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Detail is the Key of Success and Strategy Decides Success or Failure were two eye-catching books several years ago. Of course, some people may banter that “nonsense can be summarized into strategies if you succeed while any strategies would be nonsense once you fail.”
Then what is on earth “strategy”? Strategist Clausewitz defined it as “the employment of fight to achieve the success of war”, and Mao Zedong believed that “strategy refers to researches on regular rules of war. All that cover all aspects and all stages of a war belong to the war. And the science of strategy aims at researching on overall rules of war.” The explanation of “strategy” in Cihai is “the scheme used to plan and guide overall actions of wars and non-wars”. In China, the word “strategy” first appeared in Strategy, the book written by the historian Sima Biao in Xijin Dynasty, and was originally referred to “the scheme of war”. To sum up, “strategy is planning and scheming on overall operations of war”.
I worked as deputy general manager at a state-owned company in the 1980s when our director general set a rule that all the general managers who sold products well, earned a lot of money and turned in more profit would be crowned “Outstanding Enterprisers” at the year-end summing-up meeting of the bureau. These “outstanding enterprisers” would naturally be entitled to lecture on “their advanced experiences on corporate strategies, technologies, product R&D and market expansion”. In a word, the director general would try all kinds of measures to highlight these enterprisers and their achievements, which made the summing-up meeting like a popular exhibition of the “Number-One Scholar”. However, the enterprisers themselves were generally muddleheaded about their success or failure at that time. I remembered the president of Tianjin TV Corporation really enjoyed himself to the full to “be a successful enterpriser” for several years when color TVs were in short supply and a TV coupon was expensive. But one day, TVs did not sell well and the TV Corporation ran at a loss immediately with overstock and unpaid employees. The Corporation had no other way but sold its land. How good it would be if the incident occurred today as land can be sold at a higher price now! From then on, I have never heard any experiences lectured by this president and have not seen him at summing-up meetings. At that time, enterprisers honored as “Outstanding Enterprisers” changed frequently like the rapid evolution of “Hurun China Rich List”.
I initially understood corporate strategic planning after negotiating with IBM on joint venture. In 1984, President of IBM Aker visited China and submitted a document entitled Business Strategy of IBM in China (there were two versions of the document: one was the version for IBM itself to implement, and the other was an abbreviated one submitted to the Chinese government) to deputy prime minister of the State Council Yao Yilin when visiting him. The document was short and brief, and was jointly drafted by three senior third-tier managers of IBM. Among the three of them, one was an Cuban-American of over 60 years’ old, who had managed a manufacturing plant of over 6,000 employees in America, and the other two were born in Hong Kong and had worked in IBM for nearly 30 years as senior managers, with the badge of Quarter Century Club on their business cards. It is said that the three of them had stayed in China for more than three years and visited over 140 enterprises affiliated to the No. 4 Industrial and Machinery Department to finish the document. Later, Minister of the Ministry of Electronics (the No. 4 Industrial and Machinery Department was renamed as the Ministry of Electronics later) Li Tieying visited the Company and admitted that he had not visited as many as 140 enterprises affiliated to the Ministry of Electronics.
The joint venture project we launched in January 1988 was a part of the document. The three drafters of the document happened to be our negotiating partners, so it was common that they might show off their “feat”. Anyhow, I scorned it as I had seen numerous strategies or plans when working in state-owned enterprises. Generally speaking, three-year planning is nonsense, not to speak of five-year planning. Therefore, I mocked at the Business Strategy of IBM in China, which was planned for the following 20 years. Although I did not express my scorn,[link widoczny dla zalogowanych], the three were so sophisticated that they saw my heart. When they came back to Tianjin two weeks later, they brought me the diagrams demonstrating the development processes of IBM Germany and IBM Japan from the 1950s. I began to believe the document was feasible after reading the diagrams. Later, IBM established “China Research Center” in Beijing before 2000, which further proved the value of the document Business Strategy of IBM in China and I began to admire IBM’s strategic planning abilities from the bottom of my heart. It is true that only century-old companies like IBM have enough experiences to predict the future and step as precisely as a clock to prove the correctness of their strategies.
Later, I worked as director of Comprehensive Management Department at NEC and one of the sections I administered was responsible for corporate planning. The boss often asked us to collect information and conduct researches on a given subject. But the subjects mainly focused on analysis of domestic market, collection of information on rivals (e.g. Huawei, Lucent, Siemens and Bell), acquirement of development planning and new technology adoption in the future of Ministry of Posts and Telecommunications. To my surprise, the boss had never asked us to research on the strategy of NEC for the Chinese market. I once consulted with a senior director of NEC when I was on business in NEC China (Beijing). He answered that, “Japanese companies do not have strategies. They believe in the proverb of ‘strive for now’, which is quite like China’s ‘following established guidelines’”. While in IBM, people attached great importance to clear and deep-rooted strategies. Employees would take strategy into consideration when doing everything. So I doubted the remarks of the senior director at NEC to some extent.
This bewilderment promoted me to begin researches on NEC. Luckily, NEC gave a green light. Later, I suddenly found out that NEC had strategies, but the president dispatched to China declined to talk about strategies with local employees. In fact, the key points of the market strategies of NEC in China are as follows:
Strategy of product launching in the Chinese market. NEC believes it should launch technologies and products (comparatively backward products) into the Chinese market on the basis of China’s economic development and demand level by referring to the corresponding period of Japan so as to get the maximum profit from technology R&D.
Division of market regions for joint ventures. The control over regions with low operating income and poor profit will be released in order. NEC Japan directly manages Guangdong, Jiangsu and other markets boasting high operating income and large profit. New markets are developed by joint ventures.
Pricing strategy in the Chinese market. Joint venture is the cost center and it can leave reasonable room for survival and profit. From 1990 to 1997, the price of NEC SPC exchange fell from USD 140 to USD 40 gradually in the Chinese market. During that period, the joint venture saw the increase in value of products of each line unchanged, and the difference between selling price and the price of raw materials was constant.
Strategy of product localization in the Chinese market. NEC offers extremely low price for the components that have been incorporated into the localization plan before, but extremely high price for the components and key chips that can hardly be localized so as to force the Chinese company to give up on localization.
Strategy of human resources. The employees dispatched from Japan and local employees are put into different systems. NEC introduces the wage system based on seniority and the post retention system of Japanese companies, and changes lifetime employment to short-term labor contracts for local employees. It also stipulates division chief is the highest post for local employees.
To omit details, I only want to say that NEC has a complete set of prudent market strategies for the Chinese market, which is more sophisticated than that of America. But NEC declines to disclose it. I remember that when I joined in NEC, the Chinese representative of NEC asked me to put forward a strategic suggestion for the Chinese company as the assessment for newcomers. I submitted a report later entitled Report on Suggestions for the Chinese Company. The main idea was that the Japanese company controlled established technologies, core components, product launching, market pricing power, division of market regions, loan guarantee of working capital and operation & control power (the position of general manager). As a strong shareholder, the Chinese company was only entitled to control local employees of the lowest level. Since the joint venture was the cost center of NEC in the Chinese market, the best countermeasure for the Chinese company was to sell half of its shares at the price of two times as high as the original price it bought to satisfy NEC’s expectation of enlarging its shareholding proportion when it profited well in 1996. By doing so, the Chinese company could continue playing with NEC on the basis of getting back all the investment. In this way, the Chinese company could benefit in case of success and does not lose anything in case of failure. Of course, the suggestion was not adopted by the Chinese company and was bitterly denounced by the superior of the Chinese investor. One could imagine the consequence that the Chinese Company,[link widoczny dla zalogowanych], impacted by products of Huawei, ZTE and other local companies, was at a complete loss together with NEC .
NEC’s strategy is very clear, which stipulates that Chinese enterprises are employed to ensure the maximum return on the R&D investment in Japan. Local Chinese enterprises are only cost centers and product sale & service centers, and the local employees are not part of NEC. This is different from what is stated in Business Strategy of IBM in China in essence.
Is there a company that does not have strategy? No strategy is also a strategy. The boss must have a goal in his mind. To achieve his goal, he is pooling together all resources and mobilizing them to motivate the execution of his team. Similar to corporate culture, companies that do not conduct culture design also have their own cultures. Naturally, these cultures are boss cultures. It was not until many years later that I realized IBM’s strategy was to establish “IBM (China)” in China as a global multinational company; in contrast, NEC’s strategy was to establish “the company in China” as a powerful Japanese company. Thus, it is no wonder that the two companies enjoy different results because of different goals.
For companies, strategy refers to the route map to reach long-term goals, and the planning and scheming for achieving stage goals respectively. It can be concluded that strategies are achieved following planning and scheming, and stage goals are ensured in order by constant successes. It can thus be inferred that strategy mistakes will certainly lead to failures as a general without strategies will definitely lead the whole army to be killed. Strategy realization depends on the execution ability of the operating team in a company; whether stage goals can be achieved at corresponding time nodes also ensures the success of execution. With strong execution ability, goals can be achieved smoothly and nonsense can be summarized as strategy. In contrast, strategy is empty talk with weak execution and any strategy will be definitely changed into nonsense. This is because execution ability is not taken into full consideration at the stage of strategic planning and scheming. Thus, execution ability is the key deciding whether strategy can be transformed into nonsense or not.
The execution ability of American companies is ensured by effective employee training, systemized performance incentive mechanism and employee equity program. On the other hand, the execution ability of Japanese companies mainly relies on lifetime employment, wage system based on seniority, Japan’s “He” culture and restriction on remuneration differences, which is similar to the socialist allocation system.
I remember that, the vice president of NEC (native Japanese), who was in charge of marketing,[link widoczny dla zalogowanych], led a team to strive for a large order in Northeast China at the end of 1998. This order was the key for NEC to reach its annual budget operating goal. When the negotiation stalemated, the buyer, director of the telecommunications bureau, intended to quit the negotiation. At this time, the vice president suddenly knelt down in the face of the director, dragged his leg and said in tears that, “Sir, may I beg you not to quit the negotiation? This order will determine whether NEC can reach its annual budget operating goal. Without your support, my sales team and I will feel too ashamed to face our president and all employees. Moreover, the year-end bonus for all the salespeople will be lost due to my inability.” His touching remarks moved most people on site to tears. This unexpected incident impressed the director with tears and so he awarded the order to him. The scene reminded me of the “Kamikaze suicide squad” that safeguarded Japanese territories at the end of World War II. The team members wore white-cloth ribbons marked with the symbol of sun, drove bomb-carrying airplanes and cast undercarriages after the airplanes took off as they rushed to the sea for death resolutely. Although I did not appreciate the extreme action of the vice president, the unconditional and even blind-minded super-strong execution of Japanese employees still left me a deep impression.
When IBM was looking for a joint venture partner in China in early 1988, it selected two out of six companies first and finally chose one from the two candidates. Consequently, Tianjin Computer Corporation and China Great Wall Computer Corporation became the two candidate partners. Despite the wide gap between us (Tianjin Computer Corporation) and the other candidate in terms of comprehensive allocation of corporate resources and technology & market strength, we finally succeeded by adopting the strategy of “winning through details and efficiency”.
We divided the business negotiation into specific procedures. First, the negotiation group held meetings with representatives of IBM at the hotel from 9:30 to 17:30. Each day after the meeting finished, we would revise the two-inch thick text in Chinese for two hours and delivered it to translators at 19:30 for revision of the English text. At 21:30, texts both in Chinese and in English would be sent back to the office and the secretary would do word processing. We specially stipulated that each procedure should set quality control nodes and the texts should be proofread for two times before they were delivered to the next stage. At 2:00 am, the texts would be sent for copying and the new texts would be delivered to the hotel for negotiation before 8:00 am.
Every morning,[link widoczny dla zalogowanych], when the representatives of IBM came to the conference room, they would see the negotiation documents, with regular layout as well as tidy and correct words, were marked with the date of the very day and the text number of a new version. This practice was rare to see among state-owned enterprises at that time. The countermeasure of “winning through details and efficiency” enabled us to defeat China Great Wall Computer Corporation ― the leading company in domestic computer industry. Afterwards, the boss of China Great Wall Computer Corporation Mr. Wang asked me why we could succeed. After listening to our story, he also admitted that we grasped the key to success, and details and efficiency were the shortcomings of his company. He fully realized that senior executives of China Great Wall Computer Corporation were mostly directors or deputy presidents from the Computer Bureau of the Ministry of Electronics. The business strategy of “winning through details and efficiency” that required strong execution ability just hit the shortcomings of China Great Wall Computer Corporation.
Through the rankings and market shares of information service companies from America,[link widoczny dla zalogowanych], Japan and India, you may conclude that the top five companies may occupy about 50% of the market share in total when China’s outsourcing industry becomes mature in the future. The relative monopoly of the industry determines that there will be top five first-tier companies rather than top ten in the industry. It can be inferred that all of the top 20 companies in the industry now have the opportunity to rank among the top five in the future. However, is your company able to develop into one with 30,000 to 50,000 employees in the next five years, and one with 100,000 to 150,000 employees in the next ten years? This is the key.
Apart from staff size, strategic issues such as global market positioning (ratio between onshore and offshore business), vertical markets with high priorities, technology R&D and product positioning that supports market demands, complementation of natural growth and M&A, strategy of human resources and core team construction, performance incentive and equity sharing plan, financing and listing, management platform and back-office support also need solving. But I still think execution ability is the most important and the most valuable part for a company.
Unlike the century-old company of IBM with rich experiences, companies in China cannot fully predict the future to work out long-term strategies. Under the circumstances, these companies still need to work out the framework of strategies. They should accumulate experiences and revise strategies continuously when implementing the strategies. Execution is more important than strategy development. The lack of experiences to follow indicates that the strategies are weak in instructive force. Thus, implementation is the best way for us to revise the strategies. Therefore, large companies with rich experiences should attach more importance to strategies, whereas small and medium companies should pay more attention to execution. This is what we say “good before better” which is much like the “gradual approach” in automatic control theories. It is recommended that small and medium enterprises should formulate directive strategies and then review and revise these strategies regularly during the implementation so as to form an effective mechanism of strategy adjustment.
Finally, execution ability and details will be discussed. The core of the “5S campaign” launched by Japanese companies is to pay attention to each detail in the execution process and transform the perfectness of execution details into spiritual enjoyment of executors. Japanese companies emphasize execution even to the extent of blind following, which counteract insufficient strategic abilities of Japanese people in a sense (the Second World War is a good example. Japanese worked out the strategy that led to failure, but their super-high execution ability enabled them to win some stage victories in the war). During the execution process, each detail should be perfected, which is what the “pursuit for excellence” emphasized in the philosophy of IBM. I have consulted with the senior trainer of IBM on what is “pursuit for excellence”, and the answer is simple: your result should be regarded as imperfect if there could be better execution results.
So execution should be the perfect combination of sense of mission, pursuit for challenges, enthusiasm for striving for goals, punctuality and emphasis on details. Germans also often say that the magic lies in details and details are the key to decide success or failure. Germans, Japanese and Americans all have strong execution ability due to their focus on details. Neglect of details may upset the whole strategy sometimes. Is it similar to the butterfly effect we talk about today? Only the perfect execution of each step can ensure the final success of a strategy, and so nonsense can be summarized as excellent strategies. In a word, perfect details are the basis for execution, and execution ability ensures the strategy will not be empty talk.