THE INAPPLICABILITY OF WESTERN MODELS TO INFORMATION TECHNOLOGY DEVELOPMENT IN CHINESE COMPANIES - THE CASE OF THE HONG KONG NEWSPAPER INDUSTRY

Ada WONG,

Department of Information Systems,

City University of Hong Kong,

Frank GREGORY,

Department of Information Systems,

City University of Hong Kong,

Series No. WP97/06 Editor: Dr. Matthew Lee, Assoc. Editor: Robert Davison December, 1997

CONTENTS

Abstract

The paper presents the findings from a survey of information technology planning in the Chinese language newspaper industry in Hong Kong. The research attempted to apply well known Western models of strategy, corporate structure, corporate culture and states of growth to this industry. It was found that the categorisation in these models did not always apply to the companies surveyed and where they did apply they had little explanatory power. The authors argue that a different approach to modelling, incorporating Action Research, may be required in order to develop models relevant in a non-Western cultural environment.

Key Words: Strategic information systems planning, information technology, Chinese newspapers.

The paper is based on a study of information technology planning in the Chinese language newspaper industry in Hong Kong. Most sectors in the Hong Kong economy are heavily influenced by the West. By contrast, the Chinese language newspaper industry is, in terms of its product, staffing and management, exclusively Chinese. It therefore offers insights into Chinese business practices that would be more difficult to identify in other sectors.

The study was originally conceived as a statistical survey of the effectiveness of IT strategy based on Western models of strategy, corporate structure, corporate culture and IT growth. It was hoped that this would give valuable insights into the industry. However, as the research progressed it became increasingly evident that Western models were not appropriate to the task. It was found that the categorisation in these models did not always apply and where they did apply they had little explanatory power. At this point the research took a radically different direction.

Hitherto the approach had been one of questionnaire style data gathering on the basis of categorisations found in the academic literature. Thereafter, the research was conducted on the basis of open ended face to face interviews with key players (business managers, IT managers, editors and journalists) in the industry. The assumption here was that the players in local industry might have a better notion of how it is configured than academics from the USA and the UK What emerged was that many key figures in the industry had ideas about business practice, business goals, and business success that are radically different from those assumed in Western models.

The main purpose of this paper is to show that two commonly held assumptions are inapplicable to Chinese businesses. We shall call these "the prescriptive assumption" and the "descriptive assumption". The prescriptive assumption is that if Chinese companies want to be successful in IT development, all they have to do is follow Western practice. We shall argue that the different business objectives found in Chinese companies render this assumption incorrect. The descriptive assumption is that while it may not be possible to transfer Western practice directly into a Chinese context, Western models can be used to describe and analyse Chinese businesses and that such analysis can be used to determine what types of IT will be successful.

The newspaper industry is a fertile field for study. It is an industry in which information technology plays a vital role. Daily newspaper companies need to design, manufacture and distribute a new product every 24 hours. There are few other industries that have this sort of pressure. New technology continuously improves the four main components of the business i.e. production, editorial, distribution and sales. In the copy/plate/print production process, on-screen layout and computerised colour separation represent the cutting edge. On-line data bases are now being introduced to provide editorial support. Some newspapers are now beginning to publish on the Internet thereby eliminating paper from the distribution process. Tele-ad sales (telephoning in a classified advertisement) are now being supplemented by the electronic submission of artwork for display advertisements.

There are a total of eighteen daily newspapers published in Hong Kong, sixteen in the Chinese language and two in the English language. The Chinese language newspapers are: Apple Daily (AD), Express News (EN), Hong Kong Commercial Daily (HKCD), Hong Kong Daily News (HKDN), Hong Kong Economic Journal (HKEJ), Hong Kong Economic Times (HKET), Hong Kong People's Daily (HKPD), Mad Dog Daily (MDD), Ming Pao (MP), Oriental Daily (OD), Sing Pao Daily News (SPDN), Sing Tao Daily (STD), Ta Kung Pao (TKP), The World Daily News (TWDN), Tin Tin Daily News (TTDN) and Wen Wei Po (WWP). The English language newspapers are: Hong Kong Standard Newspaper (HKSN) and South China Morning Post (SCMP).

In an industry familiar with technological change and with technological competition with other media, these newspapers are now facing what is possibly their greatest challenge. With limited financial resources, most need to decide which component of the business should be given priority for technological improvement. This is a strategic decision. This industry is, therefore, one in which we would expect to find that the strategic planning of information systems is of critical importance.

In the West, generally perceived wisdom indicates that successful information systems/technology implementation can be facilitated by an information systems strategy. A second tenet is that an information systems strategy should be founded on corporate strategy (see, for example, Roberts et al., 1990). When we looked at models of corporate strategy we found that the most well known, and probably the most widely accepted, is Porter’s (1985) model of competitive advantage, see Figure 1. Based on this, a not unreasonable prescription for success would be: i) develop a competitive corporate strategy, ii) formulate an information systems strategy based on this, iii) implement information technology based on the information systems strategy.

Our research was initially concerned to determine whether this sort of prescription could explain information systems success in the area of study. The first finding was that, although many of the companies had successfully implemented advanced information technology, few had any formal corporate strategy. The formulation of corporate plans tended to be informal and strategy was rarely written down (out of fourteen surveyed only two of the Chinese newspapers had formal IS strategy, nine had informal and project based planning, and three had no IS planning at all). It was not, therefore, possible to explain success or failure in terms of a straight forward adherence or non-adherence to this prescription.

A second theory was then adopted. The idea was that although the companies might not have an explicit strategy, they might still have a tacit strategy; Mintzberg (1994) calls this "an emergent strategy". For example, if a company’s newspaper was a differentiated product we could attribute to the company Porter’s product differentiation strategy even though nobody in the company had ever heard of Porter. However, this somewhat tenuous reasoning did not apply either.

Porter (1985) states that "competition is at the core of the success or failure of firms" and "that competitive advantage is at the heart of any strategy". Newspapers obtain their revenue from sales of copies (circulation) or from advertising. Most newspapers have both sources of income. Commonly these sources of income are dynamically opposed. Reducing the selling price of a newspaper will tend to increase circulation but decrease the revenue from circulation. Although more copies are sold, this will not normally compensate for the loss resulting from the lower profit per copy. However, the increase in circulation will tend to increase the advertising revenue because the advertisers get better exposure if the newspaper is more widely distributed. Conversely, an increase in selling price will tend to decrease circulation and advertising revenue but increase revenue from sales. Whichever strategy is adopted it would seem to follow from Porter’s ideas that newspapers should be in competition with one another for sales, advertising or both.

However, our research indicates that there are a number of newspapers that are not in competition for circulation or advertising revenue. At the time the research was conducted (the two years immediately prior to Hong Kong’s reunification with China) it was widely recognised that some newspapers were pro-Beijing and some were anti-Beijing. Three of these pro-Beijing newspapers were supported by the mainland government. Much of their advertising came from mainland enterprises, an indirect form of patronage from the Beijing government. These papers had a secure advertising income and were, therefore, not in competition with the other Hong Kong newspapers for advertising revenue. Nor were they in competition for circulation. In late 1995, Hong Kong’s Chinese newspapers became involved in a price war which forced the permanent closure of three dailies. The pro-Beijing newspapers did not react to the price cutting nor were they affected by it.

One of the two anti-Beijing newspapers, MDD, obtained sales revenue through coverage of horse racing. In this respect it was in competition with other newspapers. However, its news and editorial content was rabidly anti-Beijing. The owner claimed that the horse racing coverage was there to provide the revenue that would enable them to express their political opinions in the other sections of the newspaper. In this example it would seem that a considerable part of the product was not intended to confer any competitive advantage.

The stated business objective of many of the politically neutral papers also seems to be at variance with Porter’s model. From the interviews with management, we found that in the most of Chinese newspaper industry, editors have considerable power over and influence upon company policy, business direction and information strategy. In personal interviews the business objectives cited by managers were close to editorial objectives. Examples were "educate readers", "criticise the Government" (both British Colonial and Chinese governments) and to "express readers’ opinions". TKP stated one of its corporate objectives as being the scholarly criticism of government and that they had maintained this objective for 59 years. Profit making was said to be a means to these ends. Many key players claim that newspapers are "ethical products" rather than "commercial products".

Porter’s competitive model would seem to be at variance with the political reality, the political ideology and the business objectives of many of the companies surveyed. Indeed, there is good evidence that in this sector co-operation is preferred to competition. The Newspaper Society of Hong Kong (NSHK) has acted as a medium whereby representatives from each of the Chinese newspaper companies could meet annually to discuss pricing policy. As a result, a uniform pricing policy was agreed and maintained for over twenty years. This equilibrium was rudely disturbed in June 1995 when AD entered the market selling at two Hong Kong dollars compared to the five dollar price of the other newspapers. AD had been established by a Western style tycoon from the cut-price clothing industry. His strategy prompted the price war. Although AD is an example of seeking competitive advantage by cost leadership, the effects were short lived. By July 1996, industry leaders had re-established the uniform pricing policy and all papers were selling in the four to six dollar range.

The actual stated strategy in many of these companies is also radically different from Porter’s model. In interviews with managers the term "middle way" (not being extreme) frequently occurred. Respondents indicated that they did not claim their companies to be the best in any terms (circulation, profit or technology) and that there was much room for development (in newspaper content and IT development).

All this is not to say that Porter’s model is, necessarily, an inappropriate prescription for all Hong Kong newspaper companies. For the sake of comparison we conducted research into the English language "South China Morning Post". This has a highly cosmopolitan staff and a very Western management style. Here the language of competitive advantage was very much in evidence. Also corporate strategy, information systems strategy, and information technology implementation are closely aligned. For example, they have an expert system to diagnose faults in the newspaper printing process. This helps to reduce delays in the production process, which in turn confers competitive advantage on their product by reducing the lead time between news gathering and point of sales distribution.

From this we can conclude that success or failure in IT implementation in Chinese newspapers cannot be explained even in terms of a tacit acceptance of competitive strategy. Our point here is that Porter’s model cannot be taken as a universal prescription even in a highly Westernised and money orientated society such as Hong Kong. Porter’s model is premised on the assumptions that government and politics are distinct from business, and that business objectives are confined to maximising profits. The real challenge is, of course, mainland China where the world’s most populous nation is undergoing fundamental restructuring and economic development. In China "in all areas of society ... politics and business are interrelated and inseparable..." (Foster and Tosi, 1990) and set in an environment where social values are very different from those found in the West. In these circumstances, it not unreasonable to expect that the successful application of Porter’s model, and other Western models that share the same set of assumptions, will be very limited in China.

The descriptive argument is that although Western models cannot act as a prescription for Chinese success they can explain why Chinese companies are successful when they are successful. That is, there have been unsuccessful implementations and there have been successful implementations (they helped the company achieve its objectives) of IT in Chinese companies. The descriptive argument is that Western models can explain this. To put this another way, we must be able, where appropriate, to distinguish between Chinese ideas about what constitutes a successful Chinese company and Western ideas about what constitutes a successful company. Nevertheless, Western descriptive models can explain when an IT implementation will be successful no matter how success is defined.

Our initial research assumed that the descriptive argument was correct. A considerable amount of time was spent developing a configuration model, see Figure 2 (Wong and Revenaugh, 1996), that might be appropriate to the area of study. A configuration model is one that combines models of strategy, structure and culture. The model was developed out of Jordan (1994) which in turn was a development of Miller and Friesen (1986, 1988) which was developed out of Mintzberg’s (1981) model of Organisational Structure and Porter’s (1985) model of Competitive Strategy. Porter’s (1985) Competitive Strategy model, Mintzberg’s (1981) Organisational Structure and Cameron and Freeman’s (1991) model of Corporate Culture were regarded as independent variables, while Galliers’ Stages of Growth Model (1991) was regarded as a moderating variable.

It was expected that this model would indicate what type of information strategy (cost control, cutting edge, cost control focus or cutting edge focus) was present in the companies surveyed. For example, it was expected that if a company had a cost leadership strategy, a machine bureaucracy structure and a market culture it would have a cost control information strategy. It was further expected that the type of information strategy would indicate the type of information technology actually employed.

The types of technology employed in the sector are very diverse (see Table 1). Some companies have advanced technology in all components of the business. AD is one example, since their production, editorial, sales and distribution all employ high level information technology. Others are poor in most components, MDD is poor in the sales, editorial and distribution; only in production do they have some advanced technology (for colour separation). Many newspapers are advanced in some components but not in others. For example, TTDN has a high level of information technology in production and for editorial support, but employs poor information technology in production and distribution. TWDN (which specialises in the coverage of horse racing) employs poor information technology in sales and distribution, but has some advanced production technology and advanced editorial support from a database of racing results and racing form. HKET has an advanced database that stores stock, financial, currency exchange and other business information; this database was set up before they began publishing. Their property sales database is linked with the Government Land Department and the property sales agents. However, unlike many other papers they do not publish on the Internet.

In the event, the models proved impossible to apply. Porter’s, Mintzberg’s and Cameron and Freeman’s models all divide companies into four or five categories. With many companies it was difficult to determine which category they belonged to. Galliers’ model did not seem to apply to any of the companies surveyed. When companies could be placed in the categories, what tended to happen was that all the companies fell into the same category, and, therefore, the model did nothing to explain the fact that the technology used was very diverse.

Although Porter’s model is inappropriate as a prescriptive model it could still have value as a descriptive model. That is, although a company might not be seeking competitive advantage, it might still have competitive advantage and be classifiable in Porter’s model.

According to Porter (1985), it is necessary for a business to follow a consistent strategy with respect to either cost leadership or differentiation. The scope of the market is the dimension of strategic choice. Thus, the company can deploy either cost leadership (with a broad or narrow target) or differentiation (with a broad or narrow target). Porter also argued that if firms do not have consistent business strategies, that is choosing the differentiation as well as the cost leadership, the companies will become stuck in the middle, possessing no competitive advantage.

Industry agreement on price maintenance means that the selling price is not an issue in the newspapers’ strategy. The other main factors are advertising rates and revenue. Here we found what would be expected: the advertising rates and revenues were highest in those newspapers with the highest circulations. Advertising revenue was proportional to circulation in all cases but one. HKET, which targets business readers, had an advertising revenue that exceeded that of papers with greater circulations. As the income level of HKET readers is far higher than the average it is a good vehicle to advertise premium products and the advertisers are willing to pay higher rates to reach this market. The same is true of the English language SCMP, which also targets business people.

HKET can be said to fall into Porter’s category of Differentiation Focus. All newspapers try to differentiate themselves, and in this sense they might belong to Porter’s Differentiation category. However, with the absence of any being in the Cost or Cost Focus categories it is difficult to see how this fits in with Porter’s theories.

Mintzberg developed his organisational structure model in 1981. In his system all organisational structures fall into five categories, namely: Simple Structure, Machine Bureaucracy, Professional Bureaucracy, Divisionalized Form and the Adhocracy. All of Hong Kong’s newspaper companies tend to fall into Mintzberg’s Simple Structure classification.

Cameron and Freeman categorise companies as belonging to an organic or mechanistic process, and as focusing on internal maintenance or external positioning. The four quadrants of the model are called Clan, Adhocracy, Hierarchy and Market.

Cameron and Freeman designed a research instrument to determine where a company should be placed in their classification system. This consists of a questionnaire and scoring system. The first question asks the respondents whether their organisation "is a very personal place" and "like an extended family". The problem here is that a positive answer from a North American and a positive response from a Chinese could indicate quite different types of company. This is because North American families are generally significantly different from Chinese families. The former tend to be informal and undisciplined, whereas the latter tend to be more formal and authoritarian. Considerations such as this, rendered the research instrument unusable.

The results of interviews indicated that the factors that differentiated the companies in terms of corporate culture could not be represented in Cameron and Freeman’s model. The corporate cultures were in many cases a sub-set of Chinese culture and reflect a different system of values from those found in the West. Many of the people interviewed said that the newspaper industry was scholar led. Editors tend to be academic and have a very high status in the industry. They tend to see themselves as continuing a Chinese scholarly tradition and inheriting the prestige that scholars had in the time of the Chinese Empire. The downstream effect of this can be seen in the very formal style of writing found in HKEJ. We also found that the introduction of Chinese word processors had been resisted by a considerable number of editorial staff. Many of the editorial staff regard themselves as artists. Calligraphy is an art form in China and they had been reluctant to give up this scholarly tradition and begin typing. Even today most journalists write their pieces by hand and this is then input into the system by typists/typesetters. These cultural factors can not be adequately represented in the Cameron and Freeman model, but the authors believe that they have great explanatory power with regard to corporate objectives because the emphasis on social responsibility also follows from the Chinese scholarly tradition.

Galliers’ (1991) "stages of growth" model indicates six stages in information systems development. The model places companies in a given stage on the basis of seven criteria. These are strategy, structure, systems, staff, style, skills and super-ordinate goals. It was found that Galliers’ stages of growth model could not be applied to any of the companies surveyed. For example, AD belonged to stage V according to Galliers’ criteria for strategy, systems and goals, but stage III according to the criteria for skills and stage I according to the criteria for staff. A second newspaper, TWDN, has no discernible IS strategy, but is at stage IV by structure and stage V according to the criterion for style. Galliers seems to have had large organisations in mind when he devised this model. In more recent work (Doukidis et al., 1996), he has found that the model does not apply well to small companies.

As Gallier’s and Cameron and Freeman’s models could not be applied, and all the newspapers fell in the same category in Mintzberg’s model, this left only Porter’s model to explain the diversity in the industry. However, with the exception of HKET, all the newspapers fell, again, within the same category in Porter’s system. This meant that Wong and Revenaugh’s (1996) model was quite incapable of explaining the diversity of information strategy and the diversity of successful information technology found in the industry.

Our findings clearly support the research hypothesis put forward by Avgerou (1996), "that organisations differ significantly in terms of the aspirations they are expected to fulfil, norms of performance, scope of choice according to the industry and region that they belong to; and that such differences determine to a large extent the way organisations utilise information and communications technology...".

In the same paper, Avgerou suggests that most information systems thinking has been drawn from the study of typical Western commercial enterprises. The question, therefore, arises as to whether it is regional differences or the idiosyncratic nature of the newspaper industry that is responsible for the mismatch between the models and reality that we discovered in our study. The authors believe that the industry may be partially responsible, and they surmise that a survey of Western newspapers might also show some mismatch in the models. However, it is the regional difference that they consider to be the most important factor and also the one that needs to be given the greatest emphasis. The authors’ general experience (especially the second author who had eleven years experience as a business journalist and business consultant in the Far East), supports one of the principle findings from the study: in Chinese business practice, co-operation with companies in the same sector can be just as important, if not more important, as competition with them.

The authors tested only a few of the models used in the West. It might be argued that there are other models that have been developed in the West which would apply to the sector we have studied. This might be true. But if it is true it could only be true by coincidence. Our search of the literature indicates that the models of strategic information systems planning that have been developed in the West have little input from empirical research conducted in the East.

Burn (1989) has suggested modifying Western models to produce a Hong Kong model relevant to strategic information system planning. Our research suggests that, if this is to apply to all sectors in Hong Kong, the modification will have to be considerable. The authors doubt that regional models are a practical solution to the problem. On a global scale this would require conducting surveys to build hundreds of generic models. A better use of resources, and a more rigorous solution, would be to build a more robust model for strategic information systems planning. Such a model would need to apply to different regions, to different cultures, to large and small, private and public sector organisations.

A global model for the strategic planning of information systems would need to be complex. The authors doubt that generic models that seek to place organisations in four, five or six archetypal categories are appropriate for the purpose. This type of categorisation inevitably leads to a misrepresentation of minority or unusual organisations because the analyst views the situation through a preconceived framework. What is actually needed is an open ended action research approach that can identify an organisation’s true objectives and recognise a wide range of values. Hofstede’s (1994) work represents a move in this direction. Another relevant approach can be found in Soft Systems Methodology (Checkland and Scholes, 1990). Rather than trying to force organisations into predetermined categories, this methodology treats every organisation as unique and builds individual models for individual organisations. Nevertheless, the use of Soft Systems Methodology (SSM) has largely been confined to Western Organisations and an English speaking environment. Recently, inspired by the philosophy of language, enhancements to the SSM modelling methods have been developed. These logico-linguistic models (Gregory, 1993a, 1993b, 1995) may be capable of representing the concepts inherent in diverse languages. These models will be used for further research into the IT strategy of Chinese newspapers.

The following table shows the level of IT implementation in the Chinese newspaper industry in Hong Kong. The information in this table is based on research conduced at the beginning of 1997 and is not intended to be representative of the technology currently employed by these companies. IT implementation in the industry can be classified as sales, production, editorial and distribution. Evaluation criteria have been set by the authors but are not included in the paper. The scores 0, 1 and 2 correspond to None, Low and High level IT implementation in the company, while a ‘?’ means data is not available.

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