• 7 minute read

Talking to CEO: Edward Tse

Chan, Andrew Chi-fai(陳志輝)

How do Chinese enterprises succeed by turning ‘pain points’ into opportunities

Translated by Huang Feifei, PhD Candidate, Department of Marketing, CUHK Business School

In this episode of the televised program Talking to CEO, Dr. Edward Tse of Gao Feng Advisory Company, shares his experience of launching his own consulting firm and his insights on China’s development

Prof. Chan: You worked for several well-known consulting firms such as McKinsey, BCG and Booz Allen. What made you decide to launch your own company, Gao Feng Advisory Company, in 2014?

Dr. Tse: I was a partner in BCG, and at Booz Allen I was a Senior Partner and Chairman for Greater China. In those international companies, only a few Chinese can hold those positions, so I really feel honored about that. During that period, I had some reflection too. I thought China’s rise did not solely rely on its economic development, but also from the flourishment of various companies. Entrepreneurship and innovation have been growing rapidly in the past few years, creating many outstanding enterprises and entrepreneurs as well as new management ideas and strategic frameworks.

However, over the years, from consulting firms to business schools, all the management ideas they’re using are derived from the West, particularly the United States. These ideas have worked in the past. But now with the rise of China, the landscape has changed and Western management system is no longer sufficient for today’s business world. Instead, innovative ideas from China and Silicon Valley are taking the lead.

To carry forward these new ideas, we need to have people rooted in China and understand China thoroughly. At the same time, this person should possess a global vision and relevant skills. He should be able to explain profound problems in simple ways and develop ideas into theories and practice, then promote them to the world, so that these ideas can become the mainstream of management, and turn these Chinese experiences into global intellectual capital. This is the reason I left Booz Allen to set up my own company.

What I wanted to achieve though is more than having a small consulting firm serving the Chinese market, but an international company rooted in China to nurture and develop new ideas in China, while influencing the world.

“With the rise of China, the landscape has changed and Western management system is no longer sufficient for today’s business world. Instead, innovative ideas from China and Silicon Valley are taking the lead.”

The Merits of China’s Progressive Reform

Prof. Chan: Over the past decade, Chinese enterprises have grown rapidly. What has China offered in creating such success?

Dr. Tse: Since the end of Cultural Revolution and the Chinese economic reform, China has planted some good seeds. One of them is the progressive reform that has slowly transformed the country from a planned economy to a market economy over several decades. When the Soviet Union collapsed and accepted the proposal from the International Monetary Fund (IMF) to implement the Shock Therapy, everything changed overnight, bringing about lots of problems. Those problems are still haunting Russia now. Of course, China’s progressive reform also has its problems, but it has brought along new opportunities for companies, whether they’re state-owned, private or foreign.

China is not an ideal society and there are many unreasonable things happening in the country. Each time when it opens up, we will see some ‘pain points’ of the society. For ordinary people, ‘pain points’ are bad, but for entrepreneurs, they offer opportunities. Especially in the recent decade, with the rapid development in science and technology, those pain points offer lots of opportunities for entrepreneurs to create their solutions. Unlike in the past when there was no appropriate technology to cure those ‘pain points’, now our entrepreneurs are smart and diligent enough to know how to find business opportunities from them.

In addition, the Chinese market is huge. Each reform would attract many entrepreneurs to join the competition. Fierce competitions weaken profits but force enterprises to improve every day in order to survive. Besides, the rise of middle classes and ‘angel investors’ in China have brought along many investments and funds. The profited funds would attract more capital investments. All these factors make entrepreneurs willing to try new things, make errors, and then adjust their strategies. This “trial and error” phenomenon is very common in China.

China does not lack capital nowadays. Entrepreneurs with unique ideas are often able to get support from venture capitals. Starting up a new company is like the ebb tide – the success rate may be low, but because of the huge market in China, even a small number of successful cases can yield noticeable results.

It is the combination of this kind of momentum that allows such high-speed development in China in a short period of time.

Seeing Opportunities in ‘Pain Points’

Prof. Chan: How do we explore opportunities from ‘pain points’? Can you give us some examples?

Dr. Tse: Such examples can be found everywhere in China, such as the idea of car sharing. Before, it was very difficult to call a taxi in big cities like Shanghai, especially on rainy days. I know in first-hand having lived in Shanghai. Didi Chuxing introduces its mobile application allowing people to call a taxi through their smartphones, which is a solution to the ‘pain point’. Before listing, the company’s estimated valuation already reached USD 50 billion. Another ‘pain point’ is medical service. Everybody knows how painful it is to wait for service, especially in public hospitals. If someone could solve this problem by using technology to make appointments, he would create a career opportunity for himself.

Prof. Chan: When you returned to China from the United States at a young age, you were faced with a new environment where people around you were doing things differently. How did you adapt to the new environment?

Dr. Tse: My experience taught me not to feel different from mainlanders. Although I grew up in Hong Kong and studied in the U.S., I still haven’t learnt everything about China. And I won’t feel superior or inferior because of that. I only know that I need to grasp every opportunity. When I returned to China, my mandarin wasn’t very good, but now I can communicate freely and share in Ted Talk using mandarin. This is all from learning and emerging myself in the culture. We should try to learn from each other.

Today, half of my clients are foreign companies and half are Chinese companies. Among my Chinese clients, half of them are state-owned enterprises and half are private enterprises. These enterprises should understand China very well. So why do they still come to me for advice? It is because they consider me as one of them, and have trust in our collaborations.

Be an Example to the Young Generation

Prof. Chan: I observed that Hong Kong’s new generation does not crave for success. With a mature economy, Hong Kong’s social mobility is very low. In your opinion, how can we encourage the fighting spirit in the new generation?

Dr. Tse: I agree with you. But, we cannot blame young people. Looking back, this is the result of our past development. Throughout the years, Hong Kong’s economic development has been stable. The 1970s to 1980s saw the booming of all industries which helped to generate a group of middle classes. So it is not surprising that we do not have the fighting spirit like the mainlanders.

Moreover, the media has been biased in their reports and focusing on certain issues rather than the overall development of China. To broaden the horizon of young people, we need to set an example for them and show them our successful cases as well as the business opportunities in China.

About Talking to CEO

Since 2002, CUHK EMBA has been running the Talking to CEO TV/radio program with Radio Television Hong Kong. Distinguished business leaders, academics and government officials have been invited to share their experiences and insights with CUHK alumni and students.

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