By Kevin Meyer
I just returned from my annual trip to visit some customers and attend a trade show in Shanghai, China. Always an interesting experience and I personally love Asia, although I prefer the respectful humility of the Japanese and the constant happiness of the Thai and Cambodians. The latter always seem to be full of joy even though an entire generation of men was wiped out only a few years ago – and we think we have problems.
My thoughts on China change with each trip – perhaps just as the country is changing rapidly. You can’t help but wonder about the true meaning of communism when you get off the plane and are hit with a barrage of ads on the jet way for various luxury items. Today’s state-sanctioned Shanghai Daily even had a feature article discussing how many Chinese were on the list of the wealthiest in the world. Unlike in the U.S. the article, and by extension the government, praised their success. Go figure.
On my last trip I was amazed with the accelerating improvements in this potentially monster economy. I visited medical device companies that had technology on par with the best in the U.S. and who were investing in their future growth by creating 10,000-student engineering universities of their own. I noticed how discussions with trade show attendees had changed from “here’s a sample of a product from our competitor in America – can you back-engineer and build me a million” to “here’s exactly how we’d like to improve on our competitor’s product”. Society had become, for better or worse, very westernized with teenagers wearing the latest fashions to a Starbucks on every block.
This time I’m not as optimistic. I talked to a lot of customers as well as several expats running the local operations for foreign companies. Times are changing, and not necessarily for the better. Wage inflation is accelerating, restrictions on foreign control of local outsourced manufacturing operations are increasing faster than the ability of local Chinese to manage such complex operations, and the disparity between the upper and lower class is growing.
Basic services are becoming very strained by growth, and one expat living in Shanghai told me that healthcare quality had significantly declined just in the past year – to the point that she now goes to Hong Kong or back to the U.S. for even basic care. Technology does not create great service – knowledge and experience using the technology does. The human factor, once again. I fear significant social upheaval in China’s future, and the impact that will have on the world.
Local governments have monstrous infrastructure loans that are becoming a problem. In the past they would seize property by eminent domain, sell it to companies to develop into infrastructure, and use the funds to seize more property. Lots of homes and businesses seized with as little as 90 days notice, which is why a primary consideration for multinational companies building factories is to develop in an area where seizure isn't likely – i.e. not on a straight (potential rail) line between two cities. The problem is that the amount of property that can be seized has dried up, thereby drying up the ability of local governments to repay loans. Oops.
But what has really struck me on this trip is the lack of consistency and adherence to standards. It is pervasive and makes me wonder if this is the goal, and then the hurdle, of great civilizations. How’s that for a deep thought?
I don’t necessarily mean regulation-enforced standards, but simply an inherent desire to do things right, the same way, and an inner knowledge that consistency is efficient and practical. It is also an awareness that something is wrong and needs to be changed.
A few examples to illustrate what I mean, beginning with the very basic. In our hotel, a five star by local standards, light bulbs are inconsistent in the same type and application. Overhead lighting cans may have incandescent, compact fluorescent, etc. At the breakfast bar the coffee is in a different location each morning. Sometimes there’s low fat milk, sometimes not.
Trivial? Perhaps – it didn’t strike me as all that unusual or systemic until I came across or heard about the following other examples.
An expat I talked to who is running the local operations for a large U.S. multinational told me of her frustration mentoring her Chinese leadership team – and why she believes it will be a long time before the company entrusts the operations to them without an expat chief. One example she gave was how on her gemba walks she noticed trash on the floor, every day. Her management team simply doesn’t see it, let alone take action to improve it. She then connects it to understanding the financial statements and data required to run the operations – if they can’t see trash on the floor, can they see the minor and what may appear on the surface to be trivial, but still potentially important, issues in metrics and data? Let alone do something to correct it?
Recognizing, digging into, asking why, then improving is a fundamental requirement for solid autonomous leadership. In her opinion it’s not there yet.
A third and final example, one that will scare most people flying in and out of Shanghai’s Pudong airport. A different expat was telling me about the amount of news that really is censored, especially including safety issues. The world witnessed some of this recently with the derailment of a high-speed train in China and how it was initially covered up to the point even having train cars buried before an investigation could take place.
According to a good friend of hers, a commercial pilot, the actions of planes around Pudong are scarily similar to the cars and buses on local streets – effectively a free for all. Instead of the highly-ordered sequencing, positioning, and following commands of traffic controllers that you see at U.S. and European airports, in China commands are often ignored. Just last week a Qatar jet had declared a fuel emergency and was given a direct approach into Pudong. Still, on final approach, two local airliners dove in in front of the Qatar jet to land sooner. Disaster was narrowly averted. Perhaps this is why United turns off Channel 9 when landing in China?
Understanding the value of consistency and standards, regulation-enforced but more importantly an inner knowledge and understanding of the value of consistency and adhering to standards, appears to be a key to an efficient society.
Similar to that, understanding that standards can and should be changed and improved upon with appropriate review is also key. Otherwise stagnation occurs. I see the U.S. as having a high level of standards and consistency, but struggling with creating the ability to improve and move forward.
Creating and adhering to standards and standardization are both a critical goal, and a critical hurdle. For both societies and organizations.