China is on a technological roll these days -- one that American companies ignore at their own peril. Contrary to outdated Western perceptions, 680 million Chinese have access to either a laptop or a mobile phone, and some 95% of homes in every city in China are now wired for the Internet, according to figures from the Chinese government.
In comparison, in 2013, 74.4% of all households in the U.S. reported having Internet access, according to data from the U.S. Census Bureau (though that figure includes urban, suburban and rural households combined).
According to IDC's predictions for 2015, China's information and communication technology spending next year is projected to top $465 billion -- double that of Japan, and more than half of what's spent by American companies.
Meanwhile, the Chinese government is readying its thirteenth five-year plan, this one set to roll out at the start of 2016. The government's goal is to modernize China's mammoth financial, education, healthcare and state-owned industry sectors by supporting the continued adoption of mobile, online, social and e-shopping technologies.
With all that in the works, IT leaders in China find themselves wrestling with rapid change as their companies leapfrog technology cycles and hurtle towards digital business. Here are 10 lessons that U.S. tech execs would do well to heed.
Lesson 1: Think online first for commerce
In 2013, online retail sales in China grew more than two and a half times faster than those in the United States and surpassed the U.S in total amount spent by 13%, according to figures from the Chinese Ministry of Commerce and U.S. Department of Commerce.
"The Chinese are very innovative in terms of using e-commerce and using the Internet and integrating it into their business model," says Jan Martin Bernstorf, deputy general manager of the Shanghai office of BearingPoint, a multinational management and technology consulting firm. "There's a lot we could learn."
Bernstorf offers an example: a chatting tool that turned into a commercial platform. This past spring, Alibaba and Tencent launched mobile services enabling smartphone owners to use Tencent's WeChat application to buy money market funds and transfer savings. Banks had to catch up or lose customers, Bernstorf says.
Even in rural and other areas with underdeveloped infrastructure, many people have access to the latest mobile technologies, he says. As a result, digital strategies for commerce are the rule rather than the exception.
Lesson 2: Focus on business strategy from Day 1
Because companies in China tend to be young, they don't have a lot of legacy systems and processes for IT managers to wrestle with. That frees up tech execs to step outside the traditional constraints of an IT job and concentrate on understanding their business from the ground up.
For example, Jerry Xing, VP of IT at WuXi PharmaTech, a pharmaceutical research company, devotes a majority of his time not to keeping the lights on, but in understanding his company's research projects.
"Eighty percent of my time I spend with the scientists. I go and work together with them in the lab," he says. "Now I understand what they are doing." As a result, Xing has improved his ability to tailor data processing for WuXi scientists' specific needs, he says.
Lesson 3: Eat together
In China, it's common for an office to eat lunch together daily. Peter Weis, VP and CIO at Matson Navigation, a public shipping company headquartered in Honolulu, has spent more than 25 years doing business with China. Two years ago, he initiated periodic team meals -- without senior management -- in four U.S. cities after being inspired by how he saw the practice build camaraderie in China. The company now picks up the tab for a restaurant dinner or lunch each quarter, he says.
"We have gone to extra lengths to have fun together because IT is so project-driven and so deadline-driven," says Weis. His IT organization also pays for other regular office activities.
Outings are an important element of company culture in China, says BearingPoint's Bernstorf. "Usually the whole department takes a two- to three-day trip together," he says. "This can be shopping in Hong Kong or hiking in Sichuan. Firstly, it is a great incentive for employees as they usually wouldn't spend the money for these types of trips by themselves. Secondly, it is a great way of team-building; it increases the collaboration and innovation of the team."
Lesson 4: Take a chance on smaller vendors
Chinese businesses and their CIOs are less inclined than their U.S. counterparts to use big-name Western vendors, says Noel Law, a technology consultant and former director of Asia IT at Celenese, an Irving, Texas-based chemical manufacturer. Part of the reason is that Western vendors do not easily adapt to change or to the China market, says Law.
"Chinese companies and their business models are less locked in to any certain technology vendor, so they don't have to pay premium for IT solutions," says Law, who has worked in China for other multinational companies as well.
Executing global strategies in China often requires domestic solutions, agrees George Kuan, formerly CIO at a global beverage company and currently in charge of business development for a major international sportswear retailer's China office.
"Why pay extra dollars for a big global vendor when there is a comparable local software that is cheaper and addresses local statutory requirements? It's easy to install, and it's in the local language," says Kuan, adding that global solutions are "expensive and do not support the local workflow." For example, in lieu of SAP, in China IT pros in China will use Kingdee and Yonyou, says Kuan. "These are ERP [packages] that in some cases have extended to CRM," he explains.
"I think people here really look after the return on investment and the value that they're trying to get," says Kuan. "If we want to use a big global company, the license could be $1,000 a user. We could go out locally and buy the equivalent and it could be $100 a user."
Lesson 5: Try out job candidates rather than trust resumés
In China, college graduates rarely have work experience, since students are discouraged from holding even part-time jobs while studying. What's more, even seasoned employees' resumés may not accurately reflect their work experience, because the resumé is viewed culturally more as a conversation starter than a fact-based document.
"In China, you probably shouldn't trust what's in a resumé," says Ronan Berder, founder and CEO of Wiredcraft, a Shanghai-based IT software consultancy.
Berder says before inviting someone to an interview, he reviews the applicant's website and their open-source work.
"We give them a practical exercise, usually a task on a real project that they can do in their free time," he says. Applicants are encouraged to go into Wiredcraft's offices to complete the exercise. "We usually do that for a few days, after which we may extend it to a one-month trial period." In that one month, Berder reserves the right to dismiss the applicant without cause.
"We get people to work on a real projects, with teammates, and we get an actual evaluation based on this," all of which leads to better hires and fewer surprises, he says.
Lesson 6: Embrace imperfection
"Nothing is easy, but everything is possible in China," says BearingPoint's Bernstorf, who notes that culturally, Chinese are inclined to be pragmatists -- especially compared to his native Germany. "When it comes to finding a solution, Germans tend to make a detailed plan and try to be prepared for anything that might need to be considered for its execution. If something unexpected comes up, this creates a lot of headache and stress," Bernstorf relates.
On the other hand, owing to uneven infrastructure and a highly unregulated business environment, Chinese are resigned to the fact that execution almost always will disclose new obstacles. "They are ready to adapt quickly."
Guillaume Deudon, the director of information systems for Dow Chemical's Asia-Pacific operations, suggests IT managers try to embrace the motto "fail cheap, learn fast." In China, people know if they mess something up they can always do it again, says Deudon. "Errors, mistakes, design glitches happen, but they are quickly overcome."
Lesson 7: Gain influence by cultivating relationships
In China, relationships are the only business currency that matters. Personal interaction with customers and suppliers is a necessity, says BearingPoint's Bernstorf -- even for techies who may discount the value of interpersonal networking.
In China, "it is easy and common to start socializing with people that you meet once or twice and, in fact, it is necessary to do so," he says. This is especially true when something goes wrong -- and in still-developing China, much more than in the West, it usually does go wrong. A culture of relationships makes it easier to find someone fast who can help, he says.
Relationships also cut costs and implementation time, says Law. "In the Chinese culture, intense use of lawyers and very precise definitions in business dealings, while deemed necessary and even smart by Western standards, is to some extent frowned upon because it shows lack of trust right from the beginning," Law explains. "To compensate, Chinese IT executives use the influence gained by having good relationships to get things done at every turn."
Lesson 8: Structure IT like a startup
Where 20 years ago there were no recorded startups in China, in 2013, entrepreneurial startups were responsible for 75% of all newly created jobs, according to Ministry of Commerce data. That means the startup mentality prevails, with the best CIOs functioning like savvy procurement officers who know how to take full advantage of services from the cloud -- including cheap and free software like email and WeChat, which many Chinese are now substituting for phone service.
"I have a friend who started a company," relates Law. "In order to keep his team small, he rented everything from the cloud. He outsourced infrastructure and support to a cloud vendor, and he outsourced system development to local software houses."
"The traditional role of the IT managers is shifting in a fundamental way," says Law. "They do not have the legacy IT baggage of custom developed systems to worry about, so they can take advantage of the new cloud IT world more so than their U.S. counterparts."
Lesson 9: Accommodate your introverts
By nature, IT managers doing business in China become experts in coaxing insight from reticent employees, because introverts abound. Chinese students are typically not encouraged to speak up in class, and that behavior can carry over to the workplace. Dealing with shy staff and getting clear answers requires a little more effort in China, says Dow's Deudon. Western managers hoping to elicit staff feedback in an open meeting often end up disappointed, he says.
"It's very difficult to get an open and direct discussion at a roundtable meeting," Deudon says. "People tend to keep quiet about their ideas." Good managers instead set up private one-to-one discussions and small conversations to collect feedback and solicit input.
It's a lesson domestic tech managers may want to keep in mind as IT departments in the United States move toward open-office setups and team-based collaborative projects that can overwhelm introverts.
Lesson 10: Adopt a global outlook
IT in China benefits from a workforce that is ambitious and eager to learn about the rest of the world.
"They are not stuck in their ways," says Matson's Weis. Because foreign-invested firms are the rule rather than the exception, employees "are aware of what it means to work for an international entity. That global outlook is something that American companies should try to tap into," he says.
That's not just nice to have, it's actually good for the bottom line. A December, 2013 Harvard Business School study found that employees at companies with diverse staff were 45% likelier to report that their firm's market share grew over the previous year and 70% likelier to report that the firm captured a new market.
IT managers can broaden the outlook of their workforce through their hiring practices. "Look for people who have international experience," says Weis, adding that he looks for cultural and ethnic diversity in the people he hires.
"Look for people with cultural experience who, ideally, speak multiple languages," he says. "Look for skills beyond just technology."