Wednesday, April 11, 2012

A Venture Into The Business of Business in the People's Republic of China

View from my Hotel in Shanghai
My Asian adventure continues. This time I'm writing from Shanghai. Like many of my trips to the region, I've learned more in a few days than you could in a lifetime of studying the Chinese IT business scene from afar. At this point that fact that I've build and sold a Chinese joint venture puts me in a rather unique position to describe the business landscape in China like no other. Not just from a purely academic one but from a practical one. One that allowed me to experience the full lifecycle of a Chinese JV. In my case, this lifecycle went from concept, to funding to sale within 16 months and included a cast of characters ranging from senior party members, international funders and business partners. To say business in China is exciting would be putting it mildly.

I've often described business here as an episode of TV show Madmen. Done in smoke filled rooms with significant quantities of liquor flowing freely. A business scene dominated by influence. Who you know and who you can introduce are central. A social network based on degrees of separation in the most human of ways. Your social graph in China is your currency and how you leverage it is key to your success here.

Another observation is that money and access to it is extremely accessible. This is thanks in part to strong government support for international joint ventures (such of my previous JV) makes funding potentially much more attainable. In order to be successful in this market requires that government (or at least it's money) plays a central role in your business venture. It's not a relationship based on control so much as support. Assuming your ok with the rules of engagement, the opportunities are vast. But there are caveats, IP controls are lacking and the Chinese are highly dependent on foreign innovation and technology to offset a lack of home grown options. I believe a big reason for the heavy investment in these types of foreign joint ventures is a kind of indirect flow of knowledge. It's not a blatant copying of IP so much as a loose knowledge transfer. Understand that a international joint venture is essentially a training vehicle. Once you understand this, you can properly address the market and the opportunities it holds. Mainly access to one of the largest fastest growing markets on the planet today. A planet currently dominated by stagnating growth in the established western markets. What's going on in Europe these days? Not much.  Of course with risk comes great reward. In my case the ability to build and ultimately sell a venture in less a year and half. Try that in Canada? Unlikely.

I'll be posting more details of my discoveries in the coming days, in the mean time. Some food for thought.

#DigitalNibbles Podcast Sponsored by Intel

If you would like to be a guest on the show, please get in touch.