No Winter lasts forever – What we can Learn from China’s Economy Restart
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Traffic is moving and clocking-in machines are beeping again – life in China is resuming.
China’s economic recovery picks up speed at the end of 2020 – something many other countries are longing for. And it has done so more quickly than most observers expected. According to data from the National Bureau of Statistics, China’s GDP grew by 6.5% in the fourth quarter, being the only major economy to have expanded in 2020. This puts China a step ahead of the rest of the world on the recovery curve.
For me, developments in China provide valuable insights that can help us better understand and prepare for our recovery in Europe and the US. Which is why I am delighted that my colleague Xiaoxun (BJ) Zhu, Head of Siemens Advanta China, has taken the time to share with me his first hand experiences of recent months.
1. COVID-19: LEARNINGS FOR WESTERN COUNTRIES
Bettina: BJ, looking back over recent months, what, in your eyes, can countries in the West who are still in the midst of shutdown, learn from your experience in China?
BJ: China recognized the importance of digitalization in the fight against COVID-19 and exploited its potential. Many companies reacted quickly and developed customized digital solutions as a response to the new challenges. And when it came to ramping up the economy, it quickly became clear that a digital monitoring system was the only way to ensure compliance with the strict statutory regulations. Digital tools not only guard against a new wave of infection, they have also driven forward digital transformation in companies. That makes companies more future-proof and more resilient, as demonstrated by a report from the China Academy of Information and Communications Technology (CAICT) which examined the impact of the pandemic on companies in the IoT space.
2. MONITORING SYSTEMS
Bettina: In Germany too, we are looking at ways of using digital technologies to better protect employees on company premises, like with Siemens’ Comfy App. What does your monitoring system look like?
BJ: Our system is a campus management system that we developed ourselves. It has a wide range of features, including access authentication, body temperature measurement, temperature status recording, preventive health advice, plus higher-value insights based on data analytics. It is an important element in our safety concept and has proved to be an efficient preventive tool. Our many years of experience in campus management meant that we were able to develop the tool very quickly. As a result, we were able to provide our clients in China with a cost-effective, efficient solution right when they needed it, as they got their operations up and running again.
3. EVOLVING SITUATION
Bettina: It is impressive that you managed to develop and scale the system in such a short timeframe! I’m very interested to see whether similar concepts will be adopted in Germany too. After lockdown, many companies are struggling with cash flow issues and are fearful for the future. Where you are, the economy has started up again. How has the situation evolved?
BJ: Small and medium-sized enterprises, in particular, are still experiencing problems with their cash flow, unfortunately - and that includes some of our customers. To help them, we have developed a four-point action plan:
- Comprehensive analysis of the company’s financial position to identify losses and financing gaps
- Compile a multi-point budget plan with different scenarios and versions
- Conduct emergency budget planning to implement continuous monitoring of annual targets
- Optimize and align all enterprise management tools with the aid of digital technologies
Our experience shows that these steps are essential if a company is to be able to assess the impact of the pandemic on its own business. They form the basis for developing effective targeted measures to secure the survival of the company.
4. HOW TO PREPARE FOR THE FUTURE
Bettina: I think that the cash flow problems are just the tip of the iceberg. In the current situation, what, as you see it, is particularly important for companies if they are to be equipped for the future?
BJ: With the many internal challenges facing companies at the moment, it is important not to lose sight of one’s own supply chain. Fast, efficient assessment of procurement risks and of the sustainability of the supply chain is absolutely essential. Those who have not yet done so, should first and foremost implement a crisis management system, centralize scheduling and expand their procurement channels. The next step, based on experience gained and using short-term success metrics, is to increase security of supply and improve the quality and efficiency of the supply chain. In the long term, the focus must be on optimizing the supply chain network and on end-to-end digitalization of supply chain management.
5. WILL GLOCALIZATION CONTINUE?
Bettina: For me, that last point in particular has become more significant in the current situation. Globalization has meant that supply chains have become incredibly complex in recent decades. Daimler, for example, works with more than 213 tier 1 suppliers worldwide according to LBBW Research and Bloomberg. The 10 largest of these alone have 588 suppliers, and these in turn depend on 2,900 other suppliers. Keeping track of these is virtually impossible without the right tools. Do you agree, that the trend towards Glocalization will continue?
BJ: I think so, yes – you need to ensure that your supply chain is resilient and for this a dedicated risk management in balancing global AND local vendors definitively can help.
6. WHAT IS NEXT?
Bettina: COVID-19 still has the whole world in its grip in the second and also third wave. Where do we go from here?
BJ: As the author Hal Borland put it so well - No winter lasts forever, no spring skips its turn. The pandemic is a turning point in the digitalization of the economy and society. If we are to be prepared for the upcoming uncertainties and the complexity of a digital, global economy, then a smart approach to the digital dynamic or as Christian Schuldt from the Future Institute aptly describes it - a digital resilience - will be critical to our success. Siemens, with its experience and insights, can make a valuable contribution to driving further developments in this area. In so doing, we make companies more flexible, more agile and, as a result, more competitive in the long term.
Bettina: Transformation of corporate culture also has a key role to play in building digital resilience. Digitalization must not be just a buzzword in organizations, it must be embraced actively by all employees.
Thank you very much BJ for these fascinating insights. I am certain that the four-point plan to address cash flow issues and the supply chain measures you described will be very useful for other companies too, as a way of mitigating the impact of the crisis.
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