Con­nect­ing strat­egy and ex­e­cu­tion

China Daily (USA) - - BUSINESS - By MENG JING and OUYANG SHIJIA You may con­tact the writ­ers through ouyang­shi­jia@ chi­nadaily.com.cn and mengjing@chi­nadaily.com. cn

With China’s eco­nomic growth slow­ing, it is be­com­ing in­creas­ingly im­por­tant for Chi­nese com­pa­nies to gather new ca­pa­bil­i­ties and gain more cus­tomers, said Paul Lein­wand, a se­nior part­ner of Strat­egy&, PwC’s strat­egy con­sult­ing busi­ness.

In his def­i­ni­tion, a ca­pa­bil­ity is a com­bi­na­tion of pro­cesses, tools, sys­tems, knowl­edge and peo­ple that cre­ate a very spe­cific out­put for a com­pany.

Lein­wand is a thought leader on strat­egy, growth and ca­pa­bil­ity build­ing. Three of his books were pub­lished by Har­vard Busi­ness Re­view Press. His take on slow­ing growth is that prof­itabil­ity of Chi­nese com­pa­nies will slow as well. The right re­sponse to that would be not to cut prices to meet growth tar­gets but to in­stead fo­cus on build­ing ca­pa­bil­ity, he said.

“Any com­pany, if it re­ally wants to win, needs to de­liver some­thing unique to cus­tomers, some­thing bet­ter than any­one else can pro­vide,” said the Chicago-based Lein­wand.

Dur­ing his re­cent China visit, he said that two-thirds of ex­ec­u­tives sur­veyed said their or­ga­ni­za­tions do not have the ca­pa­bil­i­ties to sup­port their strat­egy.

“Ca­pa­bil­ity is very dis­tinct to what that com­pany is do­ing. Ac­tu­ally, there is no one or two ca­pa­bil­i­ties that any com­pany should have. What com­pa­nies need to do is to make sure they are clear about what they are mak­ing for the cus­tomers and what ca­pa­bil­i­ties they need to ex­e­cute that strat­egy,” he said.

Ac­cord­ing to him, there are lots of op­por­tu­ni­ties for Chi­nese com­pa­nies to of­fer dif­fer­en­ti­ated prod­ucts and ser­vices to the rest of the world, de­spite the ris­ing la­bor cost in China that seems to have weak­ened the price ad­van­tage of made-in-China prod­ucts.

“I think it’s im­por­tant for com­pa­nies to rec­og­nize what they are good at and which mar­ket would value the type of dif­fer­en­ti­a­tion.

“The big­gest mis­take most in­ter­na­tional com­pa­nies make is that they have the sort of sense their busi­ness should be equally around the world. Be­fore en­ter­ing a new mar­ket, Chi­nese com­pa­nies need to un­der­stand what that mar­ket val­ues, who are the other com­peti­tors in the mar­ket and what ca­pa­bil­i­ties they would need (in or­der to suc­ceed).”

In his new book Strat­egy That Works: How Win­ning Com­pa­nies Close the Strat­e­gyto-Ex­e­cu­tion Gap, he dis­cusses prac­tices for con­nect­ing strat­egy and ex­e­cu­tion used by 14 suc­cess­ful en­ter­prises, in­clud­ing Haier Group, a ma­jor home ap­pli­ance maker in China.

In Haier’s case study, he de­scribes how a com­pany ac­tu­ally evolves as it adopts ca­pa­bil­i­ties. In his opin­ion, Haier kept its prom­ise to its cus­tomers that it will make cus­tom­ized ap­pli­ances.

He cites the in­stance of how Haier evolved its prod­ucts based on cus­tomer de­mand. In the 1990s, when Haier ac­ci­den­tally found that many of the farm­ers in South­west China’s Sichuan prov­ince used its wash­ing ma­chines to wash pota­toes, it spot­ted a po­ten­tial ru­ral mar­ket for a new de­vice and went on to pro­duce a potato-washer.

“Haier grows around its iden­tity rather than seek­ing growth in dif­fer­ent places where it does not have ad­van­tages,” he said.

STRAT­EGY& / FOR CHINA DAILY

Lein­wand says that there are lots of op­por­tu­ni­ties for Chi­nese com­pa­nies to of­fer dif­fer­en­ti­ated prod­ucts and ser­vices to the rest of the world.

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