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New to doing business in China? What to Expect…

The China Market will probably eat you alive.

China certainly welcomes your money, your knowledge, your experience, your technology, pretty much anything you have that they don’t.
BUT!!!… Don’t think that it is you who are entirely welcomed.

You are seen as a tool.

And like a tool, you will be used when needed and then cast aside.
DEAL WITH IT.

You are talking about the wild, wild West in the EAST.
You are in their house, trying to make money off of them.
You think they don’t know that?
Mainland Chinese are extremely pragmatic.
They wants some of what you gots and are willing to do just about anything to get there.

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WEEW’s: Top 10 China Business Mistakes made by Westerners

Jeez, too bad this isn’t a Top 25 or a Top 50, which would make things easier.

Here’s my attempt, in NO PARTICULAR order and all being important.

1.Any variation of ‘doing things like you did back home’

  • Using success back home as proof-of-concept
  • Failing to adapt to the local market
  • Using the same internal procedures and assuming they will seamlessly they will work the same

2.Overestimating the mystic of Face and Guanxi

  • The best way I can explain it to keep you on your toes, is Face is about appearance over substance. (i.e. Acting like you respect the other side even when you may not or Political correctness2)
  • Guanxi is merely connections2. Nothing mystical there.

3.Misunderstanding how (much) Face and Guanxi affects your business

  • The #1 motivation in China (and therefore the Chinese) is to NOT lose face. Followed closely behind by #2 motivation is how to gain face and then maybe #3, being not making someone else lose face.
  • If the core of business is about trust and there is a ingrained distrust of institutions in China, Guanxi uses connections with individuals as ‘insurance policy’ to make things happen.

4.Seeing China as 1 market

  • The country IS bigger than all of Europe.
  • There are local peculiarities (ie. local power struggles) that need to be understood and which for example makes using a nation-wide distribution system (sales or logistics) difficult and unlikely.

5.Managing by remote control/ not being on the ground, hands on, in the trenches

  • I hope simply reading over the other 9 will be enough to convince you.

6.Miscommunication

  • High Context vs Low Context thinking.
  • Cultural bias – They were taught differently, they think differently.
  • You think you are being clear – they are ‘interpreting’ your meaning
  • You are thinking ‘direct/straight line logic’, they aren’t.
  • But they said they understood….

7.Thinking a contract is binding

  • Think of the signing of the contract as your wedding day. In so many respects it is just the beginning of your relationship. All relationships require hard work to maintain.
  • Beware the ‘getting you on the boat’ tactic (aka Stratagem #28). Once on board and the boat leaves the dock, you can’t leave so easily and that is when the renegotiations begin.

8.Chasing Rainbows or Death by 1000 Cuts.

  • Focusing on process/method over results
  • Going for perfection instead of what works

This is a particularly tough one for Westerners to accept and tends to be an emotional issue because it is seen as a “right or wrong” issue.  Beware… this mistake has you driving yourself off the cliff while thinking you are doing the right thing.

9.Confusing language skills with management or business skills

  • Yes I know, but it makes it so much easier for YOU to talk with them. Sigh…(focus on measurable results)

10.Assuming Price and Quality are connected

  • Face is what ‘it’ is all about.
  • People will pay out the nose for something that gives them face and put very little faith in your idea of quality.
  • So if your product or service is not related to face, most Chinese go for the cheapest option

Comments?

Which ones did I miss that you think should be on the Top 10?

Also be sure to check out China Solved’s 10 Commandments and

The China Law Blog’s version of The Top 10 Reasons for China Business Failure.

 

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The 36 Stratagems

Anyone thinking about doing business in China needs to at least know about the 36 Stratagems.

Here’s my take on this classic.

BACKGROUND on the 36 STRATAGEMS

  • First appeared in the official history of Southern Qi about 1,500 years ago.
  • No one knows who wrote them or even if it was one or many authors.
  • The 36 Stratagems emphasizes the use of deception, subterfuge or hidden tactics to achieve one’s objectives. Hence the title the Secret Art of War.
  • They are grouped into six sets; the first three are designed for use when one holds the advantage, and the second three for when one is at a disadvantage.
  • The term “stratagem”, should not be confused with the term ‘strategy’; a stratagem is a clever, sometimes unconventional solution to a problem, can also be described a tactics. Think of it like this, strategies are big picture and they don’t change whereas tactics are specifics and flexible. Tactics are the set of actions taken to fulfill a strategy.
  • Good to use in combination with Sun Tzu’s Art of War which focuses on strategies.

Strategy without tactics is the slowest route to victory.

Tactics without strategy is the noise before defeat.

– Sun Tzu (Chinese General, circa 500 BC)

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Secret Art of War: The 36 Stratagems

by: Unknown

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Stratagems – When in a Superior Position

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1.瞒天过海(man2 tian1 guo4 hai3) – Deceive the sky to cross the ocean

Moving about in the shadows or hiding behind screens will only attract suspicious attention. To lower an enemy’s guard, act in the open and hide your true intentions under the guise of common every day activities.

Is this not the action of the con-man? Actions and behavior done in the open, that are done naturally and convincingly, lulls the target into dismissing any negativity.

 

2.围魏救赵 (wei2 wei4 jiu4 zhao4) – Besiege Wei to rescue Zhào

Do not directly attack a strong opponent, first attack something he holds dear and then strike when they are distracted.
The origin of this proverb is from the Warring States Period.

The state of Wèi attacked the state of Zhao.

Zhào turned to Qí for help, but the Qí determined it would be unwise to meet the army of Wèi head on, so instead attacked the Wei’s capital city. The Wei army retreated in haste to defend, then while en route was ambushed and defeated.

 

3.借刀杀人(jie4 dao1 sha1 ren2) – Kill with a borrowed knife.

Use others or get help from others to accomplish your goals; either because you need the assistance, because it conserves your own resources or because you want to keep your nose clean.

Trick another competitor into attacking your target, corrupt an official to cause trouble, entice an insider to turn traitor etc…

 

4.以免待劳(yi3 mian3 dai4 lao2) – Relax as your enemy labors.

Encourage your opponent to expend his energy in futile quests while you conserve your strength. Send them on wild goose chases, or by make them come to you from far away while you stand your ground. When he is exhausted and confused, you attack with energy and purpose.

 

5.趁火打劫(chen4 huo3 da3 jie2) – Loot a burning house

Use others’ troubles as opportunities to gain something for yourself.

 

6.声东击西(sheng1 dong1 ji1 xi1) – Feint east, strike west.

Make the opponent to concentrate his defenses on one front and thereby leave another front vulnerable to attack. To do this you must create an expectation in the enemy’s mind through the use of a feint, be it spreading misleading information about your intentions, or make false suggestions.

A.k.a. Attack where it’s least expected.

Similar to and can be used in combination with Number 11. – Sacrifice a plum for a peach

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Stratagems – During Confrontation

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7.无中生有(wu2 zhong1 sheng1 you3) – Create something from nothing.

Either conveying the impression that you have what you do not (not necessarily an out and out lie, it may be a half-truth or an exaggerated truth such as agreements not yet signed, partnerships as yet secured, you get the point). Resulting in appearing more formidable than you are and thus able to acquire promises, resources, permissions, or even partnerships out of thin air.

Or, you use the same feint twice. Having reacted to the first and often the second feint as well, the enemy will be hesitant to react to a third feint. Therefore the third feint is the actual attack catching your enemy with his guard down.

8.暗渡陳倉(an4 du4 chen2 cang1) – Sneak through the passage of Chen Cang

This proverb is a shortened form of “明修棧道,暗渡陳倉” (ming2 xiu1 zhen4 dao4, an4 du4 chen2 cang1), literally translated as “openly repair the mountain pass, but sneak through the passage of Chen Cang”.

Attack with two convergent forces, the first is direct and obvious and the one your opponent prepares for. The second is the indirect and unseen, and which causes him to divide his attention at the last minute leading to confusion and disaster.

Used in the Allied invasion of Normandy using the Pas de Calais deception)

This comes from the Warring States Period of Chinese history when rebellions broke out following the death of Emperor Qin Shi Huang.

The rebel forces were lead mainly by Xiang Yu and while Xiang Yu was preoccupied with the Qin army elsewhere, his rival, Liu Bang was able to capture Guangzhou which should have been awarded to Liu Bang. Xiang Yu however had the far stronger army and revoked his promise, sending Liu Bang to Hangzhou instead.

As a ruse, Liu Bang destroyed the mountain pass connecting Guanzhong and Hanzhong to assure Xiang Yu that he would not return to contend his rule thereby gaining time to raise and train a larger army in peace. Once he was fully prepared, Liu Bang sent men to openly repair the mountain pass he had destroyed earlier, while secretly moving his troops towards Guangzhou through the small town of Chen Cang instead.

When Xiang Yu received news of Liu Bang repairing the mountain pass, he dismissed the threat since he knew the repairs would take years to complete. This allowed Liu Bang to retake Guangzhou by surprise, and eventually led to his victory over Xiang Yu and the birth of the Han Dynasty.

9.隔岸观火(ge4 an4 guan1 huo3) – Watch the fires burning from across the river.

Wait until all the other players have become exhausted fighting amongst themselves and then go in with full strength and pick up the pieces.

Used in combination with #5 – Loot a burning house
10.笑里藏刀(xiao4 li3 cang2 dao1) – Hide a knife in a smile.

This one is a real bastard.

Charm and ingratiate yourself to your target and then once you have gained their confidence and trust, you move against him in secret.

11.李代桃僵(li3 dai4 tao2 jiang1) – Sacrifice a plum for a peach.

There are a number of ways to interpret this one. Either giving up something of little value for something of greater value, sacrificing short-term objectives in order to gain the long-term goal or, it’s the scapegoat strategy whereby someone else suffers the consequences so that the rest do not.

This works well in combination with #29.- Put flowers on the tree

12.顺手牵羊(shun4 shou3 qian1 yang2) – Stealing a goat along the way

This is a simple reminder that while carrying out your plans to be flexible enough to always take advantage of any opportunity that presents itself and gain any profit along the way

 

This comes from the story of a destitute traveler who, while walking on a road came upon a flock of sheep. Making his way through them, he behaved so calmly and naturally, when he emerged from their midst he had taken a sheep with him. And as he behaved as if he had been leading his own sheep to market all along, the shepherd never noticed the theft.

Stratagems – for Attacking

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13.打草惊蛇(da2 cao3 jing1 she2) – Beat the grass to startle the snakes.

When you cannot detect your opponent’s plans, create some sort of stir to see how they will react. Their behavior will reveal their strategy.

Also a Zen practice used primarily to test people and find out what they are like.

14.借尸还魂(jie4 shi1 huan2 hun2) – Raise a corpse from the dead.

Of all the Stratagems, this one seems to be the most creative, non-deceptive and quite practical.

 

It can mean don’t use what everyone else is using, but use what others aren’t using. Or can mean reviving something that has dropped out of use through neglect, or finding uses for things that had hitherto been ignored or considered useless.

15.调虎离山(diao4 hu3 li2 shan1) – Lure the tiger from its mountain.

Most people like having the home court advantage. Take that away, they become uncomfortable and therefore vulnerable.

16.欲擒故从(yu4 qin2 gu1 zong2) – Let go, in order to capture

If your opponent feels they are in a hopeless situation they will often launch a final desperate attack. To prevent this you let your opponent believe he still has options, diluting his will to fight by adding the desire to survive. When given the room to run, he’ll be distracted, lose his focus and then can be taken without further trouble.

17.抛砖引玉(pao1 zhuan1 yin3 yu4) – Toss out a brick to attract a jade

This can be interpreted as using bait to trap your opponent. Bait can be the illusion of an opportunity, wealth, power, and/or sex.

Or

Use something of superficial or apparent value to persuade the other party to produce something of real value.

Similar to #7 – Create something from nothing

18.擒賊擒王 (qin2 zei2 qin2 wang2) – Capture the enemy by capturing their chief.

When confronted with a massive opposition,why waste energy and resources fighting when you can simply focus on turning or persuading the real decision maker.

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Stratagems for Creating Chaos

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19.釜底抽薪(fu3 de5 chou1 xin1) – Remove the firewood under the cooking pot.

When you are in a weaker position and cannot win a head-to-head confrontation, start by undermining your opponent’s foundation; be it their resources, morale or any source of power or strength.

Similar to #25 – – Replace the beams with rotten timbers.

20.混水摸魚(hun2 shui3 mo1 yu2) –Stir up the waters to catch fish.

Create a disruption and use confusion to your advantage as a distracted opponent is always more vulnerable.

21.金蟬脱殼(jin1 chan2 tuo1 qiao4) – The gold cicada molts its shell.

This is another tactic about using false appearances to mislead your opponent  whereby the façade gives you time to slip out the back and regroup. (Similar to #6  – Feint east, strike west and #8 – Sneak through the passage of Chen Cang)

22.關門捉賊(guan1 men2 zhou1 zei1)– Shut the door to catch the thief.

If you have the chance to completely defeat/finish/capture your opponent, then do so. Don’t give your opponent another chance because it just means future conflict.

 

23.遠交近攻(yuan3 jiao1 jin1 gong1) – Make allies at a distance, attack nearby.

It is known that nations that border each other become enemies while nations separated by distance and obstacles make better allies. When you are the strongest in one field, your greatest threat is from the second strongest in your field, not the strongest from another field.
When you are more vulnerable to those close by than you are to those far away, you can defend yourself by keeping those around you off balance, in the meantime cutting of their field of maneuver by securing a broader ring of alliances surrounding them.

24.假道伐虢(jia3 dao4 fa2 guo2) – Borrow a route to conquer the Kingdom of Guo.

Borrow the resources of an ally to attack a common enemy. Once the enemy is defeated, use those resources to turn on the ally that lent you them in the first place.

You secure the temporary use of another party’s facilities in order to move against a mutual enemy. After having used these facilities to prevail over the enemy, you then turn and use them against the party from whom you borrowed them.

Stratagems for Gaining Ground

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25.偷梁換柱(tou1 liang2 huan4 zhu4)– Replace the beams with rotten timbers.

This one could as easily go into the Creating Chaos category as it calls to apply just about any means available to disrupt your opponent operations from cash flow, internal team to disrupting their supply chain.

Ie. Recruit, bribe or hire away their top talent, customers and or main suppliers.

26.指桑罵槐(zhi3 sang1 ma4 huai2)– Point at the mulberry tree while cursing the locust.

Basically, pointing at one to reprimand another. Useful when you need to discipline, control, or warn others whose status or position protects them from direct confrontation; use analogy and innuendo. Without directly naming names, those accused cannot (overtly) retaliate without revealing their involvement.

This one is used very often and probably the reason why people try to interpret what you are saying with another meaning.

27.假痴不癲 (jia3 chi1 bu1 dian1) – Play dumb without talking too much.

Hide behind a false front to create confusion about your true intentions and motivations and wait until your opponent drops their guard. Then you may attack.

28.上屋抽梯(shang4 wu1 chou1 ti1)– Remove the ladder after they have climbed to the roof.

With baits and deceptions (ie. opportunities and advantages) lure your enemy into a point of no return, and then cut off their avenue of escape.

I call this ‘Getting you on the boat’, and is a very common stratagem used in sales and partnerships.

To free yourself, you risk throwing away what you have already put in.

29.樹上開花(shu4 shang4 kai1 hua1) – Put flowers on the tree.

Tying silk blossoms on a dead tree gives the illusion that the tree is healthy. Through the use of pretense, disguise and deception make something of no value appear valuable; of no threat appear dangerous; of no use appear useful.

Dazzle with displays or baffle with bullshit.

30.反客為主(fan3 ke4 wei2 zhu3) – Turn the guest into the host.

Defeat from within by infiltrating under the guise of cooperation, surrender, or friendship. In this way you can discover weaknesses and strengths.

What happens when the minority partner takes control.

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Stratagems when Facing Defeat

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31.美人計(mei3 ren2 ji4) – The beauty trap.

This refers to the using the charms of beautiful women to influence or disrupt your target. This can work on three levels. First, the target becomes so enamored that he neglects his duties and allows his attention to be distracted. Second, other males may lured as well resulting in loss of trust, inflame minor differences, hindering co-operation and destroying morale. Third, others motivated by jealousy and envy, may begin to plot, further exacerbating the situation.

32.空城計(kong1 cheng2 ji4) – The empty fort trap.

When the other side is superior and your situation is dire, drop all pretence of defense or strength and act casually. Unless your opponent has an accurate description of your situation your unusual behavior may arouse suspicions, they may be dissuaded from attacking and lead to defeat themselves by one of three reactions: they may become conceited and complacent, leading to their downfall; they may become arrogant and aggressive, leading to their destruction; or they may assume you are setting up an ambush, leading them to flee of their own accord.

33.反間計(fan3 jian1 ji4) – The double agent trap

Spread false information. Undermine your enemy’s ability to fight by secretly causing discord between him and his friends, allies, advisors, family, commanders, soldiers, and population. While he is preoccupied settling internal disputes his ability to attack or defend, is compromised.
It’s called the double agent trap because you let your opponent’s own spy sow discord in their camp.

34.苦肉計(ku3 rou4 ji4) – The self inflicted injury trap

Pretending to be injured has two possible applications. In the first, the enemy is lulled into relaxing his guard since he no longer considers you to be an immediate threat. The second is a way of ingratiating yourself to your enemy by pretending the injury was caused by a mutual enemy.

This is a technique particularly for undercover agents.

35.連環計(lian2 huan2 ji4) – The Chain trap.

In important matters one should apply several stratagems simultaneously. Keep different plans operating in an overall scheme so if any one fails, you would still have several others to fall back on.
When facing a more powerful enemy, you don’t oppose by force, and don’t concentrate all your resources on only one avenue of strategy; you keep different plans operating simultaneously in an overall scheme.

 

36.走為上策(zou3 wei2 shang4 ce4) – If all else fails, retreat.

If it becomes obvious that your current course of action will lead to defeat, then retreat and regroup. When your side is losing, there are only three choices remaining: surrender, compromise, or escape. Surrender is complete defeat, compromise is half defeat, but escape is not defeat. As long as you are not defeated, you still have a chance.

This is the most famous one of the 36th strategy. This is immortalized in the form of a Chinese idiom: “Of the Thirty-Six Strategies, fleeing is best.” (三十六計,走為上策)

For more information or historical uses of the 36 Stratagems, go to Wikipedia.

That is where I initially took these and only edited the text where I thought I could add value.

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The Most Made China Mistakes. Not Top 10, 5 or 3, but TWO!

Being an entrepreneur, I just love how just about all the entrepreneurs I come in contact with, all seem to have some form of ADD(Attention Deficient Disorder) and as soon as my book gets mentioned, invariably the next question is ”So. What are the most made mistakes?”

They don’t want the top 10; that apparently is too many. No, they just want me to give them the main main main ones.

Ok. Here you go.

Mistake #1 – Rookie Mistakes

Everyone does them from time to time.

We get distracted or have too much going one, whatever…

@%it happens.

I’m talking about doing something that we know from experience, is a mistake.

And as sure as night follows day AS SOON AS we make the mistake, maybe even before the result is there, it dawns on us, our eyes roll and we brace ourselves for the full impact of what we know is coming.

It may be as simple as forgetting to wipe down the public toilet, or as serious as not doing your independent reference checks for a new hire or partner. Whatever the situation… it’s not good. When you do it to yourself, you grit your teeth, face the consequences and do whatever you have to clean up the mess you just made.

You probably beat yourself up a bit mentally, but God help the poor sap on your team who makes such a mistake.

Experience tells us that every industry, every market, every product, every whatever… has their own unique set of lessons or truths that are obvious in hind sight but seem to be mistakes made over and over by those just getting started. Well, China is no different.

Ok. If that was not concrete enough for you…

Mistake #2 – I know what I know and that’s what I know

Stay with me a second…

I’m pretty sure we all have patches of memories from when we were little. Flashes of scenes that happened long ago, that for one reason or another have always remained fresh and clear; scenes that seem to re-play themselves like commercials of a previous decade’s products.

Well, I have this one memory of when I was a kid growing up in Texas. I was on my own, sitting in the backyard on the patio furniture and in the middle of the table was one of those wide, shallow, flat-bottom pueblo colored plate/bowls. Well, crawling on the table was a single, pretty-big, black ant. I guess he was off looking for something because he moved in a purposeful fashion. And as it is my memory let’s say he was on a mission.

Well, after a quick survey of the table, he finds the plate/bowl, climbs up and begins walking along the rim. It was a pretty wide bowl so I imagine to his little legs he felt like he was making good time and traveling in the normal straight line. In no time he had circumvented the plate/bowl and started on round 2.

I was transfixed, watching this purposeful little guy, who was doing what, from his perspective, was the right thing; he was moving determinedly forward on the path in front of him. Around once… Around twice… Around thrice!

He just kept going.

He didn’t stop to see if the surroundings looked familiar or waiver and venture off the path. It’s not like he could stop to ask directions, there were no Guide Ant along the way. And besides as a guy ant, asking for directions didn’t seem to be in his hardwiring.

No, he kept going on the path, his path. He stuck to doing exactly what he knew and what he thought was right.

Somewhere in the middle of Round 5, I had visions of this poor fella dying of starvation on the rim of that pueblo plate/bowl. So I took a deep breath and blew him off rim. It took him about a half second to survey his new surroundings and then he was off searching for whatever he was searching for.

That memory has always remained fresh in my mind and likes to replay itself.

Last night was Friday night and I went to a bar with some buddies. Now, my daughter is almost 2 1/2 and so I really cannot remember the last time I went to a bar on a Friday night with some buddies. Don’t get me wrong, I know I have been to bars with buddies before, I simply cannot remember they last time.

Anyhow, I saw another buddy there whom I hadn’t seen in a while and we got to talking about what he was up to. Well, he’s doing business development for a large, successful American brand that is new to the China market. He’s been in China a while and his job is to develop China.

The company is very successful in the US and quite large, yet is new to China. They know what they know and they see the path ahead. From their perspective, the path is clear.

In no time we had the same (tired) conversation about quality, or rather the US side talking quality, quality, quality and my buddy and I doing the same, ‘Oh jeez, I know where this is going’, slow head shake.

While the West loves to talk quality, the China market seems to care very little about quality; at least compared to how much they do care about image.

In other words, it all comes down to face.

We then had a brief conversation about how the US has a very famous brand and how they cannot believe the few customers they have had so far, want to get rid of their logo. Which takes us back to the idea that, your ‘world-famous-back-home brand’, means zilch here.

My buddy knows he has a 2 front war* on his hands and will calmly face the battles ahead; I just hope he can blow them off course before they starve along the path.

* Struggling to gain ground in the China market and struggling with corporate back in the States.

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Aimee Barnes Interview

News/Entrepreneurship:
Aimee Barnes conducts an exclusive interview with entrepreneur, Sam Goodman on how to launch a successful business in China for expatriates

by Aimee Barnes

In today’s uncertain economic climate, China has rapidly become a land of opportunity as more Westerners leave behind their home countries to chase after the potential for success in the East. China is now a formidable world leader in technology and manufacturing, luring both talent and innovation from all points on the globe. I linked up with Sam Goodman, an entrepreneur in China and author of “Where East Eats West: The Street Smarts Guide to Business in China” to learn more about starting a business in China as an expatriate.

Aimee Barnes: You grew up in Toronto but have been living in China since 1995. What originally led you to make the move and what have you been up to since then?

Sam Goodman: I actually went to Hong Kong in 1993. I had a buddy who was living there and I knew that I wanted to be in Asia. I grew up watching black belt theatre, enjoyed reading Oriental philosophy in university and, to be quite honest, I’ve always found Asian women gorgeous, so I decided to go to mainland China while I was living in Hong Kong. I had been studying Chinese in BCLU in Beijing for about 7 months when myself and a few friends were whining about not having a place to hang out and study (like a cafe from back home) so I decided to make one myself.

That was the beginning of my entrepreneurial career. I set up a place called “Beijing Sammies” and over seven years, expanded the business into a chain with five locations, a public catering business, about 100 employees and $1M in sales.

After about 5 years, I knew that I didn’t want to be a food and beverage person for the rest of my life, so I positioned myself to get out of Sammies and to sell it. Unfortunately, SARS did quite a number on the business. When I exited, the business was not as strong as it had been. After Sammies, I did a quick stint in the field of due diligence with a Canadian investment firm and then I was asked by Korn/Ferry, the world’s largest executive recruiting firm, if I would be interested in being a client partner for them.

At the time, I’d never done any corporate work in my life, so I decided to try it out. I stuck with it for two years and it was interesting, but not for me. Following that experience, I was recruited by Westinghouse Nuclear to help them on their bid for a $5.4B nuclear power plant. They basically came to me and said, “China bought our nuclear. We know nuclear but we don’t know China.” We went through negotiations of bidding and then, once the bidding was completed, I worked on subcontracts and helped them build up their China team.

Once I was done with that, I knew it was time to move on, and that’s when I decided to write the book, “Where East Eats West: The Street Smarts Guide to Business in China.” I named it this because Westerners come to China and get eaten alive by making the same mistakes over and over again! While I was writing the book, I was also working on a start-up, a Web 2.0 reputation-driven platform called Me-2-B. I spent quite some time putting that together. We started rolling that out when the economic crisis hit and unfortunately, the project was put on hold.

I’ve since been introduced to a clean energy focused NGO called JUCCCE (Joint US-China Cooperation on Clean Energy), and they’ve asked me to head up one of their projects, which is pretty much everything I did with Me-2-B, but with a focus on solving the world’s clean energy problems through collaboration and an interest in decreasing the duplication of efforts that have been happening worldwide.

AB: China seems to be the number one destination for budding entrepreneurs who hope to make it big in business. Based on your own successes and failures, what advice would you give them?

SG: That’s easy- first you should read the book and do your homework! There are a number of China rookie mistakes that foreigners make when they come to do business in China and really, there’s no excuse to not learn from other people’s mistakes. It saves a lot of time and money. The purpose of the book is to reduce the understanding gap that Westerners have when doing business in China. Do your homework.

AB: In your book, you mention three options for people who want to start a business in China but have no China business experience: taking a corporate job in China that closely aligns to what you want to do, just taking the plunge in the “School of Hard Knocks,” or finding a mentor. Which path did you take and what seems to be the overall best route?

SG: I jumped in head first. At the time, I was 25 years old; I was overflowing with confidence and brimming with ignorance. My advice is, do your homework and find a mentor. There’s many people who have already done it- find out directly from them what they did right and what they did wrong. Learn from people who have done it before. I’m not really the corporate type and I can’t say that I’ve seen many corporate types take the plunge outside of the corporate world. The skills that you need as an entrepreneur are quite a bit more varied than what you will find in a corporate setting. It’s not the nature of corporate design to give you all the tools you will need as an entrepreneur.

AB: Would you say that speaking Mandarin is a prerequisite before going over to China to do business?

SG: It would certainly help- no doubt. Miscommunication is one of the key challenges that foreigners have when coming over to China. Taking the time to learn the language is an investment that will absolutely help you. Is it mandatory? No. I know a number of relatively successful foreign entrepreneurs in China who have not mastered the language.

AB: You state that “everything that’s not about face in China is about guanxi.” Could you elaborate? How best can foreign professionals gain the face and guanxi necessary to forge a successful business relationship with a potential Chinese partner?

SG: That’s a really good question and one I actually get a lot. Guanxi is a foreign concept; what does it mean? For Westerners, they should think about guanxi as “connections.” The best way to get connections is through networking or buying it. Yes, you can buy your guanxi. It is not so different from business in Washington paying people to lobby for them on Capitol Hill.

AB: Negotiations with Chinese companies take a lot of time, patience and cultural understanding. In your opinion, what specific factors must be considered and how can one successfully close a deal?

SG: There’s a lot in terms of homework. The quick and dirty is that common sense still applies. I am truly amazed at how often and how easily foreign companies come into China and are willing to go against what their gut says just because it’s China- as if China is some Bizzaro World. Stick to common sense and go with your gut. Do not overreact or get emotional when things go wrong because invariably, some things will go wrong.

Basically, you have to keep your cool and when you come to a point where things seem to be too much, take a step back and move on. It is acceptable to say “I’m done for the day.” Keep cool, maintain your focus and don’t get too emotional. I would also add that, if things are going really smoothly, be concerned that you’re being set up for what I call “getting on the boat.” Once you’re on the boat and have left the harbor, things can really start to change.

AB: Back to finding a mentor…Great entrepreneurs have at least a few teachers to show them the ropes. Who were some of your mentors in the China game? What was the most valuable piece of advice you received?

I have to say that I had quite a few mentors when I was first starting out. I was in a really good position at Beijing Sammies because there were a number of Fortune 500 companies that ordered my sandwiches. I would introduce myself to these CEOs and CFOs and just start with “Hi, this is Sam from Beijing Sammies.” They would usually reply with “I love your turkey sandwiches” or “your smoothies are great” or something like that.

They recognized my brand, and I would offer to buy them breakfast or lunch in exchange for having the opportunity to pick their brains. That enabled me to really tap into a wealth of experience on doing business in China. I realized that the problems I was going through in HR, logistics, consistency and operations were the same problems that Mattel and Motorola went through. The best advice that I received and that I still use- and I’ll paraphrase- was that the next time something goes wrong or somebody screws something up, you just have to be thankful. Because, if everything ran according to plan, then there would be no need or opportunities for foreigners to come to China to do business.

AB: For the past two decades, Western companies have been anxious to get a “piece of the China pie” and often rely on China consultants to help them along the way. It appears that this trend seems to be changing; more Chinese companies are looking to go West. How will this shift impact the China consulting industry?

SG: Let me quickly say something about China consultants: beware of anyone who calls themselves a “China expert.” If you think about it, have you ever heard anyone refer to themselves as an “America expert?”

It’s too broad a title. That said, after my fourteen years of experience and making a lot of mistakes, I certainly have some perspective. For companies going East to West, there are a number of China consultants that exist here now. Just as there is a gap in the West on how to do business in China, there is equally a gap that the Chinese have in doing business in the West. There will be more opportunity for those consultants who are willing to stand in the middle and assist both sides.

AB: You’ll be speaking at Harvard Club and Columbia University in September. If you had to classify the demographic most interested in US-China business today, how would you describe it?

SG: I would have to say that it’s not so much a demographic. I’ve seen everyone from fresh college graduates to retirees who are looking to come over to do business in China. It is more of a psychographic. These people are all very excited about the opportunities and challenges that living in a foreign country brings. You do see corporate types that are sent here who are not enthusiastic. The biggest factor I see to describe a person looking to do business in China is a combination of perseverance and optimism.

AB: What are some of the less obvious misconceptions that Western businesses and entrepreneurs have when they first arrive in China?

People get hung up on the extremes. Understanding subtle differences is extremely important. One example is getting bumped on the street in China. There are a lot of people here! But, if you get bumped on the street in China, you should not expect a Chinese person to say “excuse me.”

Westerners really get upset about this. If someone bumps into you on the street in China without saying excuse me, you have to realize that personal space is not even an issue here. Having an understanding that things are not perceived in the same way that you might perceive them is important. The Chinese do think differently and they perceive things very differently from a Westerner. If you can successfully wrap your head around that concept, you’ll have a better chance of success.

AB: You are currently raising a family in China. Would you consider the country to be your permanent home?

SG: My daughter is amazing! The one thing that I am most concerned about in raising a child in China is the pollution- it is certainly an issue. As for whether or not I think China will be my permanent home, well…permanent is such a strong word. I am here for the foreseeable future. I would very much like to have my child grow up to enjoy some of the same things that I enjoyed. That being said, living in China is becoming easier and easier to do. I don’t see it as a hardship at all.

AB: What’s next for you?

SG: This book should be pretty fun- I will be doing some tours for that. Of course, there is my connection with JUCCCE now- it’s a wonderful place to be in. It’s that sweet spot where morality meets capitalism, so if I can do some good, that works for me.

For Further Information
Want to learn more about Sam Goodman and entrepreneurship in China? Check out his book, Where East Eats West: The Street Smarts Guide to Business in China.

Also found on www.mba4success.com and www.WCWinsight.com

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Why This is the #1 Reason Foreign Businesses Fail in China

Oh, there are a number of reasons to fail in China, but this one is hands-down the most frequently made mistake. The kicker is that most people don’t even realize this is the source of the mistake, until after the damage is done.

You’re looking at the problem… wrong.

Most people think of a business as the product or service they provide, i.e., the end result.

Business = Product or Service

That’s certainly not wrong, but most business owners actually see their business as the systems or processes that produce the end product or service.

(Of course if you are a one-person operation, i.e. a freelancer, like a designer, then you are the business and all your ‘systems’ probably stay in your head.
I am talking about bigger businesses with a staff of around 10+ people where the systems and processes are codified.)

With the right systems in place, it’s pretty straightforward to train new people and therefore easier to scale your business and deal with inevitable turn-over. From here we get the saying People run the Systems and Systems run the Business.

If this is basic stuff for you, hold on. I’m almost there.

Of course, let’s not forget the final piece of the puzzle, the end user, the person buying – your clients or customers.

So we now have:

Plug in the PEOPLE
Into the systems or processes of your business that produce the final product or service.
Then sell to other PEOPLE in the same country.

Another way of looking at this is your business is “sandwiched” between people on either end. (I used to make sandwiches for a living so I just love being able to elevate the sandwich into a teaching tool)

For the typical business owner in the States, the people on either side (your staff and customers) are very much like yourself.

And therein lies the rub.

When you come to China, the people who operate your systems and processes are not the same as the people back home.

There are subtle differences and it is those differences that cause a tremendous amount of friction in what you see as a well oiled machine.

Think of the game of Plinko.
http://www.kongregate.com/games/StapleGun/plinko

Your systems were created for straight lines. (Just think how much easier Plinko would be if the chips were straight lines.)

Then you come to China and find these circular chips. From one perspective they are like the people running your business, but they’re not, they are circular chips.
All of a sudden, the chips dropped in the same place give an uncertain result. They simply do not fall in an orderly manner.

If that doesn’t work for you, think if it this way; how about making your favorite traditional sandwich but with a tortilla instead. Given the different foundation material, you would either make a slight modification and turn it into a wrap and have a successful result, a good meal or… you make no changes, stick to doing things the way you have always done them and end up making a mess.

When you come to China, understand the people are different and so the systems and processes that run your business that were made for the people back home, will have to adjust accordingly.

And THAT is why simply transplanting your “business” into China, fails.

Sure, this may also mean that your end product or service requires some tweaking too, but that’s another story…

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Same same, but different.

Two high school football teams decide to play a match.

The visiting team is from London, England and the home team is from Dallas, Texas.

Both teams love “football”.

Everyone is clear.

Everyone is excited.

Everyone can’t wait to get started and play.

On the day of the match the London team arrives on the field on time and is shocked to see the other side wearing what amounts to body armor.

No one thought to check if the rules were the same.

When the visiting team decides to play on, you can bet there are going to be some injuries and from the home team’s perspective, any injuries incurred is really the visiting team’s own fault.

Before you come to China to play the game of business, be sure to check how the ‘rules of the game’ are different.

Or else, you get what you deserve.

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CNN interview

Ok… This is blatant self promotion. (90% at least… read on why the other 10% actually is doing business in China related

A good friend of mine works for CNN (guanxi matters). She read the book, enjoyed it and thought a China SME business perspective would be fresh for CNN .

I did my first interview a week ago, stood outside and froze. Both physically and then when the interview started mentally. I have lectured at a number of universities, done a number of radio interviews, even was on TV once, but this was the first time I had an interview where there was a time delay in responses. Add that to the fact, that you are staring at a camera and there are voices from all over in your head. (I’m not crazy… there was a mic in my ear)

I stumbled in the interview. I froze. I couldn’t even remember how to spell CNN.

While I may be overly harsh on myself, as they said it was good. I was very happy to hear there were technical difficulties and I would have to re-shoot the interview.

So herein lies the rub.

China is rough and tumble at times, and it is THAT which enables you, when you invariably stumble along the way, to pick yourself up, dust yourself off and try it again!

I did it with Sammies, time and time again and you need to see the rough times as being part of the experience.

Sometimes 2nd chances are easy to see, but most of teh time, you have to make them happen.

oh yeah, here is the link to the CNN interview and I’ll put it up on the media page too.

What a way to end the year and start a new one.

Wishing you a safe and Happy New Year!

Sam