Taking initiative to succeed (or survive) in a slowing economy with an insecure future

It has come to no surprise, but inevitably the Chinese economy has slowed down to a growth rate of 7.4% p.a. this year – its lowest in 24 years.

At the same time has China’s public and private debt in percent of GDP grown ten-fold in just shy of 15 years, while the current stability of the political system appears placarded at best – clear control in Beijing has not been established yet.

The Chinese administration has recently announced measures to ease private investments and support of Kickstarter to fuel economic growth from the private sector rather than public. Yet no significant measures have been implemented so far to rid private companies from highly restrictive bureaucratic procedures. Meanwhile, most of the private sector is still barred from the bank financing system.

In this economic environment of slowing market growth, perhaps more restrictive rather than easing policies in the short-term and continued bureaucratic inefficiencies, Small and Medium-size, but also Large Enterprises must take their own initiative to succeed in China.

In China’s rampant growth period, we at Articulate Ltd. have observed many companies having grown rapidly, with little regard to efficiencies in people, processes and systems. Top-line results were the paramount objective. Large Multinationals with global controlling systems would still peek at bottom-line returns, but the majority of companies appeared to be at the state of “we need to grow now, profits will follow”.

Inefficiencies in people, processes and systems will now stifle or even endanger those businesses that were complacent at best before, as China’s economy continues to slow and economic and administrative reforms may not follow as fast.

Review how people, processes and systems support or hinder the realization of strategic objectives

Assuming a company’s strategy is right for the market – other than in the past – moving right into or continuing execution – may proof fatal. Now is the time for thorough review of people, processes and systems in regards to their efficiency, effectiveness and cost to the company – potentially uncovering significant opportunities in cost savings and revenue generation – and eliminating inefficiencies that hamper the company’s competitiveness in a much more fierce market environment.

People

With rapid growth rates in the past, organizations have grown out of shape significantly in the past two decades. It is not only about the right numbers in proportion of what company, customers and market require, but also

• knowledge and technical fitness to the tasks required;
• personal attributes and attitudes required;
• soft-skills required for the organization, customers or suppliers;
• business and process experience that may be of much more value to the company than in the past;
• the right organization structure and fitting leadership style that is homogenous across the company.

Processes

We at Articulate Ltd. have observed out-of-sync, incomplete and defective processes even at the largest multinational corporations operating in China – and the respective companies trying to develop upon those broken processes without at first solving their problems at the roots.

With a market environment in which opportunities are no longer simply attainable by “being there, having a good product, and strong relationships” but increasingly by rather having sound processes that do not waste the time or money of customers, internal functions and suppliers, developing, standardizing and improving processes are activities that should rather be started today, than tomorrow.

In line with Business Process Maturity Model (BPMM) best practices, most organizations will need to move beyond having repeatable, but not clearly defined, or defined but not managed processes towards proactively managed processes that ensure continued effectiveness, efficiency and a low error rate. Key aspects of (well-)managed processes are,

• clearly defined, accepted and pro-active Process Ownerships;
• a well-documented, referenceable, trained/re-trained and “lived” Process Flow;
• clearly defined, accepted and actively utilized Control Points and Controls;
• open communication across and between all functions;
• the right and the right number of Key Performance Indicators (KPI);
• the right amount and the right levels of Reporting.

Systems

We have observed business information systems to have become that rare animal that is supposed to enable, support and increase the efficiency of people and processes – yet that more often than not fails utterly in this task. Either systems – out of concerns such as cost or effort – have been half-heartedly implemented, without active involvement by the eventual users (function staff using the system for their daily operation) or they have been implemented overly ambitiously at cost and effort that went well beyond the organization’s need or ability.

As we have been preached to and preaching for a long time – systems are just that: systems that enable and support people and processes at the level they are fulfilling this task effectively, without creating a new obstruction to the business. In the most cases, systems are not the solution to a (people or process) problem but merely an enabler, once such people or process problems have been solved first.

Sound systems are thus,

• following well established organization structures and lived processes;
• not the solution to organization and process problems;
• supposed to produce a measurable Return on Investment (RoI) and not to burden a company’s finances;
• supporting people to fulfill their tasks effectively and efficiently without adding another level of complexity.

Address efficiency and effectiveness improvement opportunities now

The slowing of the Chinese market growth is not a fluke. As with all maturing economies, it will continue to slow inevitably. As China’s growth is still significantly higher – compared to all industrialized economies, overall the current business environment is still strong and full of low(er) hanging opportunities.

This is the golden opportunity at which companies both begin to feel the urge of addressing inefficiencies by improving people, processes and systems and at which they may still have the luxury of time and money to do so.

We at Articulate Ltd. are experienced in helping companies in China and across Asia Pacific to navigate through profound business transformations, organization changes, process improvements and system implementations. Please do contact us for any questions in regards to this article, or for any inquiries for support by Email to inquiry@articulate-and-win.com or by telephone on +86 (21) 6339 1312.

Michael Adick, Managing Director | Articulate Ltd.

To Do Strategy Or To Not To

          Have you – as you and your leadership team are currently defining your business strategy for 2014 – thought yourself, or heard your peers or subordinates say: “Most of the strategic actions we are agreeing to now, we had already agreed to a year ago (or two, five, eight years), yet nothing had happened then - why should it be different this time?”?

Business strategies – regardless whether aimed at incremental/evolutionary, or radical/disruptive changes to tactics or the business model itself and regardless whether based on minor adjustments in market/customer orientation, Porter’s Three Generic Strategies or on more radical strategic shifts such as according to the Blue Ocean analogy – inevitably fail to deliver their anticipated results, if not implemented and executed upon. 

I would even be so bold and say: If a business does not implement and execute on its strategy on every level of its organization - having gone through the strategy definition exercise then would have been, in essence, an enormous waste of time – time that may have been better spend on day-to-day organizational, operational improvements or – for that matter – time that may have been better spend with your customers.

Certainly, going through the strategy definition process – as so many businesses do during this season in preparation for 2014 – does have a benefit by creating that kind of team building spirit, especially among the business leadership team, that can serve as a re-set and re-focus of the team on the objectives, directions and initiatives that matter to the business in the upcoming months.

However, such potential benefit of a re-ignited team may soon erode, or even reverse itself especially at the organizational base, as your key stakeholders, contributors and all employees – and more often than not, also your customers and constituents - soon realize that those hailed strategic ideas that had been applauded during the strategy definition process are actually not being implemented and executed on (as they probably hadn't been for the past two, five, eight or more years already as well).

Likewise, I rather frequently hear the comment that “There is strategy (defined at top management level), and then there is day-to-day operations (at the operational level).” As if strategy and operations were completely different matters altogether, such or similar statements in my view are reminiscent of the very fact that business strategy has been defined – somewhere – but has not been and will not be implemented, and thus will not really have any impact on how the business acts (differently) in real terms.

So again, why waste the effort?

If we agree that business strategies in the first place aim at achieving certain financial objectives (or at the ability to optimally serve a certain constituency with limited resources, if the organization is not-for-profit or governmental), by better serving certain markets, customers or constituents than our competition - can this not only be achieved, if our business strategy in actuality converts to really changed day-to-day operations on process and all organization levels?

Or do you want to continue to merely serve lip service to your shareholders, customers, constituents, and not the least – your employees?

Michael Adick | MBA

Managing Director, Articulate Ltd.

October 2013