Four Culture and Globalization Lessons from LeEco’s Successes and Failures

Editor’s note: This was contributed by Elliott Zaagman a trainer, coach, and change management consultant who specializes in aiding Chinese companies as they globalize. He uses a comprehensive four-dimensional model that enables organizations to take a holistic approach to global readiness, from the inside out. To contact him, check him out on LinkedIn.

I worked at LeEco from March 2016 to May 2017 at their Beijing office. Beginning as an external consultant hired to coach leaders in the company’s rapid overseas expansion. I was later hired as a full-time employee, where I headed up their Culture Globalization program, an HR initiative designed to bridge the cultures of the China and overseas offices. This program was also designed to develop the language, cultural, and leadership skills of the staff at the Beijing headquarters.

In some of those areas, LeEco has made incomplete progress. In others, we failed entirely. What follows is my understanding of why we were not able to achieve our goals in this area as well as key takeaways that other Chinese companies can use in their globalization process.

My motives here are not to tear down YT Jia or LeEco. Actually, I really admire YT as a leader. We can all learn a lot from his emphasis on learning by doing, being unafraid to fail, and taking the time to self-reflect.

What I hope to do is provide an analysis framework so that LeEco, and companies like LeEco, can improve their globalization strategies. One consistent theme is evident:  that while technical and surface-level changes can take place rapidly (companies can be acquired, talent can be hired, and strategies can be laid out), the necessary cultural changes in people’s hearts, minds, and habits are complex processes that require time and patience. The speed and scale of LeEco’s development simply did not allow for that.

In analyzing the culture globalization process, I believe a comprehensive understanding can be gained by looking at four dimensions: language, the resonance of organizational values, leadership and management skills of those in power, and localization. By looking at LeEco through these lenses, we can come to a better understanding of how companies can better globalize.

Language:  Are internal documents and key information bilingual? What is the level of English competency of key staff?

As LeEco began its globalization journey, they recognized this need and took steps to address it. They hired a highly-qualified team of translators and interpreters, who would provide simultaneous interpretation in all relevant meetings. For executives with poor English skills, coaches were hired to help them improve quickly. Most internal systems and communication were made bilingual.

“The translation that was provided to us was the best I’ve ever experienced,” said one US employee, who worked for other Chinese companies prior to LeEco.

However, despite their best intentions to integrate English into the company, the reality was far more complicated. When selecting people for key overseas and global positions, English competency was far less important than the implicit trust YT had in them. While many of them were provided English coaches, the high-pressure demands of their jobs meant they had little time to study and develop their English skills.

One glaring case was in that of an executive who was placed in a key position driving the go-to-market process in the US. He had an extremely minimal grasp on the English language. This had a demoralizing effect on much of the US staff.

“People were shocked by how poor his English was, and I think it made a lot of US staff just feel like the leadership in Beijing didn’t respect us,” said one US employee.

By putting that executive in that position without the necessary skills or training to succeed, the leadership of LeEco put both the US team and that Chinese executive in positions to fail.

The degree to which the US office was staffed by transplants from China also took a toll on their ability to recruit and retain local talent.

“The working language here is more Chinese than it is English,” one senior HR leader mentioned. “This makes it very hard to recruit and keep non-Chinese staff, and therefore severely limits the talent pool that we can recruit from, meaning that the skills of our people just won’t be of the same caliber as those of our competitors.”

Key takeaway: Language matters. It is the foundational building block, not just to direct work-related communication, but to the building of trust, a key ingredient to any effective team. Without a shared language, the team will be severely disadvantaged.

Corporate Culture: Are your company’s story and values globally resonant?

The key to the sustainable success of any global organization is creating a vision, mission, and value set that are resonant beyond simply the culture of the country in which the headquarters is based.

I joined LeEco because they had the beginnings of this: a set of values focused on providing more benefits to its end-users through an entirely reconstructed value chain, and a teamwork-based working style founded on proactive trust and collaboration across teams, functions, and its seven sub-ecosystems.

While I genuinely believe that this was what the leaders of the company truly believed in, they were unable to communicate this in a way that was resonant to overseas staff, journalists, and consumers. This was made evident in the October 19 “Big Bang” event, in which LeEco and its products were officially unveiled to the US market. In a downright gaudy spectacle that lasted almost two hours, the entire business model of the company was laid out, with so many empty tech buzzwords that it seemed more like a Saturday Night Live spoof of a tech company product launch than an actual one. When YT Jia came to the stage to speak, he was preceded by a video that displayed his own face, projected 15 meters high on a screen behind the stage. When the self-congratulatory video montage ended, YT took the stage amidst a cloud of smoke, looking more like a WWE wrestler than tech company CEO. The US press widely panned this event, with many articles expressing either confusion or ridicule.

I, too, was confused. I asked one director-level employee at the Beijing headquarters. He responded: “Apple did this with Steve Jobs, didn’t they? We want to show that YT is that kind of genius.”

This way of thinking, pervasive throughout the entire company, failed to take into consideration that the case of Steve Jobs was the exception, not the rule. Furthermore, by the time Steve Jobs was lifted to demigod status by the cult of Mac, he had already built a legacy for himself through decades of technological innovation with real impact on millions of people. YT was a relative unknown, and by presenting himself in the way he did, he gave the impression that he was simply a rich guy with a big ego. Not a good first impression.

This YT-worship went beyond just the event, but reportedly to the workplace as well. “(YT) was literally treated like a king, with a dedicated (more expensive, comfortable) chair that was tucked away in storage when he wasn’t present,” said one anonymous reviewer, and confirmed by other employees.

To be fair, I want to emphasize that I do not question the intentions of LeEco and its leadership. I know many of their executives personally and know them to be very good people. A chair, in essence, means very little, and it is no one’s business to cast judgment on what kind of chair someone’s body requires. The focus here is the lack of awareness and management of the optics of their approach to brand-building, both internally and externally.

This same approach, while not uncommon in China, was entirely tone deaf to the values that govern Silicon Valley, where billion-dollar CEOs famously drive Toyotas to work, leaders refuse to sit at the head of the conference room table, and HR VPs boast about how democratic and transparent their company’s systems are. “In China, leaders show their power and wealth through status symbols, and people respect that. In Silicon Valley, those same displays of status make people think that you are weak, lack confidence, and have a fragile ego,” said one Chinese national who has spent years working in the Bay Area. By using very normal Chinese cultural messaging, LeEco alienated their US key stakeholders in the US: staff, media, and consumers.

Key takeaway: Before entering a market, learn the cultural values of the talent you hope to recruit and the consumers you hope to attract. If you share those values, emphasize them and act according to them. If you do not share their values, rethink your values, or rethink the talent and consumers that you are pursuing.

Leadership and Management: Are your leaders and management systems globally effective?

“When Japanese automakers entered the US market, they had proven systems with higher-quality results, and that gave them credibility with US employees. One of our problems is that we didn’t have a proven system, so it was much harder to get buy-in from US staff,” a senior LeEco leader told me.

“The lack of a clear, coherent system of management led to poor productivity and a disorganized workplace,” said another employee.

This became increasingly evident as the company began to suffer from cash flow issues in November 2016 and it became clear the company had a full-blown crisis on their hands.

“We had no clear company-wide plan from headquarters for crisis management in communications,” said one PR professional. “For a company of that size to have no plan is absolutely unheard of.”

This lack of a clear management system had become a big problem throughout the entire company. An underdeveloped management system, combined with the company’s hard-driving culture caused many US employees to lose motivation.

“We would work overtime for two straight days on a task, only to be told that the strategy was changed based on some opaque reasoning from the Beijing office. After that happens, it is very hard to stay motivated,” said a US employee.

The conflict over a willingness to work long hours was a point of conflict between US and Chinese staff.

“A lot of the Chinese employees who went to the US would work separately from their US colleagues, because (Chinese staff) would work late into the evening, but US employees wanted to get home to their families,” said a Chinese employee who worked in the US office of Faraday Future, YT Jia’s electric vehicle startup.

“Balancing the demands of the Chinese leaders while showing respect for US colleagues was challenging,” said another.

When it comes to leadership, it was quite clear that YT Jia was able to deliver a compelling vision. I myself was drawn to this, as were many others.

However, a compelling vision cannot be the only ingredient in successful leadership. In the case of LeEco, the leaders’ inability to accept counsel and feedback from those under was a key weakness. In the dozens of conversations and interviews that I have conducted in preparation for writing this piece, one refrain was unanimously consistent: the leaders simply were not open to critical feedback, and because of this, they were unable to gather the necessary information about the company’s severe financial issues until it was simply too late.

“By the time the leaders saw the iceberg, the Titanic was already sinking,” said a director-level employee.

The company’s financial problems spurred a vicious cycle of secrecy and perceived dishonesty from leadership, followed by mistrust and frustration from staff, proceeded by further entrenchment and secrecy from leadership.

“We were promised town hall meetings every month, but they had been cancelled for the past three months,” a US office employee told me in early March.

“When they finally did have a town hall meeting, the only person who spoke was a lawyer, not anyone in charge. I believe the only reason why they even had that meeting was because employees persistently demanded it,” said another US employee.

Key takeaway: Recognize that expectations for leader behavior are different from culture to culture. Make sure that those in leadership positions of overseas teams have flexible leadership styles, that can be adapted to the demands of the situation.  When recruiting talent, clarify expectations regarding working style. If your company’s working style does not fit the local culture, be flexible in finding a solution. Never mislead talent about your company’s expectations.

Localization: Are you meeting the needs of the local market?

The localization process is another case of good intentions falling apart. To facilitate this process, the company created a translation and localization team, made up of multicultural professionals. They were amazing and I cannot praise them enough.

However, while the team was very useful, it became clear that LeEco leaders were not utilizing them to their fullest extent. In many cases, while key language and localization oversights were made early, localization experts would not be brought in until the later stages of product development, making their job very hard. In other cases, the team was not involved in the process at all, and content, products, and promotional material designed for North American audiences were released containing glaring mistakes.

The most prominent missteps in localization occurred in LeEco’s North American go-to-market push in the fall of 2016.

“They tried to just copy and paste their model from China and use it in the US, but that’s not going to work,” said one former LeEco employee.

That model relied heavily on online “flash sales,” short periods of time in which products were heavily discounted, designed to drive enthusiasm and attention to the company.

“The problem is, flash sales don’t work in the US, especially when no one knows who the hell you are,” said another US employee involved in the marketing process.

In the end, this strategy failed terribly. Reportedly, although North America sales targets were originally quite ambitious, the final sales numbers were only a fraction of the goal they had set.

Key takeaway: Hire qualified and knowledgeable local staff, and then trust and empower them to make decisions that are well-suited to the local markets. If you do not trust them, either take the time and effort to build a trusting relationship, or hire another local whom you do trust. Only trusting people from your own country or culture to run the show is a surefire recipe for failure.


Final thoughts

No company can simply buy or hire their way from local company to global organization. It is a process that requires a fundamental shift in the language that the company uses, the story that it tells, the way that key people manage and lead, and who is trusted and empowered.

These are lessons that multinationals have been trying to learn for a long time. Over the past few decades, Western companies have failed or succeeded in the Chinese market based on how effectively they were able to deal with these sometimes painful lessons. Now, as Chinese companies globalize at an increasing rate, they must now learn and adapt as well.

I am very grateful for my time at LeEco and very glad that I joined. I cannot even count the number of friends I made and professionals who I was able to learn from. I wish them all the best.

I hope that my writing can be a valuable learning tool for not only LeEco, but all companies at any stage of their globalization process.

— This article originally appeared on TechNode.