARM to guide and to foster their investments in knowledge and capabilities, to help to reduce risks and to enhance profitability and success in global operations.