China's most successful firms adapt quickly

For the past several years, I have watched Chinese companies operate in an environment that many business leaders elsewhere are also confronting: intensifying competition, changing consumer preferences, pressure on margins and constant uncertainty.

Yet one of the most striking features of China's corporate landscape has been one of adaptation.

Leading Chinese companies are using economic pressure to eliminate inefficiencies, accelerate decision-making and stay close to changing customer needs. Some are continuing to invest heavily in innovation. Others are building capabilities designed to reduce future vulnerabilities.

In short, the strongest and most successful companies are using challenging conditions as an incentive to become more adaptable, more efficient and more innovative.

That, in essence, is strategic resilience: the capacity not merely to withstand disruption, but to use it to emerge more competitive.

One of the defining characteristics of China's most successful companies is their capacity to adapt quickly.

In a competitive market, companies need to identify problems quickly, test solutions and adjust. That requires senior executives to provide clear strategic direction while giving people closer to customers and operations sufficient authority to act.

Speed itself has become a source of competitive advantage. Chinese firms have embraced speed partly out of necessity: in markets where competitors are constantly innovating, waiting for complete and accurate information or lengthy approval processes can mean losing customers before a decision is implemented.

White goods firm Haier offers a particularly interesting example. The home appliance giant has repeatedly transformed its organizational structure, moving away from a traditional hierarchy toward flatter, more decentralized structures built around self-management teams and microenterprises. The model was designed to give employees greater autonomy and decision-making power while bringing the organization closer to end-consumer needs.

Digital technology is accelerating this capacity to adapt. Better data can help companies detect changes in demand more quickly. Digital platforms can connect decision makers with factories, suppliers, distributors and customers. Artificial intelligence is beginning to speed up activities ranging from product development and customer service to inventory management and pricing.

The larger lesson is not simply about technology. Resilient organizations do not try to predict every disruption. They build the capacity to respond faster when disruptions inevitably arrive.

Economic pressure inevitably forces CEOs to focus on costs. But there is an important difference between cutting costs and improving the system.

The first approach is defensive. The second is strategic.

Another Chinese home appliance firm, Midea, provides a useful example. The company has invested heavily in digitalization, automation and intelligent manufacturing to make production and supply chains more responsive. At its Guangzhou factory, Midea reported that its digital and Industry 4.0 transformation increased labor efficiency by 28 percent, reduced unit costs by 14 percent and shortened order-delivery time by 56 percent.

The point is not simply to reduce headcount or squeeze suppliers. It is to improve productivity, quality, speed and flexibility at the same time.

This distinction is especially important as companies rush to adopt AI. The value of technology should not be measured by how many AI applications a company announces or how much it spends. The real test is whether technology enables the organization to make better decisions, execute them more quickly and create greater value for customers.

Hard times expose inefficiencies. Well-led companies use that exposure as an opportunity to fix them.

Another striking feature of China's most competitive companies is their determination to keep innovating under pressure.

Innovation during challenging economic times does not always mean pursuing a single, expensive technological breakthrough. Some of the most valuable innovations are incremental: a better product feature, a simpler user experience, faster delivery or a more affordable way to meet changing market needs.

Chinese electric vehicle maker BYD illustrates what sustained competitive pressure can produce. The country's EV market is fiercely competitive, forcing companies to improve technology while maintaining affordability. Yet BYD has continued to increase its investment in research and development. According to its 2025 annual report, the company invested 63.44 billion yuan ($9.46 billion) in R&D during the year, up 17.13 percent from 2024. Its R&D workforce grew to 127,665 people.

When demand is no longer expanding rapidly enough to lift all competitors, companies must win customers from one another. That makes understanding customers and continuously improving the product even more important. Innovation, therefore, should not be treated as a department or a project that can be switched on and off. It needs to become a continuous organizational habit.

Adaptation also means recognizing when uncertainty makes investment more important, not less.

Chinese tech company Xiaomi offers an instructive example. The company has been investing heavily in proprietary semiconductor capabilities as part of a broader strategy to strengthen its in-house tech independence and gain greater control over key product technologies. In August, Xiaomi launched the Xring O3, its second-generation system-on-chip. Manufactured using a 3-nanometer process, the product contains 24 billion transistors. Reuters reported that the company had invested more than 20 billion yuan in chip development and expanded its semiconductor team to more than 3,000 people.

Such investments carry risk. But strategic resilience is not about eliminating risk. It is about making deliberate investments that improve a company's ability to manage future risks and capture future opportunities.

During periods of economic pressure, weaker competitors may be forced to retreat. That can create opportunities for companies with stronger balance sheets, better technology and more capable management teams to gain market share.

The companies that emerge strongest are therefore not necessarily those that spend the least. They are those that understand which capabilities will matter in the next cycle and protect them while eliminating waste elsewhere.

None of this happens automatically. Strategic resilience is ultimately a leadership responsibility.

McKinsey & Company has aptly described this expanded leadership role as that of the "chief resilience officer". In a 2025 article, the firm argued that because CEOs sit at the intersection of strategy, finance and operations, they are uniquely positioned to build resilience across four interconnected dimensions: financial, operational, organizational and external.

That framework is particularly relevant today. CEOs cannot control economic growth, tariffs, geopolitical tensions or financial markets. But they can determine how their organizations respond. Their task is to decide where costs should be cut and where investment must continue; to ensure that technology serves strategy rather than becoming an expensive distraction; and to keep the organization focused on customers when internal pressures tempt management to look inward.

They also have another critical responsibility, which is to project confidence. In periods of uncertainty, employees, customers, investors and business partners take cues from the CEO. The best CEOs communicate a credible path forward, acknowledge challenges without amplifying anxiety, and demonstrate that the organization has a plan, projecting calm and conviction that help keep stakeholders on side when confidence itself is under pressure.

Companies which succeed in difficult times offer an important observation about management: resilience is not passive. It is the ability to adapt continuously, optimize relentlessly, innovate under pressure and invest selectively in the capabilities that will matter tomorrow.

The writer is executive vice-chancellor, American president and distinguished professor of social science at Duke Kunshan University in China.

The views do not necessarily reflect those of China Daily.