28. Gravitas Shift: When Power Is in Europe and the Future Moves to China

Hello, I'm Kevin Hong. I'm a partner at LYC Partners, an executive search and leadership advisory firm. I'm also the co founder of the Council, a private network for senior executives. And this is Leaders in Motion special episode at a different format from what we usually do here. No single guest. Instead we went back through conversations with 12 executives who build a career between China and European headquarters. For years I personally heard the same comments from European global leadership. The market is huge, so why isn't the revenue reflecting it? We need people who can sell harder, who have the relationship, who use their guanxi and who stop asking constantly for more. But budget more exceptions to the rule simply because it is China and China is different. Local and international leaders in China understand the ecosystem far better than they did a decade ago. And what hasn't moved is for most companies is the headquarter model, the frameworks, the governance logic. They're starting to shift now because they are being threatened and they may be waking up too late. That's what this episode is about in five parts. The symptoms, the structural causes, the operational consequences, the long term damage and what an actual cause correction looks like. Part 1 the symptoms. They are the behaviors that manifest the problem. On a daily defensive reporting budget battles, talent churn, strategic invisibility and cost alignment. Let's look at what this looks like when local teams try to bring the market reality back to global center. Fabien Dumont navigating the global local balance. He recalls a moment when the friction between local survival and global alignments became intensely personal. You don't say I want this for me or for China versus global. That's not happening like this. It's just what I call misalignment. Everybody wants to do the right things. I believe that people have good faith. The way you communicate minor beer way is the optimum one. And this is where you see lack of alignment between the global and local. After the Olympic Games in 2008, we have seen quite new needs in China. When you have such events creates quite a lot of turbulences around. It was not easy to move goods, for instance during the Games for safety and security reason. After the game I started to procoat because I will trade again. It was extremely painful for us. We could not get goods as planned. We were close to stop manufacturing a few times due to those results. So we proposed to increase the vertical integration of those specific products. In China. We came a bit emotionally to the global team. I was part of this emotional people because I've been through the pain. So eventually it took us a couple of years to be able to convince the executive team and the board to make it happen. The reason here is not that back in the days we wanted to have China to be in front of Global. It was just the way to explain it was not the appropriate one. That's very often what happened. It's just a misalignment or miscommunication for a common goal. Explained how the official committee bring more challenges when it comes to the real negotiation. I can tell you something that might sound obvious, but again, you need to go through it and it's very different from the western way of negotiating. So typically we have a lot of negotiations to manage and you need to learn and to understand that actually in those very important meetings where big deals are being discussed sometimes, well, actually quite often the deal is not going to be concluded around the table, around the meeting room table. And the deal will probably happen and the terms will be finalized later on, either around a good meal and a restaurant, or even in the corridors or even by the respective teams and not by the the leaders, the bosses. And that's a very interesting way of functioning that is again, not easy to manage when you're supposed to be in control of your deal and of your negotiation details. And yet you to accept that it will take longer and that it will take a lot of informal meetings to make it happen. So that's an example. Now listen to Guillem Souch, who spent decades navigating how global plants travel and sometimes fail to travel locally. When I started working with couture brands. Couture brands are very into control. They want to control the image. Preserving and elevating the image age is clearly extremely important for these brands in terms of strategy, in terms of execution. And so sometimes you are facing teams in headquarters who say, I am responsible for this launch, for this project and they want it to be executed exactly the same way everywhere in the world without really adapting to local realities. And what I realized is that this hardly works. And it can even create big mistakes sometimes. You know, in our crisis when there is a cultural sensitivity involved. But most of the time you know, you need to work on local relevancy. And if you push something that is one size fits all solution imposed by headquarters and it fails, there is first a big business impact. And there is also a big negative impact on the trust between HQ and then the local teams. Though normally you have a situation where HQ think okay, execution was poor, the team in the country didn't do a good job, and local teams, they feel unhurt and they feel blamed for something they didn't believe in and they are warned about. But it's going back to the conviction topic. It's really a lose lose situation. So for me I think it was one of my big topics while I was in China was to how to fix this situation. And it takes a bit of time because first you need to rebuild the trust between HQ and local teams. So it means spending a lot of time explaining local specificities and even doing it, you know, not as to but it's feeding global, you know, with examples so that they understand by themselves what's happening in the countries. And on the other hand you also need to explain to local teams what is truly on brand and what is not on brand. Sometimes you know local teams they are on the numbers and the sales they want to go very fast and they put the the image at risk. And so it's very important in this case, especially when you are an Akmi leader in China managing people as we were saying before, who were quite junior which was the case in the 10 years ago, 15 years ago, it's very important to create a process that integrates local feedback early, before the decisions are logged and so that in the end this local feedback can be integrated and everyone feels the ownership on the results. Now Guido Mahnoor on defensive reporting. When headquarters fears losing control and cannot steer rapidly changing environments they shut down negative use companies for example friends were working in that the top management does not want negative news and people get used to it. If there's a big distance like to China of course people get frustrated and it's happening with a lot of companies. It's for example Uber Bicycle, it's mining companies who have the same situation and they later fail when they go to Europe, Africa, wherever that's in every company the same. I think when I don't accept the truth that as a leader I don't have enough self confidence and probably a lot of headquarters see that China is becoming better and they don't want to listen negative news, they cannot steer that and that's really contradiction. I agree. Jenny Lai explained alignment. When headquarters tries to remote control a market they simply do not comprehend assuming it is one massive monolithic blow. How do we get aligned on a brand? There's a global brand direction which has to be preserved and then there's the local market realities on how do you execute it? How do you bring this vision to life? Do you have to have the resources and the expertise and the autonomy to translate this vision into the local market. So everybody has to be aligned on what the brand stands for, what the brand's history is, what the brand's positioning is. And then over time, you know, it's really can you actually execute? Can you have the trust? Can you have the autonomy? Can you have the resources to do it? So in my experience, growing pains in a market entry is extremely common, both from the brands that I worked at initially, like bringing my cores into the market, but also with a variety of the portfolio of brands that I now manage at Bluebel. It's not easy. The market changes really, really fast. China is a market that I think a lot of the rest of the world were more comfortable with before COVID because it had just been growing and growing for 10 or 15 years. And then this is not the case anymore. And then now everybody has to face the reality and it's not easy to understand and it's definitely not easy to act on from the headquarter level. All these symptoms, defensive reporting, emotional alignment please. And one size fits all execution failures are not really random. They are the logical outcome of systematic blind spots in how the center views the world. And this brings us to part two, the sources. Why does this break down? It's not because you have bad people in the region or stubborn people in headquarters. It's more of a collision of fundamentally floats global logics. What we call global mindset is often a historical playbook that is being taken as a universal truth. That's number one. But second, we also see very linear logic colliding with a new agile, high velocity Chinese ecosystem. And finally, there is also an obsolete reporting hierarchy that allocates resources based on past success rather than future potential. Pierluigi Visotti, a luxury automotive executive, observed firsthand the systemic prejudice that keeps the center, the headquarters from realizing that they are no longer the exclusive teachers in the room. In the western world, there are a lot of prejudices about this side of the world until now. So until today is still like this. So this prejudice bring also the professional environment, even within automotive to think that in Europe in master technology, master working methods, we know how to develop cars, components, systems. Actually when I arrive here, I discover that know how is already existing here already nine years ago. This it, you know, a great, a great understanding. When your idea it changed completely what you are thinking because you come here that you think you can teach, but actually you can learn, you can learn. And the other thing that change also quite significantly the way to work is understanding the attitude. Here there is an humble, silent, but extremely Ambitious way to work. Not big advertisement, not big noise about what we gonna do but a very precise strategy plan very, very well declined targets and concrete follow up action concrete plan to achieve those targets. So there is ambition with know how those are great things to achieve results. Jehan on the mismatch of structural systems the whole macro environment are different and business environment are different. Twenty years back, if it's more of a, you know, international company come to Japan and try to figure out their way to grow in a very systematic way. And that was a time that international company thinking they can use whatever worked in the rest of the world and replicate that exactly here in China and expect the brand to grow. So at that time I think we spent a lot of time trying to help the international, my international clients, their Chinese employees, China paths to convince the global ones that China actually is different. I still remember there's one classic slide saying that not one China but 56 Chinas, you know, to their global leaders. And we spend a lot of time to really understand Chinese consumers behavior and attitudes in different categories. And that is the foundation for all the business strategy. Not all, but most of the business strategy. And international companies actually do have a very good system, I have to say. So they respect the true facts and consumer insights, local ones. And I see them gradually grasp the idea that China is different and they need to tailor, they need to do a lot of localization in order to really grow and fast forward. Now most of the international companies know this. The challenge they have now is China just develop way too quick. So the insight they get, let's say like one month ago, sorry, three months ago may not necessarily valid anymore. Of course there's argument of whether there's a true insights or not, but there's a lot of phenomena can go very quickly. The problem that we're helping our clients to solve now is how to adapt very quickly in such a fast change environment. And it's not just. It is specifically true for international companies because international companies still have their own system which is actually tailored more for a western world. It's more systematic which means it's less agile. So they need to adapt. Fabien Dumour explains the reverse tech transfer shock headquarters. They didn't always realize the core of innovation that has shifted. So most of the time when we stand expats, it's to bring technical know how to bring culture, that's what we say. And China has been followers for many many years. We were up to 50, almost 50 expats late in the year 2000 and we are now very few foreigners in China because we can find very capable skill set here in China without any problem today. And when you merge the China culture, when you merge the China way of working and when you merge the China market all together it has made automotive in China the best today in the world. And indeed when you look at performance, performance here in China has been been following the, the ecosystem. The ecosystem here is completely different. It's not a matter of auto leave or not. It's all the ecosystem is, is that way. So for the customer down to tier 5, 6 or 7. So we've been pulled up by all that, that ecosystem and, and today we are now in a process absolutely to we say yokoten in our language. So to, to copy paste the best practices that we have here in, in China in a, in a global manner. You have two kind of people, okay? You have the people that still think that what take us here will take us there. And you have the people that very understand that what has made us successful in the past will not make us successful in the future. So for the second category of people it's very easy to receive feedback from someone else and to move forward with those. Great idea. Deno Mahner on the cultural dominance of Western competence models versus Chinese relationship models. Two things in my opinion. So number one is China was seen as a very reliable workforce who can do something what I tell them to do. I mean German companies have come here because China supported them to come here established companies. China's built up the supplier network. If you have, if you have a company, when you build a company like Volkswagen, the Chinese government supports to schools, universities fled there. So China did everything to support the companies. So I think the life of the German building a German company was sometimes easy, but at least not very difficult. What we as German did not understand is that number one, Chinese people are learning very quickly. Number two is I think also the complete understanding of Chinese. Chinese people build relationship with or Chinese build trust by building relationships. Some people, when they stay by themselves in the compound, they don't understand Chinese, they don't learn Chinese. German people build trust by having competence. I have a doctor titles. German people would accept me and trust me because I have a good education. Danish people for example, trust people when bringing results. And if I don't understand it as a German, I probably cannot make trust with Danish people and I probably cannot make trust with Chinese people. And only when I build trust I understand how Chinese people are working and what other requirements are and only when I understand what The Chinese requirements are I can build products they want to buy. If a car like a Mercedes is over engineered and you can drive it for 400,000km, you have to pay a price for that. But do people really want that? When I see cars, for example, in Germany, the level of digitalization is not very high. Where Chinese people like to might be tell the mobile phone where's my car parked? Then the mobile phone shows where did you park your car? Where can you fill your car? Where can you fill petrol? You can tell your car to lower, to lower the windows. Where German people just prefer buttons. Because there was not enough trust and understanding, we as German people did not understand the Chinese sufficiently to build the best products. And this is why now the electric cars, partly at least in China, are very successful. And a lot of Chinese people now prefer buying Chinese cars to German cars. Sonia sums up the ultimate source of misalignment, the physical distance that breeds intellectual disconnect. I heard for all my career on how China was booming and growing and changing. But it's true that it's. You cannot know China until you live in China. It's just a reality. And no matter how much you read about it, you need to experience China to really seize all the. Yes, the scale, the speed, but also the complexity of the market. As I said at the beginning, it's all about the non said, the non explicit elements. So I wouldn't say it came as a surprise in the sense that I. I knew I should expect it. I didn't know what to expect exactly and I was not disappointed. And I'm still learning every day. That's what makes it fun on this part 3. The operational consequences we explain what breaks when global logic meets market reality. Operations often break down. First, today's economy, constant daily friction, strategic initiatives can become exhausting. We have to convince headquarters. Second, you lose the innovation speed gap. While head office is reviewing protocols, alignment and arbitrage, local competitors are launching products. And third, you lose financial relevance. The market is kept small because you starve it of the authority to play by local rules. Ye hand on the innovation speed gap. When your internal protocol takes years and your local competitor operates in weeks. There was one real case, one of my clients. They come back to us when it comes to their product innovation pipeline. It takes them 18 months to have that idea to start have the idea to the product to launch in China. 18 months, which for them is already super fast because before it takes three years. So they've already shortened the whole process. But the challenge they have is for their Chinese competitors it takes four months for them to launch similar products in the market. And at that time, 10 years back, at that time the Chinese companies may not necessarily be. The idea may not necessarily come originally from themselves, they may copycat from international ones. But still the challenge is theirs. Basically they're saying that we spent 18 months to launch this product and in two months time China copycat got it and launched in the market and make it even worse. They have those ideas at that time, like for example brands like Kang Shifu or you know, Tongyi, what's her Chinese name for Tony Union. Something like at that time they launch 18 products in one year. And I remember the whole development process was like again month and the international companies cannot, so cannot catch up. But they have all those protocols internally to go through and there's no way they can shorten it. Compliance and geopolitical tax plans require defensive structural justification that could waste precious journal momentum. The geopolitical tension I think is probably one large one because Even you know, 10, 15 years ago, you can sense it already because even though there's many foreign companies, banks, you know, building franchise in China, it may not be entirely safe friendly because you, you have to engage with many people in the corporate headquarters. So they don't understand China and there's a lot of press to kind of have some deviation about, you know, the, you know, the condition in China and very often sort of time of politics as well. So, so that kind of impacts a lot of those decisions. How we manage in China or any leaders that have to manage a franchise in here, they have to be very political sensitive and because there are certain things that you have to face and you have to just deal with it even though sometimes it may seem unfair. A good example is that my most familiar field is actually setting up the center for different banks and different banks have different risk appetite. Some of the banks may be very India friendly so to speak, you know, and they have sent a franchise in India and, or in US or in other locations. But when it comes to China there's a, seems to be a higher compliance standard is applied and to some extent there's no legal ground on that. So that's why you have to deal with that and whether you like it or not and you just have to be patient, you have to understand where they're coming from and then you have to provide a lot of evidence, information, you know, why can it be done in India and not in China? On the self fulfilling prophecy of a small market headquarters reads your small P&L share as a lack of opportunity, refusing to allocate resources to technological shifts they cannot see from Europe the market is small because you made it small. It could be much bigger. So of course it depends on the industry you are in. But at least in my previous company, it could be much bigger. Actually, our competitors, foreign competitors, they were growing much faster because they were able to capture new businesses that we were not, we didn't, we didn't catch. So it's not about what you do now, it's about the potential. China from a previous company should be big and could be much bigger. Actually, after a few months, I tried to understand the diversification and the market trend for different market Siegville, Aeronautic telecom or quantum computing or whatever the market is. And to me it was clear within 10 years you could easily double or triple the business. In 15 years it could be very measured. So it's not about the now, it's about the potential now. How to convince, yeah, to convince your management or the headquarters that there is potential is another story. But for me it's not about now, it's about the vision of the future. China is a big country and there are a lot of opportunities. If you can make a good business case, you can get the mean. My previous company didn't have cash problem. It's a rich company actually. So if you can show your case and if you can, you know, show the clear, the clear plan, the clear business plan, it's, it's okay, you can get them in. For me, at least in my previous company, that was not the issue. Cash was not an issue. What was the issue is the will to try something very different. That was for me a struggle actually. One of my job was of course to grow the business, but also to what, what do we need to do to be ready in three years, five years or even longer? So when you see some technological shift or you feel that there is a transformation of technology, you need to start preparing for that. And this is one of the issues that I face is I started to see some technological change for different product line. And I felt that if we don't work on it now within five years, we will lose 30 to 50% of business for some market because of this channel of technology. We were not ready. So I started to talk about investing in different kind of technology, different kind of product to be able to prepare ourselves for the future. That was very hard because we could not see this kind of change outside of China. But honestly, if you have technological change happening in China, what I'm pretty sure if, if it work in China, then it will be spread everywhere in the world. So that's why coming back to what we discussed at the beginning now it's very important to me because now a lot of things are happening here for some market like telecom is one example, or quantum computing, this is something that is hard is how do you. Because it's not very tangible, right? I mean you, you discuss with your customer in China, they talk about their. Their roadmap and they are working on something and that is difficult is how do you convince that something will change and you need to start investing now. It's not very tangible, but that I had hard time to convince my headquarter about that we couldn't see that from. From Europe on part four the long term consequences what the real damage really is. You might think the damage is the quarterly EBITDA target that you miss. In fact, it is more of a structural irrelevance. It's what happens when your international leaders burn out, when your models become entirely obsolete and when you have a new competitive landscape that takes over also your home market while you were looking away. Laurence Carrato on the absolute asymmetry between European nostalgia and Chinese future focus. He shares a striking metaphor of standing on a platform as the train of innovation accelerates away. At the end of 2023, we decided with my family to leave China. That was also an important step. Now why is because after 20 years I felt the need to reconnect with my roots. I come from the mountain area in France and I really felt the need to come back to my mountain and also with my friends. I felt that I had not been a very good son, especially during COVID I didn't go out of China for three years. So that's what motivated the. That being said, after one year in France with my wife, we felt after Europe was no longer a place for us. It's very hard even for a foreigner who has spent for most of his career in Asia to go back to France. It's a culture shock, to be honest. And to me it's a little bit backward now. People live in the past and social environment change a lot. So people, after one year we decided to let's go back to China. China is a place where I feel I can contribute. I feel that I'm motivated. It's fun for me to be here. So I basically came back early 2025 and then you start to understand what's happening. You talked of course to people. I wanted to find a job Locally also. And then you realized that the past 20 years the continent changed. But although, you know, something changed still connect with the news and so on. But there anymore so the social environment a lot. But most importantly that the people in they are not looking at the future, they are looking at the past. And this is contrast to me great asymmetry with what they are seeing in China. All my life In China, my 20 years in what I saw is people that don't look at the past. We are always looking at the future. The mindset is now, it's better than before. And we know the future will be better than now. Is this T2 chance to pivot quickly in China, this openness to new things, this long term vision, you know. And I'm quite amazed with that in China, 20 years, you know, vision of the country and this very deep. You have a vision. How do I go to the vision? You know, I need three unit financing. All that. What China is doing that in France there is no such a thing to impression to see four or five years old kids kindergarten, you know, very politically driven. It's like in China engineer country. And in France kids are driving the country. And to be honest, I started to feel sad about that. And I started to first sadness, disappointment. And I felt that longer stay there. Think about train that represent innovation. This train is going fast. It's a fast train, okay? China is right, it's going fast down from the train. I'm at the station, train is moving away. And I felt that stayed longer in France I would become obsolete. So coming back to China for me was a way to still be relevant. Pierluigi Pisotti under threat to the final mott of Western prestige luxury. He warns that Chinese companies are rapidly closing the distance, redefining high performance at affordable prices in the luxury automotive sector. The panorama of luxury carmakers in China is changing in these years. In the recent years, a lot of mass market players proved themselves with some luxury cars. UID did this. Yang Wang U9 is one of the example. FAW did this. GAC did this. So we see local players trying some exercise doing sport car or luxury car. They do this because. Because they want to enter in the sector. I don't think so at the moment. They want to gain visibility, international visibility. They want to show they can do good car. So in this way also Western consumer will start to look at them. But we also see some player like Stella Top Xiaomi in some way. I don't want to say Xiaomi when we talk about luxury. But some Performance is there that start to deliver contents that are super premium, are not premium, are not luxury, are very close to it. And so these are attracting the consumers now, while the consolidated brands are performance wise, design wise and heritage wise, still very far away, still very recognizable, strong and leaders in what they do. We see consumers start starting to look at this new player with curiosity. And we get back one second to Xiaomi. Xiaomi also has a very strong strange positioning because he's proposing super premium contents, super sportive contents at a very affordable price. So it's making luxury affordable. And these naturally will attract a lot of consumer even for curiosity that both cars supposed to deliver the same performance with much more millions and now can buy the same level of performance at an affordable price. I don't know where this will leap is something that we all are studying, but I think is very curious. It's very curious. Globally there is no game yet. So luxury automotive players are always the same. We didn't see globally emerging new luxury automotive players out of China. We didn't see there are few one of two in racing in California. Lucid is one of these examples. But I feel it's still in the sector of super premium and not luxury. We are not talking about level of a Ferrari, level of an aston Martin, Nova, McLaren or even more Bugatti Pagani. This kind of level. No, for this unit you need ton there is nothing to do. You can have great car with great performance. To get that luxury feeling aura behind the car, you really need a lot of result, lot of performance, lot of satisfaction behind the product. For this there is no shortcut. Eehan on the end of international brand aura. The Italian flag of French heritage doesn't guarantee a single sale anymore. Local consumers feel China pride. I think most of brands nowadays with the geopolitical matters coming around, most of Chinese brands are less emphasized on China origin. Especially in those sectors that we all know for sure. There's a less emphasis on being Chinese brands. But like for example in the countries on the Chinese government said the one belt, one road so Middle east that the South Asia part for that countries on that one belt, one road region they can talk about or they can pick up the China origin as one of the supporting elements for Chinese brands. The importance of the being a Chinese brand and the mindset of Chinese consumers switched from more kind of a Western brand orientated already like 5 years or even 10 years back to now is they see it as equal. Nowadays most of Chinese consumers see number one. China stands for good quality China. Chinese brand stands for innovation. And in actual fact there's a lot of we actually play in a very leading position in certain sectors and technologies. So that definitely helps. And I think many Chinese consumers actually very proud, number one being Chinese and also very proud of that. China has some really great brands. So this is what we call the China Pride manifesto from you know, just not just being proud of being Chinese but then to all these Chinese brands. So yeah, so that shift has already been, has already happened for the international brands have been in China. They already know that and they don't usually they don't see them as, you know, naturally would have an aura that being an international brand, they know as a fact that they need actually fight against very strong Chinese competitors. For the newcomers, well obviously in the recent years the newcomers, international companies are less so. But I think thanks for the overall, you know, the communication and all those knowledge sharing. They don't take for granted that being an international brand would have a natural charm. They know they need to earn it. So use the example, you said I've been having an Italian flag or having whatever country's flag doesn't necessarily mean automatically you have consumer to buy your products. Obviously there are still some niche sectors or categories. You would still have like more specific luxury products. But even so, like luxury brands like bags, handbags and all that, Chinese brands are also playing a very prominent role now, Sonia, on the generational divergence of Chinese consumers. There is a quite a specific generational gap in China that we don't see anywhere else in the world right now, which is the co living of three generations when it comes to luxury spending. Let me explain that further. You have the first generation of luxury consumers who are the Gen X, So in their 50s, 60s who build their own wealth and start to experience luxury quite late, quite late in life. So they were the ones who were really responding to the logomania, to the, to luxury product as a symbol of their status, of their wealth, of their success. And they wanted to send a message to their world and their entourage entourage through these European heritage brands products. So that's one generation who's still part of our clients portfolio. Then you have the millennials. So the millennials, they are digital savvy, just the natives for some of them. They're well traveled, well educated, they understand luxury but they really want to go beyond the products. So typically they're the ones resonating with exhibitions, experiences. They want to understand more about craftsmanship, how it's made, how it's done, where it's produced and so on. And they're the ones I would say that brand started educating about luxury and who were keen to see the backstage of of the luxury world. And then you have the Gen Z obviously. So that young generation who usually in most countries of the world are not yet strong luxury buyers, whereas in China they are because they do have the disposable income to to buy luxury goods. So they're probably the least loyal type of clients because they want to experience different things. They were born wealthy, they're the first generation to be born wealthy. They're still in their 20s so it's early to late 20s and they received luxury experience from, from their childhood. So they were born in that world. They like following trends and they are really sen to what's trending right now, what is hot right now and might not be relevant tomorrow. So they're hard to catch and once you catch them, they're hard to retain as well because they want relevance, they want purpose, they want experiences. So they're very demanding clients. They buy as much from the store than online vintage pieces or TMALL is not a, is not a problem and so they're, they live on multiple channels so you can see that there are disruptions three, three generations that are all part of our client's portfolio the older one and because they're both they're all attracted to your brand for different reasons. So identifying what kind of tone voice tonehop voice for which touch point is really essential while keeping a harmonious image and a consistent message throughout Yehan are the highly discerning Chinese consumers. Even in heritage fields like wine, local consumers judge by actual quality, not by a flag printed on the label. But still for more discerning Chinese consumers they can tell the difference between French versus Australian versus Chinese wine. And I have clients actually already know the Chinese wine which is produced in Ningxia province also has really good quality. Having the French flag or Australian flag flag on the wine bottle doesn't necessarily mean that you know you can immediately earn a lot of market share. Not necessarily so. So they need to connect the dots and telling a unique selling point to the Chinese consumers. As Chinese consumers become more discerning and more sophisticated that's the natural trend. The operational failures fit a long term irrelevant. So how do we fix it? Incremental changes well fail. Relabeling regional VP roles is also more cosmetic. It requires a hard pivot. Let's move to part 5 part 5 course corrective action if you want to reverse this slide, you must abandon the obsolete playbook. It requires structural Actions across forefronts, rebuilding your board capability, forcing your headquarters to physically experience the market, decentralising decision power and fundamentally rewriting your hiring internal strategy. Francesco Pesci on the necessity of a start from zero approach if your boardroom relies on past prestige, you must actively dismantle that assumption. Traditionally, European brands have emerged in the luxury business, you know, thanks to their heritage, thanks to their, I would say product, not in all cases, but in quite a number of cases. And thanks to their product excellence and also thanks to the fact that there the European brands were conveying the European lifestyle to non American markets, to non European markets like the United States market first Middle east or the Asian, the Asian market and those markets were years ago prepared to celebrate, you know, the success of these European brands because consumers were fascinated in all European lifestyle. And now this is the playbook that essentially worked for a number of years. But the planet is changing fast and the United States, well, this has been the case for quite a number of years. But especially Asia in the last, in the more recent period has emerged as a global powerhouse. And therefore these markets are more and more sensitive to how a European brand is consistent with local values and how a European brand can resonate with the local culture. And I believe that the European leadership needs to when approaching, for instance a market like Asia today and China in particular, my advice today is to take a start from zero approach. So really ask yourself whether what has made your success, the success of your brand so far in Western markets, is it going to be also effective in China or not? And that's a question that very often European leaders do not ask themselves. In my humble opinion, this is, this is a mistake because you really need to ask is my brand relevant? You know, for Chinese consumers, maybe the answer is not no or maybe yes, but I need to adjust a number of things and then you have really to do these things. What my advice would be for for European leadership. So do not assume success anymore just because you are leading. I'd say a European brand which is excellent because of its heritage, which because of its product excellence or because of its history in general. Roscoe Arto on Changing Minds PowerPoint slides in European boardrooms don't work to build belief. You must physically drag your executives to see the local ecosystem. You have to bring them to China and to see the customer because you know, seeing is believing you can please your great ppt, your business plan, your case or to in Paris and show guys. But it's not, it doesn't stick. People can, can, can, can, can hear you but that's it. They don't believe in it. What I started doing actually is to invite more guys to China. For instance, the company owner, the president of the company came to to China. We spent a few days together and we went to t customer and he could see the dynamic of both customers. I brought a director of another business unit also for civil aeronautics, because I was telling him that if we want to keep our market share in China and grow, you know, with COMAC, COMAC for the C919 is a future C929. We had to localize more manufacturing in China for that kind of product. So at the beginning he did not want because our technology blah, blah, blah, the usual thing, okay. But he never came to China. Civil aeronautics was the number one business in China for our company. But the BU director never came. So I invited him with the marketing director also. We went to a couple of customers, COMAC and their partner, and then they could see the problem very often is how can they see what you see in China. When you are in China for many years, you see things for sure, you understand things. But if people don't come honestly, it's almost impossible for them to understand. So they have to come. You need to organize business trip, what you can call a warness trip. You bring them to customer, supplier, if you can, competitor. Sometimes it's possible they need to understand what's happening here, what the team is capable in Foreignia. I mean, Europeans still see China as, how to call it, you know, people who copy or low tech or, you know. So when people come to China and they see what's happening in Shanghai, Shenzhen, you go to Huawei, you go to a company specialized in semiconductor, you, you. It's a nice opener. Then you can be at the same level. They start to see what you see. Not yet, but they start to understand what you say. So to answer your question, if people don't come here, it's impossible. Gregory on the massive shift in the talent landscape. The flow of global Chinese professionals returning home is massive. Giving local companies a high capability, high velocity talent pool that global boards struggle to compete for in payment with the financial sector. There are a lot of talent pool in China, even Alipay going overseas, right? And WeChat going overseas. the same time, there are a lot of overseas Chinese also returning back to China, which is very interesting because I still remember when I first covered China more than two decades ago, majority of the people that go overseas for education or work overseas, and only a small percentage return roughly every year. Around 1 million of Chinese in Nigeria overseas education and then only 20% return. But today there's a flip and actually retire. And you can accumulate this right every year. And you can see how many number of Chinese returnees returning home for to work, to work for a company or to start their own business or to go to research or you know, go to work in the university. And this is actually a very big shift. The US China trade war actually accelerated a lot of people actually returning home. This is definitely the trend and I can see the dynamics. I think a lot of China is actually in a very, very good position because they can either work in China to get overseas, you know, if they have that skill set. And whether it's global firms or local firms, I think there are bigger opportunities than ever before. Jenny Lai on what effective hiring in this market actually requires, how technical skills are easily found, what you must look for. Entrepreneurial resilience, character and appetite for risk. We can find a lot of the harder technical skills in the industry or people who are super going to learn. The most difficult hiring challenge I have is usually not for that part. And the hardest quality for me to find has more to do with a person's character. And I think this is an interesting aspect of hiring because in China the market was consistently growing until just two or three years ago. And so a lot of the candidates I used to meet have basically had a long history of growth. The market has been growing and there's therefore a lot of opportunities and some, sometimes any shortcomings are easily overlooked. But now the market is different. And you know, specifically when it comes to what I'm looking for, you know, bluebell is a very well established company, but we are also almost always in a startup mode because our business is bringing new brands and new business models to the market. So we are a well established company, but also having startups within our company. Right. So in the best of times, it's not easy to do a startup. The market is difficult. And so I look for people who have a combination of, you know, expertise and professionalism. But I'm also looking for people who are very entrepreneurial, very agile, very resilient. They have experience handling diverse and sometimes I would say difficult business situations or growing pains. I'm looking for people who are very curious, who are really open to learning and who find the challenges of building a new brand and a new business not scary, but exciting. And that actually has been not so easy to find. Fabian Dumont explains decentralizing control relies on building on building mutual upstream, downstream Trust real time culture requires real time operational flexibility, not bureaucratic box checking. So China is what we call reassertion based culture, right? So it's way easier to meet top leaders in China than it is in the rest of the world. Since many, many years, even, even, even when I was before the vice president for engineering for China, I couldn't. I could meet chairmans, I could meet CEOs, I could meet CTOs on a daily basis anytime I was going to see a new color. Yet it is not the same at all in the JVs or in the when I go to visit the Western world. So this, this is something that is very, very different. That's the first thing. So it allows better partnership. And the reason why is because we can build clients partner together other than to have this transactional relationship. You have an early relationship that allow you to understand what, what goals the customer wants and how can you feel better and how can you support this goal early in the, in the value chain then being located here. I mentioned how the relationship with the head office has been always important. You often over communicate to make sure that misalignment does not exist. So that allowed me to be systematically and always in connection with the different leaders that I was working with consistently. That was true in operations, it's true in quality and it's true in engineering. So definitively a key, something very, very important in my career. I'm not saying that, you know, it has been key for me to become the CTO of the company, but without those relationships downstream and upstream, you won't be able to achieve your goals. So working closely and cross functionally has been always very critical and very important for me to be able to achieve success not personally, but as a team, which will give me personal success after work. Kel Rici Wisotti on why companies must change the resource allocation strategy. Brands must keep actively working on their legacy right here in China, where the world's most aggressive cost and innovation champions exist. As a matter of fact, innovation is happening here. Cost champions are here. You don't want to learn from this, then you will lose. The next challenge is here, where things are happening and you need to be here if you want to be also able to predict what is coming next. What we said before, probably a lot of western companies didn't see this coming because they were not here. But being here, investing here now you can use cost champions, you can help great engineers can see touch the technology, experience the technology and use what is more relevant to your business. Chinese culture was always Been from my point of view, from what I Learned in these 90s, always more oriented in volumes, big numbers. But now the point is that these big numbers, in my opinion are not bringing the profitability expected. You do big numbers, but you just move money. This money never enter in the right pocket. They started to look at something smaller, but more like margin, which typically is the luxury industry. The point of luxury industry is that you really need to be the best in doing what you do. And you need the time, lot of time for consumer to get it, to get your positioning, to get the quality of your product and to build that legacy that make you recognizable as a luxury player. And this is something that in this moment, Chinese players don't have. So this, I think is still a great advantage that European companies or Western companies should not lose. They should be very careful to protect. I think is still an industry where the big leaders are and will be for several years, European or Western. From the other side, we always have to count the consumer trends. As for automotive. And we talk now luxury could be automotive or other things. And as we said here, the consumer behavior in some way can be changed, can be guided. So we cannot really predict if in some years there will be some adversion. We already start to see a little bit of adversion to Western brands and some more favorable behavior to local brands. This is for jewelry or for clothes. We start to see this here in China. So Western companies should be very careful to protect their heritage and to propose something to protect their legacy, to work on their legacy. Don't live just on what has been builded with years of experience, years of performance, but keep working on it. If you want to keep this advantage Yihan on Chinese brands going global. This is the most advanced company I've seen local company I seen here in China and with a global presence. So their mindset they already operate as a global company. And for many of Chinese companies now try to go global. There are still. Many of them are still at the baby steps. Meaning they came to us, they just had to think about what would be my global branding. They already known what kind of product I need to launch in the bestseller world. And some of them start to think treat market differently. So like if they go to Latam, you know, the product will be different. If they go to Europe, the product will be different. If you go to the Middle east, the product will be different. They already have that several years back. And now they start to think what is the overall branding needs to be look like at the global level. And whether they need to do a local relevance themes or topics. So it's like, you know, you have the stage for Chinese companies go global. It's like the international company come to China, they always start thinking as product first drive product, dump the whatever. They have their domestic market to that specific global countries and then think about okay, how I product wise probably be more, more local relevant. And then they move on to the next stage. How can my brand be more locally relevant? So they're seeing the next have this journey. International companies here in China, they've already done that journey. Chinese companies, most of them, they just start at the product level, not even the brand level, but there's a still bunch of them already start to think about how to make brand relevant locally. And finally, Guido Maunde on advice for new leaders entering the country. It requires psychological safety, flat hierarchical distance to the profound openness to learn from Chinese execution methods. Number one, what I would advise leaders who come first to China. I think the first thing is be open and be curious. So you have to be able to understand that China is different, that Chinese people have certain rules, that Chinese people need relationships, etc. So first thing is be open. The second thing is love what you do. You do not have a work life balance here. In my current job there can be some problem. Recently we had to fire in the company, very small one. But then of course I take a taxi, I go to the company and check with my team together what has happened and what do we need to do next. Might be the government is coming as well and checking. But you cannot do it when you hate it. You can only do it when you say, what I'm leading a company with 1900 people. I'm very happy because I give 1,900 people work. I help families to raise children. I have helped families to earn money to have a good life. And when you have this attitude, you always support the company and you love it. So you have to love what you do. You have to build trust with the Chinese. You have to understand how to build trust, having dinner with the people, talk with them, etc. And then at the beginning people say what they think you want to hear. It's they do it because they're unsafe, they don't know how you react. They want to please the bottom, invest time. You can do that. Create clear targets and discuss the targets with the people. Learn everyday, learn, learn what Chinese people make better than you do. As I just said, provide psychological safety and develop people. If you develop people, they say thank you. If people are better than you. If you have a good friendship, they will support you also to become better. Me, the roles are different. The finance manager will not take over my job or repurchasing manager or production manager because my knowledge is much broader. But if I make the people the production manager much better in production, he's happy. Perhaps the finance manager to be good with the KPIs in finance he is happy as well. So in some words love what you do, learn a lot, adapt to learning and work together with the people. Narrative could easily be Chinese companies are winning because they are the fair. In fact, they're winning because they built a playbook for markets and then globalized it. I would invite you to ask yourself a different set of questions. Are you trying to sell more or do you actually bring value that market needs? How fast are you operating in theory versus how fast are you operating on the ground? How much are you generally willing to localize your standards to China and not just marketing but real governance, risk appetite and decision speed? Are you pursuing market share or are you optimizing a cost to revenue ratio that is designed for a different time? What resources and capital are you really prepared to commit not as a trial but as a long term bet? China is not a low hanging fruit. It's not a test market where you send 1% to figure things out. Thank you for listening to Leaders in Motion and if you want to go further, join the Leaders in Motion Academy, our executive program. The first step is simple. Subscribe to our newsletter in the show Notes and you'll get access to our exclusive insights and all the details about the Academy. This podcast is produced by Melanie Hong, who helps leaders and organizations create strategic podcasts. I'm Kevin Hong and see you next time.