Home advantage for management consultants in China

Do international management consultancy firms still have the right answers for China?

Edward Tse, former chairman, Greater China of Booz &Co, thinks they do not. Regarded as one of China's leading management thinkers and author of The China Strategy, Tse has recently launched his own Chinese management consultancy Gao Feng Advisory.

He says most international consultancies now have their DNA locked away in the United States and increasingly do not understand the complexities of the China market.

Instead, according to Tse, they just merely resort to selling one-size-fits-all products and services devised in New York, Chicago or elsewhere, that have little relevance to the problems most companies face in China.

His comments come amid speculation that US consultancy firms may be banned from working for Chinese state-owned enterprises, a major part of the business of certain firms, particularly McKinsey &Co.

Tse says the gap in the China market is for a consultancy of scale with many of the existing Chinese operators lacking the operational reach to take on the big players－and he now aims to create one.

In his Shanghai office, Charles-Edouard Bouee, president of Roland Berger Strategy Consultants Asia, one of the few international management consultancy firms that is European in origin－its eponymous 76-year-old founder setting it up in Munich in 1967－agrees with Tse that some consultancies no longer understand China.

"I think he is right but we do (understand it)," he says.

Bouee says the US consultancies had the right model for China for reform and opening up in the late 1970s until about 2008, which he sees as a major change year for the country.

"I think that year was a turning point. I think in the 30 years until that year China pursued an American spirit. Deng Xiaoping had said getting glorious was rich and I think this provided a fertile ground for the American management consultancies. People wanted to know how business was done," he says.

"Then we had the Olympics and the financial crisis and we went from the American to the Chinese Dream. China realized－even if not consciously－that the old model had reached its limit. It had led to inequalities, pollution, bad business practices and corruption. We are seeing now a shift to a new management model."

Terence Tsai, assistant professor of management at China-Europe International School, or CEIBS, believes that Tse is right that there is now an opportunity for the sort of Chinese management consultancy he wants to create.

"There are a lot of unhappy voices among Chinese firms working with the big US-based multinational firms about not getting good service. US consulting firms have a tendency to apply in the Chinese market what they have learnt in the US without a lot of modification.