This is the second of three articles looking at the challenges faced by international B2B publishers as they look to establish operations in China. (Part 2 of 3). The first part covering the first two orthodoxies that should be thrashed is here.
China is part of the new reality, and it is firmly filed in the “ignore at your peril” category. This enormous Asian country offers tremendous opportunities for international B2B publishers, but convention and innovative conservatism mean many will either fail or will simply not deliver against the potential.
In the last article I introduced the first two orthodoxies that international publishers need to learn to ignore, and in this post I’ll discuss the final three. It is not an exhaustive list, but these do represent significant hurdles to both understanding how to operate successfully in China.
As a recap:
Orthodoxy One: I can’t do business with pirates (answer: Yes you can)
Orthodoxy Two: Chinese companies are not prepared to pay (answer: Yes they are)
So, without further ado, here’s the next installment.
Orthodoxy Three — “China needs me (or us, or our business, or our products…) more than I need it”
Does it indeed? This is part of the classic arrogance that can stem from having global scale market-leading services and the belief (that may, or may not be false) that China just needs to understand it will be a better place once it embraces the value of these international-standard services. I suppose it could be true in some cases, but it is very wrong to build a market entry strategy upon such an assumption.
Just because business isn’t necessarily transacted according to widely followed rules, regulations and cultural assumptions, doesn’t mean that the Chinese business community is just waiting for someone to come in and turn on the light. They are not. Many Chinese companies on stellar growth curves are just moving too fast to even stop and consider whether such questions need to be answered, or even asked in the first place.
The real question to ask is: “What value can I add in China?”. In the B2B information publishing sector, fast growth Chinese companies are often looking for ways to move themselves up the value chain. They have inevitably started from a perspective of rapidly building market share through delivering comprehensive services to domestic companies at bargain prices.
Moving up the value chain
This model works, but only to a point. As their clients also grow and become ever more sophisticated with larger information budgets, domestic suppliers are looking to find ways to charge more. It’s not easy to break out of the cheap bucket. Of course they can (and do) branch out into other potentially lucrative areas such as events, consultancy and business advisory, but it is around content and the perceived value of content that can leave them struggling.
For the foreign publisher, the attraction may well be the booming domestic market, but with dynamic, lithe and relatively risk averse local competition, it is very tough to compete. The Chinese competitors have scale, reach, and most importantly, the connections that make things happen.
…it is around content and the perceived value of content that can leave them struggling.
Orthodoxy Four — “If we’re cautious, we can avoid the mistakes of others”
Maybe, just maybe. But by the time you’ve sat back, carefully reviewed all the data, poured over the case studies and discussed where others went wrong, the assumptions you were testing may well have become redundant. It’s no exaggeration to say things can move incredibly fast in China (just as the bureaucracy can move incredibly slowly). In such a fast changing and developing environment those that arrive first, those that are fastest and fittest, will be able to quickly adapt within the shifting opportunities to cash in on success.
A standard approach would be to carefully test assumptions and models one at a time. With the economy and society undergoing such fantastic change, if you take too long making up your mind your ideas could end up redundant before they even begin.
If time is the enemy, procrastinating over possible strategies is destined to reduce the likelihood of success. Moving quickly is the key, after all, this is what many young Chinese companies do really well. They are not wedded to process and they are prepared to try things in different ways, often concurrently, before settling on the model that works best. Of course, once they have found success it is already operating and working, as opposed to being one concept being tested in a long line of concepts.
Decision paralysis leaves Chinese partner bemused
For a major western B2B publisher there were two choices — either accept flat line business prospects on a low base but feel safe, or build a relationship with a Chinese partner to start being able to reap rewards from this major market. The route they chose was typical of too many successful Western publishers. With a high margin and fast growing business elsewhere in the world, the senior team thought caution was the better part of valour when it came to China. They had tried lawsuits (and won), and they had expended energy, management time and money trying to stop piracy.
But all the time their attention was placed on stopping things and trying to take control, the market in China was growing at a remarkable pace. They thought a joint venture leading to acquisition would be a good idea, but as they endlessly circled around the issues, their Chinese partner was accelerating and the valuation was increasing on a weekly basis. Time really was money.
But the foreign company didn’t see it that way. A steady stream of executives would drop in to Beijing to visit the partner and sit down to discuss in fine detail all the aspects of a potential partnership. Promises were made, timeframes agreed, but rarely were they kept. For the Chinese CEO, it was a remarkable situation and one he simply couldn’t understand. His company was growing at more than 50% annually, the business plans all stacked up, but still the foreign partner wouldn’t fully commit.
More than a year later, some progress was eventually made, but by then it was so watered down that the rewards would only ever be limited. Asked what he thought of the situation, the Chinese CEO could only scratch his head and say: “We are growing fast, we offered them great opportunities to join us. I just don’t understand why they don’t want to win.”
Orthodoxy Five — “If it’s worked everywhere else, it’s bound to work in China”
Will it indeed? Possibly, but then again, possibly not. It’s easy to draw attention to cultural differences, the Communist controlled one-party state, language and other excuses, but actually you need to look carefully not at how you want to do things, but at how they are done in China. If you do not, you will fail. Simple as that.
I’m not talking about abandoning business ethics, professional work practices or common sense. I am talking about understanding the customer (or partner), a concept that is central to any business anywhere (or it should be). China is a very old country, but at the same time it is also very young. Tentative economic reforms started in 1978, and as that process took root and growth accelerated great wealth has been created. For the majority of people aged over 40 their memories centre around poverty, the austerity associated with the command economy and strict party and society control.
Indeed, definitions of individuality in the West and in China differ considerably. Whereas in the West individuals are viewed as disconnected, in China they are viewed as a vitally integrated element within a larger whole. As the Internet Encyclopedia of Philosophy puts it:
Chinese manifestations of “individualism” do not stress an individual’s separation, total independence, and uniqueness from external authorities of power. Rather, individualism in the Chinese tradition emphasizes one’s power from within the context of one’s connection and unity (or harmony) with external authorities of power.
Within the new-found economic freedoms, that collective identity remains intact, but people are also unencumbered by generations of behavioural expectations and so create their own rules. This can be seen in business relationships as well as in how people handle wealth. When money is new rather than old, and where it is combined with “face” or “mianzi”, it tends to assume a far more prominent, even possibly ostentatious appearance.
Mianzi, which means ‘face’ in Chinese, refers to more than physical face. It is the display of dignity and self-respect when interacting with others. Because of the people-based culture, an individual is conscious about one’s appearance in the eyes of others.
Mianzi, belongs not only to an individual. It can belong to a group as well. In other words, on many occasions, one has to maintain a ‘good face’ not only for oneself, but for a group or even nation. Saving of face for one’s leader is saving face for one’s organization. For this reason, if you cause a party to lose face, you could be hurting an army of individuals, rather than simply an individual.
If you want to be accepted in China, it is important for you to know the importance of ‘face’, and ways to maintain it for yourself and others. It is a critical tool for keeping harmonious guanxi that are essential to the development of healthy relationships — personal or business . (via ChineseOnTheGo.com)
This is not to say that existing practices will not work, but it is more to do with how you seek to introduce alternative methods of working, or alternative ways of measuring performance. If you try to dictate change, it can easily result in a loss of face, not just for the Chinese party but for yourself. And when both parties lose face not much good will come out of it.
The key is in spending time understanding not just how things are done, but why things are done in a certain way. It has to be a collaborative effort, and you have to be open to the idea that things actually can be done differently.
Don’t forget to take a look at the first part of this series. The third and final part will follow soon.
- Don’t fear China, publishers should trash orthodoxies and embrace change (Part 1) (contentrev.com)
- Ease of doing business in China (doingbusiness.org)