October Insight - Guanxi and the Art of War - The Tall Tale of Two China Myths

For over 20 years the notion of Guanxi or special relationships has crippled western firms entering China.

If special relationships are defined as a person that has training, exposure to and a track record in a field then by international standards they are an experienced professional and by default a good person to be part of or lead a team. If Guanxi is defined, as having political and family ties, this provides no guarantee that they have access to decision makers in the public and private sector in the relevant commercial space. It is also a recipe for a longer and more expensive journey through a series of back and side doors when a simple organized knock on the front door of a corporation or government agency may have been faster and cheaper.

Reliance on a single set of relationships held by one staff member or a consultant is potentially destructive on two fronts. First, it avoids professional analysis of who is actually the best commercial partner or what the entire decision making matrix is, especially if it involves government relations. This is because the Guanxi broker only speaks to people they already know.  Second, it sets up a situation where a company may be abused by its own door keeper.

There is only one thing worse than relying on the myth of Guanxi or “special relationships” for a business strategy in China and that is overly relying on an abstract definition of business culture expounded by western pundits based on any of the Classics such as Sun Tse and the Art of War.

Countless business books and articles quote Sun Tse not only as if it were unique but also what every Chinese executive reads on the way into the negotiation room. The European equivalent would have scores of Chinese investors ploughing through translated and annotated copies of Machiavelli’s The Prince and Clausewitz’s On War before flying to Wall Street to close a deal. The first question you have to ask is: how many people on Wall Street have actually read these classics of western warfare let alone applied them in their approach to work?

It is reasonable to state that no two American brothers raised by the same parents under the same roof share an identical approach to commercial negotiation. Therefore, it is facile to assume that over 1 billion Chinese all negotiate with the same formula. This is the absurdity and also the dated legacy of the great thinker Lucian Pye. His book, Chinese Negotiating Style: Commercial Approaches and Cultural Principles, created the myth but also the benchmark and unfortunate archetype for categorizing a diverse people into a simplified but limited set of cultural stereotypes.

The first step to understanding the people in any country is to recognize that there are a diverse variety of educational and professional backgrounds, regional differences and distinct personalities. This is equally true in China. To be successful in any culture requires the visitor to see the tree in the forest or the man or women as a person first and a member of another culture second.

A critical second step is to complete what is now called self-evaluation or apply the precept of a 360 degree valuation to one’s own personality. Personality traits that are positive will be masked in another country and the negative traits will be amplified. Either through translation or even listening or speaking through a second language, the nuance of language is eroded and leaves the concepts and attitude raw and exposed on the negotiation table ready for quick acceptance or rejection by the listener from another culture. Often the mitigation of stress through humour, that is a successful tool in one’s mother tongue, gets, as the movie suggests, Lost in Translation.

It may seem easier to rely on the simple power of the myths created by carpet baggers interested in living well off the process by pretending  in the power of connections rather than the substance of market entry into the China market. Unfortunately a carpetbag does not replace the hard work of analysis, strategy, retooling and building the right organization required to implement a sustainable business development strategy for a specific company or a specific product. Unfortunately the China market is now more complex in size, diversity and speed than the use of mythology permits.

As you purvey business book titles like 36 Strategies, or Mr. China or any title with a dragon in it, remember that Chairman Mao tried to run a country on the maxims in his little Red Book and the cultural revolution we know failed. Ideology in China was replaced by the pragmatism and complexity of Deng Xiaoping’s socialist market economy.

It is now time that western businesses forgot the simplicity of dated cultural and philosophical precepts as magic wands and simply accept that to move forward in China requires all the skillsets and mindsets that a company deploys to secure revenue and support clients in its core markets.

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