As China marches on to global greatness, one of its major deficiencies is in corporate management. It’s not that Chinese executives aren’t smart or hardworking, but the fact is they have little experience managing operations outside of China. Many Chinese outfits talk about becoming global players, but making those dreams reality won’t be easy.
Anyone who doesn’t believe that should have a chat with Liu Chuanzhi. He’s the founder of PC maker Lenovo. I consider him one of the wisest, most thoughtful and open-minded executives in China. The proof is in his amazing success. He started Lenovo in 1984 in a two-room guardhouse in Beijing. Today, Lenovo is China’s leading PC company and the fourth-largest in the world, trailing only HP, Acer and Dell. Not bad work for a couple decades.
He’s fully confident, of course, that Lenovo will remain a leading player on the world technology stage. But he’s also quite honest about the challenges he has faced getting Lenovo onto that stage, and then keeping the company there. Going global for Lenovo has been a complicated undertaking, and if a smart guy like Liu has had such trials, imagine how other Chinese executives will struggle.
His journey is the subject of my latest story in TIME magazine (the May 10th issue), which you can also read on this website. But here’s a quick summary. Liu was prescient enough to realize that, with China opening to the world, Lenovo had to become a global enterprise if it was to survive, no matter how big its home market was getting. That led him to acquire IBM’s famed PC business. The deal was finalized in 2005. Ever since, Liu has experimented with managing a multinational enterprise. Aware that Lenovo’s executives weren’t up to the task of running its new international operations, he integrated foreign talent together with his original Chinese managers into a United Nations-style team. But that led to all kinds of cultural conflicts, which were severe enough to hamper the ability of the company to compete. Now Liu is trying to restore the original (more Chinese) culture, hoping to set Lenovo back on the right course. I’m sure he’ll figure it out. But Lenovo’s story shows that success in China doesn’t automatically ensure success outside of China.
None of these problems should be surprising. Every Asian company that has attempted to go global has faced similar challenges. Look at Korean firms. Samsung Electronics and Hyundai Motor were founded in the late 1960s, but it took them more than 30 years to even begin to build respectable brands. They had to overcome reputations for second-rate merchandise, improve insular management systems and beef up their R&D and design capabilities. Lenovo rival Acer was founded in 1976, but it’s only been in the past few years that it has risen to the top. (Acer’s success was enough to get its CEO J.T. Wang onto the TIME 100.)
Chinese companies will experience the same long haul to global prominence. The next Chinese firm to face the test is automaker Geely, which recently purchased Volvo from Ford. Geely has been one of China’s most successful, homegrown carmakers, but turning around Volvo would be a tough task for any management team, let alone one like Geely’s, with limited experience outside of China. Perhaps Geely’s chairman, Li Shufu, should stop by Liu Chuanzhi’s office in Beijing before his next jaunt out to Sweden. I’m sure Liu would be happy to share some helpful advice on the challenges of global management.