Management strategy is always a topic of discussion given the ever-shifting nature of business trends and the increasingly globalized nature of business operations. The last 100 years in particular have seen the creation of myriad frameworks and solutions designed to address new business issues, but the fundamental logic behind many of them remains much the same, and has for thousands of years.
Solutions to different management issues always run the risk of being overengineered and more of a hinderance than a help, but getting the fundamentals of management right adds an immense amount of value. Larger-scale business success is often predicated on multiple smaller successes, and concentrating on the basics helps offset the stress of knowing that in business as well as in life there are no certainties.
Leadership has become less about the individual and more about creating a dynamic culture that both fits with the requirements of a specific company and the larger ecosystem in which it operates. What were once seen as buzzwords now represent a pressing need for change, therefore to realize greater business success, leaders should cultivate and act in accordance with a culture that takes these goals seriously.
To start with a recent example of an event that caused a shift in management thinking, we can turn to the pandemic. Firstly, it had an impact on the development of company culture due to the rise of remote working, and we have seen a resulting decline in the levels of productivity and real-time problem-solving efficiency that can be achieved in an office environment.
On top of this, it caused an increase in uncertainty across the board. Uncertainty is inevitable because the future is always unknown and the pandemic not only created a greater level of uncertainty, but also reminded everyone how little control we have over our own fate. It is therefore important to look at this greater sense of uncertainty through this lens of history in order to find ways to address it.
Common business practice when dealing with an unclear potential outcome is centered on the term VUCA—volatility, uncertainty, complexity and ambiguity. But to me, all of these words mean the same thing as they all reflect our inability to predict what the result of any decision will be. One of the fundamental ideas underlying good management strategy is that while the outcomes of decisions you make are uncertain, you remain accountable for making things work and a manager therefore needs to take steps to reduce or side-step that uncertainty.
People in positions of power in the business world are increasingly realizing the value of ancient wisdom in dealing with this issue. Books such as Sun Tzu’s Art of War, written in the 5th century BC, is regularly quoted to this day by leaders around the world, showing the fundamental value in the wisdom from ancient thinkers, leaders and strategists.
That is not to say that the modern scientific approach has no value, but it does demonstrate a need for modern business leaders to integrate new and old together, finding the right balance of the two in the formation of their management strategies.
To illustrate the point, we can compare a modern day SWOT analysis with the ancient quote from Sun Tzu, “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” The fundamental point of the quote is that the only way to win a battle is to know and understand both yourself and your enemy, it’s not an either/or. Today, people don’t often understand how this can apply to business situations and often disregard it as an old fable.
But when we look at the logic behind a SWOT analysis, it has the same message. Analyzing strengths, weaknesses, opportunities and threats all lead to a greater understanding of the stakeholders in any given situation which, in a battle, would be yourself and your enemy.
The key difference, and why the ancient wisdom may have more to offer than its modern counterpart, is that a SWOT analysis is done on a much smaller scale.
The longevity of Sun Tzu’s analysis shows that there is a truth that has worked, and worked well, for thousands of years, and we need to understand that building new framework after new framework to deal with problems is not necessarily going to give us the results we want. Instead, modern scientific solutions need to be founded on the fundamentals to ensure that they continue to serve their purpose.
The contradiction we have to deal with here, is that we often do require some level of conceptual framework to apply this ancient wisdom to a specific situation, but the ancient wisdom often says there is no grand narrative to apply it to. So what we must do is recognize that the new conceptual model is not designed to supply you with outcomes—which we have established are almost always uncertain and difficult to quantify—but provide a way to focus on producing a sturdy framework for future development.
Overall, it’s about having the right mindset and getting the little things that matter the most right, because progress in a wider sense is the accumulation of a number of smaller successes, both in life and at work. Business leaders need to create better cultures within their organizations to ensure consistency with the wider ecosystem and make the world a better place. In order to do that, they always need to start with a clear business strategy.
Managing in China
Looking at this within the China context, the country still has a huge amount of growth potential given the size of its population and although it is already the second-largest economy in the world, it is still well below its preferred percentage of middle-class people in the population. The country has big ambitions and is generating the technology required to challenge for global leadership.
Twenty years ago, when China was cementing its place as the factory of the world, foreign companies operating in the country were almost exclusively managed by expatriates. But if you look at these companies today, this has changed significantly, with most management positions now populated by locals.
In order to develop a management strategy for modern-day China, we need to understand the capabilities and talents of local leaders. Chinese factories, for example, are probably the most efficient and well-run in the world, with an affinity for adoption of new technologies and digitalization in a more general sense. Any business that comes to China needs to embrace this approach.
Another change over the last two decades has been the gradual shift of knowledge sharing and tech development from being almost entirely one directional into China, to a more even, bidirectional process. Understanding that both sides can provide value to a business is also important.
The final key issue to remember is that you can no longer simply enter the China market to make a profit without providing personal and societal development as well in some way. For example, the country’s widespread adoption of social media and sharing of information is something that needs to be well-understood because a company that does not live up to the values it espouses may find itself with reputational difficulties that are hard to overcome. Younger generations of leaders appear to have a greater understanding of this, and in turn are less likely to work for people who are not committed to the wider value system, including issues such as the Carbon Goals or sustainability.
It is very important to truly be a functioning part of the whole ecosystem, and this is how a business can generate the most value from and within the China market. It is also important for global companies to understand that this may require a level of ambidexterity, but how the balance of decision-making lies between your global headquarters and local leadership is an answer that varies between companies and industries.
Operating a business in China often requires a greater level of local autonomy than leaders may realize, in order to provide the flexibility and speed in decision-making that is necessary. All companies around the world find themselves somewhere on this spectrum, from old and rigid to new and flexible, but it is important to find the right balance for your company to be successful in China.
Strategies in context
Johnson Controls has been in China for around 30 years and now has about 8,300 employees, 10 manufacturing plants, three R&D centers and 49 branch offices across the country. The company is in the business of building technologies which are generally aligned with the external value system given that 40% of carbon emissions come from buildings. This provides a massive opportunity to grow.
The company has also used the past 30 years to develop a strong local leadership presence at all levels across the board. Many of its enterprises and products have been entirely localized after the relevant technologies were brought into the market. There is also an effort to work as part of the wider ecosystem with academics, policy makers and institutes to help develop the whole sector.
The company obviously operates like any other company looking to thrive in a market, but the increase in quality leadership that adds value to the wider system is beneficial to everyone, and transparency and knowledge sharing is important.
External environments are always fluctuating and the pressures we see now are obviously different to those 10, 20 or even 100 years ago. For China, as the market expands geopolitical issues are always going to be there, but regardless of what the external environment might look like at any time, there is still the underlying necessity for humanity to make progress in various fields, such as sustainability, business practices or product quality. But whatever the issues, better contributions by companies and individuals will improve society as a whole.
In general, I think leaders today spend too much time on the physical and technological requirements of their company. Any working technology can be effective as long as the right leadership and culture is in place.
There are different phases of leadership and involvement, but the world is now realizing that good leadership is fundamentally about ensuring an organization has the right culture and this is where strategy needs to focus first and foremost. If you don’t get that right, then it will not matter what technologies or other advantages you may have.
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