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:    

• Market Pressures: The market pressures on high tech firms can be seen in Microsoft's on-going anti-trust investigation and Adobe's decision to close its R&D operations in China.  Though Obama's attendance of the APEC conference in Beijing in early November brought welcome news of a US-China partnership for potential reduction of global tariff on IT products, the China market remains challenging for high tech firms.

• 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:

• Alibaba - World's Largest IPO: Not only has Alibaba, which holds over 80% of China's e-commerce market share, conducted the world's largest IPO of $25 Billion in mid-September, but they have also begun to discuss a potential partnership with Apple to help bring ApplePay into China.  

• Xiaomi - World's #3 Smart Phone Maker:  The company moved into the #3 spot for global mobile phone market share (up to 5.3% in Q3 2014 from 2.1% the year before), and was ranked as the world's 35th most innovative company in Boston Consulting Group's 2014 survey.       

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.