Not merely a tech-business

China seems well ahead on the digitization road: use of new technologies in services (e.g. the mobile payments) , use of artificial intelligence and big data analysis in decision-making (e.g. the Court of Hangzhou), consumers’ behaviors (e.g. the shared bikes), public investments (cf VVR’s article on smart energies)… As a consequence many opportunities arise for European tech businesses in China, but not only. In this article, we will look at the transformation in management, business model, and HR policies induced by the digital transition.

According to a McKinsey report, Internet-linked transformation could contribute to an extent ranging from 7% (in the lowest estimations) to 22% (in the highest estimation) to China’s GDP growth through 2025. The main identified sectors where this growth would mostly happen are:

• electronic consumer goods (with the Internet of Things, the digital media content…),
• the automotive (with the supply chain logistics, the development of services thanks to connectivity…),
• chemicals (with better demand forecast, and production planning, improved R&D…),
• the financial services (with a decrease in non-performing loans, more efficient banking operations),
• the real estate (with online sourcing and online marketing),
• healthcare (with better patient-tracking for chronicle disease, e-commerce for OTC).

To be precise, China is more advanced than Europe when it comes to the use of new technologies, in products or services. Yet, China’s digitization of its industry is less advanced and happening now. Thus European companies already present in China, especially SMEs should take this step towards digitization now, in order to lead the coming disruption (gain in productivity, new business model, new relation to the consumer) instead of feeling threatened by it.

Beyond the development of technology-savvy products for customers (which might not be relevant in all industries), digitization can impact your entire organization in the way things are done, from the product development to the interactions with the client, passing by supply chain management and marketing. In China’s coastal area, most of the companies already initiated their digitization: in an EgonZehnder’s survey over a panel of Chinese companies (2016), 70% of the participants declared that their top management was in support of digitization, and half of them mentioned their CEO as the leader of these changes. Digitization is indeed not only about finding the right technologies to improve your activities, it is first and foremost about having the right team: a team that is able to understand and use these technologies, and that thinks according to this new digital paradigm (for instance, it is about definitely giving up paper-printed presentations). Indeed, a complete shift to the digital age can impact as far as your business model. It requires thus strong adaptation abilities from your company, which need to be developed through the right HR policies.

Given the potential scope of this transition, the top management must design, or at least be associated to, this digitization strategy (e.g. Mengniu’s CEO in VVR’s article on new consumption habits). It might mean thinking about a redefinition of your leadership to better foster collaboration, curiosity and learning in your teams. Besides, there a decision to be taken on whether to allocate digitization to one specific department, in which case you should decide precisely which, to centralize it or to externalize it.

Once the strategy is set, it needs to be taken up by management, as they are essential actors for the teams upgrading, and for the transition towards a more collaborative and innovative-driven way of working. In China, we identify training as crucial: it is indeed easier to train people that are already well integrated in your company rather than hiring and integrating new talents (cf VVR advice on recruitment in China). If, after having upgraded the teams, there is still a HR need, you should pay attention to the peculiarities in China regarding this type of recruitment, making it a rather competitive process.

Indeed, digitization is set to happen faster in China than in any other economy. Thus, several observers pointed out a shortage to come in IT and TIC talents. As such, challenges usually encountered when recruiting somebody in China are exacerbated: finding the right person, negotiating a salary, retaining the new employee… As an illustration, salaries for high-skilled tech talents, especially in the coastal provinces and for people speaking good English, are high, even to European standards.

To smooth the recruitment process and guarantee its success, it is of the utmost importance to carefully follow a rigorous recruiting method. That is to say, first, establish with accuracy the real need(s) of your company that the future employee should satisfy. Then, you will be able to write down precisely the job description and the profile you are looking for (a local Chinese, an overseas returnee, a foreigner…) As digitization is a field in evolution, it is no use to look for specific skills, albeit some basic background is of course required, rather you should be looking for potential. More than ever, recruitment is not about finding a good employee, rather about finding the right person to fit in your company and to hold your company’s vision. Here, analyzing motivations, mentality, and solving approach to new problems might be of a good use.

For more details on recruitment, you may refer to our recruitment department.

To sum up, digitization is happening in China and it opens new doors for products and services, but it also redefines the organization and the vision of each company. We strongly advise to take these steps now, not in an erratic and reactionary manner, but rather in an organized and well-thought strategy, engaging all departments of your company. Two main impacts are to be forecasted in HR: the upgrading of the teams, and the recruitment of new talents.