Modern Chinese Management and Agribusiness

Reviewer

Dr. Luciano Thomé e Castro, International Adjunct Professor

Article

How Chinese Companies are Reinventing Management by Mark J. Greeven, Katherine Xin and George S. Yip

Magazine

Harvard Business Review

China is one of the most major food producers and consumers in the world. More and more western agribusinesses are forming alliances and partnerships with Chinese companies, and mergers and acquisitions are taking place. Well-known Chinese companies such as the retail giant Alibaba is involved in agriculture, working in the supply chain of fruits and vegetables. Many input manufacturers such as chemical and seed suppliers are based in China and are increasing their footprint in the western ag world. Additionally, important commodity traders such as COFCO are based in China. China, after the U.S., is the second largest investor in ag techs with $2.7 billion in investments in 2022, targeting mainly biotechnology and bioenergy, according to AgFunders. 

When selecting an article to share with our readers for this edition of the Purdue Food and Agribusiness Quarterly Review, this interesting piece from the Harvard Business Review came to mind. It describes well, yet succinctly, the Chinese management style — something the authors coined as Digitally Enhanced Directed Autonomy (DEDA).

I thought to myself, “How often do we as consultants, academics or managers rely on North American, European and Japanese schools of thought and business principles to frame our business strategies?” While there is undoubtedly a growing importance of businesses in different regions of the world such as China, the question I always have in mind is: Do these modern Chinese companies follow the same principles? The country has seen the emergence of companies like Alibaba, Huai, Schein, BYD, and more, so what can we learn from these businesses?

In this article, three distinguished authors with remarkable biographies[1] who show great global perspective and experience in China shared their perspective about what they perceive to be the modern Chinese school of management. Simply stated, they present what they believe to be a mix of important principles and practices that have guided these companies. The authors explain that DEDA is composed of three main elements: autonomy at scale, digital platforms in the middle, and a focus on clearly defined projects. Each are briefly described below.

By “autonomy at scale” the authors describe well-known self-managed teams inside organizations, but with unique Chinese elements. We are talking about multiple groups of people inside organizations with a “guided autonomy”, meaning missions and accomplishments are well-established, and established targets and indications where innovation is needed are known. There is also a “resource market” disputed by these teams, given that the more they are successful the more recognition, incentives and resources they receive. “Autonomy is given; however, it is guided, well-traced, and controlled,” and it is not the broad autonomy with reduced supervision we all know well. For example, the company Hair has adopted a model they call ecosystem micro-communities (EM). Each EM exists to search for solutions to specific groups of customer needs. In terms of how this model might serve as an example for western companies, the authors mention how the ownership by Hair of GE Appliances in the U.S. has resulted in a blended model.

“Digital platforms in the middle” are created to shorten the distance between customer-facing employees and the resources and competencies of the company. The middle management layer we normally know is based on managers responsible for bridging a gap between operations and the back end. With digital platforms in the middle, this model is replaced by well-designed shared services, data and critical resources to be used by different teams, enabling decentralized decision-making, thus conferring agility for the organization. Another aspect these platforms bring is transparency in terms of key performance indicators senior leadership can monitor to assess business performance on several dimensions such as finance, operations or customer satisfaction. SF Express, a packaging and delivery company, relies on a digital platform to connect its front and back ends. The company impressively employs three thousand software engineers to update and improve its platforms. 

The third element is “a focus on clearly defined projects”. Execution discipline is very strong in Chinese management. The authors mention strong cultural factors as larger and more compliant workforce and an emphasis on being a good follower. The authors present many examples of how quickly a Chinese organization may change its course of action when needed by shifting priorities, setting objectives and action plans, and executing. This discipline and focus make a difference when in turmoil. For example, the automaker BYD reoriented during the pandemic to produce COVID masks. At the time, the country and its factories lacked masks, which were needed by its 250,000 employees. Not only BYD produce masks needed for its employees but ended up selling and profiting from this initiative by producing about 50 million masks a day in 2021.

What this means for Food and Agricultural Business

As mentioned, more and more western agribusinesses are selling, buying, partnering and sharing equity with Chinese companies. It is critical to understand management principles, practices and the unique aspects that seem to have created a head-start for Chinese companies in the very dynamic marketplace we inhabit. In the three elements discussed, there are certainly parallels in the western world. The important thing is to notice the emphasis on them inside of business and how intrinsicality they are intertwined to yield positive results. Like the authors wrote, “Don’t be misled by slow-moving, state-owned enterprises. Today, Chinese companies are lean and mean.”

[1] Greeven, M.J. is a Chinese-speaking Dutch professor of innovation and strategy at IMD Business School; Xin, Katherine is the Bayer Chair in Leadership at the China Europe International Business School (CEIBS) in Shangai; Yip George S. is an emeritus professor of marketing and strategy at Imperial College London.