Current technology and the power of the internet gave birth to an interconnected world. In this age of globalization, there are countless opportunities to build a global enterprise – only if you know the right strategies to do so. Victoria Meyer sits down with Yubo Li, who talks about transforming Jiahua Chemicals from a Chinese private company into a global enterprise group through a systematic global synergetic lean management. He discusses how they pulled this off while navigating a major market decline by working with research universities and prioritizing customer needs. Yubo also explains how they combine technology with chemistry and manage a global team composed of people from different cultures.
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The Best Way To Build A Global Enterprise With Yubo Li Of Jiahua Chemicals
I have the opportunity to speak with Mr. Yubo Li, who is the CEO of the Jiahua Group. He joined the company in 2009 after choosing to drop out of university. Although, he has since completed an education at Harvard Business School. Since starting his career, he has grown with the company and has introduced a systematic global synergetic Lean management mode to Jiahua Group.
During that time, Jiahua has transformed from a traditional Chinese private company into a global enterprise group. We’re going to have a great conversation about doing business in China, and how the company has grown from a small private enterprise to the company that it is today and more. Yubo, welcome to the show.
What is your origin story? What got you interested in chemicals and what brought you to the helm in your role?
My father and mother were chemical engineers. They started making epoxy adhesives in our kitchen. I was six years old. That’s how they started the private business, so I got interested in this area. In 1998, they started their own business in some place in the northeast of China. I’m watching how they grow the business for the first ten years, so that influenced me a lot. I think I should share some responsibility, and also chemicals are easy for me.
Tell us about Jiahua. The company started in your parents’ kitchen. How has it evolved and what is it now?
Jiahua is one of the largest companies in China, and not just the largest company, we also have a lot of other technologies developed in the last several years. They treat us as a special chemical company. I joined the business in 2009. During that time, we are around $200 million. In 2021, the revenue is $2 billion. That’s something about our story.
You’ve grown not just in China but globally. When I look at what’s going on with many international companies, US and European companies, they would like to grow in China. Yet as a Chinese company, you’re looking to grow elsewhere. Why?
One of the reasons for our growth is not just a big capacity volume dumping products. In the last several years, I was the leader in this company. We started to develop hybrid technology for different areas, and then we started to understand what type of chemical we need for the formulations to help customers solve the problem. After that, we started building a team to develop chemical engineers and technical package, which we can build capacity based on our technology from the light. That’s how we grow. We have a strong R&D. Right now, we have 150 people working on R&D. It’s like 15% of the total employee.
Every year, we file 100 patents globally, not just in China. We have a strong engine, and we try to transform this company to a special IT chemical player. If we go more special, we will figure out that’s more than 70 on-demand instant products, not just in China. That’s the reason why we need an expansion globally.
We figured out that we develop our business in China. At the same time, we understand the needs in the US or Europe. We also understand the requirements in the Middle East and Africa. If we see the US and Europe, we can see the future for China, and then we can look back in China, and then we can use the experience in the Middle East, Africa, or Southeast Asia. That’s how we play in the chemical world.
Entering the more mature markets, which require more specialties and more sophisticated products to test them out and eventually bring them back into China. How has the pandemic and the shutdowns affected your business and growth, especially in China? All across the media and all the people that do business with China recognize there have been significant disruptions. How has that affected you?
The biggest challenge for us during the lockdown is the logistics. I think the plants still operate. I think the employees contribute a lot because they are living in the plant. In the past, that was not allowed, but during special periods, it was allowed.
The employees have stayed at the plants, so you’ve included some of the lockdown restrictions.
We housed them up. We have some empty rooms and baths in the building, so they’re living there for two months. That’s how we operate because we cannot shut down our company and pipeline to connect with a big chemical company, so they don’t want to shut down or they cannot. We choose to follow them.
That makes sense and that’s interesting. I hadn’t thought about locating people right there. What have you seen in terms of demand? That’s the other thing that we seem more holistically across the market is that demand seems to be in decline particularly in China. Europe is affected by the Russian Ukraine war and recession. What are you seeing from that perspective?
The market is different in areas. The reason for the decline in China is different compared with Europe. I talk about something about China. I think the decline is not because there is no demand. It’s because there are people in lockdown, not just in Shanghai right now, but in many cities. Then your logistics were not able to travel, and then your logistics slowed down. If logistics slows down, then the move of operations slows down. Then that affects the finance markets. The money flow or rotation slows down.
The people will be afraid to spend money because they don’t have a good prediction for the future, so there is some uncertainty. They don’t know what time they can travel, and that will influence the consumer demands. That’s making the decline happen. It’s not because they don’t want to buy something or they cannot afford something. You can say that like a saving risk in the bank. There is a continued increase. That means the money was delayed in the bank. I think our problem is the productive idea and the efficiency are getting some trouble, but it’s easy to fix if they change the policy.
The uncertainty, the lack of mobility, and being able to utilize these goods and services. What effect do you see that happening on your business elsewhere outside of China because you’ve expanded quite a bit in other regions?
We also see some slowdown in some regions. We also see a lot of new demands coming for a different type of region. Every year, we enter two different industrial applications, so we always have some new business. We can see some of our customers have a very strong demand in some applications and in some areas that they decline. It also depends on where they are.
As a relatively new entrant into the market, how do you develop that business? How do you develop and win business across these different regions and products?
First, we choose great value for the customers. We cannot also just compete. Value creation is very important for us in different regions. We don’t want people to treat us as an enemy. Also, we don’t behave like that. I think that we create value in two ways. The first is we can provide technology. We are very good at that. The team is a very efficient at developing new products, new precise and good quality of product, and also the technical service.
On the other side is we figure out that customers may not just need products with a cheaper price. They also need service. At the same time, we also hope we can provide local good service. That includes logistics and other types of services. We try to combine them together. We want to put a slogan that’s, “Advanced technology and service.”
That’s critical. That’s a big part of what companies are looking for as part of their customer experience and the service. When you’re looking at technical products, they need that technical support and the service to provide that. Tell me about where your technology and where your unique focus is? I know that you do a lot of work with research universities and other things. What’s the differentiator for you?
At first, we spent a lot of time to understanding customer needs. Customer needs, from multinationals or local customers, so they are all different. Even if they require the same products, the demand is very different. Customer needs are different. We spend a lot of time understanding it, and then we can put the needs to specification, and then we can do the research work or develop the products. The accuracy is much better compared with you creating something. For most in the market, some people like them, and some people don’t like those.Even if customers require the same products, they still have different needs. Companies need to spend a lot of time understanding these specific demands. Click To Tweet
Start with what the customer is looking for and develop products to meet that. I know when we took our little pause here that you are visiting Stanford and some other universities while you’re here in the US. What’s important about those relationships?
One thing is we cannot just run a chemical business in a traditional way. Productivity is very important for us. We want to increase our productivity. Right now, our productivity is also very high. We have about 1,100 employees that run a $2 billion business, which is three times compared with the traditional players specializing in the chemical area.
We think that there is still room to grow, so we try to use more data for R&D, planning, and production sites. When you have a lot of data, you have the speed to make all the Mathematics, and then you improvise the rules to improve. That’s the reason why we want to combine technology and chemistry together.
In technology, in this case, IT and AI to support the chemical industry. Data is becoming very important. It has always been important. I think it’s becoming even more important. What about digitalization? As a young company, it seems like you can do a lot with digitalization that maybe some of the more established companies can’t. What role does digitalization play?
We are having investments in IT stuff. We have a limit globally. Our manufacturing sites in China are in eight different cities, so we don’t have a lot of people in the company or in production. That’s the reason why we need to highly invest in IT. The first problem is we need communication. We have some very unique types of software helping us to do all the internal communication and people can share all the files.
We can have 100 people writing on the same file, and then the efficiency is very good. Also, for all of our meetings, we record first. The second one is there is automation in translation. People don’t really need to speak English. By translation and the colleagues in the US, they can guide most of the meanings. When you do a lot of work, for example, when you put the chemical work in the system and then they make translation, those types of things.
These translators don’t understand chemistry very well.
In production, we’re also using a lot of software to collect data, and then we try to link them together by using some software to make dashboards, and then we can understand where we have problems, which parts we need to improve. The whole thing is improving efficiency.
To a certain degree, it sounds like a very internal focus. Are you doing much digital with your customers?
Not yet, but we encourage a lot of our customers to use the similar type of software like we have. When we have done some technology to reference, so that it would be easy to communicate and also have transparency.
Where are you going next with Jiahua? You have significant growth now and you have some significant growth ambitions. Can you share that with us?
Right now, good energy is the hot topic. We have already started some research and development in this area. We already filed twenty patents for some applications. That’s one direction. We are also working closely with some automotive companies and battery manufacturers. Another direction is the raw material for chemistry and chemicals coming from our renewable resources. We are doing lot of those types of work. In the beginning, we may do some chemical reaction. The phase two is we will do formulation, and we already have some commercial projects with the customers.
The green bio-based products?
Yes. Maybe we select biowaste, so that’s a little bit different. We don’t use warehouse technology. We are using soybean, palm oil, and castor oil. At the same time, we are also looking for biowaste. We think if we can solve the biowaste problem through chemicals, I think the value we create for the world will be significant.
Is there a challenge in bringing technology out of China into other locations? You’re developing businesses in North America and Europe. Are there barriers that you’re seeing in terms of transferring technology that maybe is developed in China and bringing it to another region?
We didn’t see any problems so far, and we have our lawyers both in US and China, so they set up a regulation for us inside of the company, so we are not facing this type of problem right now.
I know that intellectual property and patenting, and all the technology is tricky.
We understand the rule in a different place. We’re using lawyers in helping us in this area.
What can we expect to hear from Jiahua over the next several months? What should we be looking for?
We’ll continue to have some expansions. Right now, we’re closely working with customers everywhere. We will have 10 or 15 projects commercialized in the next several months. Our portfolio of products will change a little bit, but I think the change will be quick. We are still slow on project management, but we have very good software helping us make the project management transparent. Second one, our people already have some failures, so we learn something from our failures. Number three is that we try to understand the needs from the market leader downstream customers, so that the requirements should be accurate. That’s what we’re going to do.
Thank you for spending time with me now on your visit here in the US. I wish you continued success.
Thank you very much.
Thank you, everyone, for reading.
About Yubo Li
Mr. Yubo Li, the Chief Executive Officer of Jiahua Chemicals Inc., Harvard Business School alumni, Young President Organization member.
Yubo is the company long-term strategic decision-maker, a talent leader with professional chemistry background, global business sense, acute insight of industry trends and innovative management idea, which give traditional petrochemical industry many breakthroughs and important headway.
Yubo joined Jiahua in 2009 after deciding to drop out of university, has over 10 years’ company management experience, started his career from basic team management, introduced the systematic, globalization, synergetic, lean management mode to Jiahua group steadily. During 10 years’ development, he successfully took Jiahua from a traditional Chinese private company into a global enterprise group with high efficiency operation system and advanced management. Jiahua moved from a petrochemical product manufacturer to an integration solution provider with international standard manufacturing capability and independent R&D, technological design capability.
Yubo has four children, 3 girls 1 boy.