Tuesday, June 5, 2007

My Final Assessment

It's amazing. Since I have returned home, I have thought a great deal about my travels, what I learned and the impact it has had on me. I continue to be amazed at the impact of this experience.

I read through an essay I wrote prior to the visit, having reveiwed footage from a documentary on China. What's funny is, my perspective then is the same as my perspective now. Take a read of "Colliding Cultural Forces". It sums up my thoughts still.

Colliding Cultural Forces (Written Prior to My China Visit)

The rise and fall of multiple dynasties throughout China’s history has forced the Chinese culture to endure numerous periods of control followed by chaos. The Communist Party leveraged the desire for order, wielding control over the lives of so many Chinese for so long through the promise of stability and order. One of the state’s most compelling control features? A deep seeded cultural norm of caution and unpretentiousness. The result? A cautious, risk adverse populous. China’s way is described as the “middle way” – stability over the unpredictable nature of creativity and individuality.

How can a risk adverse populous embrace the rate of change China is experiencing now? Powerful forces are colliding in present-day China – the force of change vs. the force of order. This collision is pervasive in every aspect of Chinese culture.

Young minds are opening. Innovation and daring are commonplace. The impact of a liberalized information flow is stimulating curiosity, creativity. Students now boldly question everything and distrust propaganda. Yet the government and Communist Party still find their way through propaganda into the lives of students.

The broad and uncontrolled reach of the Internet is forcing state influenced media outlets into a competition for the first time, causing many consumers to distrust state run media outlets as pure propaganda. Broadcast programs like “Live at 8” are now seen as consumer advocacy outlets forcing accountability on government officials when solving problems of Chinese. Yet government and party officials still ensure that some investigative reporting material remains unaired, unreported.

The evolution from a planned economy to a capitalist economy is creating economic forces never before felt by the Chinese. Privatization of state run firms. Pressure to perform. 10% unemployment. Yet many businesses prosper thanks in part to a strong tie in some form to party and government officials.

The Communist Party in China has prospered for so long due in large part to their ability to stabilize virtually every aspect of the lives of all Chinese. Delivering prosperity is now the “measure of the party’s legitimacy”. The government has shown incredible signs of flexibility in responding to the change. Yet much of the economic reform felt today is due to the party’s insistence that change take place.

The force of change is rampant in China. All the while, the government continues to flex its powerful muscle in more subtle ways.

But what will happen? Which force will win in the end? Human nature will eventually prevail. As the Chinese taste the effects of freedom, ingenuity, innovation and creativity, they will inevitability want more. Of course not all Chinese will want to lead the life of a capitalist society and it will take decades to truly transform the culture from one of caution to one of risk. But for the most part, the culture will follow.

But do Chinese leaders understand this? Of course they do. Chinese are planners. They take the long term view. They are calculated and take smart risks based on well thought out plans. This is game theory in action. What the rest of the world must do is understand their moves and plan accordingly.

Saturday, May 19, 2007

One Last Day

Today I left the group behind to have a day to myself. I started with a visit to Sam’s, a world famous tailor who has dressed every sitting president since Nixon. Of course I had to pick up a couple of shirts. I then hopped a cab over to the Jade Market. That was quite an experience. Rows and rows of vendors peddling trinkets of all kinds. There were a few items I had left on my list. While there I happened upon a typical Chinese open air market. I am fascinated with these markets. Rows and rows of exotic foods of all kinds – fresh meat dangling in the open air. Seafood so fresh that the clams spit at you. I then stopped in a Pizza Hutt for lunch. Brian and Lizzy showed me a good time last night so I needed a slice of pizza and a sweet tea. That hit the spot. Then, it was off to Cheng’s for my final fitting. Francis and Cindy Cheng have been fitting customers with hand made suits and shirts for 39 years. They have connections with IBM in RTP which is how we all found out about them. My suit and tux fit me like a glove. At these prices with this quality and custom fit, I’m done with off the rack clothing. Move over Brooks Brothers.

Tomorrow we leave for the United States. Last night, we gathered together to say our final goodbyes and assess the course from our own perspectives. As I said last night, this has been a life changing experience for me. I recounted Ashley’s comment to me the morning she and the kids drove me to the airport. As we wound down Glenwood Avenue passing by manicured lawn after manicured lawn, she said: “Do you realize that you are actually going to cities far more sophisticated than the one we live in right now?” How true. What has amazed me most in this experience is just how sophisticated and cosmopolitan the urban areas of China actually are. The pace of culture and business in Beijing, Shanghai and Hong Kong is fast and furious. They are confident and charging forward. There is no stopping this transformation going on right in front of our eyes. This is what we have seen, smelled, touched and heard over the last two weeks.

Honestly, each and every MBA should want to experience what I have just experienced. It has had a profound effect on me. My view of this world has changed entirely. During my childhood I watched the fall of communism. Ella Reaves, Harry and Fletcher will watch the rise of China.

Friday, May 18, 2007

Wow, Again.

Today we concluded our two day tour through the business culture Hong Kong style. On Thursday, we left Hong Kong and reentered China to visit several sites in Shenzen, a heavy manufacturing zone. After China regained control of Hong Kong, they enabled a principle of “one country, two systems”. Because of that, when entering and exiting, we had to pass through customs again with a great degree of paperwork.

Our first visit was to Lenovo. We met with the VP of Global Manufacturing for Lenovo. Fixing the supply chain is the number one priority for Lenovo. He discussed many aspects of their global and Chinese operations as well as his thoughts on the ex-pat lifestyle. We then toured the worldwide manufacturing plant for ThinkPad which produces 35,000 units per day, all hand assembled. Interestingly, there is absolutely no government control of Lenovo, never has been.

We were then hosted for a delicious lunch where we also met with the head of Gradiente for China, a Brazilian manufacturing firm.

After lunch, we visited a Joint Venture between IBM and China Great Wall Computer Corporation. Great Wall manufactures huge servers for IBM. Joint ventures are an entry point for multi-nationals into China. They are typically required for many industries and it becomes a way for companies to develop relationships and a foothold in China. We were able to hear from the head of operations and also tour the manufacturing facility. Servers of this type generally begin at $250,000 US dollars. Part of the presentation was a continued discussion about the Chinese talent pool. In almost every company we have visited, the talent pool is young, educated and very passionate – what company would not want that “problem”?

I ended the night with a stop to visit Francis and Cindy, owners of New Hung Cheng Company, custom tailors in Hong Kong, for my fitting. I have a blue suit, a tux and five shirts coming back with me. Custom work is amazing and I look forward to the final fitting on Saturday.

On Friday morning, we began the day with a trip to China Construction and Bank of America. Thanks to the fact that our dean, Steve Jones, sits on Bank of America’s Board of Directors, we were addressed by Sam Tsien, President and Chief Executive Officer for China Construction Bank and Fred Chin, Managing Director at Bank of America and also Company Manager for Hong Kong. Bank of America bought about a 9% share in China Construction, one of China’s four large government-owned bank’s. This is a strategy Bank of America is pursuing, different from Citi which bought a larger position in a smaller, regional bank. It will be interesting to see which strategy works out in the end, something we may not know for several years. The photo here was talent from the meeting room at the top floor where our meeting was hosted.

We then traveled to Li & Fung, the blue chip of the sourcing industry. We were fortunate to be addressed by Bruce Rockowitz, president of Li & Fung, a $12 billion supply chain company. Each of us on the trip is responsible for studying one of the companies we visit and serve as ambassadors for the group at each appointed visit. This was the company I reported on and boy was it amazing. Over the last several years, they sourced, manufactured, packaged and shipped 8.6 billion consumer goods across the globe and don’t have one plant, one ship, truck or train on their balance sheet. They are truly a new age, virtual company. No assets but plenty of cash flow. Believe me, I could go on forever about this company but will spare you the gory details. Just know this: I bet at least 75% of everything in your house has been touched by Li & Fung. My partner on this report, Kate Blanchard, and I are presenting Bruce with a gift, of which I told him Li & Fung probably sourced.

Finally, we ended the day at Dubai Ports International – and were simply amazed. DPI operates the Hong Kong port – the third largest in the world. At DPI, we drove our bus through the largest concrete facility in the world – larger than the Pentagon at 9 million square feet. It rises twenty floors from the port floor. Takes in 12,000 vehicles a day. Has 15 miles of highway intertwined within it and offers up 6 million square feet of storage space. We all agreed that DPI was a great way to end our trip in China.

Tonight, we head to an Irish pub to wrap up the course as we share our thoughts and perspectives on what we have seen and experienced. Tomorrow is a free day before we leave on Sunday.

Fortunately, in a truly global world, I’m off to a cocktail party hosted by Brian and Lizzy Moore, friends from North Carolina. And who knows what the night will entail.

Stay tuned.