RIP Henry Kissinger 1923-2023 Opinion: The Death of American Strategy

 RIP Henry Kissinger 1923-2023

I am saddened by the death of the greatest strategist of our time, and more saddened by the fact that his death is such a non-event. Even more sad is that today’s governments do not have the experience, knowledge and capability that someone like Kissinger had (he visited China 100 times- NBC News), so they rely on politics and knee-jerk policies with strategy nowhere to be found (how many times has Blinken visited China?)

Kissinger and Nixon changed the world by applying strategy to the Cold War situation. Actually, both China and the US applied the same strategy, which can be traced back to at least the Three Warring Kingdoms period (220-280ce). After the collapse of the Han dynasty, China rule was divided into kingdoms. The evil Cao Cao, leader of the Wei kingdom, posed a great threat to the Shu kingdom, of which Liang was the military commander. So he convinced Zhou Yu, head of the neighboring Wu kingdom, to ally with Shu against Wei. This resulted in the defeat of Cao Cao.

The same strategy was used by both Kissinger and Nixon as well as Zhou En Lai and Mao Zedong. In this case, the threat was the Soviet Union. Zhou and Mao were worried about the aggressive posture of their neighbor to the North and did not want to be forced into a head-to-head conflict. Kissinger and Nixon were fearful of the threat of the two giant Communist nations with nuclear weapons as a critical consideration.

So, even though there were huge ideological differences between the US and China, Kissinger and Nixon adopted a reality-based strategy.

What are the differences between 1971 and today, Kissinger/Nixon and Blinken/Biden?

1. Nixon had a pair of balls

2. Kissinger was a brilliant strategist with an educated and informed world view

3. Nixon’s philosophy was that whatever benefited the US benefited him, not the other way around

4. As said before, they were comfortable with a reality-based strategy. Today, ideology and politics and polls determine strategy.

The result of their successful political leveraging were the SALT talks first, then eventually the collapse of the Soviet Union—because it had neither political or economic ground to stand on.

What can we learn from Kissinger/Nixon that we can apply today? Wait- from where I sit, even if I personally advise on US government grand strategy (fat chance of that!), the bigger problem is that there is nobody on the other end of the phone to listen to and understand me. Disagree? Tell me who the master strategist is in Washington (start with the Secretary of State, who appears to be the chief firefighter)?

I know- some of you are saying (after you call me a dumbass) that China in 1971 was much different than China today; today China is much more powerful and that power may pose a threat to the US. True. But China’s power today is thanks to us; we created the monster and now we are chiefly responsible to channel its power. No? If you had a kid who became a delinquent or sociopath due to your own neglect, who is responsible to fix the problem and make them productive? YOU are.

But what is different from then to now? Russia still proposes a threat, maybe even worse than in 1971. China didn’t invade Ukraine (or Taiwan). So leveraging amongst the three powers is equally important. 

So what did the people in Washington in whom we trust do and what should they do now? They let Putin cozy up to Xi, and a year or so later we are shyly meeting with this and that to try to restart relations. F**k that. Have a pair of balls. Meet with XI and his cohorts for as long as it takes to create a mutually beneficial program of cooperation, no matter what the Right or the Left says. The US is in the center of it all—you and me.

Also, don’t give me the line about that the US is a democracy and China is a dictatorship. Events of recent years, and our income gap, has proven that, if the US is a democracy, it is seriously flawed. OR in grave danger if Trump is ever elected again (the thought makes me think of alternative countries).

There is no Henry Kissinger or John Galt to save us now. Even if there were, I believe nobody would listen. The strategy that Kissinger and Nixon used is still valid today. Russia is even more dangerous and we cannot give up any leverage to Putin, because, like Stalin and Hitler, he is dangerous smart. 

The problem is that strategy as a guide for policy has been exterminated in favor of petty politics and greed. 

I don’t have too much hope for the US ever adopting an educated, non-partisan strategy given its current divisive and self-centered population and direction. One way I believe would work, IF the government were willing to let strategy override politics where it was appropriate, would be if the government had a standing committee of academic experts whose voice would be taken seriously in the formation of national policy.

Otherwise, as I said in the beginning, strategy will pass away with Henry Kissinger. Rest in Peace.

(Kissinger is one of the two people I admire most in the world; the other is W. Edwards Deming)

2 December 2023

Companies, please tell your “Virtual Assistant” to shut the **** up! Let’s put the Customer back into Customer Service

(read the article to the end and I will give you a hint about how to possibly shortcut this nightmare)

Technology is detrimental to business? In this case, yes. Am I nuts? Yes, no or maybe, read on.

I am willing to venture a guess that we all have been through this: You call a company that is vital to your existence like your internet provider or your bank, and, instead of a person, you get a “Virtual Assistant” who asks you to state your issue. No matter what your response, it tells you that you can get a quicker response by: a. visiting their web site b. chatting with someone (who is somewhere) or responding to the link they just sent to your mobile phone. If you don’t respond to one of those choices, there is no option to speak to a live human being. In fact, in more than one case (company to remain nameless), if you don’t choose one of those it hangs up on you. IF you have experienced that, you know how I feel, and if you didn’t, I need to know which companies you have called recently.

 

It seems that, today, companies will do ANYTHING to prevent you from talking to a human being. Why? Because that human being is someone who is paid for the knowledge that will help you, while the other choices are free or cheaper. 

Wouldn’t chat be a viable option? NO. Why? Because a. It is so much easier to say “sorry I can’t help you” on chat than on phone and b. more than likely, that person is in another time zone, probably working in the dead of night, is not paid by the company that you called and c. Doesn’t know jack about your problem.

So, since I am a businessperson and professor who is supposed to understand the economic benefits of technology, I should get it, right? NO. I don’t. For two reasons: a.  I didn’t get my problem solved and b. I am really pissed off at the gauntlet I have to go through every time I call. Make no mistake about it: If I had the chance to dump your ass and switch to another company, I would. So the company’s terrible customer service moat is switching cost. They are betting you can’t or won’t switch because your brain doesn’t want the trouble. Are they right?

What have I done in these situations? Simply, get apoplectic. I yell Customer Service! Representative! Human Being into the phone while pressing 0 a dozen times in rapid succession, like 00000000000000000. Oh.. Good thing my heart is sturdy.

Do I have to go through that every time? Seems so, except when I find a workaround (see below)

Wait, it gets worse. All of these companies have conspired, once you get to a point where a human is possible, to deliver the message, “We are experiencing a higher-than-normal call volume.” That, my friends, is half the story. The real deal is that the company is experiencing a higher call volume that the fewer and fewer humans cannot handle.

But seriously folks, if I were the CEO of one of those companies, I would STOP all that and allow customers to chat with a human any time they indicate a reason that cannot be answered by an automatic response (like bank account balance). But wouldn’t this cost more money? Depends if you are looking for short term gain or customer loyalty. Executives know about the value of customer loyalty, right? (Your answer? See below) 

Even for those unlike me (there are a lot of them) who just hangs up, gives up, or chooses one of the alternatives, the experience will create a negative memory in their unconscious mind and, according to Dr. Peter Steidl, author of Neuromarketing Essentials, just as our forebears did when they were looking for easier ways to hunt food, like this is a great place for food but there are lions there, whereas another with less food is lion-free. They will try to avoid the bad experience and look for more positive ones. 

Thus, for example, the plethora of cellular companies that has sprung up in recent years. They really don’t provide better service or coverage, but the companies people are switching from really suck. So as human beings led by their quest for dopamine (the brain’s chemical secreted when we have or anticipate a pleasing experience), they have to make the move.

My message to companies is, no matter how much more you think you are spending for prompt and human customer service, it will create more business, more loyalty and create behavioral codes that will make your company a no-brainer and an automatic choice. All you need to do is connect your customers to a real, knowledgeable person that actually works for the company in the same or nearby time zone. 

Happy customers spend more, stay longer and buy more things. This is a fundamental fact. Whereas unhappy ones become part of the leaks in your Leaky Bucket. Ask Apple, who still makes it easy to get in touch when you need help (used to be ask Amazon as well but they have gone the way of the outsourced). This is more than a fact of Customer Relationship Management or business logic: It is a fundamental function of our non-conscious mind or System 1, which controls purchase decision making.

Wait. Shouldn’t big companies know this? There are ways to measure customer loyalty, like Customer Lifetime Value and Customer Retention Rate, Average Customer Spend etc. 

NO. According to a survey done by Customer Gauge in 2022, 44% of businesses didn’t know their rate of churn or retention. In fact, 32% of B2B executives were completely unaware of their loyalty rates at all.

.

“According to our most recent research, 86% of B2B (me: I know this is for B2B but it should be the same or worse for B2C because B2B firms have fewer and less diverse customers) brands aren’t measuring the ROI of their customer experience (CX), while 47% don’t measure upsells, cross-sales, or other metrics of customer loyalty.” 

It gets worse. According to the same survey, “The trouble is that many of the executives we spoke to didn’t know how to measure customer loyalty.” 

OMG. Where is John Galt?

 

 

👍👍👍

What is my little hint to circumvent the gauntlet? Don’t respond to any prompts or questions; as soon as you get connected to the bot, press 0 and say customer service, representative, human. This will confuse the Virtual Assistant and give it no choice but to hand you over to a human. (This does not work all the time, nor does it guarantee which time zone the human will be in).

Good luck with that. Protesting or writing to the company most likely won’t help. As always, customers need to talk with their feet. Or their checkbook, as it were.

The answer is NO! Creative Destruction is NOT, nor will ever be, DEAD. So what about Nondisruptive creation?

 The answer is NO! Creative Destruction is NOT, nor will ever be, DEAD. So what about Nondisruptive creation?

After reading Kim and Mauborgne’s “Beyond Disruption,” I got my answer: NO. Creative Destruction is not only not dead, it is, as was venerated from antiquity and by Schumpeter, the way of all flesh. It may wear different clothes in this age of technology, or the Fourth Industrial Revolution, as the authors call it.

My answer did not come from anything they said, but partially from my own head, and partially by what they originally wrote about in Blue Ocean Strategy. 

The authors make a good case for what they call the third path to growth, after:

• Complete disruption in the zero-sum world of conventional strategy within the boundaries of an industry. As an example, we can use Netflix streaming vs. DVD as a good example (hmm…let’s consider for a while that Netflix started in the DVD rental business). The social consequences of this type of disruption are massive in scale, like they were for everyone who worked for Blockbuster.

• Partial disruption as exemplified by Blue Ocean Strategy. Uber caused havoc and great social consequences, even suicide, in the taxi industry; but there are still taxis today,

• Then there comes nondisruptive creation, which the authors position as an innovation that has no social consequences, because it is something totally new which adds growth without something else dying or having to reinvent itself to survive. Examples they give are Viagra, Sanitary Napkins, and Prescription Eyeglasses.

Then it occurred to me, wait—the above examples were nondisruptive creation when they first came on the market, but are they now? So let’s look:

• Viagra- Pfizer’s patent expired in 2017. Immediately afterward and until now, a new industry was born- generic ED and other drugs. Hims, Roman etc. all selling generic sildenafil at a small fraction of the price of Viagra (still today). Not only could former users who could afford the outrageous price of Viagra replace it with a cheaper alternative, but a whole new marketplace was born. Think about it—ED, which occurs to something like half the men over 40, does not restrict itself to the rich. Now an even bigger market was born, all those who had ED but not the means to buy Viagra.

Somebody said, not sure who, “if you fail to prepare, prepare to fail.” Pfizer had literally 20 years to think about what would happen after the patent expired. Maybe they thought about it, but they did nothing. Of course, as a result, their business has declined. 

 

Sales peaked at $2 billion and now the graphic has them at $0.5. It is difficult to estimate the market size today because of the price difference (generic around $.37/pill vs. $5.75 for the supposed real deal), but my guess is that the market is growing for the generic providers. 

2. Sanitary Napkins

Were first marketed by Johnson & Johnson in 1888 as “Lister’s Towels.” The nondisruptive creation didn’t last long as you can find ads for other brands as far back as 1900  

The current market size is huge- $23.6 Billion in 2022 projected to grow to $34.03 billion by 2030.  But this market has never, in real life, been a nondisruptive market. It is a conventional market and a zero-sum game. Most women will continually use the same item and, if they switch, it will not be a partial switch.

3. Prescription glasses- This is the most ridiculous citation of “nondisruptive creation.” Some sort of corrective lens goes back until latest the 15th century (1430) and the first protoype of modern eyeglasses with arms was invented in 1727 and made its debut in 1750. Here is Warby Parker’s timeline:

 

Looking at the timeline, exactly when was prescription eyeglasses a nondisruptive creation and when did it become a zero-sum game?

So is there no such thing as “nondisruptive creation?” I believe there is, but not only is it not enduring, it is the beginning, the birth, of Creative Destruction and its original iteration leads to a disruptive marketplace. Will it be total disruption or partial disruption a la Blue Ocean Strategy?

Depends.

Depends on what? Depends on what the product is and its usage, as we can see from the above. IF it is simply an innovation of an existing product that calls for substitution if adopted, then it fits the total destruction mode.

IF it is a product that crosses markets, as in Blue Ocean Strategy, it will be more difficult to copy and will not total destroy the disrupted product.

But in no case that I can see will a non-disruptive creation be in the garden of eden for long.

It can be a bit of a scary thought that, no matter what you do or invent, that you can be disrupted sooner or later. And, in today’s crowed marketplace, how do you prevent that from happening?

GO DISRUPT YOURSELF.

My best example of this business strategy is Apple. I am sure it was well known that the smartphone would replace the iPod, likewise with all the other trends Apple has captured since. Philosophy should be, I have to act like I work for another company and figure out how I would disrupt the current products. Then do it yourself- or someone else will. This entails waking up every day thinking about how you are going to improve or take the next step, not going to sleep or living in a bubble of denial as so many have done (think Nokia).

So, in conclusion, my position on Creative Destruction now is that it is not replaced by Nondisruptive Creation; it is, in fact, the beginning of that cycle.

So I won’t change my classes—totally. But, thanks to Kim and Mauborgne, I can present them with the most complete picture of product strategy.

AND, I understand that there is no answer for disruption. Just a matter of who, when, and how.

 Wikipedia, “Menstrual Pad,” https://en.wikipedia.org/wiki/Menstrual_pad#:~:text=The%20first%20commercially%20available%20American,by%20Johnson%20%26%20Johnson%20in%201888.

  Verified Market Research, https://www.verifiedmarketresearch.com/product/sanitary-napkin-market/

Warby Parker, "When were glasses invented?" https://www.warbyparker.com/learn/when-were-glasses-invented#:~:text=The%20invention%20of%20the%20printing,and%20sold%20by%20street%20vendors.

Oh No! Is Creative Destruction Dead?

 Oh No! Is Creative Destruction Dead?

For years, I made a federal case out of Schumpeter’s theory. As a university professor, the theory supported my position that:

1. Disruption is the way in as a Unicorn. 

2. Disruption is your biggest danger as a business owner.

3. Your economic Moat is in place to protect you from being the Disrupted.

As a dramatic support mechanism, I used the Hindu Trinity to illustrate the Circle of Life and the inevitability of the proposition that, for something new to be born, something had to die. Netflix and other examples presented themselves as easy examples.

Known in Sanskrit as “Trimurti,” the process represented is the inevitable influence of the trinity: Brahma, the Creator; Vishnu, the maintainer; and Shiva, the destroyer. One representation of the trinity looks like this:

 

They look innocent enough, and maybe that’s the point: the constant regeneration is not a bad thing, but the reason life continues.

In business, there are so many stories that we all know that seem to support this theory- Sears, JC Penneys, Toys R Us all became irrelevant because something else came to take their place, such as Amazon; Walmart replaced countless small local shops; Smartphones, Apple replaced everything that came before them. And more.

This explains everything very neatly and is a lesson to all students and businessfolks to absorb, lest they be absorbed.

In 2005, W. Chan Kim and Renee Mauborgne of INSEAD came along with Blue Ocean Strategy, which supported the age-old principles of Sun Tzu by declaring that the way to success was to “make the competition irrelevant” which dovetailed with Sun Tzu’s principles like “Win All Without Fighting,” “Attack Weakness Not Strength,” “Shape your Opponent,” etc. 

They also seemed to shed new light on Michael Porter’s Competitive Advantage which seemed to (but really didn’t) visualize markets as bordered and to be defended from within the castle by recognizing the Five Forces that challenge firms, which has at its center Rivalry Amongst Competitors.

Most importantly, finding new market space which is a Blue not Red Ocean of competition seemed to reinforce the thought that those companies who created new market space were setting up the eventual demise of those incumbents in the previously established space. Creative Destruction- yeah!

Now, in their new book entitled “Beyond Disruption,” Mauborgne and Kim have come up with the concept of “Nondisruptive Creation,” which states that, as they notice from their work to date, that new markets and businesses can be layered on top of existing markets without disrupting them.

They stated that “Among the cases that had been added to our original database over time, a few had triggered no disruption or displacement at all.” After researching their findings, they believe that “Nondisruptive creation is distinct from existing innovation concepts and can be defined as “the creation of a brand new market outside or beyond the boundaries of existing industries.”

Wait—isn’t that what Blue Ocean Strategy was supposed to do? Where was it written that BOS only applied to disruptive opportunities. Many of the examples given in the original book didn’t seem to depend on putting someone else out of business. An example of this is Yellow Tail Wine, which they described as wine for the non-wine drinker. The customers of Yellow Tail are probably customers the traditional wine sellers would not have gotten anyway, so does not threaten them with disruption.

I think if you want to nitpick you can contend that nondisruptive creation is a subset of Blue Ocean Strategy. And, as book sellers, if they positioned it that way, they would limit their audience versus saying it is a new thing.

That said, the concept has its own validity no matter if it is a distant cousin or a brother of BOS.

The idea that new markets can be created in a red ocean that gets redder every day is a bright light shining on the future that allows new businesses, enhanced production and new demand to be layered on the well-being of society without anyone having to lose their jobs (such as the inevitable result of disruption).

So does that mean I have to stop teaching about Creative Destruction? I don’t think so because disruption will continue to exist as a force in business, especially when companies lose their relevance through poor merchandising or failed leadership ( you can think of lots of these).

But- the concept seems to offer opportunities above and beyond what has gone before. Still making the competition irrelevant? Maybe, but also creating new demand for which there is no competition. And, as the authors say, “nondisruptive creation opens a positive-sum approach to innovation and growth that allows business and society to thrive together.”

I have not read the book yet, but as usual with Mauborgne and Kim, it is well and broadly explained on the internet. I will comment further once I read it.

Bottom line for me as a professor is that I can keep teaching Creative Destruction but have to add Nondisruptive Creation as a new opportunity.

 Michael Serwetz 2023

Link to Mauborgne and Kim’s web page for the concept and book.

The CAT- a poem by me

 

(original oil by Lotus Zhang)

The Cat

A Poem by Michael Serwetz

(with Homage to Carl Sandburg's Fog)

The foggy cat

Enters on little cat’s feet

Takes a

slowly

slithering

shit

and moves on.

Top Hurdles for (some) (most?) students today and their easy (?) fixes

  

Top Hurdles for (some) (most?) students today and their easy (?) fixes

I am not looking down my nose or lecturing. What follows are some of the top hurdles facing students today in getting the most out of their journey through college and graduate education. Some of today’s students’ difficulties are different than those during my college years due to the dominance of technology (most students today were born connected) and mine; but some are similar or the same. Recently I have taught many students who are making their way through internship and school simultaneously; the stress of doing both aggravates these issues like iodine on an open wound.

1. Problem: Time management issues- Too much to do? Well, for those who have not had anywhere near such a full plate growing up, it seems to all fall at once, which gives inexperienced players the panic attack that it all has to be done at once. OR, my boss or my professor will think less of me! Giving in to confusion and fear in your limbic brain becomes a self-fulfilling prophecy.

a. Related to this-

i. Inability to establish priorities- Somebody said, “If everything is a priority, nothing is a priority.”

ii. When the tasks seem to be too much for the time you have to spend, you become overwhelmed and freeze emotionally. A suprising amount of students in this position have a psychosomatic reaction and “feel ill.” Or is that a call for help from mommy or daddy? (be honest!)

2. Easy fixes-

a. Stay calm- breathe, meditate, whatever works for you. The more anxiety and fear, the worse it gets because you are crippled emotionally.

b. Land one plane at a time. Nobody can do everything at the same time and do it well. 

c. Write s**t down- I mean really write. On a sheet of paper or notebook. IN order of priority, by due date, and any associated activities needed. Then, as you finish, Cross them off.

d. Cut down or eliminate unproductive time- the majority of students, mostly GenZ ers, spend between 4-6 hours/day online on social media, video games, shopping etc. not related to today’s needs or responsibilities. Imagine how the crunch would abate if you took half of that back: 2-3 hours x 7 days=14-21 hours more and wouldn’t cut you off from the world. With the remaining hours, you can make better decisions about how you use your time: does it contribute to your personal improvement with people with whom you have a mutually beneficial relationship? Does K-Pop offer a degree? OR a job? Or a career?

3. Problem: Attitude toward learning: Many students view learning in the same light as mopping a floor or cleaning a bathroom: I really don’t love doing it, but I have to.

4. Easy Fixes:

a. Change your mindset- this is something you are doing for yourself, and spending time to build something for you. Nobody else. Not parents, friends, family—YOU. When I wax my car it is not only because I need to protect it from rust etc. but because I want to be proud of it and of myself.

b. Give up the short term for the long term- I can guarantee that whatever dire sacrifices you feel you are making now will pale in comparison to the rewards.

5. Problem: The
Dopamine Consequence: Overcome your technology-rooted hurdles brought on by dopamine addiction- Not your fault. These are brought on by the fact that the world is literally at our fingertips and we can find and learn something in 5 minutes that took hours, days or weeks in the past. Some of these are:

a. ADHD-like attention span- Like a TikTok video, 30 seconds

b. Inability to listen- Too much noise in my life

c. Inability to focus- Too much noise in my life

d. Prejudice- No time or desire to really find out, so you go on what you know and were taught, better or worse

e. Ego and Blindspot- something you may not know about yourself and is untested because your personal relationships are superficial. 

6. Easy fixes:

a. Read a book- a physical book- from cover to cover

b. Meditate

c. Tai Chi

d. Deep breathing

e. SLOW S**T DOWN

f. BE honest about who and what you are

g. Most important: lose any denial you might have about how what I describe here applies to you.

7. Problem: Failure to recognize the most valuable elements of your education- Not the academics- you will forget most of that. So what will you/should you remember and cherish? 

8. Easy Fixes:

a. People you meet along the way- whether it is a professor, friend, classmate, speaker etc. they will carve their initials on your Wall of Growth and, in some big or small way, be a part of who you become.

b. Value your personal growth- Recognize that each small experience adds up to the most valuable element of your educational journey. This is your biggest reward, even more than the degree. 

i. Who were you? Who are you now?

I walked a mile (or two or a hundred) in your shoes and I understand that in your 20s, you may not understand or want to understand that you have to get real with your future. Doesn’t seem like as much fun. Maybe it isn’t. Can you make productive time fun? Sure you can.

I hope you can make use of the above information now. Time passes by in a blink and before you know it, you will be out of school and in a position of responsibility. Give yourself the tools for success before you look in the Lion’s mouth.

As an instructor, what can I do?

1. Understanding- Walk a mile in my students’ shoes

2. Firmness- Reminding them of their responsibilities and insisting they fulfill them by organizing themselves appropriately and not panicking.

(We used to call this the iron fist in the velvet glove)

Some gifts for you

I appreciate your reading this article and hope you will take it seriously. As a gift for getting this far, I want to share three critically important pieces of advice, maybe the most important I can share:

1. Lead by Example- If what you say and what you do are not the same, you will be ineffective in business and personal relationships. Others’ poor example is not an excuse. You are who you are, and people will respect you for that. 

2. Value others as you would have them value you- Nothing resonates better than authenticity, and nothing resonates worse than the lack of it.

3. Everyone has something to offer- including you. And each person is different. Look for the positives and understand the differences.

I have lots more of these, but that’s another article.

© Michael Serwetz 2023

 

Michael Serwetz updated bio 2023

 Michael Serwetz BIO 2023

PROFESSIONAL:

* Leadership positions in retail, marketing, merchandising, design and sourcing; more than 30 countries around the globe since 1970. 

* Retail at Federated Department Stores where, as a buyer, he developed many new items, pricing and promotional strategies, as well as creating a new denim department.

* At Levi Strauss, he was the youngest ever promoted to General Merchandise Manager of Womenswear, $300million business, first Women’s 501 in Levi’s history. 

* Joe Boxer, worked with Nick Graham to start and operate one of the most iconic brands in global textile history, grew from $15 million to greater than $70 million 

* GoldToe Moretz, he opened offices in Asia >$100 million FOB profitable international business, reducing cost of operations from >5% to 1.5%

* Lived in Hong Kong and Shanghai for 10 years, operating his own WFOE (Wholly Owned Foreign Enterprise, sourcing and marketing varied products for clients in US, Brazil and MEA.

* I, sourcerer- Industry consultant, Blogger and teacher

* Founder and Shirt Artisan- Lotus & Michael- The Art of Shirts- A LUXURY BRAND- Original, high quality Shirts for Men & Women (equally)

* Blog URL: www.isourcerer.com

* LinkedIn: www.linkedin.com/isourcerer

EDUCATION AND TEACHING:

* Bachelor’s Degree from Brooklyn College of CUNY,  American History.

* Master of Arts from Dominican University of California in International Political and Economic Assessment (Pacific Basin). 

* Adjunct professor Dominican University of California, teaching MBA courses (Macroeconomics, Political Science) on site in Wuxi, China in 1990, living in dorm with students for 6 months; 

* Has created his own style of teaching, passionate about neuromarketing and storytelling, sharing some of the knowledge and experience he has gained over his career and in recent years as a university instructor to students (and learning from them;

* Particularly created a comfortable connection with international students since he has lived and traveled around the globe (more than likely to where they are from), since 1970;

Courses Taught and Teaching:

* Campus Online Community College Program- Instructor, beginning Fall 2023- http://campus.edu; Groundbreaking program devoted to access, affordability and quality support for any student; populated by top-notch professors from premier universities. A new paradigm for education- where teachers and students are both important. 

* NYU SPS (School of Professional Studies- Division of Programs in Business (Graduate), Competitive Strategy (Spring 2019, Spring 2020, Spring 2022); Operations Strategy (Fall 2021, Spring 2022, Fall 2022, Spring 2023, Fall 2023); CRM the Experience (Fall 2022, Spring 2023); Internship (Summer 2023); Transforming Organizations (Summer 2022, Summer 2023); Strategic Marketing (Fall 2022); Global Luxury Marketing Partnership program with SKEMA Paris (Fall 2021); Undergraduate DAUS- Digital Marketing (Spring 2019, Spring2020, Spring 2021, Spring 2022), Customer Relationship Management (Fall 2019, Fall 2020, Fall 2021); 

* FIT- Global Marketing (Spring 2018), International Business Transactions (Fall 2018, Spring 2020, Fall 2020, Fall 2021), Global Sourcing for Stylists (Spring 2021); Precollege Global Marketing (Summer 2021)

* Baruch College of CUNY CAPS (Continuing and Professional Studies)- Leadership Skills for the Fashion Industry (INSEEC Paris Fall 2018), Global Marketing (Spring 2019, Summer 2019, Fall 2019, Summer 2021, Fall 2021, Spring 2022); Introduction to Customer Relationship Management (ISG France Spring 2019, Fall 2019); Digital Marketing for the Fashion Industry, Luxury and the Arts (ISG France- Spring 2021), Integrated Marketing and Social Media Strategies (INSEEC Paris-Fall 2021)

PERSONAL-

• Passionate home cook and foodie; living in Trenton NJ where he and his wife can enjoy their home, garden and vegetables.

• Author of two books: “Travels With Mikey: Global Life of a Business Foodie,” “The Culture Factor: Understanding the Plain Truth About US-China Relations;" Working on a marketing non-textbook, "The Way of the Unicorn" to be completed soon.

China textile and apparel 2023: The Party’s Over and China needs to invite a Deming to the next party (complete- Parts I-IV)

Lotus & Michael Perspective 5-2023: A Game Changer in four parts

(The article under separate cover is translated into Simplified Chinese)

I. The situation for Chinese textile/apparel exporters in 2023 and why it is what it is. What is the current textile and apparel situation in China?

II. Who is W. Edwards Deming and what did he tell the Japanese in 1950?

III. What needs to change in China to rebuild China’s reputation, respect and business?

IV. If not, will there be a Reckoning for China textile and apparel like there was for the US Auto Industry?

Article Abstract: Textile and Apparel business in China is suffering badly. Some or all of the following factors can be held responsible: 1. Political relations and the continuing Tariffs; 2. China’s reputation for cheap and poor quality product which is, at least partially, justified by evidence; 3. Sluggish domestic demand due to the lockdown and poor economy in China; 4. Due to some or all of the above, significant resourcing to alternative countries such as Vietnam.

In this article, we suggest that the only long-term solution for China is to rebuild its reputation for quality product and fashion innovation, just as Japan did in the 1950’s using the lessons of W. Edwards Deming’s teachings as a platform. Combined with this, China factories need to build their own brands which a. don’t scream Cheap and b. stand up to other international brands in style and quality.

But, China factory owners are resisting change, starting to panic and are lost for any solution except to find someone who may sell their product for commission. But, what would they be selling other than “Cheap China?”

Finally, we predict that, if some factories don’t lead the way to a new direction for China, the Chinese textile industry will crash and burn or, at best, be relegated to the mass market in such outlets as TJ Maxx and Walmart. Part of this is due to the bifurcation and consolidation of the US retail economy: The middle level department store base is disappearing, leaving only either competition for the mass market at rock-bottom prices or premium and luxury brands sold DTC or on platforms like Net-A-Porter and FarFetch. In addition, many new and innovative brands are appearing almost daily. The only Chinese online alternatives to those platforms are SHEIN and TEMU, which are by nature cheap and poor quality, and the innovative Chinese brands are rarely seen by overseas customers.

The Chinese textile industry will have to have a Reckoning, just as the American auto industry did in the 1970s and 1980s (as described by David Halberstam in his Pulitzer Prize-winning 1986 book): The world has changed; the way you did things and the things you got away with in the past are gone. If you don’t face the reality of the world today, you will also be gone.

I. The situation for Chinese textile/apparel exporters in 2023 and why it is what it is. What is the current textile and apparel situation in China?

The China textile and apparel business is in trouble. After more than 20 years, since China was admitted into the WTO and quotas were abolished, there isn’t room for one more manufacturer to do business with US customers and export their product, getting rich (comparatively or really) in the process. Here is a peasant economy that was transformed almost overnight into a global powerhouse, ascending to the #1 position as the world’s factory. Just open a factory, sell something (it doesn’t have to be great), and you will have lots of customers. 

Led by Walmart, who buys 70-80% of their product from China, immense volumes of cheap goods filled American stores and sold on websites. Department stores like Macy’s ran to China to get into the cheaper-than-thou game, rather than stick to their middle-class roots. So, in what seemed like the blink of an eye, everybody wanted to buy shit from China (that word used qualitatively). What happened on the consumer side was, confronted by a sea of cheap shit everywhere, the average consumer (not just the struggling ones who needed to buy cheap) flipped their value proposition from price is determined by value to value is determined by price.

Let’s look at the numbers, which we will say up front are deceiving:

For 2021, according to the US Department of Commerce report:

“In 2021, China remained the major source of U.S. imports of Textile Products. In 2021, U.S. imports of $50.3 billion of Textile Products from China constituted 32.6% of the total U.S. imports of Textile products.” 

And 2022:

“In 2022, China remained a major source of U.S. imports of Textile Products. U.S. imports increased by 6.7% ($3.4 billion) from $50.3 billion in 2021 to $53.7 billion, constituting 29.7% of the total U.S. imports of those commodities.” 

All good, right? We see several issues: 1. 2022 was the first non-pandemic year so it stands to reason imports should go up (they were $538 billion in 2018 so overall they were just reaching pre-pandemic levels; 2. Had China had the same piece of US imports in 2022, it would have had $1.1 billion more business; 3. Based on the numbers given, US imports of those commodities increased 18.2 percent from 2021 to 2022, so China’s increase was indeed a smaller piece of the pie; 4. These numbers reflect what was received in 2022, so based on the planning cycle of 4-6 months, much of the goods were ordered in 2021.

Any way you look at it, despite the increase, there is a clear erosion of textile and apparel imports from 2021 to 2022. Orders received in 2022 and delivered in 2023 will show a further erosion. 

Here’s the worst part: Clearly China factories are shipping goods just to ship goods and are sacrificing price and profit. Take a look at this:

 

 

Apparel Imports from China were 35% of the quantity but only 22.2% of the value. On the other hand, imports from Vietnam were 15.9% of the quantity and 18.4% of the value. What does that mean to you? Cheap China  is getting cheaper while Vietnam is commanding higher prices.

Now, we should have an idea of what is happening in the textile and apparel sector from China and why Chinese manufacturers feel lost and desperate. This will only get worse.

So the question if you are Chinese manufacturer is (or should be), “What should I do?” It is clear that the definition of insanity applies here: trying to do something the same way twice and expecting different results. China and China’s economy needs different results, especially in the textile and apparel industry. The 10% of imports from China that apparel and textile represents cannot erode without significant effect on the economy and employment. We can guarantee that, based on clearly established patterns of the industry (not just in China) that the workers will bear the brunt of any reduction; the owners are not giving back anything from their bank accounts.

Finally, weak economic growth and disruption in China has a significant effect on the world economy.

The rest of this article will build a case for a sea change in China’s apparel and textile industry, the same sea change that Japan made to transform the tagline of “Made in Japan” from cheap to one of the world’s best. 

Those who read this and know China will wonder whether the culture and experience since Deng Xiao Ping declared that some people should get rich first is so embedded at this point that it minimizes or eliminates the possibility of positive change. We believe it can happen, led by the younger generation, the sons and daughters of the people who got rich first and the easy way. But it won’t happen until the older generation steps aside AND the government lets it happen.

Next, we take a look at what happened starting in 1950 Japan, led by W. Edwards Deming, which led to Japan’s current position on the world’s quality product scale. THIS is the example China should follow.

II. Who is W. Edwards Deming and what did he tell the Japanese in 1950?

(For more details about Deming and the development of his legacy, watch the video here.

After teaching wartime courses to US forces on quality control during WWII, Deming was invited to lecture on Statistical Quality Control in Japan by the Union of Japanese Scientists and Engineers (JUSE). His lectures gave rise to development of effective statistically-based quality process systems in Japan and the framework for innovation now known as PDCA (Plan- Do- Check- Act).

Deming gave a six-part lecture series which contains many of the concepts and understandings that changed Japan and are still followed today. The same JUSE started awarding a “Deming Prize” to the outstanding firms in 1951.

Here are some highlights of the series:

 His opening- "We are in a new industrial age created largely by statistical principles and techniques. I shall try to explain how these principles and techniques are helping Japan to increase her export trade.” 

Super important and super simple: “Quality had to happen at all stages in the "chain

of production.””  This means, quite simply, that basing quality control on final inspections after the damage has already been done and value added to an unacceptable product is a waste of time and money.

What later became part of Deming’s famous 14 points was “improved competition position,” giving the customer a key role in quality management and improvement. 

Deming changed the old way of Design it-Make It-Try to sell it to what is known as PDCA:

1. Design the product (with appropriate tests).

2. Make it, test it in the production line and in the laboratory.

3. Put it on the market

4. Test it in service through market research. Find out what the user thinks of it, and why the nonuser has not bought it.

5. Redesign the product, in light of consumer reactions to quality and price.

6. Continue around and around the cycle.

I would refer to this concept as “make what you can sell, don’t try to sell what you make.” This has been and is Amazon’s paradigm and is a big contributor to their success.

Two illustrations from Koiesar’s article are material here:

  

Note that the quality process here is process-based not result-based. What this means is that by the time the product is finished and ready for shipping, it has already been tested- materials, and at various times during the manufacturing process. So final inspection is, for the most part, a formality.

Why is this better? Because problems can be identified before more material and labor is put into them, and problem processes or workers isolated. (Note that the overwhelming majority of apparel suppliers and buyers use AQL, which is a statistically-based FINAL inspection process that takes place when 80% of the product is ready for shipment).

I tried to implement Deming’s style of control when I was importing car alarms from China in the early 90’s, and in every factory that I worked with as the VP of Sourcing for GoldToe Moretz, a socks company. It was like trying to teach a chicken to dance ballet. Finally, I visited one factory in India that was conducting a full inspection after knitting. The way socks are made, 90% of the production is focused on knitting; all there is after that is closing the toe, boarding (shaping) and packing. Of course! Why spend money, time and labor to process the sock and only inspect after the entire process is finished? This is the essence of Deming’s quality philosophy.

Next is graphic representation of the PDCA cycle or “Design Cycle”:

  

This is the essence of the difference I mentioned before, making what you can sell as opposed to selling what you can make (or have made).

Also note that this is a continuous loop, so for this process to be successful, it must be something that is committed to for the long term.

So why doesn’t everyone do this? It’s so simple and makes great sense. The main reasons are because a. it takes more time, b. it costs more, and c. It requires patience and commitment to this process. Most factories, not just in China, and buyers are not willing to follow this process, or management won’t facilitate it, opting for throwing shit against the wall and shipping what sticks.

Deming’s first lecture in 1950 stated that there should be: “The integration of the suppliers into the production system and the need to take a shared responsibility for their quality, instead of treating them as outsiders and antagonists.”   This is a big issue that is not relegated to China, but is a prevalent attitude of buyers who refer to “the factory” as if it were an inanimate object. 

When this stops is when the factory produces something whose quality is undeniable and unimpeachable and where they don’t compromise anything for an order. 

Deming continues to be studied because his system is logical and it works. Those who never heard of Deming and heard the words “Statistical Quality Control” and “Total Quality Management” without knowledge of Deming himself and his principles will mistake it for a statistics-dependent methodology; that would be very wrong. Yes, Deming believed that statistics play and important role in Quality and Improvement management, but he by no means was a blind follower of numbers; conversely, he emphasized that “the control chart is no substitute for the brain”  and that "The best protection is afforded by acceptance sampling

done in conjunction with quality control at the manufacturing plant. It is not economical to try to get a good product by inspecting a lot and taking up only the best ones." 

I was lucky enough to have Deming as a professor for a course at NYU Stern in the mid-1970’s. While I now regret not absorbing more of what he said, it is clear to me that the striking aspect of his teaching and his message is that you didn’t really need to take notes because it all made such common sense.

The result of Japanese manufacturers absorbing and incorporating Deming’s lessons is history. Today, rather than representing cheap product, Japanese products justifiably compete for the title of “world’s best” in many areas. Material and manufactured product are unquestionably superior, and command a superior price. Customers pay for quality, which builds value, and are passionately loyal to brands that provide it for them. I could make a list from my own experience, but I believe you know what I mean..

Is that the case for China? Should it be? Can it ever be? If it should and can, what changes need to be made for it to be successful?

III. What needs to change in China to rebuild China’s reputation, respect and business?

Let’s do two things first: 1. Look at the situation in China now 2. Look at the cultural foundation and see if there is a strong tradition/basis to fall back on or are we stuck with the now.

Where are we now in China? As I wrote in 2017 on my blog www.isourcerer.com in the article, “China Quality- Good Enough is Not Good Enough”, there is no internally-generated quality standard for most factories (I have visited many hundreds), except for that which is generated by customers. Passing inspection and shipping the product only requires “good enough.”

So what is the problem with that? Mainly, it serves the evaluation of “cheap china.” And secondarily, it discourages investment in something better which is internally generated. Factory owners think, “Why should I spend money to improve if the buyers accept what I am shipping now?” Here’s the answer to that question with another question: IF your buyers ACCEPT shit because they EXPECT shit, is that good enough for you? Buyers don’t pay premium prices for shit, and when some factory or country comes along with cheaper shit, you lose. Some companies, like Temu and Shein, have correctly diagnosed that the American consumer WILL accept shit as long as they pay shit prices. This perpetuates the story. So cheap china ACCEPTS the title of chief purveyor of shit, because It is the only way they know of to compete with other countries with lower labor costs AND it is what they have been doing all along during the time you could ship any form of shit and be successful.

That philosophy may get some orders, as long as there isn’t another factory or country with CHEAPER shit.

Price is a race to the bottom.

Was China always the world’s leading provider of shit? Does it have a tradition of craftmanship and quality to fall back on as Japan does?

Japan was able to instititutionalize Deming’s teaching because it aligned with an ancient tradition which is called Monozokuri. “ Literally translated, it means to make (zukuri) things (mono). Yet, there is so much meaning lost in translation. A better translation would be “manufacturing; craftsmanship; or making things by hand.” 

There are so many stories in our lives to see and understand Monozokuri. It is stamped on every Japanese product we buy. For example, a 750L bottle of 12 year old Yamazaki Malt Whiskey sells for $210.99; a decent Scottish Single Malt like Balvenie Double Wood can be had for 1/3 of the price of the Yamazaki. So why do people purchase the Yamazaki? Is it three times as good as the Balvenie? From personal experience, I can say that it is because: 1. It is, in fact better, as near to perfection as single malt gets and 2. The aspirational dimension of drinking something that special.

So is China, one of the world’s oldest recognized cultures, devoid of a quality tradition like Monozokuri? OR has it been swallowed up in today’s race to make shit?

When you serve dinner on plates made by Royal Copenhagen, Wedgwood, Villeroy & Boch etc. it is sold to you as “fine china.” IN fact, this dinnerware has nothing to do with China except the origin of that product was China—during the Tang, Qing, dynasty etc. where they made bone china (partially from cow bone) like blood red, Jihong or blue and white porcelain antiques from those eras. But, as my wife Yuting Zhang bemoaned in her 2018 article published on the I, sourcerer (www.isourcerer.com) blog, “The Name is Fine China; so Why is there no Chinese Brand?” none of the premium China on the market today is actually FROM China.

The answer behind this is sad, but points us in the right direction for solving this problem. There is, in fact, a tradition in China called "造物" (zào wù) which translates to “creation.” It was this tradition which was responsible for much of what we take for granted in today’s world. ChatGPT describes this tradition as compared to Monozokuri:

“It's worth noting that while the term "Monozukuri" is often associated with Japanese manufacturing philosophy and culture, China's own tradition of craftsmanship and manufacturing aligns with similar principles of precision, attention to detail, and the pursuit of excellence. The Chinese term "造物" captures the essence of this tradition, emphasizing the act of creation and skilled craftsmanship that has been valued throughout China's history.”

When did that history take place? As early as the Han Dynasty (206 BCE- 220 CE, innovations like the compass, gunpowder and papermaking took place; The Song Dynasty (960-1279) created advancements like movable type printing were created; the Ming Dynasty (1368-1644) saw a great fleet and the Great Wall built; the Qing Dynasty (1644-1912) saw the first use of vaccines, improvement in agricultural tools and advance mathematical knowledge. 

So what happened? These developments were overshadowed by an antiquated and fractured political system which isolated itself from the world and lost its control to the Western powers whose only achievement was the deployment of seagoing ships and advance weaponry. Japan, on the other hand, united the country during the Meiji Restoration in 1868.

Then, Deng Xiao Ping, with all good intentions and rather than fall back on China’s unique tradition, encouraged people to be practical and do what worked for other countries. “The cat that catches mice is a good cat.” Too much, too fast. Many Chinese, who had been mired in poverty and anonymity, saw an opportunity to move out of their class, at least financially, quicker than ever. And it was easy, with the US and Europe as willing customers. So it was damn the torpedoes, full speed ahead and quality was crushed under the need for speed and greed.

So here we are, with Temu and Shein gaining huge international popularity through their seemingly endless pocketbooks and becoming the flagship of Cheap China. And thousands of factories (Probably including those that sell on Temu and Shein) suffering precipitous drops in business or profit or both.

What has to happen? From this end, our position is something needs to change (what will happen if nothing does will be discussed in the next section). Since labor costs are increasing in China and the working population is aging and shrinking, there is no chance to revive the naïve history of the last twenty years. But China can be two important things to the international marketplace: 1. The JIT (Just In Time) resource with still huge capacity for materials and production and 2. The location for growth of artisanal production in the spirit of zao wu.

It is the last one that we believe is what needs to be the focus of all, but especially textile and apparel manufacturers in China: Create their own brands that stand up to international competition, yet fully utilize the resources that are still strong in China: skilled labor, quality materials, coupled with fast and efficient production, short transportation leadtimes.

The how and why of this strategy depends on the industry but, as strange as it may seem in the red ocean of digital players, there are still huge holes and opportunities because most of the products online are echoes of each other, ho-hum and not worthy of customers’ attention. So the factories will ask, what can I do? The answer:

1. First, STOP. Put your ego away for a while. 

2. Understand and accept the fact that the situation has changed; the days of easy money and good-enough quality are gone; 

3. Adopt a quality standard that is great, not just “good enough,” based on your pride as an artisan, not a wholesaler of cheap goods; something you can be personally proud of.

4. Don’t expect to pay someone commission to sell what you made; make what your customer wants to buy;

5. Accept the fact that you need to spend some of the money you made so easily on future growth;

6. Don’t be in a hurry; it will definitely happen, but not tomorrow or the next day;

7. Call on the spirit of zao wu and the team efforts of talented people (not just in China, especially in the target market countries like US) to create a Unicorn;

8. Understand that you should be making a product whose price is determined by its value, not the other way around;

9. Let the product speak first so the fact whether it was made in China or not becomes invisible, as is the case with Samsung and LG made in Korea or Kia or Toyota etc.

10. Operate under the main goal of Blue Ocean Strategy: Make the Competition Irrelevant

11. Remember that your brain is your moat; even if competitors want to copy you (Good! Sun Tzu—Shape Your Opponent), they can’t copy your creativity.

12. Obey the (Chinese) strategy of Salami Slicing or The Frog in Warm Water- By the time the competition realizes that you are a threat, it is too late.

13. Read the next section for the consequences if you don’t heed the above.

This is not just a paradigm change, but a game changer, for Chinese entrepreneurs and manufacturers. There is a unique history,  tradition and an infrastructure to support this change. If you were a manufacturer in say, Bangladesh, you wouldn’t have any of this to lean on, so your road to success with this strategy would be that much harder. 

Most important, as the Japanese did, there has to be an emerging national spirit of pride in Chinese Manufacture as the site of the world’s oldest tradition of creativity and innovation. This has to be an initiative of the people, not Beijing. This is people, not government.

Further, these changes require investment and patience. They will not happen overnight and they will not happen if the only thing in the manufacturers’ mind is to sell what they make and pay some poor soul commission to try to peddle it. They need paid apostles: those who are also passionate about the goals but who are fairly paid for their work; no risk, no reward.

What will happen if nobody pays attention and nothing changes? There will be a Reckoning.

IV. If not, will there be a Reckoning for China textile and apparel like there was for the US Auto Industry?

What is a “Reckoning?”

According to Collins Dictionary, it is “if someone talks about the day of reckoning, they mean a day or time in the future when people will be forced to deal with an unpleasant situation which they have avoided until now.” 

It is the same consequence the US Auto Industry faced in the 1970’s, according to the great book by David Halberstam of the same name.

What happened then? 

As Halberstam describes in his opening chapter, “Maxwell’s Warning,” in 1973 Charley Maxwell tried to warn the automakers in Detroit that a sea change in oil prices was coming, thus their gas-guzzling big cars would be uneconomical compared to Japanese cars and German cars. He had concluded that the world “had changed and was going to continue to change.”  Not only did they not heed his warning, but he never got and audience with or the attention of the decision makers. In Halberstam’s words, “he had not even gotten across the moat. Detroit was Detroit, and more than most business centers, it was a city that listened only to its own voice.” 

It was a serious case of denial that has brought down many iconic businesses in the US even until today, such as Sears and ToysRUs. Halberstam tells us, “They believed that tomorrow would be like today because it had always been like today and because they wanted (emphasis mine) it to be like today.” 

This attitude resulted in an unprecedented loss of market for US domestic auto industry, and a great growth story for foreign brands, led by the Japanese. Let’s make a corollary here with the situation in 2023 for Chinese manufacturers, especially the textile industry. To begin, let’s read the ending paragraph of Halberstam’s book (substitute Chinese for American). He speaks of the emergence of immigrants, especially Asian immigrants, who saw the possibility of a regenerative life in the US, as opposed to native Americans who took it for granted:

“The other respect in which America was ill prepared for the new world economy was in terms of expectations. No country, including America, was likely ever to be as rich as America had been from 1945 to 1975 (my comment: China?), and other nations were following the Japanese into middle-class existence, which meant that life for most Americans has bound to become leaner. But in the middle of 1986 there seemed little awareness of this, let alone concern about it. Few were discussing how best to adjust the nation to an age of somewhat diminished expectations, or how to marshal its abundant resources for survival in a harsh, unforgiving new world, or how to spread the inevitable sacrifices equitably.” 

These are the results of the Reckoning that America faced in the 1980’s and they are terrible. Take a look at the following numbers:

Since foreign-owned auto companies relocated most of their US production to the US itself, and approximately 25% of the domestic auto production comes from NAFTA partners, it has not been a total loss for the American economy. That said, it is still a very sad story for the once-dominant American auto industry and one China can learn from.

What will be the number for Chinese textile manufacturers in 5 years? The world moves much more quickly than it did in the 20th century, so it is not necessary to wait 50 years, or even 20, for results.

Does this mean that Chinese manufacturers have to open factories in the US or NAFTA or other FTA partners in the Western Hemisphere? Maybe. This type of action would be in line with what I suggested earlier: doing something different than what had been done before because you recognize that the situation is changed and will never be the same again; therefore you need to radically change your strategy. Mostly it involves following the example of brands like Toyota, Samsung, LG etc. that have not only dominated the US market but have made their foreign origin a non-factor. This includes hiring capable people in the US who understand and can restore companies’ and consumers faith in Chinese product. 

And what about the Chinese Currency? There was a time when China was called a currency manipulator because it intentionally pegged its currency to the USD to promote exports. The bet then was that the currency would materially strengthen against the USD if it were freed. I wonder what would happen if the RMB were left to free float today? Maybe just the opposite, which would be a further disaster for China. Would you buy in?

The most important lesson to be learned is that which this article is about. Since there is no Deming to teach and inspire us, Chinese factories need to look to his teachings and the results from those that followed them, like the Japanese to lead to a sea change that lays the groundwork for success in the future. This would be a productive change for China.

Again, two main lessons from Deming are: 1. Quality control to a standard of zero defects; 2. Adopt the PDCA philosophy and methodology, which signals a paradigm shift to make what the customer wants, as opposed to selling what you have. It means a change in philosophy, but, as said earlier, not one that is non-existent in China and Chinese culture. 

It actually means a spiritual and actual return to China’s Golden Age of innovation. There are still companies in China, like Zhangxiaoquan (knives and cutlery of the finest quality) and Jingdezhen (beautiful cups) that have uncompromising quality standards and command a commensurate price. If this means they don’t reach the pinnacle of volume, they are happy to accept. This should be the paradigm of all Chinese producers who want to grow their business in a sustainable manner.

The last word should be the distinction that Lotus is fond of making, which applies to the Japanese auto companies in the 1970’s and 1980’s, and maybe still today: Between entrepreneurs and businessmen.

When the Japanese started to make an impact on the US market, some 20 years after Deming went there, they were entrepreneurs, marketing according to the PDCA system. They tested the market, revised their product and service accordingly, and continued to refine their offering until today.

We hope that system can be widely adopted in China, which would indicate a sea change in mindset. From our knowledge of many factories, the current owners, spawned from the Deng Xiao Ping era and China’s record growth, are “old school” and cannot pivot; it will have to be their sons and daughters, maybe even their sons and daughters, who understand and implement the change in a widespread fashion. This is the game changer we are looking for.

Problem is, by that time the situation will continue to erode and textile and apparel manufacturers will find themselves with a permanent loss of market share, just as the American auto manufacturers have; or worse, with the same fate as Sears and ToysRUs.

What we need and what we are looking for are a few souls to start the fire. 

Then, in the future, the Great Reckoning can be called the Great Awakening.