Eric Feng has many years of experience expanding a U.S. business in China – never an easy feat, especially for startup firms. Feng is now CTO of the Internet-based personal magazine service Flipboard. Earlier in his career, he worked in China as an entrepreneur, building a company that was later acquired by Hulu, where he became CTO.
Here are Eric’s top five tips for entrepreneurs who have their sights set on breaking into the Chinese market.
1) “Winning isn’t everything…” – Henry Sanders
The China market is so large that you can be fourth or fifth in terms of market position and still have a healthy, successful business. Even if there already are a few established players in a particular niche, there may still be room for more.
2) “If you want to go far, go together” – African proverb
Partnerships are more critical in China than anywhere else in the world. New entrants should consider leaving their comfort zone and partnering up – especially since doing business in China inevitably means interacting with the government, a task often best handled by local players. And Chinese companies are very open to partnering with U.S. companies and opening up new opportunities for them, since they themselves want to learn how to expand abroad in return and get access to new market opportunities.
3) “If you want to go east, don’t go west” – Ramakrishna
Many American companies develop a U.S. strategy and an international strategy, into which they fold countries ranging from China to Russia to Japan to Brazil. However, this is not an effective way to take advantage of opportunities in China, a unique market that deserves its own stand-alone approach.
China is one of the few markets in which a local presence is nearly a necessity. You need to have feet on the ground to understand the consumer and competitive landscapes as well as the extent of government influence on business.
For small companies, this may be as basic as getting on a plane to China and doing some networking, or trying out a mobile app on the ground in China to evaluate the state of wireless connectivity. Little things like that add up and are critical to understanding the business environment.
4) “When in Rome, do as the Romans do” – Ambrose
One mistake that many companies make when they enter China is to force their own frames of mind, values, and organizational structures onto the Chinese portion of their company. Here are some better approaches:
• Build a China-based engineering team. Many companies think that engineering needs to be centralized, but every year 600,000 engineers graduate from Chinese universities – ten times the number of graduates in the United States. Recruiting this talent is a huge investment opportunity.
• When you do invest in an engineering or product team in China, subtract one level of seniority from any given title. Since the education system is so different and there are fewer opportunities for college students to gain hands-on experience, a newly hired graduate student should probably be considered to have a skill set similar to what we would find in an undergraduate in the United States. Chinese engineers are extremely talented, but they may need a bit more professional mentoring when they first start out.
• It is never too early to recruit from college campuses. In China, the typical intern to full-time worker ratio is 2:1. So if a lab has 200 researchers, it most likely has 400 interns – and these internships often last for a year. As a result, internships offer a highly effective way to tap into engineering talent and develop relationships. Hiring interns is cost-effective as well.
5) “The price of success is hard work” – Vince Lombardi
There are no shortcuts to being successful in China. What will lead to success is rolling up your sleeves, digging in, and putting in the time to invest in the market.
If you do, it is absolutely worth it, because it is an enormous opportunity – for example, there are 600 million mobile users in China, which is twice the entire population of the United States. There is tremendous growth. And the most exciting developments are yet to come.