To China!

No coincidence

Steven’s Chinese adventure clearly was no accident.   This is something he has wanted to do for years.  As he explains; “I’ve always been curious about China.  My mother used to import Chinese herbs with the result that we had occasional visits from Chinese representatives.   In ’82 we went on a first family trip to China—what a different world it was back then.  Another trip followed in ’91 and from ’95 onwards I was doing two trips a year for my work.”  

After his MBA at the Vlerick Leuven Ghent Management School in 2003, Steven was hired by a Flemish consulting company to manage an office in Shanghai.  Thus in 2003, Steven and his girlfriend (today his wife) packed their bags and made the move to Shanghai, China’s biggest city. The job didn’t work out, but life in Shanghai certainly did.  As a result, Steven and his wife decided to take the plunge and set up a local business.

Laser scanning

Most companies need their fixed assets to be well-documented—be it for technical, safety or accounting reasons.   Buildings, industrial sites, machinery; it all needs to be accurately measured, mapped and inventoried.  But when multinational companies invest in the Chinese market they often find that their newly acquired industrial assets are poorly documented.  This is the market opportunity that Steven spotted: measuring and documenting complex industrial sites.  In 2005 he had his first contract and by 2007 he had found the money to invest in advanced laser scanning equipment, the first of its kind in the Chinese market.  

Competitive and cost-driven market

Since then the company—Globe Shanghai Advanced Technical Services—has steadily grown but Steven acknowledges that he had hoped for more rapid growth.  The challenges of doing business in China are not to be underestimated.  For one, the market is highly regulated.  For every sector there are a myriad of regulations of what companies—and especially companies owned by foreigners—can and cannot do.  Steven’s company, for example, cannot measure on the public domain.  As it turns out, that was probably a good thing because it forced Steven to focus on the more complex work of industrial measurement (chemical plants, automotive, ship building, etc).   It is in these areas that Steven managed to compete effectively, relying on his advanced (but expensive) scanning equipment and his engineering expertise (it helps if you understand what it is that you are measuring).  Finding a ‘high tech’ niche like this is essential because in most other areas cost becomes the dominant competitive criterion.  Steven’s company offers a measurement service that is much faster and more accurate than a traditional, largely manual approach.  But in the Chinese market that doesn’t count for much, since the manual approach can be so much cheaper due to the highly competitive nature of China’s labour-intensive industries.  This is why Globe Shanghai is winning contracts in areas where clients have exceptionally high quality expectations—and these tend to be Western industrial companies who are investing in China.

Working with Chinese companies—especially state-owned companies—is far more difficult.  Here the role of relationships is absolutely critical.  Working with a Chinese agent is one way of building those relationships.  Steven has also found that the Chinese tend to have a very pragmatic approach to their business relationships—if there is a solid win-win situation then the relationship certainly can work.  

Many foreign companies enter the Chinese market via a joint-venture with a Chinese partner.   While there often is little alternative, Steven has noted that many such joint-ventures fail.  They often are too large (with too much at stake) leading to conflict between the two parties and hence failure.  Steven also launched his business via a joint-venture with a Chinese partner but ascribes the success of this relationship to the fact that it was small-scale (the Chinese partner helped set up the business administratively and played a key role in setting up the first meetings with Chinese clients), that there was a clear win-win situation (the Chinese partner delivered real value to Global Shanghai, and in turn earned commissions for the work) and that the two trusted each other (they had known each other for several years).

Shanghai lifestyle

Life in Shanghai can be intense—and that is probably an understatement.  Imagine a rapidly growing city of 20 million people that live and work on a territory the size of two Belgian provinces (Belgium’s 10 provinces are the home of 10 million people—and we consider our patch of ground to be densely populated).  This is an economy that has been growing at breakneck speed and has no intention of slowing down—economic crisis notwithstanding.  The city is full of building sites, a new city metro and a high-speed rail link to Beijing are being built in quick tempo, and the excitement for Expo Shanghai in 2010 is reaching fever pitch.   According to Steven you can ‘feel’ the dynamism in Chinese society.  

But while the Shanghai experience has been incredibly enriching, Steven and wife plan to move back to Belgium within the next two to three years.  The couple would prefer to put their three kids through the Belgian school system and, quite frankly, are looking forward to living in a less polluted environment.  

Internationalisation

In the years ahead Steven has plans to internationalise the business further.  At present he is setting up a parallel business in Belgium and there are plans for other business units in Eastern Europe and the Middle East.  The potential synergies obviously are significant:  the added scale and geographic coverage will further develop the company’s competencies, competencies that can get on a plane or talk via phone.  Also, added scale will allow for continued investment in advanced technical equipment—this too can be shared between the various business units.  

The elusive pot of Gold

Steven’s Chinese adventure is exactly that, an adventure.  It is an experience that will deeply enrich his life and career.  It also is the launch platform of his business.  But it is not the pot of gold at the end of the rainbow.  While the opportunities in a rapidly growing economy can obviously be tremendous, the challenges of doing business in China are not to be underestimated.  

But the differences between China and the West must not be exaggerated either.  In essence we are still talking about entrepreneurship, and that is never easy, wherever you are.  Steven’s tale is about starting and growing business.  And his key recommendation for other starting entrepreneurs is universally applicable: be very clear about the value you create for your customers.