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KFS (KM) in China:
IX Personal interview with Peter Smith

Position: Entrepreneur in Shanghai, Founder of a design company
Interviewer: Stefan Broda
Date: 17.2.2005

Topic: Culture influencing Knowledge Management in a joint venture design start up company

The interview was very informal and took longer than 8 hours. The protocol below is a summary of the conversation. As the author has a good relationship to the interviewee, information from the interview was complemented with information exchanged at other informal occasions.

Author: So let us talk about Guanxi.

Smith:
Ok, lets look at the diagram you made for your thesis. I was telling you before how Li Ping does not want other people to know that Isabella was his wife. There is a reason for that because if other people know that they have a connection, they know can use that against them. So if you screw me over, I'll tell A and then you are screwed over too. So that is just another way people control knowledge about Guanxi.

The other thing I wanted to say about this is that I am constantly amazed about the level of complexity of these networks. If you start to put it together, it just goes on forever. I'll tell you a little anecdote to make it clearer: So there was a time when I had a visa issue. It wasn't a big issue, a minor one but it needed to be resolved. Li Ping says "I know someone who works in the visa office who will sort this out". I don't think that it was any law breaking but just making sure that my visa application was taken care of and I got the right result. The person that he knew was his ex-classmates husband. So we go to this ex-classmates husband and get sure that the thing is taken care of. In return, we get him a free dental checkup at Isabella's Mother's former coworkers dental clinic. So Isabella's mother was a nurse and back at that time 30 years ago and through some Guanxi I don't know she helped this doctor to become director at this well-known dental clinic. And this was his big career break. So for his entire life he would owe her. And now it's a card in her hand. Every time she wants to help somebody, she'll say: "Hey, I know this dentist. Maybe you might wanna check him out for free".

So then later on, the same Guanxi came up again when I was in the car with Isabella and Li Ping and parked in an area where it was illegal to stop. The police officer pulls us over and starts to write a ticket. So Li Ping is like: "No, no, no" but the officer wouldn't listen and issues the ticket. Then, Li Ping says: "I don't think this is necessary because I know the chief in this district". The officer doesn't believe him first but then calls the office to find out. Indeed, after the call the ticket disappears in the officer's pocket and we are free to go. So it turns out that 10 years ago, when Isabella's mother was in a car and pulled over by a cop, she used the dental Guanxi to avoid the ticket and started to build a relationship with the officer. Now, this guy is police chief in this district and every time somebody has trouble with the police there, the matter resolves itself and the chief gets a dinner or a dental checkup. They hook up in ways which would be unbelievable by Western standards. But I see two things here: One, its very functional and two, you always have to refresh your Guanxi network. So often you might just do things as gestures without its really being needed.

Author: So, Guanxi is important in private life. How about business?



Smith:
Very important! My business partner always says: "Guanxi is the basis of every business in China and in order to make good Guanxi, you have to be patient and begin small. Normally, I don't do business with people I haven't known for 4 or 5 years". The best example is my own company. I knew Li Ping for many years in university where we studies together in language exchange program. I visited China afterwards a couple of times and told him that I wanted to do business in China in the web design field. Although he never explicitly said that he wouldn't do it with me, he also wasn't really enthusiastic about it. So when I came back, I actually was not expecting him to be my partner because he hadn't done it the year before. What I was not aware of was that the things that were happening were a progression of steps. Looking back, its easy to see.

Author: Ok, I see. So now you have a business partner. What happened then?

Smith:
We sat down and wanted to get things straight on our perspectives and our goals. We agreed to deliver top quality on mid-prices so we are cheaper than the international design firms but more expensive than the Chinese low-cost companies. At this day, we seemed to talk about very specific terms like quality and success but later it became clear that we actually meant completely different things. You know, after half a year, we had a project for a huge company and I made a decision to spend much more money than they give us to deliver top quality. I look at it in the long term. We exceed their expectations and will get more projects later. But Li Ping wasn't very happy. For him, the project was a total failure because we made a loss. He didn't see it the same way I did. But after time, as the work delivered got a lot of good reviews from the customers and more projects came in, my way kind of became right in his eyes. Not because it was the right way but because he gained more face. Most of he communication went through him.

Author: Lets talk more about your work. Were there any cultural differences between you and your customers?

Smith:
Definitely! You know, in the beginning, I had customers who told me: "hey, you are Westerner! Could you give me a Western design?" But when I presented my new, Western style, innovative designs to our customers, I could see pain on their face. That was too new to them. They would stand out of the croud. In the US, you have to reinvent yourself from time to time. Just look at Madonna and how often she changed her style. The way I see the market in general is that the Western designer often takes higher risks by drafting very creative designs with top quality. The bad side is that this takes forever and costs the client a lot more. The typical Chinese designer I have seen so far tries to complete a project assignment as fast as possible, does not take any risks and thus delivers something which fulfills mediocre quality expectations of the client.

Author: So a more short term orientation on business? Also short term orientation in working style?

Smith:
Oh god. I need to tell you this story. You see, at that one big company, we had another project coming in to design a product portfolio leaflet for a fair in Vietnam. The photos they gave us were crap... taken with a digital camera. So we asked them to commission the photos to a professional photographer so that they could not only be used in this project but also later for other work. Actually, my business partner looked at me, smiled and said: "You know, Peter, in China, we never reuse photos". That struck me. They never invest in good pictures because they assume that the client would choose another design company for the next project which would want to take photos by itself. It doesn't cost much but it brings a little bit more profit. It think that has something to do with the Chinese being screwed over all the time in their history. First Revolution, then Japanese occupation, the civil war, great leap, it goes on and on. Every twenty years there were destructive events in china which made them loose what they built up for decades. So it became absurd for people to plan 20 years ahead. Most people now rather think how they can rich in 2 years.

Another example is Jun Ping, who we hired as work got more. Actually, we were quite lucky to get Jun Ping because he is very open to a Western perspective and prefers to concentrate on the work itself rather than relationship surrounding the work. When he works, its very different from me. He is the short-cut expert. You have to watch him work with photoshop. Its absolutely insane. He knows literally all short-cuts and if a function has no short-cut he programs them. That way you see him move his mouse a bit but the main action is on the keyboard where his fingers rush from one combination to the next. I think the Chinese education system helps a lot. Probably learning short-cuts is just like learning characters.

Author: Any cultural differences with him regarding knowledge transfer?

Smith:
Oh yes. Whereas I have to add that these problems were only at the beginning. I was really frustrated with him but figured out a way to overcome our differences and he is definitely a good learner with the right attitude. For example file conventions. As you know, I had been working many years in the US as freelancer so I knew how important correct file management is if you ever want to find stuff later on again. But for Jun Ping, that was quite different. When he thought that a project was done, he deleted it. He told me: "why do I need to keep it? I will just do it again". I couldn't believe it!
So I tried to teach him the way I wanted him to do it. At first, I believed that if I explained him why I want him to keep the convention it would be easier for him understand and do it. But that didn't work at all. He told me "OK" and nodded with his head but then just saved the stuff on the desktop. How am I supposed to find that when he is not in the office? That would really make me look bad when a customer call me and needs a file and I cannot find it. I told him that too and suddenly he listened more carefully. Probably didn't want me to lose face. So next time I saw him save something I stopped him and told him exactly how to name it and where to put it. After a while when he had done it for 4 or 5 times, he began to see the benefit himself and could understand the value of the convention. I tell you... in China; Principles don't' stick, rituals do!

Author: Very interesting. Lets go back to Guanxi. Would that be something you partner or employee would get knowledge from?

Smith:
Definitely. For example one time, a customer needed stuff printed on stickers. I had no idea where to get that so I asked Jun Ping and he just renamed his MSN nickname. And suddenly his friends and colleagues which build up most of his Guanxi now contacted him and told him that they knew people who probably knew that. So after a couple of chats he had a name and an address. I told him that in the State we use yellow books to get that kind of information and he just looked at me in a strange way and said: "Why should I trust entries in a yellow book if I don't know what and who is behind it?"

Author: Sounds like you are getting along pretty well with him.

Smith:
Very good! We have overcome our initial differences, still have some issues from time to time but you have that everywhere I guess. So I face the bit of a problem how I can keep him. The thing is that our company is really small and I don't have a lot of money. But I don't want him to go to other companies. So what I do is to try to give him work which helps him develop himself and to let him do fun and creative stuff even if it's not profitable for the company. That is something our Chinese competitors don't really care about. They just make their employees do stuff without caring about their development. Sometimes it hurts because for some jobs which are boring and competitive you get a lot of cash, like photo editing. But I think that way, I can offer him something he can hardly find at other companies.


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