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Competing in China’s e-commerce market requires a startup mentality

Xin Wang of Brandeis University International Business School and Z. Justin Ren of Boston University School of Management wrote an interesting article about How to Compete in China’s E-Commerce Market for MIT Sloan Management Review. They analyze why companies like eBay, Groupon, and Google have struggled in China.

They offer advice relevant to both entrepreneurs and large companies: understand your customers, make decisions quickly, and pay attention to your competition. As The Startup Owner’s Manual and The Lean Startup point out, the entrepreneur’s mission is to understand their customers’ needs, test hypotheses by gathering customer feedback, and iterate quickly based on their findings. When doing this, you’ll have to discover how to solve your customers’ problems better than your competitors do. And since you are testing and iterating, you’ll have no choice but to create a culture of quick decision making.

As Blank and Dorf point out, “a startup is a faith-based initiative”. It’s important for large companies entering China, or other new markets, to remember they are also “faith-based initiatives” — even though they are market leaders at home, their approach is unproven in the new market. They need to think like a startup.

When entering a new market, make sure you understand the competitive climate and your target customers’ needs. Then, alter your offering to carve out your own piece of the market. Otherwise you may end up another example of large company hubris leading to failure in a new market.

Using extraordinary service as a competitive advantage at Hai Di Lao

Creating a sustainable advantage in any industry in China is difficult, especially when competitors promptly copy anything that works. Hai Di Lao, a hot pot chain, uses extraordinary service to draw large crowds to its many locations and offers lessons for entrepreneurs in China on how to create a sustainable competitive advantage.

Hai Di Lao was founded in 1994 and now has over 50 locations throughout China.[1] Due to their success in China, they are planning to expand into the US and Singapore.[1] They are renowned for their high levels of service and high-quality food, and for customers waiting hours for a table on most nights.

Hot pot around every corner

Hot pot restaurants are as abundant in China as Starbucks are in the US — or as Starbucks are in most other countries for that matter. If you’ve never eaten hot pot (you may know the Japanese version: Shabu Shabu), I can offer a simple explanation: they bring a pot to your table, put it on a burner, and then you order vegetables, thinly-sliced meats, fish, or anything else to cook in the boiling broth. The most common style includes a pot with chicken broth on one side, and chili oil on the other. It’s delicious simplicity, and comes in many forms throughout China.
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Amazon in China — an example of localization


Amazon’s entry into China is a lesson in understanding the local market and catering to its needs. The most obvious difference is Amazon delivering goods themselves, or at least making it seem like they are. Not only do they understand the local market, but they may even be using a lean approach.

I suddenly started seeing z.cn (Amazon’s URL in China) everywhere I looked. At the time, we were still living in Hangzhou — a second-tier city about 100 miles from Shanghai — so the ads on busses throughout the city donning Amazon’s smile stood out. Advertising is pervasive in China and I wouldn’t be surprised if I found babies with logos on their foreheads; but the sheer volume of ads with z.cn and the Amazon smile surprised me.

Amazon seemed to focus on books and a few other key categories when I first noticed them making their z.cn push, though the range seems to have expanded since then. The similarity between their approach in China and the US isn’t what I find instructive, rather it’s the changes they are making for the local market that should interest entrepreneurs and foreign companies.

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An effective project kickoff meeting in 4 steps


Have you ever left a project kickoff meeting not knowing why this team was brought together or what the project is about? Were you the one leading it?

If you’re an entrepreneur, or are leading an important project within your company, you have an opportunity to take individuals and turn them into a well-functioning team during the project kickoff meeting. But, as I’ve discovered the hard way, you sometimes only discover that you didn’t run a successful kickoff meeting much later, when you’re reflecting on a project that failed.

Follow these 4 steps for an effective project kickoff meeting to avoid that fate.
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3 ways to get your team to own the project

If you’re an entrepreneur or are leading a significant project within your organization, it’s vital to develop a sense of ownership among your team members. This is difficult to do on any project, but is especially hard when you have a multinational team with a mix of native languages and cultural backgrounds. In China it’s even more difficult because you are working against a culture that traditionally values blindly following the leader, and where risk-taking can lead to a loss of face.[1]

This sense of ownership has to be built into the team from the start of the project. But I can tell you from personal experience that it’s not enough to just tell the team you want them to “own” the project. You need to cultivate this ownership at every step of the project and reward team members whenever they take ownership. Here are three things you can do to help build this sense of ownership on any project.
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Old Chinese people in the park

Every morning at around 8:00am the small park we live above in Shanghai springs to life with music, dancing, Tai chi, and singing. If this post was about night-time in a park in the US, you would probably think it was a place where high school kids hang out and have parties. Not so in China. Our park is for elderly Shanghai residents, and all morning long they fill the park as they get out of their homes, socialize, and keep the rust from forming on their joints.

At about 11:00am the park starts quieting down as they all go home to have lunch, but then at around 12:30pm the senior center located at the park’s entrance springs to life with groups that sing, dance, and play instruments, usually as they recreate famous Chinese opera pieces. This boisterous activity continues until around 5pm, when the building suddenly falls silent and dumps the retirees out onto the street so they can go home to start cooking dinner. As long as it’s not raining or snowing, this is their daily routine.

While I find the senior center interesting — though, to be honest, it’s filled with a bit too much Chinese opera for my taste — I’m not writing this just to share a fun factoid. This senior center is just one of thousands throughout China that are serving this very large segment of the population. For the right kind of entrepreneurs, these retirees, along with the demographic shift they represent, are a great opportunity.
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Brainstorming with the introverted and critical

I recently read a thought-provoking article on the Harvard Business Review blog network about how to avoid groupthink while brainstorming. I am always interested in effective idea generation and problem solving techniques because we use a variety of these when developing mobile and web applications for China. While “classic” brainstorming[1] can be effective, I have learned that it’s often best to identify the specific challenges your team faces and tweak this template accordingly.

Our team is made up of over 20 Chinese mobile and web application developers who have limited experience with brainstorming, at least when compared to the average American employee. While developers are usually great at problem solving and are often very creative, they can also be somewhat introverted. In China, we also face a unique challenge in that, while our staff understands the benefits of brainstorming and other creative problem solving techniques, they are fighting the current of decades of schooling that focused on individual rote learning rather than collaboration and creativity. They also struggle with how to effectively and safely contribute their ideas with a group of often very critical peers. While the root cause of these feelings may be unique, I’ve been in brainstorming sessions with enough groups to know that having critical team members is certainly not unique to teams in China, and doubting your own ideas plagues team members everywhere.
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How Chinese stereotypes could influence your business

“Shanghainese only care about money.” “Beijingers are really pretentious.” “People from Shanxi are really cheap.” These are a few of the numerous stereotypes I have heard Chinese people say about other Chinese people while living in China. I even often hear Chinese people use these stereotypes to explain their own views: “Of course that’s how I see it; I’m from Beijing.”

I used to just get frustrated and think of how detrimental stereotypes can be since, as an American, I have been trained to find them abhorrent in any form.[1] However, I have recently been considering how these stereotypes could affect businesses operating in China, whether foreign or domestic. Even if the stereotypes don’t apply to every individual, when people from a given area believe a stereotype is a cultural trait then it may just turn into a self-fulfilling reality as they play the cultural role expressed in the stereotype. This is something businesses need to be acutely aware of as they formulate their strategies in China.

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1.3 billion people drawing you in

I frequently ask business people why they are interested in doing business in China. The most common response I hear involves the promise of 1.3 billion Chinese consumers with rapidly rising disposable incomes. While this may be factually accurate, in my experience I’ve found that it’s safer for businesses to think of China as having many demographic subsets, rather than thinking of it as one country with a homogenous population.
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China, the Lean Startup

The Financial Times, among others, recently reported that China is going to experiment with allowing Hong Kong banks to lend directly to Chinese companies in RMB within a special zone in Shenzhen. It’s poignant that this is happening in a Special Economic Zone, which also started out as an experiment that was then duplicated in other parts of China, and finally led to widespread changes in the Chinese economy.

This type of approach, at a national level, is nearly equivalent to the Lean Startup approach [Read more…]