Developing a Sustainable China Business Model

Thursday, October 29, 2009 1:41
Posted in category Uncategorized
Comments Off on Developing a Sustainable China Business Model

Over the last couple of weeks, I have been out speaking to different groups about sustainability in China.  For me it is a topic that goes far beyond polar bears and solar panels, and when presenting recently on the characteristics of a sustainable program (in the NGO/ social enterprise sense), I put together the above illustration of the cycle that I believe sets apart those who success vs. thos who fail.

Interestingly enough, when showing a friend my presentation we discussed that it was an illustration that really anyone in China could follow.

… let me explain.

As you can see in the above picture, there are clearly four different stages of the cycle: Awareness, Engagement, Capacity, and scale.  Now, the top two (Awareness and Engagement) are dynamics that will be a mixture of internal or external, while capacity and scale are primarily internal.

Internally, the management of a firm first needs to build their case for China (awareness) and to get approval, they will need to effectively engage the stakeholders of the firm in such a way that they buy into the plan.  Once in China, then it building awareness of one’s firm, and its products becomes the first step.  PErhaps it is through a distributor arrangement, or through the first rep office, but the goal is to build an awareness of the product/ service that is being built.

During the engagement phase, this is when the sale is actually made, and in my eepxerience it will take roughly 6 months of work before the engagement process will begin. Inquiries trickle in.  Questions are asked.  Proposals are submitted.. and after a few more months (perhaps 6), engagement will occur.  The cusotmers begin to see not only the value of the products or service, but how it fits into their needs (keep in mind that not everyone needs to buy a product right then and there.. sometimes it needs to stew).

Where things tend to get tricky in China is in the next phase, capacity.  In the early phases, expats can drive much of the growth and BD necessary to develop the first pieces of business, but over time this is unsustainable.  At some point, a firm needs to develop local sales lines, manufacturing capacity, and the local talent necessary to drive growth out of the first project, city, or client relationship.  In the recent years, where this step became so difficult is simply that the lack of qualified talent left many firms feeling hollow.  They wanted to build, but were bottle necked on an organizational level.  The firms that were lucky were able to hold onto staff after their training, but for many it was a difficult path as high turnover rates would throw a wrench in many plans.

In the case of one industry, the problem was so acute that competitors were signing contracts between each other not to poach.

this then leads to scale, and how many firms struggle to move forward without capacity.  Perhaps it is through a joint venture relationship, or holding onto agecy arrangements for too long, but the problem for firms who scale without capacity is that they largely will end up failing.  The push for a “China” presence wil prove to alluring, and without the talent to effectively manage new offices, factories, and relationships, they will thin themselves out.  The worst scenario being when a firm lands a contact that is simply too big for them.. . in manufacturing and services, that leads to outsourcing.  Which leads to quality issues.

Anyway, a quick illustration to ponder.  Clearly every industry will have their own cycle, and the variables will change, but for those firms who are able to effectively manage these four elements., life will certainly easier for them.

Both comments and pings are currently closed.