China Company Transformation Indicator

Chinese companies have long been acclaimed for their manufacturing prowess, and, more recently, for their pragmatic approach to innovation. Now, it’s time to recognize how they are also reinventing the role of management through an approach we call “digitally enhanced directed autonomy,” or DEDA.

China is both a large and a fast-growing retail market worth about $5tn in 2020 – and highly digitized. Given the pandemic has made digital every retailer’s strategic priority, it’s not hard to see why the Economist opened 2021 with a cover story headlined “Why Retailers Everywhere Should Look to China.”

Most companies cannot quickly change their business model to open up new revenue streams. Different activities are interlocked with one another via standard procedures. There’s a high cost to switching internal operations. The result is like a pyramid: sturdy and impressive, but rigid and brittle.

Retailers that successfully adapt to the pandemic’s social distancing requirements offer a model for making a quick digital pivot. A crisis reveals as much as it devastates. Retailers that were struggling before the coronavirus outbreak are now crumbling.

In recent years, a handful of Chinese companies have emerged as global innovators and have garnered a lot of attention. This group includes online retail giant Alibaba, appliance maker Haier, search and data technology provider Baidu, and Tencent, the social communication and gaming ecosystem.

China’s Central Economic Work Conference 2023, led by President Xi Jinping, highlighted the nation’s focus on technological self-reliance, accelerated opening-up, and strengthened macroeconomic regulation. But it did not provide the anticipated clarity that its business world needs. Here we anticipate China’s red thread going into 2024.

By putting the consumer’s needs at the center, China’s retail companies have rethought the value chain and reinvented the retail model to deliver a greater and more relevant retail experience to consumers, argued Mark Greeven, IMD’s Professor of Innovation and Strategy, at an exclusive Industry Dialogue Series with senior leaders from around Asia.