Leadership lessons from China

There are some interesting leadership and management lessons from some of the Chinese manufacturing systems that can be applied at all levels of an organization to make it more innovation-friendly. The contrast between leading and managing may be subtle to some, but it’s hugely important in making a company capable of competing in the fast-paced Internet economy.

Not knowing the path to a particular outcome can be excruciating to someone who knows what they want. Managers find it much easier to make lists of things that add up to the sum of the final goal, and they like to put checkmarks next to all the items in the list as they are completed. This system never scales no matter how talented the manager is because that system is totally dependent on the manager.

Photo: Hocchuan

John Seely Brown and John Hagel examine how a network of motorcycle parts assemblers in China break traditional centralized management tactics to optimize for innovation in a paper called “Innovation blowback: Disruptive management practices from Asia.” In the Chinese city Chongquing a supplier-driven network of parts developers work together under the loose guidance of their customers rather than under the orders of assemply-line management:

“In contrast to more traditional, top-down approaches, the assemblers succeed not by preparing detailed design drawings of components and subsystems for their suppliers but by defining only a product’s key modules in rough design blueprints and specifying broad performance parameters, such as weight and size. The suppliers take collective responsibility for the detailed design of components and subsystems. Since they are free to iomprovise within broad limits, they have rapidly cut their costs and improved the quality of their products.”

As a manager, when you define what is to be done and how it is to be done, then you are setting the exact expectation of what is to be delivered. There is no room for exceeding expectations, only for failing to meet expectations. Your best-case scenario is that you will get what you asked for.

As a leader, on the other hand, when you set parameters for success, you let the contributors in the system share ownership of the outcome. This is participatory production which includes an important incentive for each individual contributor: pride. The outcome becomes a somewhat personal reflection of each contributor’s capabilities as a person.

There’s another interesting paper on the concept of peer production called Coases’ Penguin written by Yochai Benkler in 2002 that talks about the incentives that drive users of online media to contribute content to a web site such as Slashdot or Wikipedia. One of the interesting conclusions is that financial reward can sometimes have a negative effect on participation and collaboration:

“An act of love drastically changes meaning when one person offers the other money at its end, and a dinner party guest who will take out a checkbook at the end of dinner instead of bringing flowers or a bottle of wine at the beginning will likely never be invited again.”

John Battelle similarly points out that Google’s latest attempt to monetize peer production in online media may actually have the effect of degrading the overall quality of their ad network. As they provide ways for user-generated content (UGC) sites to kick earnings from AdSense back to content creators on those sites, they are inviting spam and click fraud at pennies in earnings per user at the expense of quality contributions.

“I’ve never seen UGC sites as the least bit driven by money. They are driven by pride, the desire to be first, reputation, whuffie. But dollars? That often screws it all up.”

Of course, pride won’t replace the need for salaries, but it can certainly make up for the margin pressure these particpatory production systems are putting on themselves. When the production process reduces waste, that savings will get passed on to the buyer before the profits get passed back to the creators. That’s how this Chinese network has stolen marketshare from the big motorcycle manufacturers like Honda and Yamaha.

“The average export price of Chinese models has dropped from $700 in the late 1990’s to under $200 in 2002. The impact on rivals has been brutal: Honda’s share of Vietnam’s motorcycle market, for instance, dropped from nearly 90 percent in 1997 to 30 percent in 2002.”

Of course, everyone in the Internet business would rather be in a position of growth than one of decline regardless of the profit margins. The way to put your company on the growth track and to stay competitive through innovation is likely based on these types of leadership principles rather than micromanaging your staff through every step of an unpredictable journey.