Managing cultural differences key to success overseas
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E-mail Shanghai Daily, September 3, 2013
Q: What is lacking in Shanghai’s tool chest to become a top innovative hub like Silicon Valley and Tel Aviv?
A: I wrote a piece for the Harvard Business Review in 2006 about the challenge for Chinese executives. We know that a lot of Chinese executives are very ambitious. They want to have innovative products, and brand names as good as GE or Cisco or others.
But the question is, how do you encourage your organizations to be innovative. Not every idea they have will succeed, a lot of them fail. That’s part of the package. So one thing of the culture of innovative companies we have seen is that they are willing to take risks. For a Chinese company to encourage innovation, they need to expect some risks.
And in that article I made the point that Chinese companies tend to be top-down. People in top positions have a lot of power. And they dictate a lot of things to people at lower levels. In cultures like that people are reluctant to take risks, because if I take a risk, and I fail, my boss may fire me.
So in that article I wrote my view that the Chinese executives have the talent, the resources, the market opportunities, to be very innovative. But for them to get there, they need to pay attention to the culture of their organizations.
The more top-down the system is, the bigger the chance people will become reluctant to take risks.
Q: Chinese entrepreneurs are buying up foreign firms and assets abroad. But many are cross-culturally insensitive. How do they compensate for that?
A: There was actually a survey done of executives of a thousand Chinese companies either expanding abroad or thinking of expanding. Many of them were asked what was their major concern.
The No. 1 concern was managing cultural differences. Yes, the opportunities are there, and Chinese companies are going to go after them. But Japanese companies did the same thing in the 80s, and they failed.
The track record of Japanese companies outside of Japan is not very good, because Japanese companies expected everybody to be Japanese. They were imposing their ways of doing things too much on other people in other countries. And as we discussed earlier, people don’t like that.
So the challenge to Chinese entrepreneurs is going to be first of all, understanding of this issue. And secondly, willingness for them to learn and to encourage their teams, the Chinese employees, to learn that, because if they don’t, they will pay a price. The price can be expenses going higher, besides, you lose local talent, market share, your brand and reputation, or you simply fail.
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