A lot of people have asked me, “You’ve successfully switched from being a general leading an army to a top executive steering a company within a short period of time. This is a radical change of role and field. How did you achieve it?” I told them that army leadership and corporate management are actually governed by the same universal rules. Our thinking mode and methods determine the outcome of our actions.

I often discuss with others about the factors that are essential to the success of an individual or a company. Factors listed include study, diligence, and integrity. In my opinion, they are all critical to success, but the most fundamental one is a scientific methodology, which includes a scientific way of thinking and working.

There are a lot of people who share equal qualifications or relatively similar knowledge bases, but their opinions and their methods in dealing with the same issue vary greatly. Some people are extremely kind, honest, and hard-working, but their work is not always satisfying enough.

Others have good motivation and are well meaning, but are bothered by interpersonal relationships. Why? The most fundamental reason is their inability to use a scientific thinking mode, thinking method, and working method.

Bodo Schafer said that real wealth is a thinking mode. Since my transfer to Air China, I have repeatedly stressed, on different occasions, the importance of a scientific thinking mode and method, and coached my employees on these points.

The way of thinking is the route for the business development of a company. The way of thinking of a corporate leader determines the operational strategy, development direction, and ultimately the success or failure of that company. A corporate leader must have a clear way of thinking, for that determines the way ahead. With a correct way of thinking, you win the war. Otherwise, you lose the war. Without a rational way of thinking, you fight a messy war. Only when you have thought things through can you understand what to do. Without clear thinking, you will never understand what to do. A scientific mode of thinking and a correct way of thinking will enable you to think things through.

I have told others about a formula, which is also my basic point of view: management = math + philosophy. Math is accounting, while philosophy is thinking. If a corporate manager knows nothing about philosophy, it is highly likely that “he will be in darkness, yet he will still try to enlighten others.”¹

Since the reshuffle of the management team in November 2000, Air China has turned losses into profits, and continued to earn profits for six consecutive years. Since the founding of the China National Aviation Corporation (CNAC) in 2002, the corporation’s total assets climbed from RMB 57.4 billion to RMB 103.6 billion,

¹ From “Jin Xin Part II,” Mencius.

and its self-owned assets increased from over RMB 8 billion to over RMB 40 billion, while the total net profit and tax paid reached RMB 10.475 billion and RMB 10.431 billion respectively over the past four years. Through further reforms and development, the corporation reduced its asset-liability ratio from 86 percent to 59 percent. Despite a general depression in the domestic aviation industry, Air China has kept earning over twice the total profit of all other domestic aviation companies in its main business for the past two years. As one of the 53 super-large state-owned groups, CNAC has been rated as a class A company by the State-owned Assets Supervision and Administration Commission for two years running. The corporation’s position in the global aviation industry has also risen rapidly. Air China’s fleet increased from 118 in 2002 to the current size of 212 and its ranking jumped from 32nd in 2002 to 18th, while profitability ranked ninth among all aviation companies in the world. Air China has become one of the World’s 500 Most Influential Brands.

Looking back, these achievements are precisely the fruits born on this tree of scientific thinking.

UTILIZE DIALECTIC MATERIALISM WITH FLEXIBILITY

After three months of writing, in July 2003, I finished an article entitled Guiding Work with a Scientific Thinking Mode and a Way of Scientific Thinking. The intention was to sum up, from a philosophical perspective, the joys and sorrows, successes and failures, and experience and lessons of my service at Air China over the previous four years. Another four years have passed since then, during which I have become more aware of the critical importance of a way of scientific thinking.

Thinking is a unique human activity and a cognitive process of analyzing, synthesizing, judging, and reasoning about phenomena and concepts. The way of thinking is the pathway, process, and cut-in point of a thinking activity. Any thinking activity is a dynamic interaction between the thinking agent, objects, and thinking tools (thinking methods and material technology). Different combinations of these three elements contribute to different ways of thinking. Historically, the path of human thinking has gone through a continuous evolution from low-class to high-class and from simple to comprehensive. This evolution can be divided into three phases: a simple integrated way of thinking characterized by intuition and observable facts in ancient times, a metaphysical way of thinking characterized by analysis and dissection in the middle period, and a dialectic way of thinking characterized by the emphasis on integration, connection, structure, and functions. The historical development of thought processes is closely associated with the improvement of productive forces and material technologies, and the trend toward an increasingly complex society will continue to push forward the development of the thinking process.

Dialectic materialism has established the basis for the formation and development of a modern dialectic way of thinking. Dialectic materialism considers all things, processes, or even the whole world as an integration of countless interconnected, interdependent, inter-conditioned, and interactive things and processes.

For a party, a company, or an individual, it is impossible to succeed without a correct way of thinking. Wang Ming’s left-leaning doctrinarism destroyed the man himself and almost ruined the Chinese Revolution. Philosophically, the Cultural Revolution is also attributable to the reversal of the party’s correct way of thinking. Since China initiated the reform and opening-up programs, thorough changes have taken place and world-shaking achievements have been made. All these are, first of all, due to the right way of thinking taken by the ruling party.

As we know, leadership is also a dynamic interaction of the leaders, the ones being led, and the circumstances, which reflects the relationship between the main agent and object. The leaders’ behaviors are conditioned by the leadership system, structure, or material means, and more importantly by the leaders’ way of thinking. Only if the leadership system and structure are guided by a correct way of thinking, can we achieve highly efficient and effective leadership. We should work hard to improve our thinking ability and methods, which include dialectic and systematic thinking, strategic thinking, innovative thinking, and the ability to switch our mode of thinking.

Strategic thinking refers to the leaders’ analysis, integration, and judgment regarding the overall situation or issues of wide-ranging significance under given strategic circumstances. The science of strategy, which studies the overall guiding rules for wars, is the most critical discipline within the general domain of military sciences, in view of its direct bearing on the sciences of operations and tactics. It deals with the general overview, while the sciences of operations and tactics focus on details in the picture. Therefore, strategic thinking is a high-level type of thinking that looks at the overall picture. Once we understand the whole, we can better manage the parts. On the other hand, the whole is composed of parts. We cannot tackle the overall picture alone without paying attention to the parts. This is the dialectic relation between the whole picture and its parts. When it comes to cognition and output, we should keep an eye on and solve the issues that are vital to the overall situation. If we understand the overall situation, we are in a better position to handle the parts: this is what we call a strategic mind and viewpoint. To develop strategic thinking, we should consider major, practical issues from a strategic point of view. Strategic thinking should become the starting point for our leadership activities.

Innovative thinking points toward creativity and the spirit of blazing a new trail. Innovation is the soul of a nation’s progress, and the continuous driver of social prosperity. Innovation, as a consciousness and practice, has a direct bearing on both individual growth as well as national development. The more practical and realistic people are, and the more closely thinking and activities conform to the real situation and objective rules, the more innovative people can become. In order to develop our innovative thinking, we should adapt to actual conditions, test everything through practice, break the chains of outmoded opinions, practices, and mechanisms, as well as doctrinal perceptions, while at the same time overcoming subjectivism and metaphysics. Furthermore, we should enhance the awareness of innovation, or the willingness, motivation, and intention toward innovation, which are the necessary prerequisites for innovative thinking. To master the laws of innovative thinking, we should look at all issues with a curious eye, bring our subjective preferences into play, enhance communication between the subject and object with an open mind, and improve our innovative thinking ability by cultivating creative consciousness and by adopting such methods as induction and deduction. We should blaze these new trails. Since there is no fixed mode or ready experience, we must be prepared to face mistakes, risks, and even costs. Therefore, innovative thinking requires confidence, courage, and energy.

Switching our way of thinking means that we have to adapt our mind to the changing world, review our inner world, and accommodate others’ opinions, so as to achieve a unity of subject and object. To this end, we should dare to break through traditional modes of thinking, and approach issues from a new point of view. For instance, we can transform the thinking of furious competition into a thinking leading to mutual benefit and common development. We can abandon one-sided, compartmentalized thinking for a multilateral mode, and give up conventional consequential thinking so as to embrace a contradictory converse style of thinking.

Thinking is always a starting point for any human activity. Whether it is right or wrong in the beginning determines the direction of what happens thereafter. Regarding the way of thinking, it is usually easier said than done, which means that the basic principles are not complicated, but hard to flexibly apply in practice. There are several mistaken ways of thinking that we tend to neglect in our daily work. They are subjectivism, doctrinarism, formalism, compartmentalization, and extremism.

A subjectivist is swayed by subjective feelings, wishes, wills, and narrow personal experience when observing and dealing with issues. He is bogged down in an isolated, static, and one-sided perspective, resulting in the separation of subject from object, and cognition from practice. He is not used to case-by-case analysis, turning a blind eye to the particularities of different things, or the differing qualities of the same thing during different periods. He never considers the situation on the basis of actual conditions. If we are guided by such a way of thinking, we are bound to fail because we are cut off from the masses and from reality.

Followers of doctrinarism neglect specific reality and observe everything according to the accepted rules or static experience. If guided by such a way of thinking, we are prone to misjudge our current work, believe that past successes guarantee today’s success, regard temporary accomplishments as final ones, and assume partial achievements as overall victory. As a result, we would lack the courage and consciousness to keep pace with the times, and even refuse others’ kind reminders, criticisms, and help, taking us even further away from future accomplishments.

Formalism is a metaphysical kind of thinking that separates form from content, pursuing form to the neglect of content. Formalism exaggerates the effect of form while denying the crucial and dominant position of content, substituting the recognition of superficiality for the perception of essence. It is satisfied with the enumeration of superficiality and has no regard for essence. Thus, a formalist usually performs superficial jobs for the sake of it, and feels satisfied with a false reputation, a position that can only result in failure.

Compartmentalization is a kind of thinking which only cares about local narrow interests with no regard to overall interests. It is individualism and sectarianism amplified, and will definitely have a negative impact upon the overall situation and finally hinder local development.

Extremism neglects the fact that things are organic systems made up of multiple layers and elements, focusing on one aspect. With such thinking, people usually jump from one extreme to another. In actual work, it is seen as focusing on one aspect without paying attention to others.

I call these five incorrect ways of thinking the five thinking traps, and I have seen them in the form of actual mistakes made by Air China. I ask the management team to regularly remind themselves to learn from others’ lessons and not to fall into such thinking traps. If we can hold the golden key of the way of scientific thinking, preserve good thinking habits, follow the right thinking paths, and avoid any of those traps, then we will surely achieve better performance in our work and bring in a bumper harvest.

As for thinking mode and way of thinking, it is a little tedious to explain all this theory, but the point will become clear once we connect it with real experience.

Dialectic materialism emphasizes the relationship of objects, regards any object as an organic whole, and looks for the essences and rules of the systematic whole in the interaction of different composite elements. Within systematic theory, the basic ideas of wholeness, relevance, arrangement, structure, and purpose are the guides for analyzing and resolving our issues at work.

The system means the integration of people, objects, and the circumstances that are multi-layered and multi-factored. If we can master and apply systematic theory, then we can find out the effective lever point for our work.

After the consolidation of the new Air China, the company’s core businesses were passenger and cargo transportation. In order to adapt to such changes, Air China had to focus on five aspects. The first was to emphasize the building of airline teams and maintenance teams, which are the main body of the company’s productivity. The second was to establish a control center, which is the pivot of company operations. The third was to build the marketing and financial systems, which are the main drivers of the company’s profitability. The fourth was to implement the Four Hearts Services for branding purposes. And the fifth was to keep operations stable, and cultivate an advanced corporate culture, the key being to enhance the building of the management team. In point of fact, these five aspects constitute the systematic work of corporate development.

Safety is the top priority in aviation transportation, and it is also a systematic project. Safety is a chain, and accidents also involve a chain, because any accident is not caused by a single negative factor, but by a series of negative factors. Therefore, the essence of our safety work is to discover all those negative factors and eliminate them in time. Some people say that aviation involves great risks. However, risks are not accidents. If we can make every effort to prevent those negative factors from forming a chain, then we can avoid all those risks.

In our work, we usually encounter situations where duties, the division of work, and administrative levels are not clearly defined, where everybody rushes toward extra benefits, and where nobody takes responsibility when problems occur. These are the key factors leading to inefficient, and even useless or harmful ways of working. From a systematic point of view, this is due to internal disorder. Systematic theory requires different sections to hold certain different positions and perform their specific duties. The administrative levels should give orders to the lower levels, and assess the implementation of the order. The orders from upper to lower levels should not be too detailed, as they aim to coordinate the work between lower levels. The lower levels should manage the interaction of different sub-systems at their levels by themselves. Only when conflict occurs should they need their upper levels to solve the problem. This means that the lower levels should not obey the upper levels unconditionally, or just be passive and hand over all the issues to the upper levels to solve. So, by sticking to the principle of administrative levels, we are capable of resisting interference from outside, and bringing into play the best possible functional effects of the system.

Some say that Air China’s pilots are arrogant and spoilt. Actually, this is also the case for other personnel in Air China. Such behavior is rooted in an inability to think systematically. If you limit your vision to a small corner and admire only yourself, it is quite natural that you will become conceited and demanding. However, you are just one of the elements within an interactive organic whole. Without the system, you are nothing. From this point of view, your high views of yourself are not justified.

I still remember clearly Premier Wen Jiabao’s remarks at a press conference during the Tenth National People’s Congress. When talking about the tasks for the government of his term, he highlighted the principles of harmony between urban and rural areas, the interaction between eastern and western regions, communication between home and abroad, the integration of upper and lower administrative levels, attention to both short- and long-term planning, and appropriate policies. These principles are a vivid application of systematic, logical thinking. In order to adapt to the needs of modern socialized production and the development of socialism with Chinese characteristics, we should consider different aspects of an issue, and think in a dynamic and methodical way. In our work, we should make an overall plan, take all factors into consideration, and seek balanced development.

When talking about systematic theory, we should never forget the key point theory. In practice, the key point theory means to concentrate strengths to solve the most important and critical issue, while at the same time paying due attention to other more minor issues. In a complex of contradictions, every contradiction has its own position and effect, and the key point is determined by the objective rules of development. It is not a go-as-you-please task to grasp the key point, since it cannot exist without those minor issues. Although the less important issues are guided by the key point, they also influence it, and sometimes this influence can be remarkable. The key point also varies during different periods and under different conditions.

To grasp the key point, you must start from an objective viewpoint, quickly catch the most important factor in the complicated work process, and fully understand the essential requirement of work development. From a hierarchical point of view, we should appropriately adjust and transfer the key point, and actively master the overall situation according to the changes in workflow. From a correlative point of view, we should promote the interaction, harmony, and mutual development of the key point and the less important ones. As we know, systematic theory emphasizes integrated thinking, an active grasp of overall structure, dynamic balancing, with the micro goals obeying the macro goals, and the functional optimization based on the concept that the whole is bigger than the sum of its parts. Therefore, theoretically, systematic theory and key point theory share the same philosophical basis and are internally integrated. We master the systematic theory without rejecting the key point development. In practice, instead of seeking parallel development in our work at certain phases, we follow the key point theory, working to hold onto the key links in the whole chain amidst resistance in the system, and pursuing the “add-on” effect for the whole system.

Perceiving and handling issues from a systematic viewpoint, we are able to look at the world with a new vision and rebuild our thinking style and methods.

EMERGING FROM THE SHADOW OF THE 4/15 AIR INCIDENT

Taking an all-sided approach is better than taking a one-sided one. But it is easier said than done. The main thrust of the all-sided approach is to learn multiple ways of thinking, and review oneself and others from an overall viewpoint. Some of us only report good news, but hold back on unpleasant news. Others always think highly of themselves and consider themselves perfect, but look down on others, and keep a close watch over others’ mistakes. Some don’t even understand the truth that “bitter medicine cures sickness and unpalatable advice benefits conduct,” and instinctively resist criticism, help, and advice, and finally become loners. Still others look at things through rose-colored spectacles—getting a distorted view. That is also why radicalism and one-sided views are sometimes further from the truth than innocence.

A good example to illustrate this is the air crash on April 15, 2002. How should we look at Air China’s future development, emerge from the shadow of this incident, and maintain the safe operation of Air China in the long run?

On April 15, 2002, Flight CA129 crashed in Pusan. When the bad news came through, the whole country was shocked and Air China was in deep sorrow. The accident exerted a great impact on Air China and put the management team under greater pressure than ever. At that time, negative opinions of various kinds were targeted at Air China, just as a line from a Tang dynasty poem goes that “the black clouds before the storm seem to crush the city.”

We decided to reach a consensus regarding the gravity of this issue, the development of Air China, and the solid foundation laid by our predecessors. We observed that there were “four elements that still exist,” namely the safety system built by our predecessors over several decades of effort, the technically and morally capable flight teams trained by Air China, Air China’s safety management experience and effective rules and regulations, and the facilities and systems to ensure safe operation. In this way, we could handle the issue better from all sides, and be objective and precise. On the one hand, if we were not aware of the gravity of the accident, we would have become insensitive over such things. On the other hand, if we denied the fruits of our efforts and the contributions of our predecessors, our confidence would have been shaken. Under such circumstances, we should not lose our confidence, should not be pessimistic, and most importantly, should not be insensitive.

After the crash, the Air China management team held several special meetings, and reached a consensus that the development direction would not change and the reform of Air China was effective and had been recognized by all circles. After the crash, reform, mechanism switching, and infrastructure improvement had to go on as planned. But while pulling through all of these difficulties, Air China had to learn a lesson from the crash, and thoroughly look into the reasons behind the accident, so as to prevent such incidents from reoccurring.

It has been proven that Air China’s way of thinking toward the air incident was logical and correct, and that the measures taken had been effective. Air China stepped out from the shadow quickly and started flying confidently again in the vast blue sky.

To look at problems from an all-sided view is not the same as viewing things “impartially.” This all-sided view should be forward-looking, proactive, and mutually supplementary. Chairman Mao once said, “When we meet difficulties, we should see our achievements and bright future so as to enhance our courage.” In other words, when we are enjoying the good times, we still need to pay attention to hidden problems and be aware of risks. The dialectic way of thinking tells us that success will not run away by itself if you do not talk about it, but hidden problems will become disastrous if you do not keep an eye on them. The more attention you pay to achievements, the more problems you will have in the future, and the more attention you pay to hidden problems, the more achievements you will gain. That’s why, at the work meeting at the beginning of each year, we always emphasize the importance of enhancing risk consciousness, so as to look for more hidden problems when we are making progress. We firmly believe that if we continue to do so, we will finally be rewarded with success.

SUCCESS IS ALSO THE MOTHER OF FAILURE

To dialectically perceive and handle problems means to regard the issues as a whole, then study them among the changes and development of inner contradictions and the interactions of various aspects, and find out the rules governing the changes and development. These rules will then be used to study, analyze, and solve the problems.

For a company or an individual, achievements and shortcomings always coexist. Your strong points always go side by side with your weak points, just as two old Chinese sayings go, “Sometimes a foot may prove too short while an inch may prove too long,” and “There is no pure gold, nor perfect person.” These strong and weak points coexist and can mutually transfer to each other. Following a dialectic view, we can evaluate a company or a person more accurately, so as to avoid biased judgments. There is no such thing as something that never changes. Everything is subject to the rules of growth, changes, and death. Those hidden problems usually stay covered, but erupt when nobody pays attention to them. People who are aware of dangers can stay safe, those who understand the reasons for chaos can govern well, and those who recognize the risks of death can survive longer. The key is whether we think dialectically, whether we adapt ourselves to the changing circumstances, and whether we can stand the test.

After the 4/15 air incident, we summed up the lessons and looked into what had gone wrong. My opinion was that success is also the mother of failure, which is in line with the old saying of “no weal without woe.” A company’s hidden problems are always covered up by its fame and success. Air China’s record of 47 years of safe operation, its experience, fame, and achievements are obstacles for us to locate those hidden problems. At a meeting of managers, I directly pointed out that the company’s flight safety training had become a mere formality, with many people just signing in on Monday and signing out on Friday, and this is likely to be a hidden cause of accidents. In recent years, plane hijacking by defectors, drug and weapon smuggling, and economic crimes had occurred quite often in Air China. It was no coincidence that these incidents were mainly committed by pilots in their thirties. Air China, as the only national airline, took on national tasks and was very much honored. But, unfortunately, some people got carried away by the fame. So Air China had to start from the very beginning, had nothing to be proud of, and regarded hard work as the only way. Only with such an attitude could Air China turn negative factors into positive ones, passive elements into active ones, and restore its glory. After the incident, Air China experienced great difficulties, but stood the test, which helped us turn misfortune into a blessing.

From a dialectic point of view, crises contain risks as well as opportunities. In dealing with a crisis, a company is likely to notice issues that are hard to find during peaceful times, especially those hidden issues in connection with the crisis. The company should then analyze those issues, making necessary adjustments, and adopting some innovative measures. As leaders, we should grasp such opportunities and turn the crises into opportunities, of which the key is dialectic thinking.

In recent years, I often emphasized solidarity, from which we could also learn some dialectics. Some companies owe their long-term stable development, deep talent pool, and good working style to a united management team. Solidarity also contributes to a good atmosphere in interpersonal relationships. The dialectics of interpersonal relationships are that others will usually treat you in the same way that you treat others. If you plant love, you will harvest sunshine, but if you plant hostility, you will only get darkness. It happens often that others will suspect you in the same way that you suspect others. Two people who blame each other will end up with additional blame for each other. Confucius said, “Do not impose on others what you yourself do not desire.” To be more accurate, do not impose on others what people do not desire, which is the dialectics of interpersonal relationships.

We should also apply dialectic thinking to the issues of profit and services. The poor profitability of some companies results not only from force majeure, but also from narrow concepts of operation. This also means that there is still a lot of room for profit improvement. In the past, some people said Air China’s services were not good. We accepted the criticism humbly, and worked to improve our services. We launched the Four Hearts Service—Trust, Comfort, Convenience, and Satisfaction—which is well-known to the public.

Dialectic vision is a pioneering vision that can clearly see the interactions of different things, the birth and death of things, and the development and change of things. With such a vision, your life will be smooth sailing, buoyed up by light and wisdom.

A DEVELOPMENTAL OUTLOOK KEEPING PACE WITH THE TIMES

The transformation of things from small to big, from simple to complex, from low-level to high-level, and from old quality to new is the process of emergence, development, and resolution of internal contradictions. Development is also a process of social direction and the process of conforming to a main historical trend.

In our daily work, life, and study, we should stick with this perspective of development as a very important way of thinking and working, using it to analyze and manage situations.

Its efficacy can be proved by the case of Air China’s continuous profit earning after the SARS outbreak.

In 2003, with the first outbreak of SARS, the Chinese aviation industry suffered a severe blow. For the first half of the year, Air China experienced heavy losses. Instead of being frightened by such losses, Air China saw a bright future, saw future development, and saw a fast recovery once SARS was over. Therefore, Air China focused on the recovery and remedy of the market after SARS and actively prepared and planned its work in advance. In July 2003, after the SARS warning was lifted, Air China quickly seized the opportunity. With the increasing number of travelers, Air China immediately achieved 90 percent of its average capacity, with domestic and international routes reaching 100 and 80 percent respectively. For some of the hot routes, such as Beijing-London and Beijing-Frankfurt, tickets were even oversold. The seat occupation rate per flight and daily income returned to normal levels. Compared with the SARS period, when the capacity was reduced by 78 percent and the daily income decreased by 90 percent, Air China’s recovering speed was beyond many experts’ expectations.

According to the financial statements of 2004, Air China realized a profit of RMB 2.01 billion in the latter half of 2003, resulting in an earning of RMB 96 million for the whole of 2003 after offsetting the huge losses caused by SARS, becoming the only aviation company that earned profit in that year. Air China also achieved good results with the remedial measures we had taken. After SARS, Air China’s capacity share in Beijing Capital International Airport increased from 31 to 39 percent while its share of passengers grew from 32 to 40 percent. At the same time, Air China developed 415 new direct customers, generating direct sales revenue of RMB 2.3 billion.

In recent years, Air China has effectively explored the rules on profitability growth, and opened some new profit-earning channels. Compared with another famous Asian aviation company, Air China has a better profit-earning capability (excluding two incomparable factors: jet fuel and aircraft materials). In the aspect of ton-kilometer return, we have also exceeded a well-known European aviation company.

At the beginning of 2004, when China National Aviation Corporation set the operation and profit targets for Air China, some people in Air China thought that with the continuously increasing oil prices, we would not be able to fulfill the target and suggested a lowered goal. At this I pointed out, “As a company we should pursue profit in the short term. However, in the long run, from a developmental viewpoint, what we pursue is not merely those figures, but rather the profit-earning capability. If Air China can maintain its 2003 share of the total profit of the whole aviation industry in 2004, that means we have attained a certain profitearning capability. If all other aviation companies lose money that year while Air China earns just RMB 1, this will account for 100 percent of the whole industry’s profit, which will still reflect our profit-earning capability.” By the end of 2004, we actually hit our target.

Many people asked me how Air China had continued to earn profits. I told them it was hard to explain with only a few words, and even if I had told them, it was impossible for them to implement the measures at once. They would need three to five years to achieve it. Of course I was not trying to fool them. The company’s profit-earning capability was ultimately demonstrated as the capability for cost reduction and efficiency improvement. Simple as it may look, many enterprises have not grasped these fundamentals. Profit-earning capability is an inevitable result of the interaction of all factors.

Let us return to the perspective of development.

The essence of the market is competition, while the essence of competition lies in progress and innovation. Competition means to constantly look forward, and to only recognize the present and the future rather than the past. The ultimate purpose of returns and innovation is to create market value. Therefore, we should approach reforms and support innovations with this developmental perspective, and assess development with returns, thus realizing self-development through freeing the mind and vision updating, all of which will further push forward productivity development.

Development is to keep pace with the times, and make better use of the developmental perspective to skillfully understand and manage issues. In this, there are principally four relationships to consider.

Learning and development. Given the fierce competition and the explosion of knowledge, it is essential for you to learn faster and better than your competitors. In a modern organization, the basic unit of learning is no longer individuals but groups, since group wisdom is superior to the individual mind. Group learning can help members better collaborate, improve the overall quality of the organization, and realize the goals of the group. However, the habit of learning is not innate. Rather, it is acquired from training and practice. Only when we have development in mind can we fundamentally improve the quality of individuals and groups.

Opportunities and development. Opportunity is the matching point and dialectical unification of historical and logical processes. People often describe opportunity as “the chance of a lifetime,” “a fleeting opportunity,” or “opportunity knocks only once.” However, opportunity is not something that is intangible, but is closely connected with the development perspective. Hence, we have another saying, “Opportunity favors the prepared mind.” With the development perspective in mind, we will have an awareness of crisis and a motivation for self-improvement. With the development perspective in mind, we will regard everything we consider and handle as a test of our capabilities, as well as a sign of trust and a test for us by the organization. In this way, with good performance and a clear mind, we will not let the opportunity go easily, and we will cleverly guide action according to circumstances so as to reach a new stage.

Talent growth and business development. Business development and talent growth supplement each other. Business cannot develop without talent, while business development also provides a broad stage for talent. The key point here still lies in development. In reality, some people do not focus on development, which results in biased opinions toward talent growth. Regarding the appointment of cadres and themselves, some people still rigidly adhere to the past, dwelling on past experience. Why can’t we pay more attention to the present and future? The only result of comparing the present to the past would be disappointment. In recent years, Air China has implemented a policy of competition for posts and introduced a mechanism for selecting people that is quite effective. Of course, growing talent is not a once-and-for-all case. The key is whether you have the competitive edge for tomorrow.

Experience sum-up and innovative development. Experience is a basic part of human cognition, which is beneficial to our work. But generally, experience belongs to perceptual cognition and needs to be systemized. The purpose of summing up experience is for reference, and for today’s rational and better development. If we become conservative and satisfied with our narrow experience, mistaking partial experience for universal truths, turning a blind eye to concrete conditions, or taking past experience as a miraculous cure-all, we will end up nowhere. In practice, we often make such mistakes and should be aware of this. Therefore, we should not only attach importance to the beneficial experience, but also be good at summing up brand-new experience from our work. Such summing up is a sublimation of the dynamic development. This is innovation, which is sought for the sake of better development.

THE ART OF MANAGEMENT LIES IN THE MANAGEMENT OF EXTENT

Any object has two sides—quality and quantity. The unification of quality and quantity is called extent. Extent, as the unification of quality and quantity, is the quantitative limit, range, and scope of an object to maintain its quality. It is the quantitative limit that is unified with the quality of an object. The movement, change, and development of an object are demonstrated in quantitative and qualitative changes. Objects involved in quantitative changes are moving toward the limit of extent. Reaching the critical point where the limit of extent is surpassed, quantitative changes lead to qualitative changes where one object becomes another. Quantitative changes lead to qualitative changes, and qualitative changes lead to new quantitative changes. Thus the two changes link with each other and become each other, pushing forward the development of an object.

People often say that they know something fairly well, but what they “know” is the quantitative limit that determines the quality of an object. It is commonly said that the extent of an object should be well managed, and this extent refers to the dialectic unification of the quality and quantity of an object. In the work place, extent is a policy as well as a strategy. To push forward the job, we need to boost the qualitative changes of an object in which quantitative changes (realized through hard work) are the necessary preparation for qualitative changes. Such qualitative changes require development as well as accumulation. It is a process. A long journey is covered step by step, and small streams join to become large rivers. If we are unable to adopt a down-to-earth attitude and work hard, if we become hasty and seek instant results, it will be like “pulling up the seedlings to help them grow faster,” and the result will only be contrary to our wishes. The process of conflict resolution is also the process of promoting the changes in things. This kind of change is tantamount to dredging the accumulated silt, or beating swords into plowshares. In other words, it aims to change negative elements into positive ones. To manage the extent from quantitative changes toward qualitative changes (positive or developmental qualitative changes), it requires strategic insights and concrete measures, which find a perfect expression in the extent of the dialectic unification of quality.

Extent also requires a clear mind and sharp perception that are based on the compatibility between subject and object, and that between changes of situation and objective processes. Leaders should manage singular situations well, dissect and dissolve negative elements as much as possible, and obtain a clear understanding of the employees and all levels of the enterprise. They should adopt effective measures to address potentially risky units and problematic places, and make sure that measures are improved and implemented as soon as possible.

There are different levels in the management of extent. Confucianism takes impartiality and moderation as the fundamental principle, and measure for moral cultivation and dealing with things. This philosophy is very inspiring.

There are three levels for extent. The first level is, “Success will come when conditions are ripe” or “just right.” There is a famous couplet in the Wuhou Temple² in Chengdu that says, “Try to persuade an enemy to stop his attack during a war and the war will then disappear. No soldier wants to fight all the time. Try not to forget to weigh the conditions and situation, or else leniency and strict punishment will both fail. Those who will govern the Kingdom of Shu should think it over and over.” Here, the terms, “persuade,” “weigh the conditions and situation,” “no soldier wants to fight,” “those who will manage the Kingdom of Shu should think it over and over,” are all talking about different kinds of extent. If the extent is well managed, “the war will then disappear,” “both leniency and strict punishment will succeed.” To manage the extent well, we should refrain from becoming radical or conservative, excessive or inadequate. The second level is to think over and take the future into consideration with other possibilities in mind. “You see a brighter future when you take a step back. The road to the future remains wide, even if you have to take a few steps back now.” To keep other possibilities in mind is not a negative but a positive attribute. At a time when the conditions are not fully ripe or right, “act when we should act and halt when we should halt” is the right thing to do. We should keep a firm grip on the present while keeping the future in mind. We take a step back because we want to move two steps forward. This is what foresight means. The third is to be inadequate rather than excessive. We can make up for the inadequate part, but it is hard to fix the excessive part, so we choose the less harmful of the two. When we manage the levels of extent,

² Wuhou Temple: Zhuge Liang Memorial. “Wuhou” was the title granted to Zhuge Liang after his death.

we have to weigh the situation and press ahead instead of acting blindly. Past experience tells us that fixing excessiveness consumes more energy than resolving inadequacy.

In working, if we can manage the extent well, as we enjoy “opportunities of time vouchsafed by Heaven,” a “favorable geographical position,” and “unity and coordination within the team,” we can make plans in accordance with opportunities, and move at the right time, which is to act when we should act, and halt when we should halt. “Opportunities of time vouchsafed by heaven,” “a favorable geographical position,” and “unity and coordination within the team” are conditions that need to be created through endeavor. Whether a leader manages the extent well in his work should be evaluated by whether what he says and does are legal, reality-based, and in accordance with the wishes of the majority. In other words, whether a leader manages the extent well in his work should be evaluated by whether what he says and does are right, feasible, and good.

As mentioned earlier, the fact that Air China cut 1.1 billion shares in its A-share issuing is another classic case of extent management. In corporate management, good extent management is of vital and immediate significance. The art of management is the art of managing extent above all. It should not be excessive or inadequate. The limits and duration should be well managed.

After the 4/15 air incident, Air China launched a special investigation into the flight team. Major reasons for continuous severe accidents in the team were imperfect management and lax requirements. According to a questionnaire, only 5.5 percent of the respondents thought that management had a good command of the flight team, whereas 24.8 percent and 37.9 percent believed that the management was “weak” or “bad.” To seek strict management in terms of extent, I think that we need to be clear-headed, fair, and reasonable. These aspects are indispensable to proper extent management.

However, some people talk about strictness, write it down on paper, and post it up on the wall, but the word “strict” suddenly disappears whenever things emerge that should be strictly dealt with. Those who should be strict are nowhere to be found whereas those who beg for leniency always turn up. “Objective reasons” are emphasized while “subjective reasons” are put at the back of the mind. As a result, “strict” ends up as an empty word.

Extent management is also seen in the appointment of cadres. In the past, the work of cadres was command-based, simplified, and secretive, unable to arouse the enthusiasm of cadres and demonstrate the organization’s caring for them. With these past lessons in mind, we came up with a people-centered management measure: whenever we wanted to reappoint a cadre, we made a point of asking him or her for their opinion. Of course we could not spoil the cadres by allowing them to freely choose their favored positions, and ask for the organization to be caring but not to discipline them. Failure to skillfully manage the extent will result in either unkindness or overindulgence, leaving the original intention subverted.

In 1991, when I was still serving in the air force, I was appointed commissar of a division that had experienced four flight accidents within three years. I found after an investigation that this division was loose in management, and provided no systematic training for pilots. The army must be strictly managed. We punished 36 officers within three months, ranging from warnings to dismissals. Everybody was shocked and new changes began to appear. After a period of time, my superiors visited this division and asked, “You’ve punished 36 officers. You’ve paid too much attention to the negative side, haven’t you?” I handed him some detailed records, showing that we had also awarded 98 officers, and rewards and punishment were carried out in a strict yet fair manner. A company commander who had made some mistakes was demoted by one level to a platoon leader. However, to the surprise of many people, this officer learned the lessons, corrected his mistakes, and behaved very well. After one and a half years, he was directly promoted to deputy commander of a battalion.

My way of working, which emphasizes the interaction between quality and quantity, was actually cultivated while I was in the army.

CAUSE-EFFECT RELATIONS AND CATERING PROFITS

The cause-effect relationship is one of the universal relations between objects. There are no effects without causes, nor are there any causes that do not lead to results. The ancients said, “Only when you are desperately poor do you begin to consider changing your life, and only when you are stuck do you plan to think of a way out.” The “butterfly effect” in chaos theory, which claims that the tornado in Florida could be caused by a butterfly flapping its wings in Tokyo, is a kind of cause-effect relationship. The cause-effect relations between objects not only exist universally, but also happen sequentially. Such a relationship is in a sense equivalent to the relationship between the present moment and the future.

As a kind of effect, the future is always caused by practical reasons. Therefore, as long as the practical causes are managed, their effects in the future can be predicted. As an old Chinese saying goes, preparation ensures success, and a lack of preparation spells failure. By means of the principle of cause and effect, we can make a connection between our perception of future effects and our understanding of practical causes, which will in turn make our prediction more accurate and reliable. To grasp the cause-effect relationship, we need to recognize that contradictions are the motivating power of development. We should predict the future trends and results on the basis of contradictions and rules governing the present objects, understand the rules of quantitative and qualitative changes, and forecast future qualitative changes based on present quantitative changes. We also need to recognize the dialectic dichotomy of affirmation and negation, and predict the future negative form of an object (such as the fact that things will develop in the opposite direction when they go to one extreme, and the fact that pleasure comes from the depths of misfortune) based on the present dialectical affirmative form. To recognize the complexity of the cause-effect relationship (one cause and one effect, one cause and multiple effects, multiple causes and one effect, etc.) is to avoid the absolutist view of cause and effect relationships. Applied to practical work, these arguments require us to gain the initiative, enhance the predictability of the work, as well as improve work performance.

How Air China manages to save RMB 370 million each year is achieved by a way of thinking that is able to grasp the cause-effect relationship.

Many people may remember that Air China used to serve luxurious food such as sashimi to first class and business class travelers, only to find that passengers on domestic routes had little interest in sashimi, which is expensive and difficult to store. Therefore, we quickly changed our strategy and swapped sashimi for popular local snacks and desserts in accordance with different routes and the demands of different passengers.

In the past, in order to manage those flights that needed two meal sets, Air China maintained the meal preparation rate at around 125 percent for in-flight meals. The cost of one set for a domestic route in-flight meal was around RMB 50 and that of an international route RMB 70. In the long run, this was an enormous additional cost. What was worse, leftovers from in-flight meals were increasing day by day.

Following the way of thinking that traces causes from effects, we found through careful research that, with the improvement of people’s living standards, many passengers did not need an in-flight meal at all, and even if they did, they did not eat much. Therefore, the 125 percent meal preparation rate had actually exceeded the demand. It should be noted that in-flight meals are one-off expendables which will be disposed of after the end of the flight. Therefore, Air China considered lowering the meal preparation rate. Through several rounds of calculation, we finally set the meal preparation rate at about 95 percent. At the same time, airplanes carried some food that was easy to carry, and had a long shelf life so as to meet emergency demands. Therefore, measured by a flight volume of 200,000 per year, Air China saved an amazing total of RMB 370 million.

It should be noted that mistakes can be made in managing cause-effect relationships due to wrong ways of thinking. For example, regarding the attitude of an individual toward his workplace and colleagues, or his way of handling his relationship with his workplace and colleagues, some people attribute their achievements at work to themselves alone, while neglecting the effort made by former colleagues, the help from current colleagues, the contributions by others, and the support of their superiors. Others, who fail to achieve their personal wishes, always suspect that someone must have meddled or complained that the superiors were not considerate enough, without reflecting on whether their own wishes were realistic or whether they had done their best at work.

Ralph Emerson said: “Cause and effect, means and ends, seed and fruit, cannot be severed. For the effect already blooms in the cause, the end preexists in the means, the fruit in the seed.” An individual as well as a unit both need to analyze achievements, problems, and mistakes in their work. However, the purpose of analyzing causes is to sum up experience and lessons in order to improve, rather than to boast about your personal contribution or look for excuses. The external causes of an object are the conditions for change, while the internal causes are the basis for change. External causes can only function through the agency of internal causes, while it is the internal causes that play the dominant role. How can we improve ourselves and the workplace as well as harmonize the relationships with different aspects, if we scramble for commendable service but shift the blame onto others, or attribute mistakes to objective causes without conducting a thorough self-examination first?

In short, a correct grasp of the cause-effect relationship is also important in our effort to coordinate interpersonal relations and scrutinize ourselves for signs of progress.

GRASP THE PRINCIPAL CONTRADICTION AND TURN THE TABLES IN THE NEGOTIATION PROCESS

Philosophy is known as “the science of wisdom” or “the science of intelligence,” while the science of thinking is to some extent “the science of analysis” or “the science of dissection.” The “analysis” and “dissection” relate to contradictions within objects. Grasping the principal contradiction is the gist of “the science of analysis,” and “the science of dissection.”

Mao Zedong pointed out in “On Contradiction” (1937):
There are many contradictions in the process of the development of a complex thing, and one of these is necessarily the principal contradiction, the existence and development of which determines or influences the existence and development of other contradictions … If in any process there are a number of contradictions, one of them must be the principal contradiction playing the leading and decisive role, while the rest occupy a secondary and subordinate position. Therefore, in studying any complex process in which there are two or more contradictions, we must devote every effort to finding the principal contradiction in the situation. Once this principal contradiction is grasped, all problems can be promptly solved.³

As a cadre, a leader, or a corporate manager, you often face complex contradictions. Only when you are good at analyzing contradictions and grasping the principal contradiction can you take the initiative and easily resolve the situation. Otherwise, if you try to grasp the eyebrows and beard at the same time as a Chinese idiom goes, you will end up getting less done with more effort. Worse, things may run contrary to your original expectations.

The joint-venture negotiation between Air China and Lufthansa is a case in point. Air China and Lufthansa founded a joint-venture airplane repair and maintenance factory in 1989, shortly after China initiated reform and opening up. The first term of the joint venture agreement was to expire in 2004 after a span of 15 years. To extend the joint venture for a second term, the two parties began negotiations in the latter half of 2002. However, the negotiations were still in a deadlock in March 2004.

Lufthansa highlighted 26 disputes with us on the basis of the agreement signed 15 years before. Back then, as the Chinese aviation industry had been fairly underdeveloped, we had to make several concessions to the German side in terms of rights and interests. However, by 2004, Air China’s capability for production, technology, and management had been greatly enhanced. If the joint venture were to be extended in accordance with the conditions agreed on 15 years previously, Air China would lose a great many benefits and interests.

³ Mao Zedong, “On Contradiction,” http://www.marxists.org/reference/archive/mao/selected-works/volume-1/mswv1_17.htm (accessed on November 30, 2007)

After the negotiations fell into deadlock, both sides were ready to terminate the deal. At the request of the German side, the two sides held a summit meeting in Singapore in May 2004. As the top negotiator of Air China, I met with the chief representative of Lufthansa for the last round of negotiations.

This was not a simple business negotiation. Employees of Air China felt mounting pressure. To urge the project forward, the then German Chancellor Schroeder paid a special visit to the joint-venture factory during his visit to China. The Ministry of Foreign Affairs and the Ministry of Commerce of the People’s Republic of China also faxed us three times, inquiring about the progress of the project.

In terms of scale, the venture was the biggest airplane repair and maintenance factory in both China and Asia. Apart from Chinese airplanes, it also repaired airplanes owned by more than 40 countries around the world. Obviously, the failure of the joint venture would be a huge risk for Air China both politically and economically.

However, I did not take the 26 disputes as the focal point of the negotiations. During the negotiation, I first made a presentation of the overall situation to give a hint to the other party that both China and Germany had been through tremendous changes over the past 15 years. Even if we did not draft the agreement in accordance with the terms and conditions agreed on 15 years ago, the joint venture would remain profitable for both parties. However, if the agreement were signed in accordance with those old terms and conditions, it would be very harmful to the Chinese side.

Having finished my presentation, I suggested a 40-minute break in order to give enough time for the German side to think through my views on the future agreement. Not long after the start of the break, while the Chinese representatives were still chatting in the coffee room, the German representatives started arguing loudly on the other side of the room. I smiled and told our team members, “It’s good to see them arguing. This means that what I said just now has had the intended effect.

An hour later, the negotiation resumed. The German side took the initiative to cut out 23 of the 26 disputes. The remaining three disputes were: firstly, the new joint venture should last for 25 years and the term of the general manager should be five years, with the German side appointing the first general manager. The implication was that the German side would have the privilege to appoint the general manager three times and the Chinese side two. Secondly, the land use was tax-free before, and therefore should remain taxfree, or else the Chinese side should bear the tax burden. Thirdly, regarding employees’ welfare, the German side offered a fixed amount for 25 years (RMB 340 million), because the German side was not absolutely clear about the changing Chinese welfare system.

I shared my understanding with them on these three points. First, on the issue of the general manager—what was the purpose of appointing a general manager? Obviously, it was to make money. To this end, the two sides should appoint only those who were able to earn the most. It was easy to figure out by then who of the seven general managers made the most money for the joint venture. Or the two sides could recruit someone else. There was no need to argue about which party should be in the key position so long as the person chosen could make money. The German side agreed with me on this.

Secondly, about the tax issue for land use, I explained, “The national policy does not apply to this joint-venture project. Land used by all joint-venture enterprises must pay tax. I also hoped we might enjoy tax-free privileges, but the government could not grant us the exemption. So it doesn’t seem reasonable for Air China to bear the total tax burden for the joint venture. But we can share this tax in accordance with the share-holding percentage. Air China must shoulder 60 percent, as we hold 60 percent of the shares.” At this, the German side had nothing else to say but to agree.

Regarding the third point on welfare, I began by talking about Germany, which was also a country ruled by law. The law in Germany also provided for a perfect welfare system. From the perspective of German law, there had never been a precedent where an enterprise had allotted enough money to cover the whole welfare of employees. This was unrealistic, and therefore we should change as the policies changed. We were acting in accordance with the law, which was fair. The law applied to all joint-venture enterprises, not just to Chinese-German ones. So there were no such things as disadvantages or advantages. The German side finally agreed to my arguments.

The protracted negotiation was reversed within two hours. The German side canceled all its 26 requests and agreed to continue the cooperation. The result was surprising to all who had participated in the negotiations. Why had such a reversal taken place? The reason is simple. You have to analyze contradictions reasonably, and then let others follow your analysis until they agree with your conclusion. I assured the German side, “Even if you do it my way, we could still make a lot of money. It’s only a matter of some changes in the method.” The nature of doing business is to make profit. Once we grasped the principal contradiction of “profit” between the two parties, other problems were quickly solved.

Human thinking is like a sophisticated camera with two important features: first, its wide-angle lens is like future-oriented thinking, and second, its focusing capability resembles our ability to grasp the main points. People often say that we should be generous and open-minded. Without an open mind, many things may not occur to you. However, open-mindedness alone does not work. As much as you brainstorm without a correct choice or focal point, it is easy for your eyes to become blurred, your mind confused, and your way lost. As a consequence, you will most likely take the wrong road.

When the banzi of Air China first took office, they were faced with various contradictions such as three years of continuous severe losses, the coming reforms and reorganization of the company, clashes of all kinds of ideas within the organization, as well as serious threats to security and stability. However, after some broad research and a careful analysis of Air China’s current situation, the leaders of Air China agreed that the three years of loss were the No. 1 factor that bothered the thinking of cadres and employees, and dampened their enthusiasm. It was also the focal question that bore closely on the employees’ vital interests and the company’s future development. Firmly grasping the principal contradiction of “turning losses into profits,” a fact that concerned all employees and influenced the development of the company, and making important breakthroughs, were the two main keys to ending the depression and creating new prospects for Air China.

Of the strategic development goals Air China has set for the new era, the most important one is to become the aviation company with the strongest profit-earning capability in China. Only when Air China acquires a strong profit-earning capability can it create an outstanding brand image and become a world-competitive aviation company that is recognized by the majority of passengers. This, in turn, requires Air China to enhance its operational capability. Centered on this goal, Air China has done a lot over the past few years. For example, Air China promoted its hub strategy in airports such as Beijing, strengthened its network, focused on the transfer passenger market, and strategized operations on the basis of the company’s large financial costs, so as to lower operational costs in long-term operations. As a Chinese saying aptly describes, when the head rope of a fishing net is pulled up, all its meshes open. All these efforts have enabled Air China to get a clear idea of its direction of development, and build up its profit-earning channels.

Practice has shown that as long as we operate by holding on to the principal contradiction of corporate profit-earning, and cultivate core corporate competitiveness, the company will not go amiss. In the developing years, Air China stuck to a systematic approach to development, pursuing intensive development and implementing principles that prioritize security, profit, human improvement, and all-round corporate development. These seemingly abstract principles have all translated into concrete measures here in Air China.

In a nutshell, as an effective way of thinking, we need to analyze the issues and grasp the principal contradiction. The old saying rings true again, “A thorough analysis brings great benefits.”

SOLVE MANAGEMENT PROBLEMS WITH INNOVATIVE THINKING

Innovative thinking is pioneering and creative. Corporate leaders must never just stick to traditions. Instead, they must be good at innovative thinking and solve major, practical problems in corporate development by following a brand new approach.

Several years ago, some air crew members of Air China complained about the average hourly allowance of crew leaders. The flight team leaders had fewer tasks but were paid higher allowances than ordinary air crew members. The ordinary members were unhappy about this. In 2003, Air China’s banzi revised standards on the flight time for air crew leaders, encouraging them to fly more wherever possible. The 200-odd flight team leaders in Air China were all backbone pilots with excellent skills and rich experience. Their participation in front-line work not only enhanced flight safety but had also helped increase the company’s air traffic per year by more than 50,000 hours, which meant an addition of about 60 captains and an increase of RMB 300 million in profit.

Similarly, if leaders in other business units such as the cabin crew, air crew, marketing, and ground services could participate more in front-line flights and other work, Air China’s service quality could also be effectively elevated. At the same time, this measure would also tighten the tie with general employees and make it easy to track and solve problems at the grassroots. Hence goes the saying, “Instead of listening to successful experience, leaders should go to the grassroots.”

Since these reform measures were adopted, Air China’s overall security has witnessed a steady rise. Over the past three years, Air China has managed to top the industry in terms of high flight punctuality rate and fewer passenger complaints.

Such reform measures are the result of innovative thinking. If we follow the beaten track and only seek new solutions through propaganda and education, problems will pile up and contradictions will become sharper.

Over the years, Air China has continued to explore innovative solutions to problems that have appeared in the course of corporate reform and development. As the company has expanded in scale and fleet size, the original organizational structure, style of management, and management measures are no longer valid. For example, of all large enterprises supervised by the State-owned Assets Supervision and Administration Commission of State Council, we took the lead to openly recruit corporate managers from within and without the company, select cadres on a competitive basis, and revise the salary system. We founded Air China Cargo, the business jet branch company, the engineering technical branch company, as well as the commission of business and commerce. The benefits and effects of this intensive development soon began to emerge. We also studied the management methods of world-class airlines, laid down the principles to “pool the resources, streamline the procedures, sink the management, and move guidance forward,” in an attempt to promote reforms that aimed to bring about the transformation of corporate organization.

We have applied innovative thinking both inside and outside our company. We have felt its importance in our negotiations with vendors and joint-venture partners as well as in our direct sales with large clients. Many negotiations ended up with a satisfactory result for both parties due to a combination of innovative thinking, negotiation skills, and experience.

Corporate innovation capability depends on the innovative thinking of corporate leaders and cadres. Such thinking does not grow on trees, but is acquired through intensive training. In fostering innovative thinking, we must first enhance the awareness of innovation, which is the desire, motivation, and purpose of innovation. This is the necessary preparation and starting point for innovative thinking. To some extent, it is also directly related to the leaders’ ambition to succeed and their sense of responsibility. Also, we need to master the rules of innovative thinking, and view things in a curious way in order to bring into play our subjective initiative. Moreover, we should strengthen subject–object communication and transformation with an open mind.

Occasionally, while some cadres were in the midst of debriefing me, I would interrupt them. “Stop. You’re not telling me anything new. Start over and think it through carefully. And come back to me when you’ve got something new.” Then, after a few days, if the person did not come back to me, I would go and listen to his report once again. I imposed more pressure on cadres on purpose to enhance their awareness of innovation. No innovation, no progress. Under the circumstances of fierce competition, operating a company is like paddling against the current. If you do not go forward, you slip back.

To emphasize innovation, we should also avoid unrealistic fantasies and reckless moves in the name of “innovation.” I found out something interesting. In times when a company suffers a loss, sees no development prospect, and is in urgent need of change, few people dare to innovate. By comparison, when a company is making profits and has a bright future, a lot of innovators suddenly emerge, bursting with new ideas, and proposing various investment projects.

Once a leader from a secondary company came and said to me, in great excitement, “Mr. Li, we have a real estate project in Shanghai with a guaranteed profit. We should hurry up and invest in it!” As we are in the aviation industry, we barely know anything about the real estate business. What’s more, Shanghai is a capital- and talent-intensive internationalized mega city. How can a profit-earning opportunity as obvious as this knock at our door? Is there really such a thing as money growing on trees? After careful consideration, we resisted temptation and refrained from making a blind investment.

A few years ago, Air China canceled more than 90 percent of its non-key business investment projects at the stage of decision making. Although most of these projects were designed for the so-called purpose of “active exploration,” only a tiny minority of non-key business investment projects were approved because they were necessary, helpful, and easy to control.

All wrong suggestions and decisions are disguised in trendy terms. Or all wrong suggestions and decisions are due to the temptations of trendy terms. To prevent such mistakes in the course of seeking innovation, we should seek truths from facts, and proceed in touch with reality and objective rules.

REALISM WILL MAKE ALL YOUR DREAMS COME TRUE

Someone once asked me, “Mr. Li, people say you have secret methods to realize every one of your dreams. Is it true?”

I smiled. “Yes, it’s true. My secret is that I never dream about what cannot be realized. All I dream about are dreams that can be realized. That’s how I realize every one of my dreams.”

Actually, this is not a joke. Everybody wishes to realize his or her dreams, but it is generally achievable. The key element is how you envisage your dream.

One newly appointed general manager told me that he had to have the final say if he were to attain the operational goals. I said, “It isn’t wrong for leaders to want to have the final say. The most important thing is to know how to make your decisions the final say. Are you clear on that?” He did not answer. “To have the final say, as a leader you should make decisions in compliance with three principles. First, you should conform to reality, or else reality will reject you. Second, you should comply with laws and regulations, or else laws and regulations will reject you. Third, you should respect the majority’s wishes, or else it will be difficult to make it the final decision. An old saying goes, ‘You cannot afford to incur public anger. Autocratic desires win little support.’ Only in this way can you make your dreams come true.”

Envisaging your dream is an intellectual activity in the final analysis. There are three components to intellect. The first is scientific analysis. The second is precise judgment. The third is correct choices. Actually, human life is full of choices all of the time, from the choice of hairstyle to the choice of clothes, from who to meet to what to say. It is just that some choices are minor while others may relate to your whole life, such as the school you go to, the major you choose, the life partner you have, the friends you make, and our involvement in risky projects. Correct choices are dependent on correct judgments. Correct judgments are dependent on scientific analysis. Scientific analysis negates fantasy.

A friend of mine asked me to write a few words to wish him success in business. Here is what I wrote down, “Honesty is the center, science the foundation, diligence the path, kindness the bridge.” All these words imply that you can achieve success only when you are not a daydreamer.

The word honesty in Chinese is written as 诚信 (cheng xin). The character 诚 (honest) is composed of two parts, 言 (saying) on the left and 成 (accomplishment) on the right, meaning that you must realize what you have said in order to obtain the reputation of 诚. The character 信 (trust) is made up of 人 (person) on the left, and 言 (saying) on the right, meaning that we can only trust those who speak reasonably or mean what they say. Conversely, those who speak unreasonably or go against their own words cannot be trusted. Those who try to get by through lying and cheating will see their integrity and consciousness damaged. There is a famous American saying that goes, “You can fool all of the people some of the time, and some of the people all of the time, but you cannot fool all of the people all of the time.” Lying and cheating will be exposed sooner or later.

The word “science,” which has a lot of implications, mainly refers to acting on objective rules, including the rules of corporate operations. Seeking and applying rules are no easy tasks. First, the methods adopted to seek rules must be scientific. To this end, you must think rationally. To avoid irrational thinking in business, you should place your operational activities on a solid foundation. The Art of War states, “In war, the victorious strategist only seeks battle after the victory has been won, whereas he who is destined to defeat the enemy first fights and only then looks for victory.”⁴ Mao Zedong interprets this saying as “Fight no battle unprepared, fight no battle you are not sure of winning.” Preparation

⁴The Art of War, translated by Lionel Giles, http://www.gutenberg.org/catalog/world/readfile?pageno=41&fk_files=118464 (Accessed on December 3, 2007).

leads to success whereas reluctance to prepare is destined to result in failure. It should be pointed out that reliability does not run contrary to taking a unique point of view as well as winning by a surprise action.

Here I would like to tell you a story which took place when the Communist Party was in Yan’an. Mao Zedong was discussing with his commanders the question of how to force the Nationalist army into a trap laid by the Communist army. Mao Zedong asked, “Can we force a cat to eat chili?” One commander answered, “Yes. Open the cat’s mouth and stick the pepper in.” Mao said, “This isn’t a good method because you might be bitten by the cat.” Another said, “I have an idea. Put the chili inside a fish, and the cat will eat the fish together with the chili.” Mao said, “This is no good. The cat will eat the fish, leaving the chili untouched.” Everyone was eager to know the answer. “Chairman Mao, don’t keep us guessing any more. You must have a brilliant answer.” Mao said, “My idea is to smear chili sauce around the cat’s anus. The cat will definitely lick it away little by little.” Mao’s unique method was based on his correct perception of a cat’s habits. The method, which may sound weird at first can be seen to be excellent on second thoughts.

There is no need to go into details on diligence. Diligence and success always go together. The word “kindness” refers to thinking from other people’s standpoints. This is a must if you want to make a lot of friends. Whether your wishes can come true is also subject to the workings of opportunities. But where are the opportunities? Friends usually bring opportunities. A line from the lyric of a Chinese song goes, “You will have an easier life if you have a lot of friends.” This is indeed true. People often say that we should seize opportunities. To this end, the most important thing is to hold on to your friends and try not to lose them. However, friends are not gained by seizing but by kind behavior on your part. Only when you are good at thinking considerately can others consider you trustworthy. Kindness is not only the bridge to knowing more people, but also an effective way to communicate, and one which will usually help you succeed.

In 2003, Air China and Boeing negotiated for half a year with no results on the modification price of an airplane. Boeing asked for US$45 million while Air China could only offer US$15 million, resulting in a difference of US$30 million or about RMB 250 million. Finally, Alan Mulally, CEO of Boeing Commercial Airplanes invited me to the Boeing headquarters in the United States for a face-to-face talk. Before departing, I was told that Mr. Mulally offered me a US$5 million “special offer,” which meant that the modification fee would be no less than US$40 million. However, our side stood firm on US$15 million and not a single cent more was allowed. The large difference between the figures put the negotiation at great risk.

Consequently, we had to take another approach. I did not fax Boeing the negotiation prospectus as I had often done before. Instead, I prepared only a draft and went directly to Boeing’s headquarters. Mr. Mulally asked Mr. Dickenson, the vice president, to receive me. I thought that Mr. Dickenson would talk to me for a while before Mr. Mulally came out to sign the deal with me in accordance with their proposal. They might believe that the US$5 million “special offer” was kind enough.

Mr. Dickenson said to me confidently, “Mr. Li, whatever proposals you have in mind, you can just present them.” I said directly, “I have come with no proposal. I knew that US$15 million was impossible. But I also knew that American people like to hear the truth. So I’d like to tell you something you do not know. If you take what I am going to say as goodwill, we will discuss the proposal again. If not, I will go back to China this afternoon.” Mr. Dickenson said, “Please go on.” I said, “First, Boeing knows very well why we have to modify the airplane. This is also why Air China cannot revise the US$15 million modification fee. Second, another airplane-making company has approached Air China, expressing its willingness to modify the airplane at Air China’s bidding. But they had one condition attached, which was that Air China should buy no more airplanes from Boeing. Considering the long-term relationship between Air China and Boeing, we have not agreed to their proposal so far. Third, based on my personal estimation, since China imported the first Boeing 707 in 1972, it has purchased a total of more than 4,600 Boeing airplanes. It will book another 6,000-plus airplanes. Air China has been flying more Boeing airplanes than any other airline in China. Over the past 30 years, Boeing has earned more than RMB 500 billion from the Chinese market. I believe my friends in Boeing will treat this airplane modification issue from the perspective of history as well as of the future.”

Upon hearing what I said above, Mr. Dickenson looked serious, and then stood up. “Thank you, Mr. Li. Please excuse me for a while.” He hurried away. About 20 minutes later, Mr. Mulally came to the meeting room, looking delighted. “Dickenson has told me what you said. We appreciate your friendliness and goodwill. Now what’s your opinion about the modification?” I answered, “Thank you for hearing me through. My opinion is that we sign the modification agreement at the price of US$15 million. Specific technical details can be further discussed by the technical teams.” Mr. Mulally agreed at once, saying, “OK, we’ll do as you say.” He took me to a hall which had been prepared for the signing ceremony. This is the power of sincerity and goodwill.

UNIVERSAL TRUTHS GAINED THROUGH VISUALIZED THINKING

Life is full of philosophy. Life is a big classroom for studying philosophy. Live an in-depth life, think about life, and utilize common sense for visualized thinking, in order to figure out the universal truths to guide our work, study, and life. I call this “concept making.” Concept making is an effective way of thinking and working.

To master operations and management, a leader must be good at categorizing and thinking through problems that emerge during work, and working out ideas at the conceptual level. This should be a key leadership ability. If leaders only concentrate on specific issues, there will be no end of tasks. Then what is this concept? The concept is the linguistic expression and specific manifestation of an idea. Faced with such complicated problems as the company’s internal and external production safety, operations and management, and reform and development, leaders must abstract complex problems into working ideas that can be implemented at all levels, and spread modern operation and management knowledge. Leaders must also be good at translating difficult theories and abstract concepts into popular concepts that are intelligible to cadres and employees.

For example, corporate operation and management are things that are integrated and mutually complementary. What is operation? Operation includes various elements, which I sum up in four sentences. Master the market conditions. Use well thought through strategies. Minimize costs. And maximize profits. Management also includes various elements, which I will also put into four sentences. Know your employees very well, especially the managerial team. Take great care of key personnel. Improve on regulations in all respects. Increase overall employee quality.

For a long period of time in the past, service quality was always understood by many service enterprises, including civil aviation companies, as simply being a matter of serving, and serving manners usually came in the form of a smile. Serving with a smile is only a form, not the essence of service, and definitely not the whole of service. Service is the satisfaction of particular needs of clients. What are the needs of aviation passengers and cargo owners? After two years of consideration, we launched a service project known as the Four Hearts project, focusing on four areas: trust, comfort, convenience, and satisfaction. They represent the most fundamental service that an airline should provide to its passengers and cargo owners. Over the years, Air China has extensively launched a Trust Project centered on flight security, a Convenience Project focusing on flight punctuality and a smooth service flow, a Comfort Project highlighting the comfort of passengers, and a Satisfaction Project aiming to satisfy passengers’ reasonable individual demands. These projects have enhanced and widened our understanding of service, elevated Air China’s service quality and standards, and improved its market competitiveness.

People taking care of Party affairs in the company are required to be able to “serve in daily life, guide the ideas, solve conflicts, and grasp the key elements.” They should be able to interpret abstract and profound theories in concrete and easy language, substantiate abstract truths with practical examples, and differentiate wrongs from rights. They must make employees feel that they are amiable, dependable, and trustworthy. Corporate leaders and cadres should improve themselves so that they are “able to present themselves while standing, write documents while seated, and work at the grassroots.” In connection with this, a talented person is defined as someone who is “good at thinking, working, accomplishing tasks, and avoiding accidents.”

I often tell people about the “pig-feeding” theory: a herd of pigs surround the trough, eating. Those who have occupied an advantageous position dig their heads into the food with no need to look around, whereas those who come later can only walk around the trough anxiously, unable to get anything to eat. This is also true of corporate operations. We should take the lead to grasp the market opportunities. Once we do, we must firmly hold on to our position, allowing no one to slip in.

I have also told people about the “cart-pulling” theory. A banzi is like a horse and carriage. The leader controls the reigns and correct direction, and grasps the overall situation. The deputy leader cracks the whip to help maintain the direction, and should be ready to help at any time. I have also quoted Tolstoy in answering questions about how to make profit and what my secrets are. Tolstoy once said, “Happy families are alike, but every unhappy family is unhappy in its own way.” Based on my observations, this can be rephrased as: Profit-making companies are all alike, but every money-losing company is also alike.

In 2005, one partner of Air China helped revitalize a piece of land that Air China had purchased a long time ago in Sanya of Hainan Province. A hotel was built on it. My concept of this project was to make people want to stay in the hotel once they had seen it, make people reluctant to leave once they had checked in, and make people want to come again once they had left. In the end, through joint efforts from various parties, the project has become one of the best real estate projects in Sanya, earning high benefits.

A scientific mode of thinking, a correct way of thinking, swift reactions, and innovative ideas do not grow on trees. Neither are they implanted in human brains. They are acquired through long-term, persistent learning, practice, and thinking. The intellectual capacity is the embodiment of a person’s full worth.

In “Of the Teacher,” Han Yu wrote, “A teacher is one who can propagate the doctrine, impart professional knowledge, and resolve doubts.” I do not think this is enough. “Inspire intellect” should be added, because the three points are all viewed from the standpoint of teachers instead of the students, and are thus unable to stimulate the enthusiasm and creativity of the students. Only by opening the door of intellect inside the students can better educational effects be achieved. Inspiring intellect is also a responsibility for corporate leaders. They should cultivate the intellect of the grassroots, and upgrade grassroots traditional thinking and backward concepts, in order to make employees confident, rational, and intelligent.

For a commander, it takes three months to completely change a squadron, three to six months a platoon, half a year to one year a company, but at least two years for a regiment. As for a huge business such as Air China, only through the inculcation and popularization of correct ideals and concepts as well as a scientific mode and way of thinking can corporate energy be better pooled, development direction unified, and people’s intellect improved.

Since I began to work in Air China in 2000, the new banzi and I have devoted most of our energy to the transformation of Air China employees’ thinking as well as the establishment of talent teams. It is not hard for a company to have good strategies, but it is difficult to ensure that the strategic ideas are carried out, as this requires a vertical agreement and unity. I am delighted to see that, through years of effort on the part of Air China’s banzi, the Air China employees are undergoing in-depth changes in terms of how and what they think about corporate operation and management. The scientific outlook on development is becoming more and more popular as the lighthouse for Air China’s future development. The blue sky and the white clouds bear good witness to the outstanding performance of Air China.

Could there be anything more encouraging than this?

My Way: The Eight Strategies of Air China Towards Success