Manufacturing in China: A CEO perspective

In this podcast, Heidrick & Struggles’ Roman Wecker talks to Rainer Hundsdörfer, CEO of Heidelberger Druckmaschinen, a global printing company. Hundsdörfer discusses how the manufacturing industry is evolving in China and its importance to Heidelberger’s competitiveness. He also shares how doing business in China compares to operating in the Western world and how China is ahead of the game in its digital transformation.

Some questions answered in this episode include the following:

• (1:02) Why is China important for Heidelberger and for the manufacturing industry in general?
• (4:49) What will China’s digital transformation journey be compared to the ones of the Western countries?
• (6:46) What are the three most important factors for attracting and keeping the best talent in China?
• (8:16) What would you consider, compared to the Western countries, the most effective leadership and communication skills in China?

Below is a full transcript of this episode, which has been edited for clarity.

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Roman Wecker: Hello, my name is Roman Wecker, a principal in the Heidrick & Struggles Frankfurt office and a member of the Global Industrial Practice. In today’s podcast, I’m speaking to Rainer Hundsdörfer, CEO of Heidelberger Druckmaschinen, a global printing company, about China. Rainer has been the CEO at Heidelberger since November 2016. Throughout his career, he managed a number of leading industrial technology companies, including Schaeffler and Trumpf. Rainer, welcome and thank you for taking the time to speak with us today. To give a bit of context, could you please tell us why China is important for Heidelberger and for your industry in general?

Rainer Hundsdörfer: China is important to Heidelberger in two major aspects: one, as a market, and second, as one of the best countries for manufacturing. It is the fastest-growing market in the world; the population is growing, but, even more so, the wealth is growing. And then, of course, China is a strong manufacturing nation with lots of exports, and export also requires packaging, and packaging is the growth market for Heidelberger. At the same time, Heidelberger has a significant plant in China, in nearby Shanghai, and it is a very competitive place to manufacture machines. Heidelberger has been established there with manufacturing for about 10 years and has reached a quality level where we produce certain product lines in this plant for the world. This is a significant contribution to Heidelberger’s competiveness in the world—significantly low on manufacturing cost and at the same quality level as we can achieve in Germany.

Roman Wecker: Great. And talking about the way you do business, how does China differ from the other BRIC [Brazil, Russia, India, and China] countries?

Rainer Hundsdörfer: If you compare China to the other BRIC countries, what is most noticeable is the speed of growth, the speed of development, the openness, and the business sense of the Chinese people. If you look, for instance, at the digital business in China, it is ahead of Europe; it’s ahead of all the BRIC countries; it’s even ahead, in my point of view, of the United States of America. So we have adopted Chinese systems, so our own e-commerce platform is not a Western platform anymore. We use the WeChat platform to achieve that business because there’s no way, with a Western solution, to do any sustainable business. What is of course also different is that it’s very difficult and very competitive; in some areas, we do not have a USP [unique selling proposition]. So it is not difficult for Heidelberger to sell the machines. Our machines have by far the highest standard, and there is actually no real competitor in this world and also not in China. But when it comes to our life cycle business, to our consumables, to printing plates, to ink, to codings, of course there are a lot of manufacturers also in China, and you will always find somebody in China who does it for less. Chinese people are very active businesspeople and, of course, also not always very straight; there is a lot of, as we say, under-table business, and it’s quite difficult to compete here if you don’t have a really strong USP. And that’s why we started an e-commerce business for the life cycle, where we offer the same convenience as Chinese people have in their daily life—with WeChat, with EasyPay, with very simple processes—and that’s how we started our digital transformation in China, different from the rest of the world. Quite along the philosophy of “Do in Rome what Romans do; do in China what Chinese do.”

Roman Wecker: That sounds great, and you touched upon the digital progress already, so in the current context of technological progress, in your opinion, what will China’s digital transformation journey be compared to the ones of the Western countries?

Rainer Hundsdörfer: As I mentioned before, China is, in many areas, already ahead of Europe, ahead of the Western world. When it comes to B2C, it’s definitely the case. There is no cash in real practical life anymore, so even at the food market they pay with WeChat; you find a QR code everywhere. It’s very convenient, very easy to handle, and it’s better than having cash in your wallet. But also in other areas, very much supported by the government, like AI, China is probably quite ahead of us. And that is not the only area. If I look in many other areas, China has left already the state of copying. They are on their own, they’re developing their own technologies, and they’re well underway, so they’re becoming more and more a competitor, on the one hand, but, at the same time, also even a bigger and more important market. So my personal opinion is we shouldn’t be afraid of China, that they become too strong. Because at the same time they’re growing technologically, they will grow the wealth, and that will create markets for us, for Europeans. We should be more afraid if China struggles and becomes weak, because then, at least, Heidelberger and most German machinery companies will have a big issue, and that is the real risk. So we should hope that they stay strong and move ahead.

Roman Wecker: You talked about the importance of technology and of the technological progress, how impressive that is in China. Still, I assume also in China that people are the most important factor, probably even more important than the technology.

Rainer Hundsdörfer: Absolutely.

Roman Wecker: So, in your opinion, what are the three most important factors for attracting and keeping the best talent in China?

Rainer Hundsdörfer: If you want to get the best talent in China, it’s very helpful to have a brand that is known. So we at Heidelberger, even in China, are a well-known famous brand, and people love to work for us. The second, of course, is that you have [good] leadership, because the relationship in China is more to your boss than to the company. So if you want to attract good people, you need to have a good reputation for good leadership, and Chinese people will honor that. And a third is that you need to offer Chinese people, in particular when they are young, career opportunities. You need to promote them basically each year, step by step, so typically you need to have more ranks than in the Western world. Where it is probably enough to promote somebody once every four years or so in the Western world, this frequency must be much higher in China. And, of course, it goes along always with fair pay. Fair pay is very important because they compare, and if you don’t pay fair, they will leave you, even if you’re good in leadership and brand.

Roman Wecker: So now, if talking about the people and your leadership team there, what would you consider, also compared to the Western countries, the most effective leadership and communication skills in China?

Rainer Hundsdörfer: What is completely different to the Western countries is that the leadership is very personal. You’re not only the boss of your employee; you are also responsible for the wealth of his or her family. So if his or her mother is sick, you need to care about that; you need to make sure that the person can get to their family. It is very personal, and the better you build this relationship, the more motivated employees you will have. And, of course, it’s very helpful if you speak Chinese, so at Heidelberger we have almost no expats in China, very few. The majority of our managers are native Chinese people.

Roman Wecker: Now there is a last facet I’m interested to get your feedback. If you look into the skill set of the leaders in China, if you compare it again to the Western leaders, is there anything you see as a strong commonality or as a strong difference regarding, for example, strategic skills, conceptual thinking, creativity, or maybe innovation power?

Rainer Hundsdörfer: I think those skills are very similar because the education Chinese leaders have today is based on the same basis as in the Western world, so it has come very close. On the other hand, one thing I’ve always noticed is that Chinese people are very creative, in particular when it comes to workarounds. So they’re very flexible, and sometimes the challenge is to keep them close to the process and by the rules. Many things will be resolved on a very personal level. So, for instance, if you have a quality issue with your customer, they try to solve it, so to speak, under the radar, so they don’t have to report it. So their quality numbers are probably better than their reality. That doesn’t mean that they let down the customer or do workarounds without pleasing a customer; they please the customer but on a very individual basis, and the customer understands, and nobody in headquarters will ever learn about it. That’s one example of the flexibility they have to adapt to the situation and make themselves look good.

Roman Wecker: So Rainer, thank you very much for those great insights into China, and maybe as a closing question, not only for China but for the management in general, if you were to give one piece of advice to future leaders about what they most need to do to strive today, what would that be?

Rainer Hundsdörfer: Be open-minded, leave the track you’re running on, and look not only a little bit left and right but also much further left and right because the world is changing quickly, and if you stay on the track you’re on, you will not be successful.

Roman Wecker: Rainer, thank you very much for taking the time to speak with us today.

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