The Global Race

Modern technologists like to trace the beginnings of the “social network” back to the late 1970s when the first electronic bulletin board systems were brought online. These small servers, powered by personal computers, were linked to telephone modems and allowed users to engage in discussions, file sharing, and online games with like-minded peers. The early 1990s saw the rise of more mass-market friendly platforms such as Prodigy, Compuserve, and AOL capture the public's imagination as they linked far-flung friends and acquaintances around the world. As the World Wide Web began to grow and the personal computer became ubiquitous, new platforms designed to connect us socially took root. Early pioneers in the social networking arena such as Napster, MySpace, and Friendster made headlines as they allowed us to share, connect, and maintain relationships in a digital world. Although, in most cases, these early innovators have seen their popularity and relevance all but disappear, their influence has been profound. Without their early contributions, you could argue, there would be no Facebook. With more than 900 million active user accounts, Facebook boasts the largest online community in history²—connecting people to those they care about, those that share their interests, and the brands they love like never before. The very concept of social networking has become one of the hottest trends in the consumer market, and the business world, always looking for the best way to connect with customers, is starting to take notice. The past five years has seen a whole new industry emerge to help organizations navigate the world of social networks. And while Western companies engage with consulting firms and perform countless ROI studies to determine if the social network can in some way benefit their bottom lines—they only need to look East to understand the impact and importance of the social network in a business context.

With apologies to the modern technologists referenced above, the idea of the “social network” dates back much further than the 1970s. Dating back thousands of years, guanxi is an essential component of getting anything done in China. It's the original “social network.” Commonly translated as “connections” and “relationships,”³ guanxi refers to an individual's personal network of family, friends, classmates, coworkers, military peers, and other personal contacts with which the individual has formed some kind of relationship. When combined with the networks of those in your immediate circle, guanxi provides a complex web of connections and contacts much greater than the sum of a single individual's reach. Whereas the West wrestles with new platforms such as Facebook or LinkedIn to develop, nurture, and leverage a network of connections to our own personal or professional benefit, guanxi is ingrained in the very fabric of Chinese society and culture.

Taking the phrase “It's not what you know, but who you know” to a whole new level, guanxi traces its roots to Confucianism, which emphasizes group identity and long-term personal alliances. Essentially a system of mutual obligation, guanxi is based on long-lasting individual relationships that require the exchange of personal favors.⁴ As these ongoing interactions are nurtured through the reciprocation of these favors, the personal network grows stronger and more effective for the individual who maintains a state of “good” guanxi. But to the outsider, guanxi can look a lot like corruption or cronyism. According to Andrew Hupert, a consultant to Western companies looking to do business in China, this is true to an extent:

New technologies and services, which have introduced the West to the concept of social networking, are also being leveraged in China to further augment guanxi. Researchers have pointed to the impact that the spread of advanced IT technologies and services has had on encouraging and improving this unique Chinese practice.⁶ According to the China Internet Network Information Center, China boasted 513 million Internet users at the end of 2011, with 356 million of these getting online via a mobile device. Although Facebook may be prohibited from operating in China, there is no shortage of social networking activity on home-grown Chinese language sites. According to the consulting firm TNS, 265 million Chinese participate in social networking via these sites for 5.6 hours per week on average. More than half (54%) of these users engage with these sites on a daily basis.⁷ In the United States, the same social networking activity is primarily just that—social. In China, the activity is much more. According to Hupert:

There is no doubt that things are done differently in China. Custom and tradition dictate a certain set of social rules that regulate the interactions that people have with one another in both their personal and professional lives. Beyond these traditional social norms, the emergence of new technologies and services in the workplace is changing the complexion of how this global powerhouse goes to market. Instead of upending long-established organizational culture, Chinese workers are integrating new technologies into their work lives and embracing the opportunity to augment and strengthen their competitive efforts.

It is clear that China is no longer an “emerging” economic superpower. Since the late 1970s, China has focused on shifting its national economic focus from a closed, centrally planned system to a more open market-oriented economy. A careful and gradual approach to opening to foreign trade and investment, fiscal decentralization, and the encouragement of private sector growth saw China stand as the second largest economy in the world by 2010. With an estimated 2011 GDP of $11.29 trillion, China ranks number three just behind the United States and the European Union, respectively. With a total population of 1.3 billion and a workforce estimated at 796 million, China boasts the number one position in each category.⁹

In an effort to understand the impact that new and emerging network-based technologies are having on the productivity, culture, and competitiveness of this immense workforce, in 2012, Alcatel-Lucent engaged in a comprehensive qualitative and quantitative primary research study to compare and contrast adoption and integration of these technologies between Chinese and American firms. This study on the future of the enterprise comprised more than 3,000 frontline workers and decision makers from a variety of Chinese industries whose responses were analyzed alongside those of their American counterparts. The results paint an interesting and informative picture of two cultures leveraging technology to enhance and improve their go-to-market efforts:

• The Chinese worker is personally connected to the professional workplace—Along with rapid urbanization and a growing middle class, China is becoming much more than a manufacturer and supplier of goods to the world, but a nation of consumers as well. This is especially true when it comes to technology. According to the 2012 Accenture Consumer Electronics Products and Services Usage Report, Chinese consumers spend the largest percentage of their income (4.5%) on consumer electronics—especially mobile computing devices such as smartphones and tablet computers—when compared with the rest of the world.¹⁰ This rapid adoption of smartphone and mobile technology is having an impact on all aspects of Chinese life. A study by the consulting firm KPMG found that China leads the world in terms of mobile shopping and payments. Consider that 79 percent of those Chinese surveyed by KPMG prefer to leverage their devices to purchase goods online. A full 84 percent indicated that they are willing to use their mobile device as a wallet—compared with 66 percent globally. According to KPMG, such widespread use and adoption of advanced mobile technologies signals a significant trend for the global market place:

  Asia seems set to leapfrog the rest of the world when it comes to the use of new technologies. This Asian-led revolution will have a dramatic impact on the global market and will largely influence the future design and sales of new technology products.¹¹

  This widespread adoption of mobile computing technologies is by no means confined to the consumer space. As discussed in previous chapters, BYOD has emerged as a significant trend in today's workplace. Looking to increase their productivity, workers around the world are leveraging their personal devices to get their work done—often in direct defiance of established company IT policies. China is certainly no exception. Alcatel-Lucent found that of the almost 1,300 frontline Chinese workers surveyed, a full 72 percent indicate that they are using their personal devices to help them get their work done—compared with 48 percent of their American counterparts. Almost two in five (38%) of those same Chinese frontline workers bring their own device to work despite specific organizational restrictions on such a practice.

  According to Patrice Perche, Senior Vice President of International Sales and Support at the Internet security firm Fortinet, the rapid adoption of BYOD by Chinese employees, even in the face of corporate restrictions, is due to several factors:

  The widespread broadband availability, Asians strong commitment to work, and rapid urbanization drive more young people to work in cities. Their growing affluence also enables young workers to afford smartphones and handset manufacturers have successfully positioned high-end gadgets as status symbols. Compared to their counterparts in the U.S., Europe and Middle East, young workers here are significantly more attached to their mobile devices. This is not surprising, due to the rapid mobile device and social networking adoption in Asia.¹²

  These forces have combined to create a remarkably connected workforce that is prepared to leverage the technology available to them to further increase their productivity for the benefit of the enterprise. When the same Alcatel-Lucent study asked Chinese frontline workers to make a choice between two options:

  • The technology at my disposal gives me the freedom to work when I want, where I want;

    or

  • I can't escape from work demands;

  nearly three in four selected the former. And although 92 percent of these same workers indicate that they are “mobile capable”—nine points higher than American workers—the majority of them (76%) are more likely to be office-bound. Despite the fact that 71 percent of those Chinese workers who do work remotely report that telecommuting makes them more productive, deeply ingrained cultural issues are slowing the mass adoption of mobile work in the Chinese enterprise.

  Renowned researcher Geert Hofstede is well known for his work in developing a framework for assessing national and organizational cultures. Characterized by Hofstede as a high-power distance culture, Chinese workers accept more autocratic and paternalistic management. Power is granted to others simply based on where they fall in the organizational structure. The result is a much more centralized and directive style of management. Regardless of the capability and the desire of the workforce, researchers have found that, because telecommuting provides greater autonomy to the workforce and decentralizes authority, the long-term development of a mobile workforce in China is questionable.¹³

  Cultural issues aside, the influx of Western organizations and business practices combined with a remarkably “mobile-capable” workforce could trump tradition—especially if a mobile workforce can show itself to be more productive. Researchers at Stanford University set out to determine the impact that telecommuting would have on the productivity of Chinese workers. Partnering with a Chinese travel agency, these researchers asked for volunteers to participate in a study that would find them working from home as opposed to working in the physical office. Volunteers were screened to ensure that each had adequate work space in his home and that each had the trust of his manager based on a personal track record of performance. Once selected, 255 volunteers began to telecommute. In the end, it was clear that the telecommuters were outperforming their peers back in the office. The telecommuters took more calls, worked more hours, and experienced fewer sick days. As a result, the company found that these telecommuters contributed more profit to the bottom line and immediately began to implement a wider telecommuting policy.¹⁴ Unfortunately, despite the overall success of the program, previously discussed cultural complications reared their head during the course of the wider rollout. Slate.com performed a deeper investigation of the results and found that:

  Surprisingly, only about one-half of the employees agreed to the deal, and many of those involved in the original experiment decided that they'd had enough, preferring the hours in commute in exchange for the human interaction of office life and a fixed beginning and end to each work day.¹⁵

  But even if the Chinese workforce is slow to embrace the concept of a more flexible workplace, this increasingly “mobile-capable” segment has wholeheartedly embraced the connectivity provided by their mobile devices. Alcatel-Lucent found that Chinese enterprise workers depend on their mobile phones and/or tablets much more than their American peers. More than 70 percent of frontline Chinese report that they use their mobile phone or tablet computer at least several times per day, compared with only 57 percent of American workers. Despite this increased level of interaction with their technology, enterprise workers in China report that they are less tech-savvy than their counterparts in the United States—with only 25 percent indicating that they have “outstanding” technical skills compared with 39 percent of American frontline workers.

• As a result, the Chinese worker holds his or her IT staff in high regard—When the Chinese employee encounters some sort of issue with her personal technology, she is much more likely to contact her IT department for help than a peer in the United States is. In China, it would appear that the enterprise IT organization is under less threat of disintermediation than they are in the United States. Alcatel-Lucent found that 60 percent of non-IT personnel and 74 percent of IT personnel agree that the influx of personal devices into the workplace has increased the amount of contact that workers are having with their IT departments. As discussed in an earlier chapter, only 7 percent of American frontline workers report that they are contacting their IT department more often as a result of the consumerization trend. There are three primary reasons for this disconnect. At a fundamental level, as previously discussed, Chinese workers report being less tech-savvy than their American counterparts—they simply realize they need the help. Second, Chinese IT departments have been more open to embracing the BYOD trend in the workplace—with 78 percent of Chinese IT respondents indicating that their organization encourages employees to leverage their personal technology in the workplace. Finally, as a high-power distance culture, the Chinese worker is more culturally inclined to grant power to a person or department based on where they fall in the organization. To the Chinese worker, it is the obligation of IT personnel to help them solve their technical issues. This openness on behalf of IT and the willingness of employees to leverage their expertise are positively affecting the perception of the IT department in the Chinese enterprise. A full 67 percent of Chinese frontline workers agree that their IT department “equips employees with innovative tools, services, or capabilities that foster a healthy culture,” with only 1 percent indicating that “IT is a frustration, often a source of employee aggravation due to inferior tools, services, or capabilities.” Contrast this with only 45 percent of American workers agreeing that IT provides innovative tools and services and 13 percent agreeing that IT is a source of frustration, and the cultural differences become clear.

  

  Beyond the positive relationship that the Chinese worker has with his IT department, the BYOD trend is also changing the face of enterprise IT in China. More than half (56%) of Chinese IT personnel surveyed by Alcatel-Lucent indicate that consumerization has “allowed IT to become more strategic, since we are no longer consumed with purchasing and maintaining hardware for employees in the company.” These Chinese IT organizations are taking full advantage of the BYOD trend to refashion themselves into strategic organizational partners aimed at improving employee productivity through the implementation of advanced technologies.

• A more strategic view of IT finds China leading the new technology adoption curve to its own competitive advantage—Chinese enterprises are more quickly adopting and integrating technological innovations into the fabric of their organizations. Alcatel-Lucent found that 59 percent of Chinese enterprises report that they are generally among the first to try new technological solutions compared with only 25 percent of American companies that would prefer to wait. For example, face-to-face meetings are an important part of Chinese business culture. However, not unlike the way that Chinese workers are leveraging social networking platforms to improve their guanxi, videoconferencing has emerged as a significant force in today's Chinese enterprise. Four in five (83%) enterprise workers surveyed by Alcatel-Lucent indicate that they use videoconferencing on a weekly basis—compared with slightly more than half of their American counterparts. This desire is reinforced by the fact that 75 percent of these same respondents preferred videoconferencing to audioconferencing given that nonverbal communication cues are not sacrificed and richer interactions can result. Surprisingly, these “richer interactions” that are gained through videoconferencing are not being delivered via the latest and greatest, high-definition videoconferencing systems. As part of the same survey, Alcatel-Lucent found that Chinese enterprise broadband speeds are slower, on average, than in the United States. Two in three (66%) Chinese enterprises have broadband connections slower than 20 Mbps—less bandwidth than is typically required to effectively deliver high-definition videoconferencing. In contrast, only two in five (38%) U.S. companies reported having speeds that slow. Regardless of the lack of quality, Chinese workers find significant benefit in interacting with internal and external stakeholders via videoconferencing.

  Cloud technology presents yet another example of Chinese IT rapidly embracing an emerging technology for the benefit of the organization. Morgan Stanley reports that companies in China represent the heaviest users of the public cloud, at more than 73 percent—almost twice the level found of companies in Europe or the United States. This integration of the cloud into the workplace is happening despite the fact that 33 percent of IT personnel say that the move toward cloud-based services, which creates new security, reliability, and performance concerns, is a key challenge for their organization. These IT organizations understand the benefits that the cloud can offer their organization from a cost and productivity perspective and are trying to stay ahead of the demand. Their workforce is already embracing the flexibility that the cloud provides. Alcatel-Lucent found that a full 63 percent of Chinese workers surveyed indicate that they use Amazon, or some other cloud-based service, to help them get their work done. More than 20 percent of these workers do so in direct violation of company IT policies. In contrast, only 32 percent of American workers reported using these services in their ongoing work life.

  Far from being bypassed in the Chinese enterprise, these IT departments are supporting employee needs for technological flexibility and working to stay ahead of the curve in reaping the benefits that new and emerging solutions can provide the organization. As discussed in an earlier chapter, Nicholas Carr famously proclaimed in 2003 that “IT doesn't matter” and companies should follow, not lead, when adopting IT solutions, treating the function more as necessary defense than opportunistic offense. With respect to Carr and his theories, it would appear that the Chinese enterprise has cracked the code on implementing technology to realize a competitive advantage. Alcatel-Lucent found that the most successful Chinese companies (as self-reported based on various financial metrics) were the ones most willing to adopt and deploy the latest technological solutions. A full 75 percent of companies identified as “Top Earners” and 71 percent of “Tier 2 Earners” indicate that their organization is generally among the first to adopt a new technology product or solution. When contrasted with the fact that 65 percent of the least successful companies tend to lag their competitors in implementing new technology, a causal relationship between technology adoption and organizational success may be responsible. Further to this evidence, 69 percent of these top-earning companies report wider usage of more advanced technological devices (such as tablet computers and smartphones) in the workplace versus only 35 percent of less successful enterprises. By providing the tools, support, and services that the employee base demands, the Chinese organization is creating a productive working environment that influences organizational competitive advantage. As part of the same Alcatel-Lucent study, 82 Chinese enterprise workers were interviewed to provide their perceptions of technology and IT in the workplace. According to one interviewee, the link between IT and competitive advantage is obvious:

  IT spending is seen as a cost that can bring strategic advantages of investing in today's era of science and technology by constantly updating. If they lose the advantages of information technology, we will lose the company's development potential and the company's survival will encounter great difficulties.

  Successful, top-earning organizations in the United States are also finding success in proactively implementing new technologies across the workplace—just not at the pace seen in China. Alcatel-Lucent found that 35 percent of the most successful American companies were generally among the first to implement new technologies. The differences between American and Chinese enterprises don't stop there. Despite the global economic difficulties of the past several years, more than half (53%) of Chinese enterprises report that they are “very profitable,” with profits of at least 8 percent. In contrast, only two in five, 38 percent, report the same in the United States. This Chinese profitability shows no sign of falling off. More than 15 percent of Chinese enterprises report that their profits have increased significantly, and a full 66 percent report at least modest growth. Enterprises in the United States are starting to recover from the economic downturn, but, with 16 percent reporting significant profit growth and 43 percent reporting modest growth, they still lag the performance of the Chinese enterprise. The Chinese workforce is reaping the benefits of this ongoing success. A full 99 percent of these employers provide bonuses on an annual basis. Additionally, three in five (58%) Chinese companies report giving out more bonuses than last year. The combination of all these factors has resulted in a thriving and expanding workforce. Despite the job worries faced by the rest of the world, 62 percent of Chinese enterprises are growing their workforce, compared to 45 percent of American companies.

• China is keeping its eye on the ball when it comes to instilling a culture focused on doing what works—When Chinese workers were asked to identity what they saw as their biggest advantages when competing in the global marketplace, innovation (27%), technology (26%), and the ability to adapt (23%) ranked the highest overall. Surprisingly, these same factors were again identified when these respondents were asked to identify the areas that need to be improved to increase global competitiveness—technology (28%), innovation (23%), and the ability to adapt (20%). This alignment signals a clear understanding by the Chinese enterprise that current actions are working, and fostering a culture of continuous improvement in these areas will only serve to benefit the economic health of the enterprise.

  In an effort to better understand how the introduction and implementation of new technologies are affecting the organizational culture of the modern Chinese enterprise, Alcatel-Lucent asked nearly 3,000 Chinese employees and decision makers to respond to a series of cultural attributes that best described their company. These attributes probed areas such as organizational decision making, strategy development, communication flow, and how technology is embraced. These responses were used to segment Chinese organizational cultures into the following categories:

  • Cultural laggards—These represent almost 17 percent of the population and are characterized by a risk-averse environment, a dearth of employee training and assistance, and an unhelpful IT department that is primarily viewed as a cost center across the organization. On the whole, employees of cultural laggards understand and readily admit that their organizational culture is not very healthy.
  • Traditionalist—These organizations comprise nearly 38 percent of the population and represent the common assumption of the culture of a Chinese enterprise. These organizations are distinguished by a strictly defined organizational hierarchy, a high degree of managerial oversight, and a lack of interconnectedness among the employees.
  • Decentralized leadership—These are those organizations that feature a more relaxed hierarchy and a very uncommunicative management team. At 8.4 percent of the population, these organizations tend to severely restrict web and technology usage among employees and impose considerable managerial oversight of activities while demonstrating a low ability to adapt to change.
  • Cultural gurus—These represent just more than 37 percent of the sampled companies and feature an overly communicative upper-management team and a proactive approach to addressing business issues. The IT department is considered very helpful and is widely regarded as a strategic resource for the enterprise.

  In addition to measuring these qualitative attributes that comprise a company's culture, the study went one step further to evaluate the financial success (or failure) of each of the different types of firms. As previously stated, all respondents were screened for a competent degree of knowledge related to the financial metrics of their organization and self-reported these metrics for their own enterprise. When comparing the impact of cultural characteristics to financial results, a clear picture of the impact that culture has on success begins to emerge. Specifically, a full 66 percent of those least-successful Chinese companies are classified as cultural laggards. This compares with just 6 percent of cultural gurus who find themselves in a similar position. On the other hand, 58 percent of the top-earning companies find themselves classified as cultural gurus compared with only 4 percent of cultural laggards enjoying a top-earning position. Although they can clearly influence the ongoing success of an enterprise in a competitive marketplace, cultural aspects alone aren't sufficient to predict the future health of an enterprise effectively. However, when that culture places a focus on the integration of technology across the workplace, a more open, flexible, and communicative organization culture will find itself best poised for success in a highly competitive and rapidly changing marketplace.

As the second largest economy in the world, China has done a remarkable job of insulating itself from the storms of the recent global economic downturn. Since opening up its internal markets in the late 1970s, the Chinese have been methodically working to merge the most effective business practices of the West with those of its own culture to great benefit. Armed with an understanding of how technological advances can help increase productivity in the enterprise and staffed by the largest workforce in the world, China is flexing its muscles in the global market more than ever before. By encouraging the use of personal technologies across the enterprise, the Chinese company is freeing its IT organization to focus on developing and implementing the most cutting-edge solutions for their employees. As a result, the Chinese CIO is seen as a significant strategic contributor to the business with a full 91 percent of Chinese business decision makers indicating that IT is an effective and strategic tool. While the American enterprise continues to struggle with the strategic value of IT and technology in the business world, the Chinese seem to have figured it out. By continuing to focus on those factors that have already made them a success—innovation, technology, and adaptability—the Chinese are signaling their intention to further stretch their capabilities and remain successful in a highly competitive business environment.