Book Review: Made in China: What Western Managers Can Learn from Trailblazing Chinese Entrepreneurs

    By: PDMA Headquarters on Oct 02, 2013

    Book Review: Made in China: What Western Managers Can Learn from Trailblazing Chinese Entrepreneurs 

    By: Donald N. Sull, Boston : Harvard Business School Press , 2005 . 231+xiii pages 
    Review by: Carla L. Kuesten

    Product Image for: Made in China: What Western Managers Can Learn from Trailblazing Chinese EntrepreneursUnpredictable markets and winning strategies comprise the theme of this book as Donald Sull introduces us to Chinese entrepreneurs and companies. Case studies based on extensive research of the Chinese business and economic environment serve to illustrate general principles for managing uncertainty. Sull pairs successful businesses in each sector, where possible, against a comparable firm that was less successful in the past, thereby providing valuable contrast.

    A historical overview of recent Chinese history provides an understanding of what molded these entrepreneurs, including the civil war and Japanese invasion (1927–1949), the chaos of the Cultural Revolution (1966–1976), and growth after Tiananmen Square (1989–present). The hardships of times past has produced a generation of entrepreneurs inured to hard work and hardship, eager to pursue opportunity.

    Sull's rich case histories—many involving captivating details of the individual entrepreneurs themselves—form the basis of each chapter. The brevity of these excerpts does not do justice to the resonant detail and spirit in which the book was written. The case studies covered here highlight many product development best practices in action.

    The case study titled “Acknowledging the Fog of the Future” considers a view of time as a steady stream of unanticipated threats and opportunities rather than a predictable future that can be planned with accuracy and certainty. For this case study, the company is Chinese Internet portal Sina Corporation, and the comparison company is InfoHighway.

    Sina's story combines the unpredictability of China's economy with the roller-coaster history of dot-coms. Sina faced operating, market, competitive, technology, and legal and regulatory risks and survived the Internet fray by practicing active waiting, an approach to managing in highly unpredictable markets that consists of anticipating and preparing for opportunities and threats a manager can neither fully predict nor control. During a time of deliberately reducing the company's sales and marketing expenses and cutting product development outlays, the company explored pathways to increase revenue that ultimately showed promise as future source of profits and revenues: active waiting.

    Zhidong Wang, a technically minded programming star, and Yuan-chao Yan shared a vision for a Chinese-language software application and seized an unexpected—golden—opportunity arising with the Internet: Sina was formed. InfoHighway, in comparison, suffered a sudden-death threat from being slow to respond to the Internet service provider business decline and the portals wave of the future.

    This case study highlights for product managers the variable rate of the clock; corporate financial health requires diligence and attention to regulations, business trends, and competitors on an ongoing basis. The clock ticks very fast for new growth businesses. Sina seized the opportunity to have a large impact on the Internet market with short messaging services, thereby providing for new customer needs and making available new resources. InfoHighway lost the lead and dropped out of China's top 10.

    Sometimes refocusing on promising disruptive opportunities quickly may be the only way to avoid becoming obsolete, which InfoHighway learned the hard way. To maintain and implement continual growth in an unpredictable market requires timely anticipation of threats and opportunities as they arise.

    The second case study, “Conduct Reconnaissance into the Future,” is about developing a comprehensive awareness of the shifting situation and anticipating threats or opportunities rather than relying on a preconceived plan. For this case study the company is Ting Hsin, and the comparison company is Uni-President.

    Ting Hsin's origins stem from a family-owned Taiwanese food-oil plant founded by Hede Wei. Four sons, after their father's death, pursued the food-oil business into mainland China where consumers were using low-quality cooking oil. After other nonprofitable ventures, they pursued a last-ditch effort with instant noodles from Taiwan, which they discovered serendipitously on a train ride in China.

    The Wei brothers learned through market research that the Chinese market had lines of instant noodles, but they were of low quality and in shabby packaging. Recognizing their opportunity—a high-quality noodle at an affordable price—they conducted research to understand consumers' preferences and flavored the noodles to regional tastes. They advertised their Taiwanese noodles under the Master Kong brand and seized market leadership from Uni-President, the local competitor, who failed to conduct local taste tests and value pricing. The Wei brothers had succeeded by using the “discover, don't impose” (p. 58) principle to shift an unpredictable situation to their favor, Uni-President, on the other hand, imposed its preconceived notions of flavor and price of noodles to lose market leadership.

    Product managers will appreciate the importance of market awareness from this case study—integrating research focused on the market opportunity (i.e., affordable quality noodles) and the consumer (i.e., flavor preferences). Through astute observation of both the market and the consumer, companies can create their own opportunity and shift in the marketplace.

    The case study titled “Manage Relationships Dynamically” focuses on actively managing dynamic relationships with partners to share risk and obtain resources. For this case study, the company is the Galanz microwave-oven industry, and the comparison company is SMC.

    Galanz built its position from the Guizhou Down Product Factory, which produced and supplied goose down for branded clothing companies; the plant prospered under the leadership of Qingde Leung. Anticipating depressed profits from competition for the textile industry, Leung sensed the demand for microwaves; he changed the company name to the Galanz Group of Guangdong and transformed the state-owned agricultural company into a microwave oven business. Overcoming organizational challenges, Galanz seized approximately 25 percent of the domestic microwave market and overtook then-leader SMC. In contrast, SMC had entered into a poorly managed joint venture with Whirlpool; Whirlpool lacked local knowledge, slowing Whirlpool and SMC's ability to respond. Galanz seized the initiative through a series of aggressive price cuts and rapid-fire new product introductions, forcing the joint venture to its knees and pushing many of the smaller competitors out of the industry altogether. Galanz was noted throughout its history in structuring relationships with technology providers, distributors and customers and was particularly effective at partnering with Europeans during the low-price competition from Korea.

    Product managers observe the balance of costs and benefits that characterize partnerships in this case study—partnerships that have gone well and those that suffered and why. Stretch relationships can link world-class partners and improve performance whereas transparency allows companies to attract and retain partners.

    The fourth case study, “Go for the Gold,” systematically evaluates opportunities to recognize a golden opportunity and to decide on whether timing is right to pursue the opportunity. The company studied here is the Wahaha Beverage Company, and the comparison company is Robust.

    Wahaha became a leader in China's beverage market in the face of fierce competition from both domestic and foreign beverage companies. Wahaha's founder, Qinghou Zong, descended from a distinguished Chinese family. After high school while working on a farm, he was offered the opportunity to take charge of a school-associated workshop that had not turned a profit in years. He borrowed money and set up a small processing workshop to produce and sell nutritional drinks popular in China at the time.

    Spotting a golden opportunity—the one-child-per-family policy—he developed a nutritional drink aimed at “feeding China's little emperors” (p. 148). Among the nearly 300 drinks on the market, none were targeted at children. Anticipating a crash in the nutritional market, Zong entered the soft-drink market with a fruit-flavored milk and concentrated on a nationwide campaign. The company then migrated into healthy beverages for adults as well, including single-serve bottled water, followed by juice and tea. Sensing a strong national movement to support a domestic alternative to Coke and Pepsi, Zong decided to enter the carbonates, launching Future Cola with the tagline “the cola owned by the Chinese” (p. 153). Wahaha sustained the benefits of seizing golden opportunities: providing windfall profits and positioning itself for subsequent opportunities.

    Product managers discover key points from this case study on how to recognize and evaluate a golden opportunity by focusing on customers, competitors, and context—minimizing the chance (and risk) of pure, dumb luck. An important concept to master for success with opportunities is how to concentrate resources: money, labor, and attention.

    Sull boils down the book in the final chapter by saying, “In markets (such as China) where multiple variables interact, managers enjoy limited visibility into the future” (p. 191). Long-term visions can paralyze managers; the implementation logic of predict, plan, and implement remains intact, but the process is more circuitous than linear, with constant revision and iteration. Adopting a fuzzy vision and abiding by Chairman Mao's advice to seek “the truth from facts” (p. 194) rather than vision or dogma is key. Mianmian Yang, a colleague of Haier's chief executive officer, Ruimin Zhang, describes three Qs to succeed in China: intelligence quotient (IQ) for understanding, emotional quotient (EQ) for a positive attitude, and tenacity quotient (TQ) to strive over the bumps in the road. As a final thought, Sull reminds us that leadership in unpredictable markets requires courage.

    A consistent theme across all successful companies is the persistence and resilience of the entrepreneurs themselves. The early careers of the entrepreneurs reviewed in this book were challenging; each learned from hard knocks and hard work. All of them could be described as passionate, committed, observant, driven, talented, and relentless. None of the winning companies in China were without strong leaders focusing and applying these principles so meticulously gleaned from careful study of the turbulent markets of China.

    Product managers reading this book can benefit from the entrepreneurial spirit of the Chinese as distilled painstakingly by Sull. One cannot escape appreciating the elements of chance, luck, and timing or the ecstasy of fortune and bitterness of misfortune throughout this book. Lessons learned are applicable to any business environment; in fact, the markets in China serve as a good test bed in which to apply product development efforts, and developers appreciate the full extent to which it is imperative and essential to apply all the product development and marketing skills, intuition, and timing they can marshal.

    Released: October 2, 2013, 11:36 am | Updated: November 20, 2013, 11:56 am
    Keywords: PDMA Blog

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