Country focus: China

Simon Lelic talks to Arno Boersma and Sridhar Vedala, management consultants at Squarewise, about the evolution of knowledge management in China.

In this, the final article in the ‘Country focus’ series, it seems appropriate to turn our attention to the country in which knowledge management has the capacity to make the biggest impact. China is the most populous nation in the world and an economic superpower in waiting. The country remains a communist state, but is gradually succumbing to both democratic and free-market forces. No longer the pariah it once was, China is actively engaging with the outside world both politically and economically. For the majority of its inhabitants, particularly those based in rural areas, there is still a long way to go before living standards reach levels that would be deemed acceptable levels in the west, but the country has clearly woken up to its own potential. And, as Arno Boersma and Sridhar Vedala, management consultants with Squarewise, point out, knowledge management is already playing a central role in China’s economic and social development.

Working in both Amsterdam and Shanghai, Boersma and Vedala are ideally placed to monitor the impact of KM-based thinking among China’s public and privately owned enterprises. Since the end of the Cultural Revolution, they believe that three distinct phases of economic development have contributed to the gradual infiltration of KM principles and working practices. The first, from 1978 until 1985, was a period of what they term ‘institutional reconstruction’. A drive for modernisation led to the foundation of various research institutions focused on developing and imparting specialist scientific knowledge. “This laid the foundations for the future development of knowledge management in China by recognising the importance of knowledge acquisition and dissemination,” says Boersma.

The next phase lasted until 1991, and heralded a period of further reform. In 1986, for example, the government launched the High-Tech Research and Development Programme and the Beijing High-Tech Development Trial Zone. This gave impetus to institutional development by creating clusters of knowledge centres and introducing elements of competition. According to Boersma, interaction and knowledge sharing among research centres increased dramatically during this time, eventually spreading to other organisations and precipitating the final period of development, which continues apace today.

In this latest phase, says Boersma, a model of co-operation between government, academia and industry has been fostered as a vehicle for moving China forwards as a market-oriented economy. “The government has positioned itself as an agent of change and as a facilitator for knowledge-base expansion,” he continues. “The intent was to develop an economy that was based primarily on knowledge. Various enterprises have emerged that are closely related to universities, while the government provides the infrastructure and support. The main focus of this phase is to commercialise knowledge through innovation.” At the same time, an increase in foreign direct investment has fostered competition, and local enterprises are becoming more aware of the need to develop marketing and branding expertise, recruit talented workers and differentiate themselves from their global competitors. As Boersma says, “This period has therefore made the need for even a rudimentary knowledge-management platform highly apparent.”

It is early days, admittedly, but already there are signs that Chinese companies are responding positively to the challenges they now face. Vedala cites Haier Group, Lenovo, Founder and Huawei as examples of early KM adopters. “These companies have implemented various initiatives and processes to acquire, disseminate and commercialise knowledge, enabling them to respond to market needs,” he says. And while Vedala maintains that the country has a long way to go before KM becomes an integral part of corporate strategy, he points to a number of trends that suggest knowledge management will become more pervasive among Chinese firms in the near future: continued government support for knowledge-based businesses through tax benefits and the provision of key resources; the creep of globalisation and thus increasing levels of competition; the return of large numbers of skilled workers from abroad; and, the emergence of globally competitive academic institutions, for example the China Europe International Business School, whose MBA programme currently ranks number one in Asia.

Within multinational companies operating in China, knowledge-management programmes are even more advanced. “Even though China presents lucrative investment opportunities [for foreign businesses], competition is fierce,” says Vedala. “Knowledge management and innovation are therefore essential to achieving competitive advantage.” Almost inevitably, some organisations have experienced difficulties in transferring or imitating KM-based practices established in other regions of the world, but most have adapted accordingly, customising KM initiatives to suit local conditions. This, says Vedala, is indicative of the importance multinational firms operating in China attach to knowledge management. And once success stories begin to circulate, KM in China will be given even greater boost.

Indeed, Boersma and Vedala highlight several socio-cultural factors specific to China that they believe will further help the knowledge-management movement. “Chinese culture is based on Confucian philosophy, which advocates loyalty, righteousness, friendship, filial piety and the importance of education,” says Boersma. “Moreover, the Chinese are highly group-oriented and place a strong emphasis on collective identity.” Collectivism, he feels, is one of the key characteristics of Chinese culture that will help to facilitate the acceptance of KM-based working practices. Just as important, Vedala adds, is the level of respect Chinese people have for knowledge and learning, and the ‘unspoken rule’ of Guan Xi. “Guan Xi stands for the relationships between people and organisations,” he explains. “It is a dominant characteristic of the Chinese people, extending beyond business into every aspect of life. Guan Xi serves as an instrument for the acquisition and dissemination of information.”

But while these traits may help to foster a collaborative ethos in Chinese organisations, Boersma and Vedala are cautious not to paint too rosy a picture. Would-be KM practitioners also face a number of cultural hurdles, as they point out. “The social milieu based on hierarchical structures extends to business,” says Vedala. “Knowledge flow is therefore usually top down in most organisations.” The Chinese style of communication is also quite different from that of western cultures, he points out. “The Chinese are not very direct. They avoid using provocative or aggressive language, and this sometimes leads to misinterpretation and ambiguity, hampering effective communication.” Furthermore, the educational system in China has traditionally emphasised learning by rote, at the expense of independent, innovative thinking. “The Chinese are taught to accept theories blindly,” says Vedala. “Creative thinking and fresh ideas are not encouraged. In a business context, corporate dictums are never questioned or challenged.”

The knowledge-management movement must also overcome an almost total absence of media interest in, or understanding of, KM. This in turn has generated enormous confusion as to what knowledge management actually is, and many organisations continue to regard KM as an exclusively IT-based discipline. This perhaps explains why KM has made the biggest impact among high-tech companies; according to Boersma and Vedala, only a tiny proportion of businesses in other industrial sectors have so far adopted KM working practices. In part, they say, this situation has been exacerbated by the absence of knowledge resources and well developed manufacturing and distribution networks in other industries, as well as a lack of intellectual-property legislation. In contrast, the high-tech industry is well served by government and institutional support systems, and benefits from a dynamic, well educated work force.

Nevertheless, both Boersma and Vedala are optimistic that this situation will soon change. They point to a survey conducted by DaoChina.com in 2002, which found 86 per cent of enterprises had at least heard of knowledge management. Of these, only 27 per cent had actually implemented a KM strategy, but a further 66 per cent felt it would be necessary to develop one in the near future. Only seven per cent said that they had no intention of putting a KM programme in place. In this context, argue Boersma and Vedala, China’s accession to the World Trade Organisation, continued government support for knowledge-based businesses, a better educated workforce, the growth of new economic sectors, and trade and outsourcing partnerships with multinational companies will all help to drive KM adoption.

In China, of course, things should not be taken for granted. As the saying goes, nothing in the country is impossible; everything is difficult. A continued lack of awareness among Chinese businesses may yet scupper the KM movement, and even if firms can be convinced to invest in a discipline that deals primarily with intangible assets, success – as so many western enterprises will be able to testify – is by no means guaranteed. On the flipside, the potential impact of knowledge management in China is huge. If businesses find the means to tap into the immense intellectual resources at their disposal, China’s status as an economic power capable of rivalling, and even surpassing, the United States and Europe will be assured.

Arno Boersma, partner, Squarewise
boersma@squarewise.com

Sridhar Vedala, management consultant, Squarewise
vedala@squarewise.com

Knowledge-management resources

Websites

ChinaKM.com (popular KM portal)
www.chinakm.com

Events

Knowledge Economy meets Science and Technology (KEST 2004)
17-20 September 2004
www.paperdyne.de/kest04-cfp.html
KM Asia conference and exhibition
2-4 November 2004 (Singapore)
www.kmasia.com

Consultancies/solution providers

DaoChina.com
Knowledge Corporation
Consulting, research, auditing and accounting services
www.daochina.com
Linefan
(software provider)
www.linefan.com

Academia

City University of Hong Kong, Kowloon
www.cityu.edu.hk
The Hong Kong University of Science & Technology, Hong Kong
www.ust.hk
Peking University, Beijing, China
www.pku.edu.cn
Shanghai Jiao Tong University, Shanghai, China
www.sjtu.edu.cn

Factfile: China

Area: 9,596,960 sq km
Capital: Beijing
Population: 1,298,847,624
Currency: yuan (CNY)
GDP: $6.449 trillion
Average annual growth in real GDP: 9.1%
Structure of employment:
Agriculture 50%
Industry 22%
Services 28%