Consulting | Zheng Yangpeng

Within one week after he got his new job this year, Boston Consulting Group President and CEO Richard Lesser traveled to China "to be where the growth is", in his words.

China's growth was the subject of his talk with China Daily at the international management consulting firm's Beijing office. He especially focused on how the world has changed and how companies can learn to compete and grow in the global environment.

Part of the change is China's rise, and Chinese companies' overseas expansion.

"Check out the number of Chinese companies in the Fortune 500" list of largest corporations, Lesser said. They represent "a batch of large companies with handsome business in every corner of the world".

Meanwhile, more and more Chinese small and medium-sized enterprises, dreaming about faster growth, are exploring the overseas market.

But there are questions: Do the largest companies necessarily become more efficient by gaining more global reach?

And do the SMEs necessarily stand a better chance to realize their dream by just becoming more active in other countries?

To them, Lesser has a word of advice: "Part of the reason for BCG's success is: The more the world changes, the more you can't use the past to guide the future."

Chinese enterprises, Lesser said, generally started on the basis of their low costs, but to compete globally, that is far from enough, although a winning strategy may still contain a cost element.

Instead, it is innovation, especially innovation based on the understanding of the local dynamics of other markets, that is more important, Lesser said.

At the beginning of their globalization, many companies regard overseas markets simply as new sales channels. They take what they already did and bring it into the markets they are developing.

The next step for these companies, however, is to recognize the local differences and adapt to these differences; in many cases, it is a different kind of business, and a different kind of offering.

Learn and adapt

The problem, then, is how to customize.

There is no magic bullet. It's by "learning, learning, learning", Lesser said. And "adapting, adapting, adapting".

Interestingly, more often than not, companies are forced to learn.

"The time to learn comes when the market is challenging, and the competition environment becomes more difficult," he said.

"If you look at the ones with the fastest growing rate, they are probably in the most intense environment where they are forced to learn," he said.

To better illustrate the point, Christoph Nettesheim, managing director of BCG Greater China, who joined the talk over the phone, cited some Chinese examples: "Chinese companies like Huawei and Lenovo have built their global competitive capability. They are the ones that are really putting themselves into areas that are intensely competitive."

On the other end, Nettesheim noted, some State-owned enterprises in sectors like energy and resources, which are highly regulated and shielded from competition, are the companies that have a harder time learning and adapting.

Lesser said that for companies that are really driven to learn, part of BCG's role is to catalyze, to accelerate their learning processes, and to help them figure out what could be done before a crisis and what should be done after it.

He said being collaborative with the clients is of the utmost importance for consultancy.

"The best effect is realized often when they feel they are self-discovering. The role of consulting is the catalyst... because at the end of the day, the organization has to embrace it and really believe in it and has to have the skill to execute it on an ongoing basis," he said.

Another potentially harmful problem for companies is the pressure from shareholders - growth and profitability dominate their thinking. But this mindset often leads them to disregard different priorities for different markets.

"Part of (BCG's) job is to help companies to make the best use of the opportunities, to understand the different parts of the business portfolio, to understand in some markets, growth may be the highest priority while profit is more important in other places; and in other places, building a position and new kind of offerings is most important," Lesser said.

"Part of the sign of sophistication is the ability to look at the portfolio and individual components, and decide different key measurements for different parts of the portfolio," he said.

As enterprises grow larger, mergers and acquisitions become a natural need for companies. But Lessers said although M&As are becoming increasingly frequent for Chinese companies, there are plenty of misunderstandings about them.

"I think right now, many companies think the key issue is who you buy. But our experience over the years is how you integrate them," he said.

"Sometimes companies think: 'I'm the acquirer, I know how to do it.' But if you look at the very best acquirers, they are very thoughtful about, 'What will I learn from the company I'm acquiring?'

"To be true, most acquisitions don't create value. The earner is the acquiree, not the acquirer. The way you do integration is the determinant of how much value is really created," he said.

In Lesser's view, "sophisticated" companies differ from ordinary ones in that sophisticated companies understand the benefit of an acquisition is not just about the acquired company's product and market, but its talent and processing.

Being a real "multinational" means you can bring the successful experience in your home market to market A and B, and also being able to bring the experience in market A and B to the home market - this is the real integration.

"General Electric, for example, has gone through that process. Now they think of China and India as sources of innovation, and bring them to the rest of the world," Lesser said.

But that would also be the very challenge for most Chinese companies, Lesser said. Starting from a gigantic home market may be a blessing in disguise.

"If you start from a small market, for example, Switzerland, you have to learn very early on how to compete in different markets and how to operate the multinationals," he said.

"Chinese companies, like US companies decades ago, have the opportunity to be in a very big home market. But sometimes it makes them less quick to learn how to adapt to other markets," he said.

Asked about BCG's performance in China, Lesser said it had grown "rapidly" over the years, without offering specifics.

He said the firm is not just serving multinationals' China divisions, but also Chinese companies and government entities.

Before taking the new job in January, Lesser served as BCG's head of the company's New York office system since 2000. In 2009, he was named as BCG's regional chairman for the Americas.

He has been offering consultation for companies that seek to develop their foreign market. These clients include fields as diverse as healthcare, and the consumer and IT sectors.

Contact the writer at zhengyangpeng@chinadaily.com.cn

(China Daily 01/18/2013 page17)