Red is Ok! China’s Economic Slowdown Forces Leaders to Sharpen their Strategy Implementation

(Hier der Link zum Original in deutscher Sprache, wie herausgegeben im Controller Magazine)

It has come as no surprise that China’s market growth has slowed to a rate of 6.9% p.a. in 2015 – its lowest in 25 years. Some future predictions lead to a further slowdown of less than 2% by 2017, or somewhere between less than 2% to less than 5%. In January, exports fell 11.2% year-on-year in dollar terms, compared with forecasts for a decrease of 3.6%, while imports slid 18.8%, against expectations of a 1.8% drop, according to recently released government data released.

At the same time, China’s public and private debt in percent of GDP has grown ten-fold in just shy of 15 years. While the current stability of the political system appears placated at best – clear control in Beijing has not yet been established.

The Chinese administration recently announced measures to ease private investments to fuel economic growth from the private rather than the public sector. Yet so far, no significant measures have been implemented that would rid private companies of highly restrictive bureaucratic procedures. Most of the private sector remains barred from the bank financing system.

In this economic environment of slowing market growth, perhaps more restrictive rather than easing policies in the short-term and continued bureaucratic inefficiencies, small and medium-size, but also large enterprises must rely on their own initiatives to succeed in China. The concept Strategic Management, called Strategy Compass is based on the Japanese model “Hoshin Kanri” (compass needle) and combines the approaches of balanced scorecard, the competence models of organizational development and lean management principles of Toyota Production System (TPS).

Strategy Compass Focuses on Implementation

The economic success of a company is connected to the quality of its strategy. However, success depends significantly on quality of implementation of the same. Typical problems of strategy implementation are:

  • Insufficient alignment among management
  • Insufficient link between strategy and budgets
  • Insufficient awareness of strategy and what it really means
  • Insufficient focus of management on implementation

Strategy Compass is a Triad

The concept of Strategy Compass is a well-balanced triad.

  • Specially structured planning and reporting (mechanics)
  • Schedule and clearly defined procedures (phases)
  • Compass principles (philosophy)

The philosophy derived from Lean Management differentiates it from many other strategy implementation concepts. Plans and controls do not shape performance – people do. People improve work and people improve performance. This is why fostering human resources and competency is essential. This leads to seven basic principles of Strategy Compass.

See the full article in the German Chamber of Commerce Magazine here.

By | 2017-01-17T14:29:03+00:00 July 2nd, 2015|Articles|0 Comments