Ignoring China not an option
Updated: 2012-08-31 07:49
By Andrew Moody and Hu Haiyan (China Daily)
Group chief executive of Accenture Management Consulting Sander van't Noordende says China is just "too big to ignore". Feng Yongbin / China Daily
No hard landing but transition to consumption-led economy will take time, says Accenture executive
Leading international management consultant Sander van't Noordende says China is not an easy place to do business but it is just "too big to ignore".
The 49-year-old Dutch group chief executive of Accenture Management Consulting was on a visit to his company's Beijing offices on the 21st floor of the west tower of World Financial Center.
"Everyone wants to have a China presence. But at the same time, China is a difficult place to be successful and do business at scale because of the strong local companies."
He adds that although other emerging markets such as Southeast Asian countries and Latin America are easier to penetrate, China remains the place for major returns.
"China is too big to ignore. The potential payoff is also big."
China is an increasingly important part of Accenture's operations. It employs 7,400 people in the country and has a presence also in Shanghai, Dalian, Chengdu, Guangzhou, Hong Kong and Taiwan.
Van't Noordende, who was looking remarkably fresh despite having just got off an overnight flight from New York, says a lot of the company's work is now devoted to advising Chinese clients on expanding overseas.
"They are asking how they can grow internationally, what kind of acquisitions should they be looking at and what sort of models they need to follow."
Van't Noordende, a lithe figure who is a field hockey enthusiast in his spare time, says fears of a hard landing in China are exaggerated and the world's second-largest economy is still a key place to do business.
"There won't be a hard landing. There are some bubbles like house prices but for a hard landing you need major bubbles to explode, like the mortgage market in the United States which triggered the global financial crisis."
Van't Noordende, who was born in the eastern part of the Netherlands but was brought up in Amsterdam, is more gloomy about Europe, however.
"I think it is quite embarrassing what is happening in Europe," he says.
He says the politicians are only just managing to keep on top of the euro and sovereign debt crisis by piecemeal action. "That is how Europe works, by doing too little but just in time so that we can move on to the next time.
"You could argue it is the default strategy because it is impossible to develop another strategy. There is a plan B to become more of an economic union, a banking union and political union but that takes time. So Europe is going to be a drag for a while."
Van't Noordende did a master's degree in industrial engineering and management science at the Eindhoven University of Technology, which has strong links to electronics giant Philips.
He was always more interested in the management science aspect and joined Arthur Andersen as a consultant in 1987.
He has essentially been with the same company throughout his career as it evolved first into Andersen Consulting and then into Accenture in 2001.
He headed the group's resources operating group for five years before taking over as group chief executive of Accenture Management Consulting in March last year from Mark Foster, who has gone on to become commissioner for the Independent Commission for Aid Impact in London.
Despite the demands of his current role, he says he always tries to ensure he reserves his weekends for leisure.
"I have one single rule. The weekend belongs to myself. I don't do conference calls, although I will look at e-mails. That is one of my little tricks," he says.
Van't Noordende says management consulting fundamentally changed character since he began his career 25 years ago.
"Our clients are looking for results. They are no longer looking for power point presentations, spreadsheets and nice reports," he says.
"Clients are also looking for someone who has a point of view and who is actually able or capable of delivering results rather than just a report."
He says that companies are increasingly wanting to hire Accenture on a performance-related basis.
"They say 'you think you can generate $100 million for us. Okay, show it and we will pay you a bit more. If you don't do it, we will pay you a bit less'," he says.
Accenture, which employs 250,000 globally and after floating on the New York Stock Exchange in 2001 has a market capitalization of between $35 and $40 billion, first came to China in the early 1990s.
Van't Noordende said it would be difficult for Western companies to enter the China market now, given the evolution since then.
"If you are thinking of entering China now you are relatively late. Accenture has been in China for the last 20 years, not that is long given the history of the country, but at least we have had 20 years of doing business in China," he says.
Some see that the best opportunities for late entrants are the smaller cities, which are now experiencing double-digit growth, without the intense competition found in cities like Beijing and Shanghai.
"If you go to the high-growth areas, which might be second-tier cities, it might be more complicated in terms of how to do business. It is certainly not immediately straightforward," he says.
Van't Noordende says Chinese companies themselves have progressed markedly from where they were just a few years ago.
"I would say that in terms of management they are still very open to learn. They definitely have evolved and become better, basically. That is notable. Today many more people (within Chinese companies) speak English than they did, even five years ago," he says.
"China's economy is becoming more international and more global. I think outside of China also there is more of an appreciation for everything that is Chinese."
Van't Noordende is confident China will eventually make its transition from being an investment-led economy to one driven by domestic consumption but that it will be a long process.
"I am not sure it will be a difficult transition but I think it will be a long transition. If you want investment-led growth you take a pot of money and you commission work and that basically is what China has done over the past few years," he says.
"If you want consumption-led growth you need to change how people behave. It is no good giving them money and telling them to go spend it because they will just put it in the bank for later. People need to be comfortable about spending money and that comes with social security and pensions."
Van't Noordende says that despite the current quagmire the West finds itself in, there are still ways of making money.
"It is not that everyone is belly up in Europe and North America. There are definitely opportunities to grow in Europe and again in North America but again you have to be precise as to where they are."