Wednesday, December 3, 2014

China Tech Best Practices - Part 2: High Tech Challenges

Like the traditional technology companies featured in this first blog post, high tech firms face significant challenges with their China operations.  This post highlight the key challenges for high tech firms and two best practices that will enable companies to overcome them.

The Challenges: Pressures and Competitors

At the Minnesota - China Business Forum on November 1, 2014, I highlighted two key challenges for high tech companies:    
  • Innovative Competitors - Alibaba and Xiaomi:  Viewing Chinese technology companies as merely Western tech knock-offs of Apple or Google is inaccurate and unhelpful - here are two prime examples:
The Way Forward: Clear Vision and Teachable Teams

The good news is there are two best practices that will enable high tech firm's to overcome these challenges:  
  • 1) Clear Vision - Build and Communicate a China Business Case and Associated Metrics: Successful companies have a well resourced, long-term vision for China operations that clarifies both the value-add for the China market and how this value can be leveraged globally.  This vision must include a clear business case for the China operations and timelines for achieving related metrics.  At the same time, the business case and associated metrics must be co-created by the China leadership and the executives accountable for evaluating the Chinese operations.  Once there is agreement, the business case and metrics must be effectively communicated to the China team.  Such communication must be more than thin executive presentations communicated on an annual basis.  Instead, an on-going, two-way discussion with local managers and individual contributors about their priorities and daily activities that will support the vision is required.   
  • 2) Teachable Teams - The Key to Keeping Pace with Constant Change: For such on-going communication to be effective the teams must remain teachable on China.  The China market is incredibly complex and constantly changing.  Therefore, the business case and metrics contained in the company vision must be clarified through an on-going emphasis on learning what is most relevant to the target customers in the China.  Such continuous learning requires employees to leave behind any biases about how their company successfully operates in other countries.  They must see the unique value they provide to their Chinese customers with fresh eyes.       
Everything is Possible but Nothing is Easy 

The potential of the China market is indeed significant, but success comes to high tech companies who work hard.

In short, the key is working with the China leadership to craft a company vision that is both clearly understood by the local team and is adaptable to the changing needs of Chinese customers.  Such adaptation will come to firm's that can cultivate teachable teams who continuously seek to understand the customer's perspective on the unique value they are providing in China.

Monday, November 10, 2014

China Tech Best Practices - Part 1: Traditional Tech

On November 1, 2014 I had an opportunity to join the inaugural Minnesota China Business Forum, which was co-sponsored by two organizations focused on fostering Minnesota's engagement with China - China American Business Association of Minnesota (CABAM) and U.S. China Business Connections UCBC.  My remarks on the panel that concluded the forum answer the question "What are the key challenges and best practices for foreign technology firms operating in China?"  I answered this question in two parts: traditional technology firms and high tech firms.  In this post I will focus on traditional technology firms and in a future post I will address the best practices of high tech firms.

Traditional Tech: 2 Best Practices for IP Protection - KISS and KICX 

Traditional technology companies are in traditional markets such as manufacturing, but rely heavily on technology to remain competitive.  For these firms a major challenge continues to be protecting their Intellectual Property (IP).  Key reasons this problem persists include: lax enforcement of IP protection laws and a traditional culture that encourages copying.  However, what is most critical isn't what is causing the issue, but proactive ways to address it.

Field research I conducted with executives in China identified two key solutions: keeping it simple and keeping it complex.  

1) Keeping It Simple (KISS):  When firms focus on simplicity they are crystal clear on both the broader picture of why they are in China and the business intelligence for the specific segment of the massive China market they aim to service.  At the same they put simple legal practices in place to protect their company trademarks - in their home market and in China.  It is critical to note, however, that these practices must go through a process of continual refinement as the needs of the Chinese customers and the legal landscape are very dyanmic.

2) Keeping It Complex (KICX): Competitive firms work hard to keep their operating framework complex from the vantage point of their competition, partners and even employees.  This best practice is broken down into 6 pillars

  • Interest Alignment: Understand the interests of your community, government officials, customers, employees and suppliers; actively find ways to put your company in a position to benefit their interests.  
  • Disagregation:  Don't put all your eggs in one basket.  Externally work with a variety of local vendors and partners and proactively seek to understand what they will do with the IP you've share with them.  Fragment knowledge of your IP - internally and externally - so that IP is shared on a need to know basis.       
  • Dynamism:  Seek to out innovate the would-be copy cats through continually improving your products and processes.  The more flexible your company is in adopting technology that benefits end-customers, the more difficult it will be for others to copy.
  • Control Discipline: Clearly segregate the access anyone - internally or externally - has to IP information through varying levels of IT access.  Deliberately build a culture that encourages control of company information and reinforce this culture through rewarding good behavior and quickly addressing questionable actions.
  • Talent Management: Create a company culture marked by challenging work, opportunities for professional develop and recognize employees who share their knowledge in a way that benefits the company.  Actively work with employees, especially high performers, to outline a career path of continuous development and increased opportunities to contribute to the company.
  • Focused Community Activities:  Attract and retain top talent through both a reputation for community involvement and on-going activities that support this reputation.  If a company has both a positive impact on the community and treats employees fairly, staff are less likely to steal company IP. 
More details about this research can be found both in this Forbes article (May 2011) and in this MIT Sloan Management Review piece (Summer 2014).

In the next post in this short series I will focus on the best practices of high tech firms in addressing similar challenges in China.