China's leading Internet guru Charles Zhang, chairman of SOHU.com Inc., on how the Internet has changed the world's most populous nation

Abstract

The article presents an introduction, foreword, and speech from Charles Zhang, chairman of SOHU.com Inc. to the Academy of Management Executives on August 8, 2004. Zhang discusses the need for cross cultural understanding and mutual respect for cultural difference, SOHU.com's role in the development of the Internet in China, and the emergence of China as a global economic power. Dr. Charles Chao Yang Zhang is the founder of SOHU.com Inc. He has served in the positions of chairman of the board, president, and chief executive officer of the NASDAQ-listed company since its founding in 1996. His Chinese name, “Chao Yang,” means “sunrise.” SOHU.com Inc. is the first Chinese-language search engine in the world and a leading internet portal in China. At the end of 2002, China had overtaken Japan to become the second most wired nation in the world, after the United States. At present, there are over 100 million Internet users in China. This represents approximately ten per cent of that country's population. SOHU offers the most comprehensive matrix of Web properties in China. According to the Motley Fool, a leading provider of investment advice, because SOHU's portfolio of services/products is very diverse, it resembles an amalgam of Yahoo!, Amazon, and Google.1 As such, it has tremendous potential for further growth and development in China, the world's most populous nation. Dr. Zhang was born in 1964 in Xian, the ancient capital of China. After graduating with a bachelor of science degree at Qinghua University in Beijing, he won a prestigious scholarship under the China-U.S. Physics Examination and Application (CUSPEA) program to study in the United States where he earned a Ph.D. in experimental physics from the Massachusetts Institute of Technology. In late 1996, with an initial investment of $225,000, Dr. Zhang founded Internet Technologies China, subsequently renamed SOHU.com Inc. “Sohu” stands for “search fox” in Chinese. The reason for the choice of “fox” as a name for a search engine is that the fox is swift and good in searching for its prey. Within three years of its startup, the company's revenues reached $1 million, most of which came from online advertising by leading multinationals such as Hewlett Parkard, Intel, Nokia, Compaq, and Audi. In July 2000, the company's shares were listed on NASDAQ. In October 1998, Dr. Charles Zhang was named by Time Digital to its Cyber Elite top 50. In July 2003, he was featured by Time Magazine as one of 15 Global Tech Gurus. In September 2003, Business Week listed Dr. Zhang as one of 25 global E-biz CEOs. He has been recognized by the World Economic Forum as a Global Leader of Tomorrow. Dr. Zhang regularly participates in leading international conferences, including the Fortune Global 500 Forum, Fortune Magazine roundtables, and World Economic Forum meetings. In July 2001 Zhang co-led an executive delegation to support Beijing's successful 2008 Olympic bid at the 112th International Olympic Committee Meeting in Moscow. In December 2001, upon the invitation of former U.S. Secretary of State Madeleine K. Albright, he joined the International Advisory Board of the Pew Global Attitudes Survey as an inaugural member. In March 2003, Zhang became a member of the All-China Federation of Industry and Commerce. Because of his celebrity status in China, Zhang was recently appointed by the Chinese Ministry of Health as one of three ambassadors to raise AIDS awareness to stem the spread of that disease in China. His visibility both at home and abroad has led to his being dubbed “China's Bill Gates.” Furthermore, similar to Steve Case, the public face of America Online, Charles Zhang is very much the public face of SOHU.com. In May 2003, as part of the SOHU-sponsored China Mount Everest team to celebrate the 50th anniversary of human conquest of the world's tallest mountain, Dr. Zhang climbed Mount Everest to an elevation of 6,666 meters (18,198 feet) above sea level. In his address, he explains why he stopped at 6,666 meters. Dr. Charles Zhang is a particularly appropriate executive for the Academy of Management to honor. He is a self-made man who was born in the waning years of the Chinese Cultural Revolution (1966–1976). From his very humble beginnings in Xian, through education, vision, hard work, an indomitable will, and perseverance, Dr. Zhang has emerged as China's first true Internet celebrity. Dr. Zhang represents the new breed of executives in China (a country that has experienced the fastest growth rate in the world in the past two decades)—young, enterprising, adventurous, and believing that China's economic future does not rely solely on low-cost manufacturing but, more importantly, on rapid development in the information and high-technology sectors. In reflecting upon Dr. Charles Zhang's presentation, I could not help but realize how many of his observations about management and cross-national culture closely parallel much of what I have written and taught in the past two and one-half decades, some of which can be summarized below: We need cross-cultural understanding and mutual respect of cultural differences. My studies of business negotiations between East Asians (the Chinese, Japanese and Koreans) and western firms have revealed that while knowledge of cultural differences is not a critical factor to success, its absence can contribute to failure. Charles Zhang's allusion to the problems encountered by foreign multinationals in China supports this point. In my studies on the role of guanxi (connections), I found that, in general, the need to build good connections or relationships is more important to business success in China than it is in western societies. The examples that Dr. Zhang provided in his speech about how he overcame some of the challenges his company encountered, particularly in the initial years of operation, support the need to build such relationships. However, as I have concluded in my studies, reliance upon guanxi alone cannot guarantee success in China. Charles Zhang is a living testament to this fact—he is not related by birth to the influential government elite in China. He relied on technical competence instead to establish credibility in the world of business. Yet he has never failed to recognize the significant and complementary role that guanxi can play in facilitating and enabling efficient operations in China. As one who writes and researches about similarities and differences across cultures, I have surmised that one of the most salient differences between east and west is the eastern (Asian, perhaps) belief that management is more of an art or craft than a science. In his presentation, Charles Zhang emphasized the need to be a good craftsman to succeed in China. More importantly, he has demonstrated that despite his lack of knowledge of theories and principles of management, he has succeeded by just doing it. Charles Zhang's assertion that the Chinese can embrace western principles yet remain Chinese supports my conviction that modernization is not synonymous with westernization. Dr. Zhang himself epitomizes this fact. Despite his MIT education and U.S. work experience, his management philosophy and approach are heavily influenced by Confucianism, Taoism, and Chinese stratagems as exemplified in the 36 Stratagems and Sun Zi's Bingfa (translated as the Art of War). Often times, westerners and western companies err by assuming that if a country is modernized, then by definition it is also westernized. Developing corporate strategies and behavior based on such a misguided assumption can lead to very costly mistakes. Last, but certainly not least, Charles Zhang's success at a young age can be attributed in large part to his visionary skills. He wanted to build a company based on two major trends that he projected. He went out on a limb regarding this conviction, and his conviction paid off handsomely. As researchers and management educators, we ought to possess similar visionary skills and recognize future trends. Often times, to meet the publication standards of our journals, we are constrained by evidence-based research dealing with phenomena that have already occurred. This constraint can limit our ability to pay due attention to what is important in the future. While evidence-based research is undoubtedly important and has its role in management research and literature, Charles Zhang has shown in the case of China that there are alternative paths rather than the one best way. We too as researchers and management educators should entertain a diversity of research topics and/or approaches. In my opinion, as researchers and management educators, we too should try to envision the future and attempt to project what will constitute important topics worthy of investigation even though they might not be in the mainstream at this point. These projections should, of course, be based on well-informed and educated opinions. For example, I started to engage in research on international human resource management and cross-cultural management research long before they became “hot” topics. My current research on ex-host country nationals (EHCNs), while constituting a continuation of my earlier research on international human resource management, represents yet another such projection. EHCNs are individuals who share the same ethnic background as the people in the target culture to which they are assigned, be they self-initiated assignments or relocations by the corporate head office of multinational firms. The trend toward the use of EHCNs is growing in popularity among many transitional economies and some newly industrialized countries, such as China, many countries in Central and East Europe, and South Korea. Dr. Zhang is an outstanding example of an EHCN who has done well, both from his own career standpoint as well as service to his country of origin (China) and the country that played host to him for many years (the United States).

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