The big idea: For decades, business schools have taught students how to formulate strategies and execute them. More recently, equal attention has been given to a third dimension that is critical to success in today’s global context: culture, a combination of customs, values, beliefs, heritage, language and social norms. By focusing on culture as an integral part of strategic thinking, executives and practitioners take a holistic approach to management.
The scenario: With natural entrepreneurial skills, Jiancheng Zhang had built several successful Chinese-English bilingual preschools in Beijing. Aspiring to replicate his success in the United States, Zhang moved his family to Seattle with a plan to open his first U.S. school just 10 months after his arrival. He secured a site and hired an architect and contractor, assuming two to three months would be plenty of time for the permitting process. The builder’s renovation price would be 50 percent more than the cost estimated by a Chinese contractor whom Zhang had heard was reliable — but he figured the American contractor would be more influential with local government officials. Things started to unravel.
The permitting process dragged on, driven by rules rather than relationships as in China. Construction costs mounted. Finally, the work was complete — in March 2015, six months after the start of the school year. Between the budget overrun and lost revenue from the delay, Zhang faced a loss of nearly $1 million. What made this project so much less successful than those in Beijing?
The resolution: When U.S. companies and entrepreneurs enter a market, hiring consultants is common practice. This is not so for many Chinese and other international business people, who are not used to paying for such “intangibles” and generally do not value professional advice as Western practitioners do.
Zhang could have sought out “ambicultural” advisers from the Chinese-American community to help him understand the “Western way” of doing things. They could have counseled him on local market conditions, hiring the right contractor, and how to execute his plan with realistic time and cost expectations. With a better understanding of the aspects of the project that were affected by culture, Zhang may have been able to open his school on time and for less money.
The lesson: Zhang overlooked a crucial component: culture. Cultural norms and expectations in one country are often different in others. Not knowing the local culture, practices and regulatory processes can limit one’s ability to create and implement a strategy.
Chen is a business professor at the University of Virginia Darden School of Business, where Chan, principal at Chanden Inc., is a visiting lecturer.