Can do? Must do?

In 2000, the Chinese economy opened itself up to world markets. Since then the country has become popular with foreign companies who are acquiring holdings and opening branches there. For their part, large Chinese corporations are adopting a more global approach too. This turbulent development process has turned ERP solutions into a key vehicle for innovation. Enterprise Resource Planning features repeatedly on the political agenda and businesses are exhorted to implement it. However, Chinese companies are not prepared for implementing ERP, as this would require them to adopt a completely new management philosophy. It is therefore often touch and go whether ERP implementations in China will be a great success or a miserable failure.
Chinese companies often expect that ERP solutions will deliver comprehensive modernization in a single development step, effectively through a single package solution. Foreign companies for their part generally want to implement their own process standards in their Chinese branches. These two sets of intentions are often melded together in joint venture companies, which are common in China.

Departmental orientation

SAP software is consciously oriented towards business processes. However, these are often unfamiliar to employees in Chinese companies. Companies here are perceived differently to those in western industrialized countries. Employees in Chinese companies identify themselves predominantly with departments, in which each employee has an assigned role and function. Organization at company level, known as “danweiism”, tends to be less developed. The interests of the departments predominate and their relationships to one another are clearly defined. Only if departmental orientation can be overcome can process-oriented thinking and behavior be introduced to structures of this type.
This is not the only peculiarity that distinguishes Chinese companies from the international “best business” practices of western industries. Other examples that have a negative impact include the practice of issuing reciprocal sales tax invoices, and the customs regulation that the manufacture of goods for export – from the raw materials to the end product – must be kept strictly separate from the production of goods for domestic consumption. This latter point ultimately leads to companies having to open a “factory within a factory” for their export production.

Model with quantum leap

A further oddity is the way in which laws and regulations, which change regularly in China, are dealt with. A subjective distinction between what “must” be done and what “can” be done leads to different results in different cases.
Another reality of Chinese companies is the fact that most business processes are manual, often involve different variants, and do not conform to fixed procedures. Procedures are not usually discussed openly or documented. Where business processes are transformed into a definitive model and automated in the course of an SAP implementation, this represents nothing less than a quantum leap for the company in question. All of a sudden, ways of doing things need to be put in place for procedures that previously were not even conceived of. Procedures are also needed for ensuring the quality of master data, since the consequences of poor data quality will not filter through until a much later stage.
Functional and process-linked characteristics can be easily underestimated during ERP implementations as these have hardly been an issue when handling processes manually. Although functions and hierarchies are much in evidence in China, their effectiveness is not discussed.

Movement on the job market

The demands made on Chinese employees in implementation projects and subsequent application are very high. After all, they are required to learn and operate a new and complex piece of software. To do so, they require a corporate culture that is geared towards management and business processes. ERP solutions require an automation logic that needs to be implemented with a considerable degree of discipline – makeshift solutions and improvised working practices are no longer viable. Staff also need to have a command of SAP terminology and often have to learn English, sometimes in complex subject areas.
Only a few people on the job market can offer this skills set. Any employees who fit the bill often already hold other key positions and cannot be easily scheduled for additional project work. As staff in implementation projects are often assigned two or three functions, it is extremely difficult to ensure the requisite quality. Despite this, foreign firms in China provide only a small number of highly qualified positions.
While young staff in particular are very keen to learn, they are also very inclined to switch employers. Sometimes project teams change composition even before the live implementation phase is underway. This delays projects, since there is seldom a sufficient budget in place to resolve such problems quickly. The high staff turnover continues into the follow-on period involving the main user group and regularly results in situations where the necessary expertise is suddenly no longer available in the company.

Growing with solutions

Successful SAP implementations often follow very simple rules. One basic rule is that SAP implementations should be set up to be “growing solutions”. It is better to achieve a little less functionality within the earliest possible timeframe than to attempt to have fully optimized processes in place right from the outset. The process of defining the functions to be implemented can be equated with a large meal where sufficient “time for digestion” needs to be allowed between the various courses.
It is best to look for ways to simplify the ERP implementation process. One way is to draw up a phase model that initially seeks to deliver a simplified set of functions, which is then upgraded to a more complex set later on. This approach needs smaller optimization projects to be scheduled into the plan from the very outset. These projects may be earmarked to take place one year after the live implementation phase, for instance. “Growing” also means taking into account the speed at which the organization can change. Pushing things too quickly can cause staff to adopt a defensive stance. Employees often keep these feelings well under wraps and do not communicate them openly, so westerners may find it difficult to pick up on them and will often do so too late if at all.
In China, it is essential to have the support of the users on the ground. Local support services must be in a position to understand process problems expressed in Mandarin Chinese. If this is not the case, linguistic shortcomings can only serve to amplify any problems that may occur.

Problem with templates

As a result of China’s development into the production location of choice for many international companies, ERP implementation projects essentially need to reach all the way from the management to the factory floor. One preferred implementation strategy is to roll out ERP solutions as preconfigured templates in the different branches. This roll-out strategy may initially seem viable and cost-effective as it promises rapid implementation and control of key concepts. As process definitions and the implementation model are already in place, an additional business analysis is often viewed to be unnecessary.
But this approach causes further problems in addition to the peculiarities of corporate culture illustrated above. It creates a dangerous mix when combined with the reticence to exchange information within the company, since process malfunctions tend not to be addressed early on, but are only discovered when it is too late.

Dr. Oswin Hartung
Dr. Oswin Hartung