Part I in a series of 3 blogs on doing business in China.
So many people do business in China these days, that you would expect that with some little adaptations in the way you do business, you can be successful over there. But just counting the number of Western business people being active in China is not very useful. You should count the number of Western business people being successful in China. And that’s a different story. Many large companies have large numbers of managers that are actively trying to build up business with Chinese clients or partners. Managers often rely on previous international experience, trusting that with some adjustments they will be able to make things work in another country. But they need more.
Just open last week’s financial newspapers, and the amount of news on China is overwhelming again. Last Friday the Dutch FD opened with the message that China actively reduces the import of dairy products now, resulting in only 51 companies worldwide that meet the restrictions set by Chinese autorities. To succeed in China, companies like FrieslandCampina make long-term investments in the Chinese market for baby nutrition, exploring joint ventures with companies such as Huishan. Talking joint ventures. Lufthansa last week announced a joint venture with Air China, by combining their routes between China and Germany and so competing more strongly with Arabian airlines. Russia announced the biggest deal in history for gas deliveries to China: the ‘Power of Siberia’ pipeline will provide China with 38 billion cubic metres of gas in the next 30 years (the gas price that Gazprom charges China is not published). Meanwhile, Audi has published all-time record sales in China for vehicles in the luxury segment, the Chinese services sector expanded in June at its fastest pace in 15 months and even Facebook now opened an office in Beijing last month (although it’s service is not accessible in China). News enough about China. Lots of activity.
But it’s not activity that counts. It’s success. What do Westnern people need to understand to be successful in China? I limit myself to three aspects of international business. Many problems in joint ventures or other types of partnerships with Chinese companies suffer from limited understanding by Western managers of three concepts:
1. The (apparent) absence of logic in China.
2. The role of deep, personal trust in a network of people you deal with.
3. The limited freedom and limited mandate that your business partners have.
In this first blog I deal with the apparent absence of logic. The next 2 blogs will go deeper into the role of trust in a network, and the mandate that your Chinese business partners have (or have not).
1. The absence of logic
The way someone makes decisions can be a purely rational, logical process, in which facts are analyzed and conclusions drawn. Or it can be a process in which the relationships between and the interests of the people involved are more important.
Western business people are used to get the facts straight and apply logical reasoning. If there’s a problem, we analyze, then we interpret and then we conclude. The law of cause and effect. In China however, there’s a strong belief – deeply rooted in the Confucian traditions – that the cause is not of relevance: it’s the context and the people that are relevant. Root-cause analysis, fact-based reasoning and structured arguments will not help you. From an Asian perspective, the world is too complex to capture in rules, models and categorizations. Things happen, events are often volatile and unpredictable, and problems are part of daily life. Your energy should not be spent avoiding problems; this is a waste of energy. Your energy should be spent dealing with problems in such a way that collectively you gain the most in the long run. The words ‘collectively’ and ‘long-run’ are vital here: in business you need to be successful as a group, and strive for long-term gradual improvement rather than short-term quick wins.
Not all problems can be solved by logic. Which certainly does not mean that Chinese have a problem with logic. On the contrary. They just rely on it less often than Westerners do.
So do not make the mistake that many Western (headquarter) businesses make. Often I have seen situations where the sales in China drop. The response of German headquarters is to ask the Chinese sales-manager for a report. Or when engineering problems have come up in the release of a new product. The response of Dutch headquarters is to ask the Chinese engineering manager for a 7-step root-cause analysis followed by corrective action. The Chinese will politely follow Western requests for reports, analysis and recommendations. But it won’t change a thing.
So what should you do when discussions with Chinese counterparts do not proceed well?
When problems come up, take a time-out. Resist the temptation tob urn energy by running around. Take the mindset not to fight the problem with all energy and resources you have, but accept the problem and see it as a fantastic learning opportunity about Chinese business methods.
Find locals who can help you understand the situation, and spend lots of time talking to them about the context of the problem. Your Western logic will not provide you with the answers. Ask your Chinese counterparts – on a one-to-one basis – for advice. “If you were me, what would you do next?” or “What would you advise me to do now?” will bring you further than continuing to push for your goals.
This sounds logical and rather straightforward. The reality of business in the Western world however is that we don’t easily ask for help. We’d rather continue to fight, and individually come up with the very best solution to the problem. Think of the last business problem you dealt with. Honestly, did you spend lots of energy to solve it yourself, or did you invest a lot of time (and I really mean: more than a 5-minutes chat) into really understanding the perspective of the other person involved.
After you have asked for help, you will need to listen attentively to the answer. Sounds logic again, but this is one of the hardest things to do for many of us. Listening means not being busy with your own next contribution to the discussion, and trying to outsmart the other person. It means, temporarily parking your own thoughts and conclusions, and open up to the reality of the other person. And whatever the Chinese person is telling you, do not apply logic to the answer you get. Don’t challenge his words for being right or wrong. Accept the words, listen between the lines to find the real meaning and now deal with reality. The clue for solving your problem is in what you have been told. Up to you to pick it up and deal with it.
I have seen many situations where problematic cooperations with foreign business partners come up. When the manager really wants to deal with the problem, he asks for a training ‘Intercultural Awareness’ for his people. And in the most polite but clear way, I then need to tell him he needs a solid understanding of cultural differences himself, and a training ‘Deep listening skills’ for his people. But I certainly will encourage him to join himself as well.
Read also part 2 of this series, which deals with the role of deep, personal trust in business networks in China.