HBR May/June 2021: Understanding China

Harvard Business Review
May/June 2021
Annotated table of contents

1. Adi Ignatius, A complicated relationship

Adi Ignatius, the editor in chief of Harvard Business Review, and a former correspondent in Beijing, draws out the urgency of understanding China as the importance of its relations with the West can only increase in the face of global challenges.

Idea watch

2. HBR team, Why customer loyalty programs can backfire

Customers enrolled in loyalty programs have high expectations of their favoured brands and can feel let down irreparably when their special status is not acknowledged. While companies normally create special offers and benefits for loyal customers, it is also the case that their status is not consistently recognised across all departments. As a result, resolving issues such as shipping, returns or availability of coveted items can become more complicated and time consuming. Janey Whiteside, chief customer officer at Walmart describes their efforts to personalise customer journeys by identifying the most consequential failures and effective means to address them.

3. Scott Berinato, Banks with more women on their boards commit less fraud

Berinato interviews professor Barbara Casu of Cass Business School about her research on board and senior executives at European banks that violated US regulations and were fined a total of $500 bn from 2008 to 2018. The presence of a critical mass of women, at least three on boards, has had a noticeable impact on risky behaviour, leading to fewer and smaller fines. Women tend to be risk averse and vigilant; they are also wary of the gender punishment gap, as failure of any kind can have greater consequences for them. Despite these advantages in skill set, broader representation of women at senior levels is still resisted and could only be achieved through determined effort.

4. Albert Bourla, CEO of Pfizer, on developing a vaccine in record time

When the pandemic hit, Bourla had been Pfizer’s CEO for only a year, but this was long enough to create a strong leadership team, building on his 26-year career at the company, in a variety of roles in different countries. The response to the Covid pandemic was swift and decisive and this article explains the decisions that shaped the effort: the ambitious deadline, the collaboration with BioNTec, the refusal of public funds, the choice for scientific autonomy and independent oversight, and commitment to pre-invest in production capability. Bourla reflects as well on the lessons learned, such as the importance of team effort, putting purpose first, thinking outside the box to achieve the impossible, and the need for industry cooperation.

Spotlight: Understanding China

5. Rana Mitter and Elsbeth Johnson, What the West gets wrong about China

Mitter and Johnson combine political-historical and business expertise to question common myths in how the relationship between politics, economy and society is currently understood in the West. They argue that a transition from economic to political liberalisation, although common in other contexts, is in fact far from assured in China where an authoritarian regime has been able to achieve both political control and dynamic economic innovation while retaining its legitimacy. Perhaps paradoxically the fast pace of change in the economy has encouraged Chinese people to trust and even take pride in their government and to rely on it for necessary stability.

6. J. Stewart Black and Allen J. Morrison, The strategic challenges of decoupling

The strong intervention of the Chinese state in the economy is clearly articulated in development plans that identify priority sectors and quotas for national capital development within certain deadlines that are likely to define market conditions in the coming decades. In this article, Black and Morrison provide a framework for understanding the likely impact of these national plans on foreign companies. They identify four types of foreign companies, upstream players, below-the-radar, market, and dual players, depending on their focus on upstream and downstream activities in China, and make suggestions for strategies available to them.

7. Zak Dychtwald, China’s new innovation advantage

Dychtwald points out that the lived change index captures the extraordinary pace of economic development in China, where per capita GDP has increased 30 times in the last three decades (the next closest country is Poland, where per capita GDP increased nearly 10 times in the same period, and other fast-growing countries coming at less than five times). As a result, many (younger) Chinese have become accustomed to near-instant adoption of technological innovations, establishing large and resilient domestic markets for new products and local companies. To compete effectively, foreign companies will need to develop an understanding of this dynamic, learn to copy certain practices and optimize their competitive strengths accordingly.

8. Adi Ignatius interviews Wijian Shan, CEO of Pag: “Americans don’t know how capitalist China is.”

Wijian Shan, who trained at UC Berkeley and worked for the World Bank and JP Morgan is now based in Hong Kong, where he leads Pag, a $40 bn private equity firm with investments in China and across Asia. He answers questions about market conditions in the US and China, their rivalry, and mutual misunderstandings. Notably, China has attracted more FDI than the US last year and its trade surplus at the expense of the US has increased. Despite extraordinary investment in economic development, not least spectacular infrastructure projects, inequality is on the rise in China. It has more billionaires than the US and mints them three times faster, while the welfare system remains rudimentary.


9. Lynda Gratton, How to do hybrid right

Gratton draws on her work with the Future of Work Consortium at the LSE to present findings on how companies have adapted to remote work during the pandemic and how they plan to move forward with hybrid working. She argues that redesigning hybrid work practices ought to take account of four distinct but related perspectives: jobs and tasks; employee preferences; projects and workflows; and inclusion and fairness. Gratton sets out the core questions in each area and presents examples of solutions for certain roles, including strategic planner, team manager, product innovator, marketing manager, at companies such as Fujitsu, Equinor, Brit Insurance and Ericsson.

10. Tom Eisenmann, Why start-ups fail

In this article Eisenmann provides a preview of findings from a large research projects on common pathways to failure (or success) for start-ups (published in full as a book, The fail-safe start-up, a Penguin paperback). He identifies six patterns in all, three each for early stage and scaling up start-ups: good idea, bad bedfellows; false starts; false positives; speed traps; help wanted; and cascading miracles, with case studies and suggestions to counteract negative pressures. The research seeks to modify the prevalent advice for start-ups, which recommends high speed, high risks and high stakes and suggests that with careful preparation more failures would become avoidable, leading to a more inclusive and less bruising entrepreneurial economy.

11. Felix Oberholzer-Gee, Eliminate strategic overload

Oberholzer-Gee argues that by putting value at the core of strategy companies can determine simpler, more confident, and effective priorities. There are three areas for value creation: for customers, as expressed in their willingness to pay; for employees, whose stronger intrinsic motivations makes the work more fulfilling; and for suppliers who can reduce their operating costs. By embracing this ethos, companies are more likely to enjoy profits as a by-product rather than direct focus of their work, attracting the employees and customers best able to appreciate their offering, and innovating easily by finding complementary offerings, whose value can be captured across the whole lifetime. A detailed analysis of Tatra, a Slovak bank, illustrates and refines the practical implementation of value-based strategy.

12. Claudio Fernández-Aráoz, Gregory Nagel and Carrie Green, The high cost of poor succession planning

This article proposes several solutions for quantifying the costs of poor succession planning and estimates these costs at $1 trillion a year for S&P 1500 companies. This is the result of several related, common practices: hiring of external CEOs at companies that are not in crisis; the loss of intellectual capital at companies that lose these qualified personnel; and inadequate preparations for internal succession. The scale of the problem requires a strong response, and the authors go on to sum up existing best practice: early planning, development of internal stars, using the board to groom candidates, and cautious use of search consultants.

13. Andrew Hagiu and Julian Wright, Don’t let platforms commoditize your business

The power of platforms over third-party sellers and customers is well-documented and takes many forms, constraining prices, and competition. However, the platforms’ very reach and stability have now created conditions for a more vigorous response, including new business models that can pose a real threat. Drawing on their study of companies who use platforms successfully, Hagiu and Wright define four types of effective responses: having a strong direct channel; using platforms as showrooms; going deep or wide in the range of offerings; and making good use of the current shift in public opinion to contain the worst platform excesses.

14. Tim Fountaine, Brian McCarthy and Tamim Saleh, Getting AI to scale

In this article, experienced McKinsey consultants explain a methodology for choosing the right AI project that is likely to have a large business impact and to scale. Using case studies of business challenges in the aviation, telecommunications, and energy sectors, they offer criteria for choosing the domain where AI could make the right difference. Domains with a sizeable impact, interconnected activities, a committed sponsor and reusable technology and data are most likely to benefit from AI. Further, the authors suggest guidelines for structuring the team and using design-thinking to re-imagine business processes to integrate AI effectively.

15. Colleen Ammerman and Boris Groysberg, How to close the gender gap

In a preview of their new book on the gender gap in US companies and beyond, Ammerman and Groysberg present data diagnosing the large divide between the aspirations and realities of women’s inclusion, especially at senior level. To tackle this disparity, all the stages of the talent management process would need to be re-assessed: attracting candidates, hiring, integrating new employees, assessing performance, managing compensation and promotion, and retaining good performers. Ammerman and Groysberg define the main problems in each area, suggest questions to ask and propose good practice. Appreciating the more subtle dynamics, such as the likeability factor and the effect of double standards in the assessment of women’s performance can take us further along the path of greater fairness for all in the workplace.

16. Kenneth P. Pucker, Overselling sustainability reporting

By his own reckoning Pucker has belonged to what he calls Sustainability Inc, the group of executives and activists who have driven the debates around sustainability in companies and the public sphere at large, including a drive to measure and report the impact of business activities on CO2 emission. Despite the large increase in reporting in the last couple of decades, however, the impact on emissions has been minimal, suggesting that reporting may have become a substitute for more effective action. In this article Pucker spells out the limitations of current measurement, reporting, and investment practices and proposes a shift to a more aggressive approach that would take account of hard limits to the use of natural resources and put wellbeing ahead of growth.


17. Leslie K. John, Savvy self-promotion

Does the cream rise to the top? Is focus on consistent performance enough? In this article John outlines some unobtrusive tactics for helping the process of recognition along, by striking a balance between making others aware of one’s achievements and avoiding envy and resentment. For instance, she recommends using the opportunities that arise naturally, when asked to share and when others are sharing, offering realistic information, including both advances and setbacks. For individuals, as for companies, an appropriate third-party endorsement also speaks louder. Developing deep sources of personal and professional satisfaction can help set realistic expectations and eliminate any excessive need to brag.

18. Christopher J. Malloy, Case study: What role should a company play in a national crisis?

This is a case-study of a company affected by a natural disaster in its small, developing home country. How can the company help beyond looking after its own employees and assets and donating to the relief effort? Should it lead nationally, or should it simply support the broader, government and NGO-led recovery effort?

19. Gretchen Gavett, Anxiety when there is a lot to be anxious about

Talking about anxiety usually brings its own relief, helping us realise that we are not alone in this predicament, as Gavett’s review of four new books on the topic certainly shows. Moreover, the books, and the review, recognise the very real effects of mental chatter and self-talk and propose remedies.

20. Eben Harrell, Life’s work interview with Alex Honnold

Honnold gained worldwide recognition for his free-solo ascent of the 3000-foot El Captain peak in the Yosemite National Park which required years of preparation and was captured in an Oscar-winning documentary. Here he explains his choices for a life dedicated to pushing his own boundaries and inspiring others to help protect the natural environment.