The right stuff for a changing world

Founder of new Chinese business consultancy wants to serve clients both within and outside the country

Edward Tse wants to change the face of global management consultancy forever.

The 58-year-old recently quit as Greater China chairman of Booz & Co to form his own China-based management consultancy.

Regarded as one of China's leading management gurus and author of the highly acclaimed The China Strategy, he believes the rise of China now necessitates a complete rethink of the global consultancy industry.

He hopes his new consultancy, Gao Feng Advisory, will put an end to the 100-year dominance of big name US consultancies such as McKinsey & Co and others such as Boston Consulting Group and Bain & Co that emerged after World War II.

"Our aim is to be mentioned in the same breath as McKinsey & Co and Boston Consulting Group on a global basis. We are positioning ourselves as a global firm, and because of the importance of China today, we have already got a good platform," he says.

Tse was speaking at the China World Hotel in Beijing just a few days after leaving Booz (which has now been renamed Strategy& after its recent takeover by PricewaterhouseCoopers).

His move has come as something as a shock within China's management consultancy circles, particularly since he is such a high profile figure within it.

He believes a gap has been created in the China market in part by international management consultancies not responding to the rise of China.

He insists that their DNA has remained locked within the United States and that they have been too reliant on selling standard products and services in the China market that no longer best fit market needs.

"In management consulting today, most of the large international consulting firms originated in the West and, in particular, the United States. Their DNA is very American," he says.

"China is set to become the largest economy in the world but today China has no real representative organization in knowledge-based industries, including management consultancy."

He says there is a gap in the market because the existing Chinese management consultancies - some in existence for almost 20 years and with more than 1,000 consultants - have very much limited themselves to the China market and do not have global reach.

"They are purely Chinese. They started in China and they are run by Chinese and are based only in China. They typically tend to work for only local Chinese clients. They are also fee-based and their fee size is much smaller than the average international consultancy fee. You might say that they have smaller ambitions."

Gao Feng, which will have offices in Hong Kong, Shanghai and Beijing, will start with a core team of 20 but this is expected to rise to 100 next year.

To give it greater scale, the consultancy will be linked to a network of consultants in locations all over the world, many of whom would have worked in the past for the major consultancies.

"We will have a combination of a core team with an extended team of gray hairs who will have a real depth of experience our clients will be able to draw on. We believe we can grow from between 50 and 100 percent a year in the foreseeable future."

Tse, who almost has the air of a high priest, has no concern about choosing a Chinese name for the consultancy since he believes it will have resonance in the future.

"The literal translation is high wind but it is actually made up of four Chinese characters, gao feng liang jie, which means integrity.

"You don't have to call yourself something Western-sounding to make an international impact as Huawei (the Chinese telecommunications company) or Samsung have proved. I intentionally chose a Chinese name because if we become a global firm in 10, 20 or even 50 years' time, I want people to know our Chinese roots."

Although to some extent disillusioned with the approach of Western management consultancies in China, Tse is very much a product of the industry.

The son of a Hong Kong building contractor, he studied engineering at the Massachusetts Institute of Technology before doing a doctorate and an MBA at the University of California, Berkeley.

He first went into consulting with the Boston Consulting Group in San Francisco in the 1980s before moving back to Hong Kong in 1990.

He was managing partner for China of BCG from 1993 to 1996 before moving to Booz in 1997.

He has also had stints as executive vice-president of corporate strategy for Hong Kong Telecom and as a part-time member of the Hong Kong SAR government's Central Policy Unit.

He believes the international consultancies have often adopted the wrong approach to China and have been all too keen to sell one-size-fits-all products whether they work in the China context or not.

"The consultancy firms can be too American-centric. The CEO can sit in Cleveland, Ohio, travel very little and not really know the difference between China, Brazil or Russia and just want to sell the same thing everywhere."

He says the big names are also very keen to work for the big-fee-paying clients, which is not the right approach in China, where budgets are often smaller.

"They want to go with bigger clients, bigger accounts and bigger revenues. That is OK in some markets. In the United States you can have clients that are worth $10 million, $15 million or $20 million a year. But in China very few clients will pay that. The market is still in the very early stages of consultancy."

Tse also believes some aspects of Western management education that often underpins the work of the international consultancies is increasingly out of date.

"In my view the Western management theory that is being taught in business schools and which is practiced by the leading consultancies was developed more than 20 years ago and hasn't changed in any distinct manner," he says.

He singles out the core competency theory, adherents of which take the view that companies should stick to a particular specialized area and not diversify.

This has dominated management thinking since the early 1990s and was a break from the previous norm of diversified conglomerates often operating in several diverse sectors.

"It doesn't really fit into the China context. If 15 years ago you told Jack Ma (founder of Alibaba, the China e-commerce giant which will soon have an IPO in the US) you can only do what you are good at, he would have said he wasn't good at anything. The Western consultancies would have told him there was no way he could take on eBay."

Tse says it is also increasingly important to understand the context of the Chinese market.

"Companies can be particularly vulnerable to changes in government rules and regulations. You have to get very close to the industry and anticipate changes not just next year but also in five and 10 years."

He also says some of the international consultancies haven't kept pace with the increasing multidimensional nature of businesses. The rise of China has increased the complexity even more.

"I don't know how many dimensions there are but before China emerged as a new commercial and business power, the rest of the world only believed there was a certain number of dimensions. I think there are now some additional dimensions that weren't previously talked about or discussed."

Tse hopes to play a role with Gao Feng in helping Chinese businesses go global and he has been impressed by the success many have had so far in underdeveloped markets like Africa.

"Africa has proved a great training ground for Chinese companies to help them eventually take on more developed markets.

"We intend to be very much a global consultancy and we will also be keen to help African companies exploit opportunities in the China market also. If they really want to understand the China market and understand how to be successful here, we would certainly be a service provider to help them," he says.

Perhaps more importantly, however, Tse believes Gao Feng can be at the vanguard of China's adjustment to be a more service sector-led economy.

"I believe that if or when Gao Feng achieves critical mass, it will be a manifestation of China's soft power. That China is not just about manufacturing, or about Chinese tourists buying luxury brands in Paris and London but also about a new sophistication in the service knowledge-based industries."

andrewmoody@chinadaily.com.cn

(China Daily Africa Weekly 06/06/2014 page8)