Corporate
Change and Traditional Chinese Medicine
Doctoral Program, Graduate Institute of Business
Administration, National Taipei University, Taipei, Taiwan, R.O.C.
kcwang@ttu.edu.tw
Abstract
This paper attempts to examine the role of business functions in the
corporate change in light of the traditional Chinese medicine and provide a
unique view that the corporate change hinges on the timely termination of the
old business model. The five elements theory has been successfully applied to
the principles of traditional Chinese medicine (TCM). If organizations are
considered as human bodies, what could be learned from their organic reactions
to the change in the environment from the perspective of TCM? There are three
organs the liver, spleen, and lung bearing a close
relationship to the body’s reaction to the external change. The functions
of the liver, spleen and lung could be understood as those of the research and
development (R&D), operations, and accounting/financial functions
respectively.
The Nei-Jing says, “The liver is the foundation of terminating
extremes.” The extremes characterize the critical points of the occurrence
of the fundamental changes in the human body. As extremes and disharmonies
occur during the interplay of the natural elements, plagues
and disease arise to cause suffering in people. The dramatic change in the
weather always necessitates a fundamental change in the human body. What is the
organ that can monitor and control the critical points in time to prevent the
effects of imbalance from the macrocosm upon human beings? It is the liver that
is responsible for detecting and making adjustment to dramatic environmental
changes. Likewise, the R&D function is expected to assume the role of a terminator
of the extremes and a matchmaker between the innovation and marketing
function when a firm is confronted with serious threats. The terminator focuses
on how to stop in time the obsolete business plans and actions while the
matchmaker is responsible for reconstructing market boundaries through
differentiations in marketing related areas or activities. Nevertheless, the
R&D function cannot perform these two tasks well without its cooperation
with the other two functions related to the corporate change: operations and
accounting/financial functions. The operations function should be responsible
for screening out useful the practice or knowledge for the next innovation. On
the other hand, the accounting/financial function could contribute to the
evaluation of the cost and benefit of the plans and execution concerning the
planned change.
Keywords: change management; traditional Chinese medicine;
five elements theory; business functions, Chinese systems thinking
Introduction
This paper attempts to examine the role of business
functions in the corporate change in light of the traditional Chinese medicine
(TCM) and provide a unique view that the corporate change hinges on the timely
termination of the old business model. Facing diversity, complex and rapid
technical development, firms always have to conduct company-wide changes to
survive severe competition with global companies. However, one of the big three
corporate-wise failure issues that contribute to 75 percent of all major
changes failing to attain their desired goals is an unsystematic approach to a
systems problem (Haines et al., 2005). Therefore, the systematical management
of change has been an important key for organizations to build up their competitiveness and to survive
the competition.
The management of change could be learned
from the organic reactions to the change in the environment from the
perspective of TCM. Change management could be defined as “the process of
continually renewing an organization’s direction, structure, and capabilities
to serve the ever-changing needs of external and internal customers’ (Moran and
Brightman, 2001). Morgan (1997, p. 33-71) has tried to think of organizations
as organisms and examine how they adapt to changing circumstances. What could
help us build the correspondence between the business functions and the organic
functions of the body and then incorporate these relationships holistically
into the management of change? The five elements theory may provide the answer.
The five elements theory is considered as the most fundamental and influential
Chinese systems thinking. Particularly, traditional Chinese medicine has been
one of the disciplines that successfully applied the five elements theory.
Therefore, the systematic knowledge of change management may be learned from
the theory of TCM.
This study tries to find out the business
functions that bear a close relationship to management based on the theory of
TCM. By examining the roles of those business functions, the core of change
management is formed and a plausible strategy for the change management is
suggested.
Traditional Chinese Medicine and Five Elements Theory
Traditional Chinese medicine is “a coherent and independent system of thought and practice” (Kapuchuk,
2000, p. 2). Traditional Chinese medicine
refers to the traditional medical
practices used in China that have developed over two
millennia. Based mainly on Chinese systems thinking, TCM investigates on a
macro-level into the internal systems of the human body and their mutual
relationships with the internal and external environments. It seeks to gain an
understanding of the fundamental laws which govern the functioning of the human
organism, and to apply this understanding to the treatment and prevention
of disease as well as health maintenance. Rooted in the philosophy, logic, sensibility, and habits of the Chinese
people, TCM is the result of the Chinese systems thinking in addition to
extensive clinical observation and testing.
The traditional Chinese
medicine could provide a bridge between the five elements theory and the theory
of management. TCM is established within a
unique, comprehensive, and systematic theoretical framework including the five
elements theory, the human body Meridian
system, Yin-Yang and other systems. All treatments
of TCM have been conducted according to this systems thinking. Moreover, it is
the five elements theory that plays the most essential role in the theory and
practice of TCM. The roots of TCM are
planted deeply in the Chinese systems thinking the five elements theory. The five elements theory
has been successfully applied to the principles of traditional Chinese
medicine. Consequently, a good understanding of how TCM
utilizes the principles of five elements can reveal how to apply the five
elements theory to the management problems.
How does the TCM apply the five elements theory? First, the human body is considered as a holistic system an integrated set of
functions and relationships. Understanding of these functions and relationships
enables the practitioner to identify and treat a disharmony in them (Kapuchuk,
2000, p. 77). When there is a disharmony in the human body, the
traditional Chinese physician always tries to first seek out dynamic functional
activity rather than to look for the fixed somatic structures that perform the
activities. In the Chinese system, the organs are always discussed with
reference to their functions and their relationships with the fundamental textures,
other organs, and other parts of the body. For this reason, they are regarded
as organ networks rather than simply individualistic organs. Indeed, it is only
through these relationships that an organ can be defined. Each organ network refers to a complete set of functions physiological and psychological rather than to a specific and discrete physical
structure fixed in an anatomical location (Beinfield & Korngold, 1991, p.
91-92).
Second, the functions of organs are
classified into the corresponding elements and their interactions are defined
as either the nourishing or controlling effects. Chinese medicine recognizes five Yin organs (wu-zang) and six Yang
organs (liu-fu). The Yin organs are the liver, heart, spleen, lungs, and
kidney. The Yin organs produce, transform, regulate, and store the fundamental
textures Qi,
blood, essence, spirit, and fluids (Kapuchuk, 2000, p. 78). The six Yang Organs
are the gallbladder, small Intestine, stomach, large Intestine, bladder, and
triple burner. The function of the Yang organs is to receive, break down, and
absorb that part of the food that will be transformed into fundamental
textures, and transport and excrete the unused portion (Kapuchuk, 2000, p. 78).
Generally, the Yin organs are more important in Chinese medical theory and
practice. According to the theory of TCM, the correspondences between the
organs and the five elements are listed in Table 1.
Table1. Correspondences between the five elements
and organs
|
Five Elements |
Yin organs |
Yang organs |
|
Wood |
Liver |
Gallbladder |
|
Fire |
Heart |
Small intestine, Triple burner |
|
Earth |
Spleen |
Stomach |
|
Metal |
Lung |
Large intestine |
|
Water |
Kidney |
Bladder |
Source: Zuo (2002, p. 26-29)
Third, the diseases could be traced to the imbalance between the nourishing and controlling effects of the organs’ functions. Health for the Chinese is a sense of equilibrium (Kapuchuk, 2000, p. 75). When all the functional activities of the organs take place harmoniously, the person is healthy and in balance. The equilibrium is maintained if the interactions among the functions of the organs are balanced. All the factors that have harmful effects or influence on the dynamic balance of the functional activities are called pernicious influences in TCM. They are formed by the interactions among the variables such as the environment, emotional responsiveness, way of life, or heredity. The pernicious influences would not cause an illness under the normal condition because the defensive and regulative system of the body could react effectively as well as timely to the imbalance of the pernicious Influence and the normal Qi. However, if the normal Qi is weaker than the pernicious Influence, disharmony arises and the balance between the nourishing and controlling effects is disturbed. Therefore, TCM emphasizes how to identify the patterns of disharmony and locate where it occurs (Tang, 2004, p.42-43).
Lessons from the Human Body
If
organizations are considered as human bodies, what could be learned from their
organic reactions to the change in the environment from the perspective of TCM?
To realize the reactive mechanism of the body to the external changing
circumstances is the primary purpose of this study. After we have known that
the organs function as a system to react to the external influences, the next
step will be moved to analyzing the major organs that are responsible for this
purpose. Finally, the corresponding business functions will be identified to
formulate feasible strategies for the corporate change.
There are three organs the liver, spleen, and lung bearing
close relationship to the body’s reactions to the external changes. All Chinese
medical theory originates from Huang-di Nei-Jing or Inner Classic of the Yellow
Emperor (hereafter referred as the Nei-Jing) written
in the second century B.C1. The Nei-Jing says “The liver is the foundation of terminating extremes
(Tang, 2004, p. 73-74).” These extremes characterize the critical points of the
occurrence of the fundamental changes in the human body. As extremes or
disharmony occur during the interplay of the natural elements, plagues and
disease arise to cause suffering in people. The dramatic change in the weather
always necessitates the fundamental change in the human body. What is the organ
that can monitor and control the critical points in time to prevent the effects
of imbalance from the macrocosm upon human beings? It is the liver that is
responsible for detecting and making adjustment to dramatic environmental
changes.
The spleen is in charge of
the transformation and screening functions. The spleen belongs to the Earth
element, which provides stability and is a transformer. In the five elements,
it is the transforming energy from one season to another. In fact, the spleen in
TCM is the primary organ of digestion. Although the stomach is responsible for
receiving and ripening ingested food and fluids, the energy it needs is
supplied by the spleen (Tang, 2004, p. 73-74). Because the spleen provides the
source of sufficient Qi and blood2 to fuel the life of the body and
mind, the Chinese believe that it is the “foundation of postnatal existence
(Li, 1998, p. 7-8).” After extracting the pure nutritive essences of ingested
food as well as fluids, the spleen transforms them into resource or garbage.
The resource is the raw material for Qi and blood that the body could utilize.
By contrast, the garbage refers to the waste material. The activity of
separating the useful essence from the wasteful one is defined as the screening
function.
The lung is expected to
function as a sensitive evaluator and adapter. Nei-Jing says, “The lung can
manage the Jieqi.” A Jieqi is a solar term, each covering a period of 15 days in the traditional Chinese calendar
to signify a particular natural phenomenon or agricultural arrangement in ancient
The roles of the three
organs in adjusting the body to the changing environment differ in respect to
the time span of the external change. The lung is responsible for fine-tuning
the short-lived fleeting events for every fifteen days. The spleen is in charge
of the transformation of the middle-range seasonal shifts (Liu, 2004, p.
342-344). By comparison, the liver answers for the long-term change in years.
The organic division of these three adaptive functions gives us a
good deal of enlightenment on the time of the corporate change. A business
function may have a major impact on short-term change whereas the other
functions may affect the medium-range or long-lasting changes.
The functions of the
liver, spleen, and lung could be understood as those of the research and
development (R&D), operations, accounting/financial function respectively.
With the function of the three organs briefly elucidated, the next spotlight
would be focused on identifying the corresponding business functions concerning
the management of change. The relationships among the Yin organs, five
elements, and business functions are summarized in Table 2. Therefore, the R
& D function is fulfilling the capability of the job of the liver terminating the extremes detecting and making
adjustment to dramatic environmental changes. The operations function is to
engage in the activity of the spleen the transformation and screening. Finally, the
accounting/financial function is carrying out the task of the lung, being a
sensitive evaluator and adapter.
Table2. Correspondences between functions of Yin
organs and business functions
|
Yin organ |
Five Elements |
Business Functions |
|
Liver |
Wood |
R & D |
|
Heart |
Fire |
Marketing |
|
Spleen |
Earth |
Operations (Production) |
|
Lung |
Metal |
Financial & Accounting |
|
Kidney |
Water |
Innovation |
Source: Wang (2002).
Systems Thinking For Change Management
The traditional Chinese medicine offers a different
perspective of coping with changes. The successful management of change is
crucial to any organization in order to survive and flourish in the present highly
competitive and continuously evolving business environment. In fact, the
enterprise-wise or transformative change couldn’t be avoided while firms
encountering a life-and-death competition. A corporate-wide change necessitates
the systems thinking. However, one cannot adopt a piecemeal approach to a
systems problem. The human body has shown its wisdom of holistically reacting
to the external changes. Thus, firms can learn from the experience of the human
body to untangle the problems in managing change.
The management of change could evolve from the
change triangle. The change triangle consists of the R & D, operations, and
accounting/financial functions (see Figure 1). It forms the core of the
corporate change. Building on the change triangle, a manager could grasp in
time the critical point of change through the R & D function, utilize the
operations function to effectively transform and screen resources, and
accurately evaluate the performance of change. Therefore, the expected
activities of these business functions will be discussed first. Then, the
systematic interaction of the triangle and the two other functions marketing and innovation will be explored to reach
the ultimate goal of change.
Figure 1. Change triangle
When a firm is confronted with serious threats, its
R & D function is expected to assume a role of a terminator of the
extremes and a matchmaker between the innovation and marketing functions. The
terminator focuses on when and how to stop in time the obsolete business plans
and actions. The managers are always brainwashed by the traditional concept
that highlights the importance of “unfreezing” as the first step of change.
Instead, the role of the liver in TCM advises the managers when to trigger a
change. Because the inertia always delays the reactions to changes
(Gharajedaghi, 2006, p. 4-6). The inertia, in fact, usually originates
from the past formula of success. It is very likely that the organizational
behavior is deeply influenced by the inertia making managers unable to smell
the critical point for change in time. Therefore, the R & D function should
start from ceasing the extremes.
To stop the extremes entails detecting when the
critical point emerges. In other words, the critical point manifests the proper
time for launching a change plan. This study found that the change plan always
occurs when the operations function couldn’t transform the resources
efficiently into economic performances enough to sustain the business growth
and survival (see Figure 2). For example, facing external problems such as the
fierce competition, increasing cost structure, as well as falling prices, firms
suffer greatly from the declining performance and cannot earn the normal profit
to stay in the industry. In this case, they may confront a critical point for
change.
Figure 2. R&D monitors the transformation
from operations to accounting/financial function
In addition, as a matchmaker, the R & D
function is expected to match the innovation (Water) with marketing (Fire) function
to remark market boundaries. The Water-Fire effect signifies the interaction
between a firm and its customers (see Figure 3). It denotes the value
proposition, from the firm’s perspective (Water), for the customer. In
addition, it stands for the evaluation of corporate offerings from the
customer’s perspective (Fire). A balance will be reached when both parties meet
the needs of each other. In fact, the R & D function is designed to help
create profitable orders by matching innovation with differentiation in
marketing activities. Thus, a matchmaker undertaken by the R & D should
focus on how to apply the existing innovative capabilities to the perceived
changes in the market. Furthermore, to avoid the competition in red oceans, the
R & D function has to be responsible for reconstructing market boundaries
through effective differentiations in marketing related areas or
activities. As suggested by Kim & Mauborgne (2005, p. 47-80),
companies could discover new market space by rethinking the conventional
boundaries of competition, such as looking across alternative industry,
strategic groups within industry, complementary offerings, customer appeals, or
redefine the industry buyer group.
Figure 3. Match between innovation and marketing
function
Nevertheless, the R&D function cannot perform
those two tasks well without the cooperation with the two other functions
related to the corporate change: the operations and accounting/financial
functions. The operations function consists mainly of transformation and
screening capabilities. Similar to the role of the spleen, the operations
function assumes the duty of transformation. It helps to transform one or more
inputs, adds value to them and finally provides products or services for
customers. Actually, this transformative capability is engaged not only in
operations activities that produce goods and services for customers, but also
in all other business functions. The Earth element is like the infrastructure
that provides the necessary energy for supporting the five elements framework.
All the activities of firms cannot do without the transformation function.
Likewise, the corporate change cannot be excluded. The operations or
transformative function should always be re-examined as the survival of
business has been threatened by deteriorating economic performances.
More importantly, the operations function could
unravel the problems of enterprise change by screening out the useful practice
or knowledge for the next innovation (see Figure 4). In addition to the
transformation capability, the operations function has to provide a useful tool
for selecting the potential innovative technologies, practices, or ideas. As a
firm undergoes a transformative change, innovation is always needed to lower
its cost structure and exploit another new market. Frequently, the operations
function is called for examining the alternatives of innovation and screening
out the best one that could be produced by their core competences in hand. The
interaction of the operations and innovation activity is just like the
controlling effect of the Earth (operations) on the Water (innovation) element,
which could cultivate the organizational learning capabilities within an
organization. More specifically, the screening function can be realized by four
actions framework proposed by Kim & Mauborgne (2005, p. 29-35). In other
words, companies can challenge their business model by reviewing their competing
factors and decide which ones should be eliminated, reduced, raised, or
created. Then, a unique set of practical and valuable factors would be picked
out for the R & D function to utilize.
Figure 4. Screening the effect of operations on
innovation
On the other hand, the accounting/financial
function contributes to the evaluation of the cost and benefit of the plans and
action concerning the planned change. Without sustainable economic performance,
an organization change is doomed to be crippled. It is insufficient and
dangerous for a company to trigger a transformative change only by the R &
D and operations functions. A change labeled with unsatisfactory economic
results cannot persuade the employees and stockholders to demonstrate their
further commitments. Nor can it rescue a deteriorating business from the fierce
competition. Therefore, managers have to take the accounting/financial function
into consideration in formulating a change plan. The function of the
accounting/financial activity corresponds to the lung’s function, which is
supposed to act as an “adviser” in the human body from the TCM perspective. In
terms of management, the accounting/financial function should advise the
manager on how to evaluate the performance of change.
However, to successfully complete the work of
evaluation, the accounting/financial function has to collaborate with the
marketing function (see Figure 5). It is very important for a firm to achieve
both lowering cost and increasing customer value to guarantee an anticipated
level of performance. These tasks necessitate the cooperation with the
marketing function, which could provide the financial assessment of products,
services, customers, competitors, and the industry.
Figure 5. Evaluation the effect of marketing on
financial/accounting
To sum up, companies could conduct holistic change
based on the change triangle. The process of corporate change is triggered by
the R & D function that should assess the effectiveness and efficiency of
transformation within a firm to identify a critical point for change (see
Figure 6). This is related to the problem of why to change. The next step can
be completed by finding the “blue ocean” to which the existing innovative
capabilities can be applied. It becomes a how-to-change problem. Finally, the
problem of how to change should be the target of corporate change, which
emphasizes screening and evaluation effects.
Figure 6. Process of corporate change
Contribution and Conclusion
The purpose of this article is to borrow from the
principles of TCM to offer a creative reflection on the change management.
Explore the change management by systematically integrating business functions.
This
research seeks to integrate business functions holistically to find a workable
way to corporate change. The change triangle comprised of the R & D,
operations, and accounting/financial functions would make a significant impact
on the efficacy of change. Furthermore, the interaction among the change
triangle and the innovation as well as marketing functions is able to achieve
both cost reduction and increasing buyer value.
Examine the corporate change from an interdisciplinary perspective the
traditional Chinese medicine approach.
It is the
first research that applies the theory of TCM to management. The strategy of
change can be inspired by the working knowledge of the body’s organic reactions
to the external changes. Basically, the liver, spleen, and lung are the main
organs accountable for the adaptation to fluctuating environments. This study
identifies their corresponding functions in business the R & D, operations, and accounting/financial
functions. Eventually, a plausible strategy for change is suggested.
Emphasize that the termination of “extremes” would initiate the
corporate change.
Informed by the adjustment
capability of the liver, the R & D function should give managers advice on
when to stop the obsolete business model in respect to change management. This
critical point usually occurs when the operations function couldn’t transform
the resources efficiently into economic performances enough to sustain the
business growth and survival.
Notes
1 The Nei-jing is composed of two parts: the Su-wen and Ling-shu. The
Su-wen emphasizes on the theoretical foundation of Chinese Medicine, including diagnosis
methods and treatment methods. The Ling-shu deals with acupuncture in great
detail. However, because the Su-wen is much more widely quoted and referred to,
the Nei-jing often refers to just the Su-wen. The Chinese translation of Nei-jing
can referred to the book of Ni (1995).
2 The approach of Chinese medicine includes, yet moves beyond,
issues of physical health. The Chinese believe that the greater integration of
body organs can be achieved through the cultivation of Qi. Moreover, the
balance of forces within us, such as Yin-Yang, Blood-Qi, Heat-Cold, determines
the internal healthy and diseases(Beinfield & Korngold,
1991).
References
Beinfield H,
Korngold E. (1991). Between Heaven and Earth: A Guide to Chinese Medicine.
Random House: Toronto.
Gharajedaghi
J. (2006). Systems Thinking: Managing Chaos and Complexity-A
Platform for Designing Business Architecture (2nd ed.). Butterworth-Heinemann: MA.
Haines SG, Aller-Stead G, McKinlay J. (2005). Enterprise-Wise Change.
Pfeiffer:
Kaptchuk TJ. (2000). The Web That Has No Weaver: Understanding
Chinese Medicine. McGraw-Hill:
Kim WC, Mauborgne R. (2005).
Li ZZ. (1998).
The Essential
Liu LH. (2004).
Thoughts on the Traditional Chinese Medicine (si kao zhong yi) . Taipei:
Jimu Wenhua press. (in Chinese)
Magretta J.
(2002). What Management IS: How It Works and Why It’s Everyone’s Business.
Free Press:
Mintzberg H,
Quinn JB. (1996. The Strategy Process: Concepts, Contexts, and Cases (3rd
ed.). Prentice-Hall:
Moran, JW. Brightman BK. 2001). “Leading Organizational Change,” Career
Development International. 6(2): 111-118.
Morgan G.
(1997). Images of Organization. Sage:
Ni M. (1995). The
Yellow Emperor's Classic of Medicine: A New Translation of the Nei-jing Suwen
with Commentary. Shambhala: Boston.
Tang U. (2004). Come
Close to the Traditional Chinese Medicine (zou jin zhong yi) . Taipei: Jimu
Wenhua press. (in Chinese)
Zuo Y. (2002). Basic Theory of Traditional Chinese Medicine.
Publishing House of
Wang, K.C. (2002). “The Five Elements Theory in Business Research,” Paper presented at the 46th Annual Meeting of the Association of International Society for the Systems Sciences , Shanghai, China.