Finding the right growth prescription
New challenges and intense competition can often prove to be tough for most companies. But they also provide an opportunity of a lifetime for success, says Richard Lesser, global president and chief executive of the Boston Consulting Group.
“The more the world changes, the more you can’t use the past to guide the future. To win in this world of uncertainty, there is no magic bullet, but just ‘learning, learning and learning’; ‘adapting, adapting and adapting’,” said the head of the US-based global consulting firm.
Lesser, who took the helm in 2013, said that though the task appears to be easy, it is not so, and companies need someone from the outside to guide them through the maze.
“They need companies like BCG who can help them with their wealth of global wisdom and extensive local insights.”
Though most people would dismiss such claims as hyperbole, Lesser begs to differ. “About 90 percent of our over 400 employees in China are Chinese. We have 850 partners in 50 countries, and about 70 percent of them are based outside the US,” he said.
“We do not represent or belong to any particular country. We are not a German firm or a US firm. Instead, we would like to be known as a global partnership. Our focus is on building local capability, local talent and then infusing them together to provide the best expertise,” said Lesser.
“I think our clients also realize this. They see that our teams in China are mostly Chinese, but also see inputs from Europe, US, and India. We do the same in other markets. This is the spirit and essence of BCG,” Lesser said.
Lesser, a frequent globetrotter, said that BCG became the first global consulting firm to get a license in China in 1993. Since then BCG has been recruiting locally and training massively in China and focusing on having a diverse crosssection of views.
“Our partners meet twice a year and share and learn from each other’s experiences,” he said.
Though meetings are an essential part of the learning process, the BCG ethos frowns “blue-sky” thinking or ideas that clients cannot use, or are something that they already know, said Lesser, adding that the emphasis is on “ideas that can really drive the change”.
Christoph Nettesheim, senior partner and former managing director of BCG Greater China, said that unlike other firms, BCG does not deal with companies who just want to outsource some work “to get things done without our views”.
Lesser said: “That is not our type of work or business. We are direct and candid with all our clients. We have told many companies that if they know the answer to their problems and are just looking for a consultant to put their stamp of approval on it, then we are not the right persons for it.
“We are the people that companies turn to when they encounter difficult situations and need customized solutions along with a dedicated set of consultants working with them.”
That strategy seems to have more than paid off for the global company. BCG’s China business has recorded faster growth this year than what it achieved last year. Its Chinese companies unit has delivered the strongest growth — a remarkable achievement given that the consulting company faced stiff competition from local players, which claim to understand China better.
The ability to adapt has always been the core of what BCG calls its “winning formula” for corporations. Asked if Chinese companies’ situational reflexes have improved, Lesser said some have while some have not.
“Alibaba is one of the most adaptive, rapidly changing companies in the world. Huawei competes in over 100 countries and is incredibly good at understanding the local environment. The chairman of Haier has spoken extensively about the importance of being adaptive and in creating organizational flexibility and responsiveness. So there are examples from China that are as good as anywhere else in the world,” he said.
However, for many Chinese companies it has not been the case. Their focus has been “on winning the home market in a local environment”. Their strong growth drives home the point that if you have a winning formula, then there is no need to change it, he said.
But it is equally important for these companies to realize that being adaptive is the key to long-term success and diversity in leadership is one of the best ways to achieve this goal.
“If everybody grows up with the same model, then their ability to tackle change, challenge each other, or come up with new ways of working diminishes,” he said.
Another key component of the winning formula — innovation — is increasingly critical in China where wages are rising and growth has slowed.
“What has been true until quite recently is if one simply operates in a highly productive way, focusing on understanding the local market and driving down the costs — then that’s a strong base to be highly competitive.
“But it is increasingly becoming clear, something that we repeatedly tell our clients, that the previous goal for winning has changed. Economic growth has moderated, while wage pressures and competition are rising.
“Companies will necessarily have to push themselves to change, and the key elements of that are more differentiation, being adaptive and innovation,” he said.
Nettesheim said that though the common perception is of Chinese companies lagging in innovation, in reality it is the “Chinese way” of “experimentation” that is much more suited to today’s world.
“It’s a different model. My sense is that many Asian and Chinese companies are better at really testing the new way of approaches — be it new products, new processes or new business models — and in rolling them out rapidly. If you think of today’s world — which is volatile and where it is difficult to predict the long-term future — then this way of ‘constant incremental experimentation’ is much more suited,” he said.
A view of the financial district from the Bund in Shanghai on Sept 20. The city has played a lead role in attracting foreign investment and is now the second headquarters for several multinational companies. Foreign consultancies like BCG have also benefited from China’s rapid economic growth with a slew of business opportunities.