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IM: Richard, thank you for joining us once again for an interview! Could you briefly introduce our readers to your latest research topic?
Richard Li-Hua: First of all, I want to wish the readers of InnovationManagement.se a belated “Happy New Year” of the Snake! I am delighted to be here again and to share more about a very exciting topic entitled: “Integration of Western Management with the Eastern Philosophy in the post-recession period”
IM: This seems a profound topic with plenty of questions around it. When did it first become of interest to you?
Richard Li-Hua: To address the first part of your note: it certainly is. Many people will legitimately ask: Why is this important? How to correctly integrate? What is the exact significance of the integration in the post-recession and are we going to do it?
I actually proposed this topic in the Chinese year 2009 when I was in Cambridge. As a visiting scholar there I was invited to hold a keynote speech and was naturally interested in finding a suitable topic to address. So I chose to touch upon the economic downturn of 2008 and was to offer a topic called: “Integration of Western Management with the Eastern Philosophy in the current recession”. At that time it was current. Since then I have delivered over 30 keynote speech seminars in China, the UK and the US – the topic extremely welcome in all these areas. And of course, I have updated the content of the seminar each time. This means I constantly added something new since I have shared this topic with different audiences, who are from both the West and East.
IM: Why is this topic a necessity? How is it relevant to managers in general and innovation managers in particular?
Richard Li-Hua: As a professor of strategic management my concern has always been the correct assessment of both the internal and the external environments of an organization. When we talk about strategic management all we talk about the following three pillars: identification of strategic position, about making strategic choices, and about turning strategy into action. How are we going to do it? How to identify the strategic position, how to make the choice, how to perform the action? What is the approach? We have to use the strategic approach – both the internal and external analysis.
In fact, I have been comparing the West and East for over 30 years now. I have personally worked 15 years in China – the last job (I resigned from) I was the CEO of a multinational company – and for another 15 years in Europe in higher education. Thus, this 30-year time span has allowed me to view plenty of transformations – making a comparison of what has happened in the East and West during this time came naturally.
IM: Can you tell us a bit more about these observed transformations?
Richard Li-Hua: Well, if you look at what happened in the West – and clearly it is Keynes’ theory – we can note the gradual conviction that anything public was bad and that anything private was good from an economic standpoint. This led to the increase in the private activities and decreasing the state-owned ones. For example, in the UK of the 1980s and 90s, due to massive privatizations there were different companies owning different parts of the railway system: the railway tracks owners, the owners of the stations and those of the actual engines and trains. Being the secretary of transportation at that time was no doubt a hard job!
Richard Li-Hua: The promotions were the privatizations, the liberalizations – in other words laissez-faires. That was the watchword along with deregulation. And this led to the development of the “flawed business model” and the burst of the financial bubble back in 2008.
IM: What about China? How has it transformed?
Richard Li-Hua: As for what happened in the last 30 years in China, there was a significant change from “class struggle” to “harmonious society”. The ancient Chinese philosophy of “embracing contradiction”, meaning no argument of socialism or capitalism- a clear contrast to “We would like to have socialist grass rather than capitalist crops” 30 years ago. It doesn’t matter if it’s a black or white cat as long as it catches mice. This was a metaphor (strategic thinking innovation by former Chinese leader, Deng Xiaoping) for a recovering country that embraced two systems: the socialist and capitalist and the two economies: the marketing economy and the planned economy. You mentioned in the beginning you would like to hear about innovations – this is precisely the Eastern philosophy of “embracing contradiction” meant to stimulate and inspire innovation.
To better explain: in a classic sense, China is a country with a good understanding of two systems; a country embracing contradiction to meet its economic goals and feed its population. This co-habitation of Confucius, socialism and capitalism also solved the problem of Hong Kong and enabled the smooth handover.
Here is another example: December 26 last year marked the inauguration of the Beijing – Guangzhou high-speed train, an experience through which people could experience 4 seasons in a day. How so? As you might know, in Beijing we have the cold weather, about -20 Degrees Centgrade and heavy snow. This is where you start. Then you get on the train and within 8h at 310km/h you are in Guangzhou where it feels like summer with 25 Degrees. People go flower shopping and sweat. There is plenty of sunshine. This experience is due to China’s innovations. I call them technology transfer-based innovations.
In my new book: Competitiveness of Firms in China, I interpreted that foreign technology and FDI have stimulated research and innovation that have helped build the Chinese economy.Perhaås most importantly, these innovations have meant an increase in the competitiveness of China. I believe that the Western leaders can learn something from such applications.
IM: What are the main challenges the West and East are currently facing?
Richard Li-Hua: In management we always face the following situation: we are using 20th century methodologies in solving 21st century problems. Frederick W. Tayor, Heri Fayol, Harold Kootz, Peter Drucker – they all made enormous contributions to the management science. Elton Mayo in particular made great contributions to HR and motivation theory in general.
In fact, we understand very little about how people engage outside the organization. And as in any organization, you cannot see the organizational wall – however, there are driving forces in making changes and cultivating innovation but also resisting forces and/or informal organizations, where we need to understand the informal ones. We have to motivate people. Actually Peter Drucker talked about management by result. And clearly that is the symbol, the milestone if you like of American Management.
And then we have Schumpeter and his theory about innovations. “Innovation” has never stopped shining since he coined the term in his book Economic Development Theory in 1912. That was wonderful. Innovation changes the world and leads to the future.
Now, one point I want to highlight is (and western management scholars will agree with me) that no scholar, no matter where he was from, could predict the disaster in 2008. Western managers are not in the position to tackle this crisis.
IM: Could you elaborate a bit on the Eastern Philosophies?
Richard Li-Hua: When referring to Eastern philosophies I usually quote ancient Chinese philosophers: Confucius, Sun Tzu and Lao Tzu in particular.
Lao Tzu is well known for the concept of “action without action”. For example: when you look at a tree you do not realize it is growing. However, if you come back after 10 years a little young tree will become a very high tree (Chinese version). As for Sun Tzu, his main contribution is the Art of War. The essence of the Art of War is winning without fighting.
What is worth mentioning is that there are hundreds of scholars and many schools, but in fact the Chinese/ Asian philosophy is not homogeneous. Using another metaphor, there are thousands of flowers in bloom because of the hundreds of philosophers. So embracing contradiction is deeply rooted in these Asian philosophies.
IM: In your presentations about integrating Western Management with Eastern philosophies you also mention a few other interesting terms. Could you expand upon “resigning before achieving the top of a successful career” and “the two invisible hands”?
Richard Li-Hua: Certainly. Resigning before achieving the first position is clearly Confucian. In China people say that the fat hen will be sacrificed first or that the tallest tree will fall the worst. This is neutrality/ centrality and is also related to a certain balance, equilibrium and flow of energy. A natural adjustment of forces.
As for the two invisible hands – here two there is an anecdote. This is a classic case for China in achieving its success. One hand is the marketing force, and the other is the morale. These two came from two books: one is “The Wealth of Nations” while the other is the Theory of Moral Sentiment – both authored by Adam Smith, an 18th century Scottish economist. These two hands were strategies that China had learned to successfully and deliberately manoeuver.
How? By integrating prescriptive and emergent strategic approaches. Prescriptive refers to what was already there, the law of things, while the emerging to challenges. For example, when you face a river, you do not know how deep the water is. So you throw a stone to test it. This is called emergent.
The above is one aspect of the integration that I tackle in my future book. The other is the integration of the hard and soft capacities. The hard capacity is the foreign investment (FDI) and is made up the foreign technology innovations; the soft part is the Chinese learning and digesting capacity.
IM: Coming back to the challenged faced by executives everywhere: what are the most prominent ones?
Richard Li-Hua: I think for China in the last 30 years things have gone well – it has grown to be successful but the challenge is enormous. The future will belong to sustainable economic development and in the meantime the friendly environment. So people like to breathe the fresh air and see the blue sky, and not only worry about the “stomach” issues if you like. In the past we had a concept called the “global village” – today due to the globalization, online networking, this concept has become a reality. I have my Chinese Linkedin called Weibo. If I post something interesting my friends and fans from US, UK and China can comment straight away. However, in that 7 billion Global village, China has a 1.2 billion population with the second largest economy. So whatever China does, whatever China says comes under close scrutiny. Close attention of the world. That is the main challenge.
Chinese President, Xi Jinping recently mentioned that China’s economic development is an opportunity to the world. At the same time, the world development is an opportunity for China as well. This is his vision but how to share this with other parts of the world? My opinion is that this is only possible though the integration of Western Management with Eastern Philosophies.
The second point I was to make was about the challenge overtaking the West. As I mentioned, we have excellent theories of management but are far from being in a position to solve the current economic problems. I understand that the Western Politicians have been working hard in tackling the problem since 2008. Hillary Clinton very recently, made statement (in a farewell speech) that said: actually we are trying to provide some answers to old questions. And these questions are clustered around: what happens when a new power meets an old power?
This is China versus US. I feel this is the challenge in the 21st century. Both west and east are affected and can only come out the predicament through close collaboration; collaboration and integration will provide the necessary strategic insight to evolve and prosper.
IM: So the world of the 21st century is a very interesting world.
Richard Li-Hua: Indeed it is. Have you noticed what happened on the Diaoyu island? The small island between Japan and China. That is a very hot topic these days. Japan claimed it was its territory. China demanded the same. There is a strong tension here. In the 21st century this is the reflection of when the no. 1 and no. 3, see no. 2 rise to no. 1. Reading the World Bank forecast, the IMF forecast and also the Financial Times point to one aspect: China will become the no. 1 economy in 5 years’ time. Since the current no. 1 and no. 3 are allies, the political reaction are somewhat justified and mirror the psychological complications of these power shifts.
Still, if we now start talking about the integration of the Western Management with Eastern Philosophies, economic scale and innovation capacities are different concepts. In 5 years’ time China will be no. 1, but if you look at the innovation capacity (or innovation Index), where is China now? It is low on the list. Therefore China has a lot to learn about innovation frameworks and innovation implementation strategies.
And there is in fact a strategy. By 2020 China would like to become the innovation-oriented society. This would mark 100 years from the birth of the Communist party. By 2050 (which is 100 years of the birth of China) China would like to become a technology super-power. The challenge for China will clearly span from these ambitions.
At the very beginning I mentioned how Chinese ancient philosophy stimulates innovation. These innovations are just concept innovations. Technological innovations are different and this is why China has a long way to go. Catch-up is necessary. Innovation + IP + Green tech, Sustainable tech, Climate change. In summary these are China’s challenges.
IM: Unfortunately we are running out of time. Richard, could you summarize a few take-aways for our readers? What is there to be done? How to be successful?
Richard Li-Hua: In conclusion, I would like to come back to the point of strategic management. If the company is based in the US, knowing US and understanding the US market is not enough as it is only internal. So you have to have that external analysis – i.e. External environment analysis. You have to connect with the EU, and the other markets, BRICS, emerging economies etc. and try to forecast where the opportunities will be by 2020.
Vice-versa: if you are a company based in China, my advice to Chinese executives is: you are already familiar with this huge market: you know all about venture capital companies and investment opportunities but that is not enough. That is only the internal. The external aspects reside in Europe and the US. Strategic management requires the chief innovation and finance officers to perform this integration. This is the key to success.
Richard Li-Hua, PhD,is Professor of Strategic Management and Development and Director of International Centre for Research, Innovation, Sustainability and Entrepreneurship (RISE) at Sunderland Business School. He is a world leading expert on technology and innovation and an internationally recognized authority on international technology transfer and Chinese business and management. He is a frequent speaker at international conference and publishes frequently in leading international journals. In early 2006 Richard launched the China Association for Management of Technology (CAMOT), which has genuinely become an international forum for debating and provoking the current and strategic thinking of how core competences can be achieved through strategic management of technology and innovation.
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