30 Apr 2001  Research & Ideas

New Paths to Success in Asia

The HBS Asia-Pacific Research Center in Hong Kong is helping HBS faculty identify opportunities for researching Asian businesses. This local base of operations opens doors to faculty that would have otherwise remained closed or undiscovered.

 

Businesses in the Asia-Pacific region today are caught up in a dizzying swirl of economic, cultural, political, technological, and social change. Enormous opportunities await managers who can harness these power currents to drive their businesses forward, but their task is made more difficult by the fact that they are often breaking new ground.

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"A lot of people think that dot-coms in Asia are just taking U.S. technology and replicating the same business models. That may have been a valid criticism in the past, but things are really changing." The speaker is David Lane, an HBS senior researcher in the Global Research Group who has been working recently with a number of faculty members to develop Asian-based cases for the School's curriculum. "There's one Chinese company, for example, that has established an e-mail/postal service that expedites correspondence with people in rural areas who don't yet have computers," he continues. "This company's service allows e-mail messages to be sent from anywhere in the world to a post office near the addressee's home, printed out as a letter, stuffed in an envelope, and delivered in just a few days. They're even selling advertising space on the back of the envelopes. It's one example of how Chinese companies are looking at their own environment and finding interesting opportunities that someone in the United States wouldn't even consider."

Business frontiers are being pushed back in countries throughout the Asia-Pacific region. Poised to enter the World Trade Organization, China is sowing the seeds of entrepreneurship in its state-owned enterprises; the Japanese government is challenging its own telecom monopolies; and wireless technology in South Korea and elsewhere on the Pacific Rim has leapfrogged U.S. advances. In this dynamic environment, detailed insights such as those developed by Lane and other HBS scholars are essential to understanding the realities of doing business. They provide what Asia-Pacific Initiative director F. Warren McFarlan calls "local content." For HBS faculty, access to such information has been made easier since the 1999 opening of the School's Asia-Pacific Research Center in Hong Kong, which has served as a jumping-off point for scholars who are involved in a fascinating exchange of ideas with many of the senior executives who are charting the future course of Asian business.

"Asia has always been a tough place to do research," notes McFarlan, the driving force behind a joint HBS-Tsinghua University executive education program that premiered in January. "With a 24-hour plane trip and 13 time zones between Boston and China, the language barrier, and cultural differences—Japan is as different from China as the moon is from Europe—having the Research Center as a base has made a tremendous difference," he observes. Executive Director Camille Tang Yeh (MBA '80) and her staff, says McFarlan, "have helped our faculty make the best use of their time by providing logistical and research support, establishing contacts with leading CEOs in the region, and sharing expertise that comes from living and working in the Asian environment on a daily basis."

Under McFarlan's guidance, seven new cases were prepared for the Tsinghua program and will find their way into the School's MBA and Executive Education Programs. They range from a study of a century-old Hong Kong-based trading company that has extended its global reach with a $200 million Internet operation to a profile of a new state-owned enterprise charged with developing China's first all-fiber-optic broadband Internet infrastructure. "The region is rich with research opportunities," McFarlan notes. And the growing number of HBS faculty members who are studying companies throughout this rapidly changing area of the world would doubtless agree.

In Japan, for example, Professor Lynda M. Applegate is working on a case on the launch of Nasdaq Japan. "This new venture is developing a hybrid financial market model for Japan that integrates Nasdaq's U.S. market and the traditional Osaka Securities Exchange market model," Applegate explains. "It ties in with my ongoing research on the impact of information technology on industries, markets, and organizations." This interest has also brought Applegate to Singapore, where she is studying PSA, formerly the Port of Singapore Authority. "PSA has launched a new business, Portnet.com, that licenses its world-class transshipment port operations and technology to ports around the world. In some cases, PSA not only sells the software but also operates the port. I'm looking at how Singapore is using such technologies to create a global presence that far exceeds its modest size."

Technology has also inspired Professor Richard L. Nolan's current interest in Asia. Nolan, who was involved in the recent Tsinghua program and teaches Competing in the Information Age in the MBA curriculum, is intrigued by how different countries react to new technologies. "In the United States, we embrace new technology with a huge amount of enthusiasm," he observes. "We develop a lexicon, rush to invest large sums of money and energy, and a phenomenon is born! Then, after a year of unsustainable stratospheric growth in stock prices, we wake up to find that we have really created a lot of dot-nothings.

"However, in Japan, China, and elsewhere," Nolan continues, "you see a different perspective. Many companies abroad have been very smart about importing the U.S. dot-com model—without all the hype—and are really looking at what works and what doesn't. China knows it has a huge price advantage in terms of production capability if it can make the Internet work to its advantage to market goods to the West. American managers are still reeling from last year's wild dot-com ride, while managers abroad are busy applying its lessons." (Nolan will document management lessons from the recent experience of dot-com companies in a forthcoming book, dot vertigo.)

An interest in the concept of mentor capitalism brought HBS Professor Dorothy A. Leonard and Professor Walter Swap of Tufts University to Singapore and Hong Kong last fall. The pair had been studying Silicon Valley mentor-capitalists (successful entrepreneurs who have cashed out of their own companies but serve as business coaches to fledgling enterprises) and wondered if a similar phenomenon were taking place in Asia. "We looked at industries from timber to Internet software and found that there is a real difference between Silicon Valley and Asia," Leonard reports.

American managers are still reeling from last year's wild dot-com ride, while managers abroad are busy applying its lessons.
—Professor Richard L. Nolan

"We encountered far fewer mentor-capitalists in our research in Hong Kong and Singapore," she elaborates. "First of all, we found that there aren't as many Internet executives who have been in their businesses long enough to be able to cash out. Also, mentoring is done through the more traditional channels of venture capital and, more recently, business incubators. The family business concept is still pretty strong over there." Leonard and Swap did observe, however, that more family companies are starting their own business incubators, often run as a kind of venture arm by younger members of the family. "Silicon Valley is definitely a strong influence in Asia," says Leonard, "but its trends are subject to a different cultural filter."

The list of HBS research projects in the Asia-Pacific region is long and destined to get longer. "The dividend, of course, is new programs, books and papers, better teaching materials, mutually beneficial relationships with Asian companies, and more top-notch Asian students in our programs," notes Warren McFarlan. "We're in a much-foreshortened global economy today, where the impact of developments in one part of the world is felt across the globe in pretty short order. The importance to the School's mission of in-depth, locally based research is more significant than ever."

Key Themes

Exceprted with permission from "Beyond the Rim: New Paths to Success in Asia," Harvard Business School Bulletin, April 2001.

Since the opening of the HBS Asia-Pacific Research Center, Executive Director Camille Tang Yeh has stressed the importance of facilitating faculty contact with prominent issues, individuals, and companies in the region. "One of the primary values of our center is to help faculty identify key business players and to place interesting business problems in a relevant context," she notes. "We provide observations and insights that wouldn't necessarily be on Western radar screens." Below are some of the research topics faculty have pursued with the support of Yeh and her staff.

  • Executive stock options: Their treatment and use in different Asian countries.
  • Mentoring new businesses: How is experience and expertise in building businesses transferred?
  • Southeast Asian management learning, pre-and post-Asian crisis: Have there been changes in management practice in Southeast Asia in the wake of the Asian economic crisis?
  • Broadband development: Hong Kong and Singapore have the most sophisticated fiber-optic infrastructure in the world. What are the implications for their ability to leapfrog content and technical developments in this sector in the United States?
  • Internet development in China.
  • Online marketing and consumer behavior in South Korea.
  • Models of Internet business rollouts in and outside Asia by Asia-based old economy and new economy firms.
  • The development of supplier and client relationship management in Japanese companies.

Exceprted with permission from "Beyond the Rim: New Paths to Success in Asia," Harvard Business School Bulletin, April 2001.

From the Harvard Business School Bulletin