Company Special: ChemChina: Hard choices in a historic era

We are living in an unprecedented period of time, with globalization and information changing our lives, our work and our minds, and making major transitions.

Popular opinion has it that China' economy is at a critical moment and its enterprises are facing a critical choice against an economic background of changing growth rates, structural adjustments and growing pains.

This period of adjustment is necessary if we want to help enterprises deal with deeply rooted problems built up over the years and restore their competitiveness. A new economy and more reforms are inevitable.

The market-oriented view is that to be a success, economic transformation needs enterprise transformation behind it. So, for an improved version of the Chinese economy we need an improved version of the Chinese company.

So it is with industry. In the chemical industry there are similarities to manufacturing, meaning a tough choice of whether or how to transform.

Fortunately, we don't face only hardships thanks to the vigorous development of the new economy, which has led to emerging enterprises and has forced the adjustment and upgrade of our industrial structure.

The 18th Party Central Committee's decision at the Third Plenary Session to increase reforms meant a great opportunity for State-owned enterprises, where the environment and internal pressures opened a time-frame for industrial restructuring, enterprise reshuffling, and business renovation.

To adjust this time, we need strategy and vision, while trying to grope our way forward.

It's only in this way that we can follow the "new science, new future" vision of China National Chemical Corp, also known as ChemChina, in the 2011-2015 period and make a new start for a new round of competition.

A good strategy can help in the decision on core products, business models, and resource use. It should also help in developing a technological advantage, increasing enterprise vitality, and assembling good teams.

A good business plan is crucial for a company's core products and, the primary issue here is deciding where to compete.

In the chemistry business, Chem-China has many assets and is fully competitive, but there isn't much room for us to maneuver outside our core products and make a new start.

What we can do, however, is to analyze our product value chain and find new business opportunities and further separate sectors to look for products that have a good market share and high added value.

A chemical enterprise can have a natural advantage with a long industrial chain so we should focus on the product value chain and trade-offs in the industrial chain to meet market demand and remove excess capacity.

In deciding "how to compete", a business model is critical.

Today, with the Internet exerting a lot of influence on the traditional economy, a business model is something we really need to take seriously in our decision-making.

On the Internet, customers go through many links in the value chain and decide on a product, which means jumping traditional management boundaries and tying bulk goods distribution to various business models, to form a customer-to-business model that suits our needs.

This shift from manufacturer to integrated solution provider is an amazing leap that involves a lot of risk and resources.

This leads to a third question - evaluating competitiveness. Our current enterprises are over-extended in both product line and the business chain, with a sort of miscellaneous approach to business and organization.

Much of this has historical roots but it is a perfect example of how many of our enterprises fail to develop products that are fundamentally competitive.

So, with what or whom do we compete? It's not with our factories, money, or projects, but with our people.

In looking at our resources, a talented team is clearly the most important thing. What really matters is entrepreneurs and management with proven practices and global competition.

The Internet economy is used by enterprises that adapt quickly and dramatically so they can compete.

Innovation and entrepreneurship and talent are important to a company, and the soul of innovation for an enterprise is always its people.

Therefore, new technology and deepening reform form the background of the big era, helping enterprises speed up their reshuffle and making innovators stand out.

So, here we are with the chemical industry at a critical stage of transformation and upgrading, and a new economy brought by new technology is giving us nearly the same historic opportunities as the world's leading companies first got.

Some American think-tanks and experts believe that the world is facing the next major technological change, with a third industrial revolution via new manufacturing technology, new energy, and smart cities, which will have an influence on future politics, economics and society.

As was the case in the two previous industrial revolutions, the third industrial revolution will change the production model, and have a deep influence on society as well.

Another approach to transformation and upgrades is through reforms. Most SOEs have undergone a tough restructuring to get where they are today, but, development based on investment in recent years has not answered the demand for reforms and some companies have just suffered a relapse.

The 18th Party Central Committee's Third Plenary Session underscored the need to follow a socialist path with Chinese characteristics and restart the reform process.

In the area of economic reforms, our basic economic system is one with public ownership in the lead while developing other forms of ownership.

We need to keep on developing the system while reminding ourselves that it's important to let the market determine resource allocation and let the government play its part better, as a force behind the reforms of the economy and the comprehensive transformation and upgrade of China's enterprises.

In this critical period of transformation and upgrade, we need to rely first and foremost on systematic reforms, and need to find an internal force for organic growth, establish incentives based on investors and clear-cut market relations.

It's also necessary to give greater freedom to innovation, encourage responsibility and performance awareness of shareholders, attract more talented people, and let leaders and employees apply their enthusiasm and wisdom as a continued source of wealth.

The chemical industry, which had its beginning back in the early 19th century, was a powerful force behind the second industrial revolution. Now, 100 years later, during a great era of change, can we here at ChemChina, where people who believe in human effort and are eager for change, release newer, more powerful energy?

At the beginning of A Tale of Two Cities, Charles Dickens wrote, "It was the best of times; it was the worst of times", and now, for better or worse, this is certainly a time of change, and we cannot stop exploring and moving forward, while making some difficult decisions. We have no alternative.

Today is ChemChina's 10th anniversary and I have taken the opportunity to write this article to encourage all employees and myself as well.

The author is the president of China National Chemical Corp

For China Daily