Monday, March 15, 2010

Sun Tzu - War On Business Part 2 (Chinese Cultural Centre)

Part 2 on the Sun Tzu series shows James Sun in Beijing, China, where he is similarly applying the principles of the Art of War veteran onto businesses here. This time, he is focusing on the Chinese Cultural Centre (“CCC”) in Beijing, which is rich in cultural heritage, history and Chinese culture. The CEO and boss is called Feng Cheng (“Feng”) and he is by and large a very culturally rich person who strongly believes in promoting and preserving Chinese culture. However, as the program initially alludes, Feng is not a very business-oriented person and he is not running the CCC as a profit-maximizing business. Hence, James’ job is to review the organization to suggest improvements.

To start off, the CCC is located off a small side street, thus is not easy to find and has no visibility. When James visited the CCC, he found out that it was organizing many activities for participants such as noodle-making workshop as well as tours to the “original” Beijing, which consists of guided tours to parts of Beijing which have been spared China’s rapid modernization. In other words, the CCC’s job was to “sell” culture to foreigners and visitors who are interested to not only find out more about China’s culture, but to also immerse in it and experience it for themselves. However, the CCC had no marketing strategy in place. There was no marketing department as well as many of the contacts and customers were based on word of mouth – not exactly a very effective or wide-ranging method to garner more business.

Feng himself was rather indifferent initially to the state of affairs at CCC. He knew he was losing money on most of the courses and workshops being organized but was content to let them continue running as they were rich in culture, and deep-down he was a cultural person, not a business person. James then went on to interview his No. 2 in charge, a lady called Crystal Ma (“Crystal”), who shared that tour bookings for the ancient city of Beijing made up 90% of CCC revenues, and most of the profits came from organizing such tours (note: no numbers such as pricing of tours or costs were provided). Other workshops like the noodle-making involves many tourists and “novices” but the CCC hired a costly top chef to conduct the training, thus it would imply that the CCC did not mind losing money as long as it retained its “core values” of promoting China culture and practices. Feng is also too much of a “hands-on” man, preferring to sit in on every lecture and workshop to personally oversee it; as well as providing info as a tour guide on the tours which CCC organizes. As the CEO, his time could be better spent on more strategic affairs and he could delegate these tasks to his subordinates.

James then engages the help of Yifei Li, who worked in MTV for 10 years and who understands market demand, culture and Chinese business very well (note: James will always have a local “advisor” to assist him, for Part 1 it was Kenny Yap of Qian Hu). They reasoned that the tours were actually an integral part of keeping CCC alive and profitable; but that the tours should be “re-structured” to make them more tourist-friendly and customer-oriented. The current tours being conducted are somewhat “purist” in nature, with customers being taken on rickshaw rides through narrow lanes strewn with piles of festering rubbish! It was indeed a “down and dirty” experience but when James interviewed some of the participants of the tours (casually), they admitted they did not like the “unique smells” and therefore did not find the tours very enjoyable. However, all agreed that the tours were informative, thus James and Yifei suggested to Feng in the War Room to plan more friendly tours yet retaining the same flavour as the existing tours. Sun Tzu’s saying is “Never Fight Unless You Are Confident Of Victory”.

Feng then starts working on the new tour itinerary and all customers are brought to see an authentic “old” village in the rural part of Beijing, where the villagers put up an energetic performance to entertain their guests. The tour then ends with an old courtyard visit with an old couple, and along the way the tour is peppered with intriguing details on Beijing's old quarters.

The lessons to be learnt are as follows:-

1) Quality of Tours – This had to be maintained as the foundation of CCC and their reputation depended on it. If the tours were too commercialised, then it would lose its culture focus and hence the positioning of CCC would go awry.

2) Unprofitable Divisions – As in any organization, a rigid focus on costs and contribution margin analysis have to be conducted to ensure unprofitable divisions are cut/divested, while nurturing and building up the revenues and business prospects of the more profitable ones. Sometimes it does not pay to over-emphasize on trying to turnaround unprofitable divisions, and one can save costs in the long-term by immediately terminating them.

3) Niche Focus – The CCC was operating in a niche industry, so in a way this limited competition as not everyone has the expertise or knowledge in running a cultural centre. However, Feng has to ensure that a niche focus can allow the organization to be profitable; thus he has to work through the numbers to maximize profits and minimize costs.

4) Delegation of Duties - The CEO Feng should not undertake to supervise every single tour and workshop. Even though he is passionate about the business, his time can be better spent in planning, strategizing and organizing rather than being personally involved. This point stresses the importance of delegation of duties to ensure a lean and efficient organization.

In the end, the new tour had about 30 customers, just a fifth of what was targeted and planned for; but it represented a good start as customer feedback was more positive and the enjoyment factor was definitely there! James Sun mentions another of Sun Tzu’s sayings: “Opportunities Multiply as They Are Seized”, so taking advantage of such opportunities opens up more potential business for CCC to expand their offerings.

One complaint of mine is that no numbers were provided or mentioned at all with regards to costs, margins, pricing and revenues; but this is understandable considering the information is probably private and confidential. Still, one must remember that aside from assessing the marketing and strategic aspects of a business decision, one has to run through numerical projections and forecasts as well. These all contribute to a holistic review of the entire business and makes for better business decisions.

I will be blogging about Part 3 of the series* soon, which is on Plastered 8 business also domiciled in Beijing, China.

*Note that the each episode is shown weekly on Channel News Asia, but I will not be blogging about each episode consecutively; hence there will be a time lag between what is blogged about and the actual airing of the episode. Readers who cannot recall what went on are advised to either record the episode down or try to find it on the Internet (Youtube may be a good place to start searching).

Visit the CCC's website at

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