Management lessons from Chinese business and philosophy Fang Ruan
I love dumplings.
But I seldom have dumplings
in a restaurant,
because my mom’s cooking is the best.
One day, I happened to take a bite
of Dumpling Xi’s dish.
To my surprise,
they had a flavor of going home.
Fresh, chewy and unexpected.
In addition to being a dumpling lover,
I actually have a full-time job.
I am a management consultant,
so naturally, I was keen to understand
the reasons behind
those delicious dumplings.
What I didn’t expect
is that this dumpling
triggered my exploration
of new ways of management in China.
A change that is deeply rooted
in ancient Chinese philosophies.
But first, let’s go back to the dumplings.
Gāo Défú founded Dumpling Xi 17 years ago.
Today, the company enjoys 500 stores
with 8,000 employees.
But it wasn’t always the case.
Three years ago,
the demand for his dumplings was soaring
due to consumers' craving
for healthy food.
But the strong growth
of online food delivery services
had pulled the consumers away
from store visits,
causing a huge concern for Gāo.
If I were to advise Gāo back then,
I would go directly
with the classical approach,
hiring venture managers,
providing training on how to integrate
online-offline sales,
or having some high potentials
fully dedicated to the new job,
such as a Chief Digital Officer.
But Gāo did something totally different.
He invented a two-hat model.
Instead of recruiting new executives,
he invited five successful regional heads
to take on a second role at headquarters.
The catch was, they had to do it
while still being the frontline managers.
Keep in mind that these people
had no formal training
or related experience in this field.
What they did have, though,
was natural strengths
and a growth mindset.
When Gāo first told me the idea, I said,
“Are you sure?
I have seldom seen companies
as large as yours
having part-time senior executives.”
But Gāo smiled.
“This is my dumpling way.”
Gāo’s team was also puzzled.
In the first three months,
the sales fluctuated,
some even dropped by 20 percent.
But Gāo didn’t blink.
The regional heads had to learn new skills
while still doing their job.
Things like what kinds of dumplings
can be sold online,
how to digitalize their supply chain.
After the transition period,
something magical happened.
The sales came back.
One year later,
the company began to launch
its fresh and spicy dumplings online.
Two years later,
more talents with
start-up dreams were attracted.
More importantly,
the company began to translate
these individual new capabilities
into company policies,
and roll them out.
A true differentiator
compared with his peers.
Because most Chinese entrepreneurs
are very good at growth strategies.
In Chinese, we call it kāi jiāng kuò tǔ,
expanding territories,
but not so good at
what we call zhì guó ān bāng,
converting individual best practices
into company policies for the long run.
The nature of Gāo’s approach,
such as having tolerance
for frontline managers
to make mistakes,
or having some new ideas
not coming from the top,
is not common in China.
Because they go against our traditions.
In the past 2,000 years,
Confucianism has been dominant in China,
which values seniority and authority.
For a nation, this is
a time-tested formula
to ensure order and harmony.
For a company,
this ensures precise execution
at a large scale.
But with business environments
constantly changing,
internet disrupting
traditional industries,
new millennials becoming
a major workforce,
new ways of management emerge.
I feel so lucky to study this
in such a dynamic age,
while at the same time
to satisfy my stomach
with delicious dumplings.
Gāo’s two-hat approach
is just one example.
Another example comes from Miranda Qu,
the founder of Xiaohongshu.
Xiaohongshu is a thriving internet company
with 300 million users.
It is an online community
where young fans can get together
to talk about their favorite
soap opera, “Go Go Squid!”
Or buy the cool shoes
that the lead actress wears
in a running scene.
From the early days,
Qu wanted the whole organization
to be ready to spot things
that need to change
and challenge the authority.
But one day,
she noticed her interns
were calling senior staff “teachers.”
This may sound innocent,
but it signaled a problem to Qu.
Because if the teacher
phenomenon becomes a norm,
it will encourage hierarchy
and discourage ownership.
This is also something
related to Confucian thinking.
In Chinese, we call it “benfen.”
“Ben” means me, myself.
“Fen” means the share of the job.
“I will just focus on my job
and not cross any lines,”
which is totally the opposite
to Qu’s thinking.
So Qu created a unique initiative
called “Signature Program.”
In the program,
each employee chooses an avatar character
that pops up alongside
digital communication channels.
Some common ideas include
Captain Hook, Harry Potter
and many well-known characters
in Chinese literature.
The way these characters interact
proved to be the answer to Qu’s problem.
Avatars from the same story
would get together
to talk about their favorite characters.
In the community called “Slam Dunk,”
people from different cities,
different departments,
different levels of the organization,
they would talk about how these characters
inspired them at work.
An employee with a signature
called Coach Anzai
was facing some difficulty
in leading a very young team.
Other Dunk fans will share
the best practices
on how to motivate a diversified team
and inspire them to work
to their full potential.
The signature program plays a pivotal role
in fostering a collaborative
environment at Xiaohongshu.
Not only the teacher issue
has disappeared,
the company has been ranked
as one of the most innovative
Chinese companies by Forbes
in the past two years.
Gāo’s two-hat approach
and Qu’s signature program
are just two examples of empowering
the frontline staff.
But these methods may not always be right.
Let’s take Ping An, for example.
Very successful insurance company.
The company couldn’t adopt
such an approach
for the whole organization,
because, one, the company has
400,000 employees,
and the line between innovative chaos
and chaotic chaos is very thin.
Two, the company has five ecosystems
and 10-plus sectors –
health care, insurance,
real estate, smart city.
Very difficult to apply
a bottom-up innovation to all.
But the company
still needs to be innovating.
Ma Mingzhe, the founder,
positions the headquarters
as the steering wheel.
Steering innovations and new ideas,
cascading them down to its subsidiaries.
One of the ideas
that headquarters came up with
is AI-enabled loss assessment.
For a not-so-complicated case,
the car owner can take a picture
of the damaged car,
upload it online.
The insurance center
can decide a claim amount right away
by AI-enabled loss assessment.
Facial recognition, ID verification.
The car owner can get a payment
in a few minutes,
which could have taken a few days.
So, for companies that [find it] difficult
to conduct grassroots innovation,
a centralized approach is also an option.
The more I see these unconventional
management mechanisms –
Gāo with two hats,
Qu with the signature program
and Ma with the steering wheel –
the more I ponder where
do these mechanisms come from.
They’re definitely not Confucian.
They are very similar
to another Asian school of thought,
Taoism.
Confucianism believes
the way to achieve perfection
is to organize and regulate things.
But Taoism believes in letting things
work to their perfection naturally,
to support their natural state
and to let them transform spontaneously.
In other words, leaders
should not impose their will.
Leaders should act by shaping the context
rather than control.
Confucianism works best
in winning a stable context,
whereas Taoism, with its power
to shape the context,
is more effective
in dealing with uncertainty.
A leader is best when people
barely know he exists.
When work is done, people say,
“We did it ourselves.”
Thank you.
(Applause)