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Covid-19 Flattens Chinese Business Structures


Chinese companies have used the Covid19 crisis to redesign their organizations to become more agile in responding to fast-changing customer needs, which at times were happening daily. The old hierarchies were ill-equipped to respond to these high-velocity changes. This required flattening the pyramid. In the process the traditional middle management layer was done away with, as a digital transformation enabled direct communication between leadership and front line managers, and also between front line managers and customers. This also resulted in a lot of automation of routine activities. 
The Harvard Business Review quotes an instance from Ping An Bank which elevated its “data-oriented operation” to the next level, transforming its organization from the traditional hierarchical pyramid to a delayered organization with an increased number of senior executives focused on digital transformation and IT; keeping the number of middle-level managers flat despite rapid growth; and scaling up front line market-facing teams. 
The firm’s senior leaders to directly managed larger front line teams using digital tools and data, changing their primary mode of working from “managing with experience” to “managing with data.” The business performance reached record high levels in April 2020 despite the crisis.
With leaders able to directly engage the entire organisation through digital channels, mid-level managers were no longer vital communication channels between leadership and the front line. Senior managers had to become more deeply involved in strategy and policy decisions to ensure speedy response to rapidly shifting business conditions. A high degree of variation in local conditions, moreover, drove more real-time execution decisions by empowered front line teams closer to customers and more familiar with the local laws and conditions.
Yili Group, a leading dairy company, faced unprecedented logistics and transportation challenges during the shutdown. It had to reach out to farmers, milk factories, transportation companies, and local governments, as well as other partners in locations across the country, to keep the supply chain moving. Regional front line employees were authorised to take action to resolve unexpected problems such as road blocks, health checks for drivers, and community shutdowns.  This ensured that they were able to continue to deliver to even the most remote locations across China.
For years together the technology industry has been trying in vain to convince organisations to initiate digital transformation; now Covid19 has turned it into a mission critical objective to survive and thrive in this unprecedented situation. Indian organisations too will have no option but to transform themselves to digitise their operations. 
While this will mean job losses in the middle layers of the pyramid, it will create new jobs that will require digital literacy and dexterity at all levels. At the same time, soft skills, like communication to articulate the new business value generated through use of technology, critical thinking, creativity, problem solving, remote  team management will become essential.

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