One of the interesting phenomenon over the last 18 months, as the Cleantech market reached its bubble, was how important it was to have a “China play”.

There was a lot of coverage on the issues, a lot of announcements by corporations/ funds looking to capture the market, but there has yet to any real penetration of the market.  That while many media reports tout the fact that there is a Dongtan ecotown project, and debate its future, few have understood that in the meantime 10,000s of buildings have been built using the same old standards.. and that even if all 30 ecotowns were successful,the face is that very little of these ecotowns will penetrate the market in a way that will influence the way the next 5 million buildings are built.

It is a constant question on my mind, and the minds of some friends that I have met with recently, and do I wanted to devoted a little time to this issue of how can firms really crack the China market.

The Problem: Hitting the Brick Wall

How to bring a product to market that will not just succeed in the traditional sense of bringing in a profit for that company in particular, but will penetrate the wider market and influence the wider market.

Within the context of cleantech, and more widely sustainability, China’s problems at times can be very unique once you get down past the headlines of global warming, water, and energy. Everyone has those problems, but for China the root structure that defines the fruit of the problems are often quite different.

At the same time, the sheer size of China’s market plays a very important factor. Issues themselves require scalable solutions, while solution providers can often find a very sizable “niche” market here that makes financial sense in the short term, but may require a completely different model once the market grows from niche into a mass market.

Which leads me to the first China trap, the trap that snares many foreign firms, more specifically foreign managers. 15 years ago, when China’s new economy was just forming, firms were really left with 2 options: manufacture for export or import for sale. However, as China’s market has grown and foreign firms flood the market, a third market has developed whereby foreign firms can sell to foreign firms. It is perhaps the most lucrative market, in the short term, but long term it is more difficult to develop a product/ service that will sell into the local market. Firms fail to effectively penetrate the local market, their messages are lost, and real “China-wide” change does not occur. It remains a solution that does not scale.

A situation that is less than ideal when speaking of sustainability and improving environmental conditions.

Step One: Develop a Message

When “entering the China market”, if there is one step that is missed more than any others it is that the firm (manager) fails to take the time to understand the needs of the China market and develop a suitable message.

It is the critical first step that will determine the level of penetration/ impact an organization will achieve, and it is during this time (developing a message) that a firm’s China lens will be crafted.

With the overarching goal to develop a message that is locally actionable, a localized message should not be one pushed down from a position of superiority, but developed with the masses in mind and brought to the top.

Step Two: Developing a Platform

Once a message is developed, the next step firms need to begin working on is building a platform. Perhaps an area viewed as expensive for some, the investment in building a platform to support growth is necessary to do none the less. It is a process that can be subsidized through sales/ service to foreign firms (price), who will pay for the platform that then reaches the local market (volume)

Starting small with a single industry and in a single city for many SME firms will be best (large firms tend to go for the 3 gateways – Beijing, Shanghai, and Guangzhou) way to develop a network of gatekeepers who will become the future network.

For many firms in China, learning where the 80/20s is critical as it will help to focus efforts in a manner that builds the most stable foundation from which growth can take place – Identifying and approaching large customers inhouse while managing extended networks through agents/ distributors is perhaps the most common model.

Creating local content that will educate the market on a wider basis, and working with clients to provide quality technical support, will over the long term pay dividends as these are areas that many local firms fail to develop themselves or are able to effectively execute.

Step Three: Develop a Team
Without a strong team developing an effective message or platform will be impossible. They are all inextricably linked, and as much as the message will define the platform, the local team will define the message that in turn defines the platform.

When bringing people together who can develop the long term capacity of the organization in China, it is important to remember a golden rule:

Foreign talent is temporary, its limited, and it is important to localize as quickly as possible.

As a foreigner this is a message that is hard to embrace and celebrate, but as a manager the simply fact is that foreigners are unable to penetrate the market like a local, that they are going to leave a firm before a local, and that they are more expensive to keep.

Certainly, local talent is difficult in many areas to assess, manage, and retain as well, local talent brings a local base of knowledge, experience, and contacts that few foreigners typically cannot

For firms entering the market, and kicking off their talent acquisition, it is important to remain selective and take the necessary time as many fail to effectively understand and assess the drivers for long term development.

Step 4: Develop Scale
In china, to be successful firms need to scale, and this is no different for firms who are trying to address a social issue. So, once the message, foundation, and team are in place, it is time to grow out. To test whether or not the product – service – message will be accepted outside a niche population, and whether or not it will penetrate.. or just skip off the surface.

The reason for scaling is simple. To drive sustainable products, technologies, services, and ideas to as many people as possible is a goal that must not be let go of when scaling

Whether or not the application will roll out past the traditionally western friendly/ aware markets, past the English capable populations, and into areas whose business cultures have not been exposed to “Western thought”, will be the true test of a offering over the long term.

It is a process that will ideally occur organically as that ensures the greatest amount of internal stability, but can occur through partnerships with agencies, government groups, or academic institutions…. and it is a process that must be supported by internal talent, successful relationships, and a strong program base

Last Step: Building a Legacy
Beyond creating some awareness, and a limited market impact, for firms operating with an underlying social directive, building a legacy that grows beyond the income statement is important.

Sure, building a single ecotown is an achievement, and 30 is 30 times better, but if the lessons of those 30 ecotowns is lost when building the next 5 million buildings, then what was really the impact?

the developer makes money, the architect wins a prizes, and the media has a great story, but in the end all those things will matter little.

Firms must not simply look at bringing products that will sell well, but need to really understand that the products that address real needs on an appropriate scale will be the ones that have the most long term potential.

Wrapup:
When entering the China market, or developing a product for the China market, the need to think big and build appropriately is critical to the long term success of any product or service. For firms whose mandate is to address a social issue through their product, this is even more important, and hopefully through the above i have sparked a few ideas for those considering their “China Play”.