A Mandarin Narrative

“Understanding the China effect on global innovation will be essential for companies that wish to compete in China, take advantage of China’s innovation capacity, and adopt Chinese approaches to innovation to improve their own performance. The overall effect is that more innovation will originate in China—from both Chinese and global companies—and more companies would adopt the Chinese style of innovation.”*

What has helped many Chinese firms make remarkable strides—not just in the realm of innovation—is their swiftness in reformulating themselves, eschewing hierarchical structures, and adopting a customer-centric approach

- Mark Greeven, ​​​​​​​Antonio Nieto-Rodriguez

In his 1962 book Strategy and Structure, Alfred Chandler argues that an organization’s structure should be driven by its chosen strategy and, if it is not, inefficiency results.

Taking this one step further, we believe that the degree to which project activities are important in an organization determines overall strategy implementation success. When managers underestimate or completely ignore this fact, organizations fail to evolve (or adapt) as quickly as business drivers. As a result, a large proportion of transformation initiatives fail.

Most western companies have a functional/hierarchical structure. This was ideal for running the business efficiently in a stable world. Departments are divided along a value chain influenced by Michael Porter’s value chain model. Traditional companies are generally run by a CEO, a CFO, and often a COO and a CIO, followed by the heads of business units and functional departments. Each has its own budget, resources, objectives, and priorities.

Until recently, departmental success was measured using key performance indicators tailored to each unit or function. For example, the finance department’s success was measured by whether it was closing the books and producing the financial statements on time, and that of the HR department by whether it had managed to keep good people on board (low turnover), or had finished employee appraisals on time.

This approach creates significant internal competition, often leading to the well-known ‘silo’ mentality. Some heads of department build their own little kingdoms, and cooperation with other parts of the business becomes difficult, sometimes impossible. In many cases, the key performance indicators of one department are at odds with those of another.