The 6th Whitepaper on China Best Managed Companies (BMC)

Preface

China Best Managed Companies and all outstanding entrepreneurs:

Over the past five years, the world has witnessed profound changes unprecedented in a century. Especially in the aftermath of the global pandemic, the world economy has undergone long-term structural adjustment with sluggish macroeconomic recovery, weak international trade growth, declining developed markets, and the rise of anti-globalization, leading to increased uncertainties. Meanwhile, it is heartening to observe that many leading private enterprises in China have seized new opportunities in globalization, digitalization, and green transformation. Built on comprehensive management excellence, these companies have accelerated their evolution from champions in specific sectors in China to global leaders through determination and innovation. They have made bold commitment and progress towards elevated core competitiveness rapidly with all favorable conditions in place - the opportune time of global expansion, the geographical advantage for technological innovation and AI development, and the right resources from enhanced organizational agility, which have driven the transformation and upgrading of these companies and their industries towards high-quality development.

In its sixth year in a row, the Whitepaper on China Best Managed Companies offers an in-depth, unique analysis and summary of the best practices in private enterprise management in the Chinese market based on surveys and analysis conducted on leading private enterprises in China. As the only international award in China that comprehensively evaluates the management systems of private enterprises, the China Best Managed Companies (BMC) program employs a mature global framework - the BMC Management Excellence Standards, which encompasses four dimensions namely strategy, capabilities, commitment, and financial strength. Through comprehensive evaluations, the program identifies and highlights Chinese enterprises with future competitiveness, bringing together exemplary private enterprises in China.

The Whitepaper garners the best management practices unique to Chinese enterprises through questionnaire surveys of the 6th BMC candidates and in-depth dialogues with enterprise founders, CEOs, and senior executives during the BMC CXO Lab, serving as a reference for Chinese enterprises. The Whitepaper consists of three parts: Part I presents the list of the 6th China BMC winners, showcasing the “portrait of hidden champions”; Part II reflects on the key factors for success and the primary challenges for future consideration among the winning enterprises; Part III extracts the winning strategies of these “hidden champions” in accelerating the upgrading of their core competitiveness, offering insights for entrepreneurs.

The 2024 BMC New Winners have continued to innovate and lead industry development, creating truly distinctive core values and achieving leading performance levels with significant social impact. The 2024 BMC New Gold Winners, being winners for five consecutive years, are commendable for having demonstrated resilience and sustainable growth during economic downturns. Three aspects are particularly noteworthy:

First, BMC enterprises exhibit strategic foresight, transitioning from “going global” to “accelerating the global operations of Chinese multinational corporations”.

In 2023, Chinese enterprises, especially private ones, significantly accelerated their pace of globalization, shifting from “going overseas” to “exploring the vast overseas markets”. Exceptional private enterprises engaging in globalization are no longer satisfied with developing localized overseas operations but pursue global operations, a trend expected to persist in the coming years. Our research found that many newly awarded BMC enterprises’ strategies are forward-looking and unique as BMC enterprises are determined to become “world-class”. Half of the winning enterprises have overseas operations with an average overseas business revenue accounting for about 25%. Most of these enterprises have secured a foothold overseas leveraging their strong technological advantages, exceptional brand impact, and high cost barriers.

Whether through greenfield investments or overseas mergers and acquisitions, these enterprises have demonstrated the following strategies during global localization (or “glocalization”). First, they have gained a deep understanding of local cultures and anticipated customer needs, innovating with agility to meet these needs. For instance, MINISO Group Holding Limited iteratively updates its business model to become a globally leading value retailer of trendy lifestyle and household products. Second, when formulating global strategies, they have considered both macro-level strategies and minute details, because better control of details can impact the overall situation. For example, BYD Co., Ltd. persists in excelling through technology, transitioning their focus from product exports to establishing overseas factories, continuously leading the agile iteration of the new energy vehicle technology globally. Third, internally, they have created globalized mechanisms for agile and transparent adjustments. Fourth, while initial global mergers and acquisitions may not necessarily yield substantial immediate benefits, becoming a global brand and manufacturing global products inherently allows enterprises to expand the market. Fifth, compliance and anti-corruption measures provide long-term support and protection, ensuring a more balanced development between long-term global operations and localization.

Second, diversified technological innovation, high barriers, and strong ecosystem

The high-quality development of China’s economy requires technological innovation to lead the way, and corresponding technological innovation capability is also the most important core competitiveness for enterprises. Internal technological innovation not only strengthens technological barriers but also creates protection through optimal cost, providing greater value to customers. In external ecological collaborative innovation, a more diversified incubation and collaborative innovation mechanism can help enterprises enhance smarter customer insights and frontier perception, plan and incubate new areas early, promote industrial chain collaboration, and accelerate the realization of scale advantages.

BMC winning enterprises have continued to focus on technological innovation, with an average R&D investment ratio of about 5%. More than half of the BMC enterprises were involved in the formulation of industry-related standards. Meanwhile, the continuous “integrated innovation” of BMC enterprises transcends single product or technological innovation. It centers on customer needs, and leverages digital technology to empower the full lifecycle of products. It also drives product and technological upgrades, and continuously optimizes and enhances operational efficiency. At the same time, we also observed that such “integrated innovation” can lead and facilitate the overall transformation of industries and ecosystems. By setting out innovative small and micro enterprises in the industrial chain through internal company funds, enterprises can plan the track of innovation more prospectively and robustly to create new technological advantages. For example, Sungrow Power Supply Co., Ltd. adheres to the mission of “Clean power for all” by strategically focusing on its principal business while pursuing technology leadership through vertical development to build a win-win ecosystem with customers and partners; Fujian Sunner Development Co., Ltd. not only broke the shackles of relying on imports for the breeding source of white-feather broilers, but also established a deep and extensive full industry chain for the green, circular economy, leveraging its breeding source and cost advantages to build an industrial ecosystem; iFLYTEK Co., Ltd., adheres to its “platform + business” AI strategy by first focusing on issues that need to be solved at the market demand end and then aligning them with technology accelerators to form a barrier for solutions.

Third, continuous refinement of operations and reshaping organizational vitality

In the face of multipolar and complex market demands, more and more enterprises require organizational upgrades to be “customer value-centric, collaborative, transparent, and agile”. Becoming digital driven, refining operations, and reshaping organizational vitality are the most pressing concern for most BMC enterprises. Leveraging advanced digitalization and process mining tools as well as AI technology, some process-driven organizations have empowered new organizations and new skilled employees to refine operations, promote the realization of key process values across functions, and achieve sustainable vitality in organization and talent development. For example, Intime Retail (Group) Company Limited does not only opened up externally with its supply chain capabilities and business intelligence solutions, but also devotes efforts in internal improvements by implementing an “internal company system” for internal departments, allowing spontaneous and adaptive adjustments within the organization, and focusing on “magnitude value” in operation and management, thereby enhancing organizational vitality and taking its business to the market. Digital China Group Co., Ltd. promotes the integration of AI with innovation in all industries to achieve business innovation and value reconstruction. The company has formed a market value-oriented strategic management and advancement system internally, and has linked the incremental remuneration and review of its leadership team to the “incremental market value” as presented by different categories of business, becoming an “exemplar of business transformation”.

We would like to thank all the BMC candidates for providing insightful remarks and forward-looking perspectives on best management practices during our survey and the CXO Lab interviews. We hope that more Chinese private enterprises, represented by BMC enterprises, will seek to attain to the broad and great while addressing the delicate and minute, stay vibrant in the long run, and continue to upgrade their core competitiveness to progress towards becoming world-class enterprises from exceptional enterprises in China to further magnify the global impact of Chinese enterprises.