More than ever, leaders must anticipate rapid changes and be able to quickly adjust

As far back as the 1980s and 1990s, a consensus was forming that the business environment was becoming competitive, with a marked increase in complexity, turbulence, and other extraordinary changes.

In 1999, scholars Duane Ireland and Michael Hitt said that in the 21st century, CEOs would need to be "strategic leaders" in such an environment and coined the phrase "strategic leadership".

The current turbulence and changes in our lives makes our business environment even more extreme than these scholars predicted 16 years ago, and Chinese CEOs must adjust accordingly and be increasingly strategic in business operations.

In general, the reasons the business environment is becoming more extreme in China can be traced to two major factors: disruptive technology innovation and the Chinese government's powerful moves. This difficult environment requires Chinese CEOs to integrate Ireland & Hitt's "strategic leadership" with Chinese characteristics.

I recommend that they cultivate four distinct abilities to master the Chinese market: Chinese executives must have the ability to anticipate, to envision, to be flexible, and to leverage guanxi in an ethical framework. Guanxi means a network of relationships designed to provide support among parties involved in doing business. Favors are expected to be exchanged regularly and voluntarily.

To demonstrate why and how Chinese CEOs need these four abilities, we can analyze real business cases and government decisions that affect everyday business in China.

It's no secret that disruptive technology innovation changes the rules for a firm's establishment, growth, and survival in today's high-tech industry. All these changes only increase the need for CEOs to be strategic.

To illustrate the competitiveness of industry that CEOs face, we can analyze the smartphone market. Case in point: It only took several years for Nokia, a well-established phone giant, to become a vanquished notion and sell its mobile hardware business to Microsoft. Moreover, smartphone innovation changed not only the hardware ecosystem but also the software world. Now there are millions of apps in the iOS and Android systems, pushing Apple to become the world's most valuable company.

However, disruptive technology innovation changes not only the high-tech industry but also the finance industry and other industries. For example, Apple Pay has made Apple a powerful player in the finance industry. In China, the Alipay and WeChat payment syatems make their companies - Alibaba and Tencent - huge threats to Chinese state-owned banks.

Online retailers such as JD and Taobao have killed most of the retail businesses in Beijing's Zhongguancun, which used to be known as an electronic retail village. Therefore, Chinese CEOs are urged to understand the technology and the future trends and to be aware and cautious of how technology might impact their businesses.

In China, the CEO has a complicated role in reacting to the government's determinant power over other things, like new national strategies. Chinese CEOs must not only be knowledgeable of such strategies but also be able to execute profitable deals despite all of these changes.

For example, the recently proposed "One Belt, One Road" national strategy will boost the infrastructure investment in the eighteen provinces on this road. The name is shorthand for the Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives launched by President Xi Jinping's administration to tie China closer to other countries in Asia, as well as East Africa, the Middle East and Europe.

The "Blue Sky Return", or fight against air pollution strategy, has seriously damaged the coal industry and the iron and steel industries but gives needed boosts to environmental technology and green businesses.

The recent anti-corruption campaign restricts spending on luxurious hotels and restaurants by government agencies, the military, and state-owned enterprises, hurting high-end hotels and restaurants.

In addition to these strategic moves, changes in policies and regulations also greatly impact doing business in China. For example, without permission from the government, financial services such as Alipay and WeChat payment cannot enter the finance industry and provide their services legally.

In order to help CEOs deal with such a competitive environment of both a rapidly developing technology industry and the pervasive changes brought about by the Chinese government, I propose that a strategic CEO in China should possess the following competencies that illuminate Ireland and Hittin's "strategic leadership" theory.

First, the ability to anticipate. A CEO needs to foresee what will happen and prepare to take action. However, being sensitive to the environmental changes, including disruptive technology innovations and government moves, is the foundation to being anticipative. For CEOs in this turbulent business environment, it is easy to become a "boiling frog", meaning changes may seem gradual and harmless at first but then suddenly lead to disastrous consequences.

Second, the ability to envision. When a CEO is aware of what will happen, the next step is how to come up with a viable vision and novel and competitive strategies by using a creative, divergent thought process and then making the vision and goals happen. The vision should be used to keep people following the CEO.

Third, the ability to maintain flexibility. It is not effective for a CEO to follow the traditional path of developing a strategy and then taking weeks or months to implement it. Executives have to remain agile and flexible all the time, retaining the ability to anticipate and envision so that they are able to adjust their strategy and the implementation of it to adapt to environmental changes. Doing so can allow a firm to gain the competitive advantage.

Fourth, the ability to leverage guanxi but remain ethical. Every person in China, including foreign CEOs, knows that investing in and maintaining guanxi is crucial to be successful in China. Building and maintaining guanxi is easy to do by spending money for giving gifts, treating people to dinners, or drinking with customers. However, it is easy to cross the line and become engaged in unethical, or even illegal, practices. Executives doing business in China should be aware of where the line is, set a good example to followers, and demand ethical practices - no matter whether they are working in state-owned enterprises, the private sector or multinational companies, and no matter whether they are Chinese or foreign executives.

The author is an assistant professor of management and a leadership expert at Guanghua School of Management, Peking University. The views do not necessarily reflect those of China Daily.

( China Daily European Weekly 04/10/2015 page9)