How we want to transact is important too: Chinese companies as market disruptors.


Market Disruption


Much continues to be made of the rising tide that is “CHINA”. Regardless of which lens you use to view this country, they are a power in every sense, and much of the current discourse focuses on how it will evolve in the next 50 -100 years.

This morning I read an article by the London Business School called: Making the leap into developed markets which discusses in great detail the process by which Bottom of Pyramid companies (companies who make cheap goods cheaply) have historically tried to disrupt the incumbents. In the context of this article the focus is on how companies in India and China might disrupt their Western counterparts in the future, as Japanese companies have done.

You can read the article for yourself to get all the details, but there was one aspect that wasn’t addressed and that is the psychology and philosophy of business and how we transact and more importantly want to transact. Speaking from personal experience, as I sit here in Guangzhou China, the primary focus of the vast majority of Chinese companies is to extract as much profit as possible while giving as little as possible in return…thereby maximizing profit.

Examples of this abound but here is a personal one: I paid 4000RMB for my gym membership. The gym opens at 10AM and closes at 11PM but management refuses to turn the air conditioners on until 5PM during the peak hours. The same applies to the lighting. They only turn 30% of the interior lights on during the day because from their perspective if the gym is only 25% full, they are wasting money keeping it cool and well-lit. The change room is always kept at a sweltering 29 degrees. Despite repeated complaints over a six month time frame, nothing changes because customer service isn’t viewed the way we do in West. They simply do…not…care…

This isn’t just a casual observation either. Driven by frustration after having attended two different Chinese owned Gyms I did a little research and found a report by Deloitte on the state of the Fitness industry in China which highlighted several problems.

The reality is that many gyms are in trouble, chasing short-term cash flow and churning members. All
too often in China, the default tactic for attracting members is to compete and differentiate on price.
This may bring short-term gains, but in the long-term damages the revenue model and erodes both
brand equity and member loyalty.

This is but one example, but the mentality of business owners is the same from the mom and pop level all the way to the biggest organizations. You could buy your fruit from a local vendor down the street on a weekly basis, engage in wonderful conversation, tell them you live just across the street and plan on recommending all your friends, and then find out that the vendor has been charging you 3 times the market price.

Yes I know as a foreigner this is part and parcel with the territory so maybe it isn’t the best example, but Im trying to get at the psychology of the matter. Rather than seeing long-term benefit from the fact that I live across the street, will become a regular customer and will tell all my friends in exchange for good service and a fair price, the vendor sees short-term dollar signs by charging me 3 times the going rate despite the fact that I now wont go back.

Now look at the global market as it stands today. Chinese consumers flock to Western brands because of the perceived quality and integrity of the products (as well as status of course). Whether or not its a conscious decision or not, the honesty and transparent way in which most Western companies operate surely helps. If you don’t like something, or it isn’t up to your standards, or you changed your mind about something, the industry leaders will go out of their way to make it right.

So, am I saying that things wont change or that Chinese companies wont adapt? No, more likely than not, they’ll hire foreign talent and expertise and attempt to adjust to what the foreign markets demand. The reality is however that when you buy something you get more than the tangible. You also get a story, a feeling, and a degree of service, things that are much harder to replicate when customer service doesn’t come naturally. Therefore any discussion surrounding the likelihood of disruption by BoP companies must also include a measure of philosophy if we are to get a proper understanding of the factors which lead to market disruption.







Gun-Control1Its been a while, but m trying to start writing again and have started posting a little using “Medium”, so sometimes Ill post links here that will direct you to my posts there. Here is my first post on the topic of guns in the U.S.

After you read my thoughts, come back and weigh in.

Which lines have you been waiting in?

It has been quite some time since my last entry. Blame it on life…actually lets just call it priorities. I’m not doing much modeling at the moment and have started to teach english privately while studying Chinese. It’s fair to say that the business is going MUCH better than the Chinese. My next post will update everyone on life, but this post is about that most wonderful time of the year…

Yes, I’m talking about Black Friday…what, you thought I was referring to the Christmas? Thanksgiving? Or maybe Remembrance Day? Actually, now that I think about it, I guess I am referring to those three days which when combined make up what should be the most reflective time of the year for the average person.

Once a month in October, November, and December, we are given a day or two off of work  so that we may celebrate, give thanks or pay tribute to others. It’s against this back-drop that “Black Friday” stands out like a business suit in a soup kitchen line. To be specific, it’s the fights, lines and obsession with getting a “steal” that I’m talking about, not the shopping itself.

In the following clip listen to how excited people are, and look at how many of them there are?! I mean you would think that they were about to meet Jay-Z and Beyonce or something…but no…they are buying underwear…that they can’t even afford.

So what’s the point of this post? Well, personally I find it hard to watch footage like this, because I just don’t get it. But, my point isn’t to judge. It’s certainly not to say that this is something endemic of a particular nation because as soon as something is “on sale”, “marked down” or “free”, it seems to bring out the worst in people regardless of where they’re from. For an example of this right here in China read this. All I’m hoping is that all my readers reflect a little on their own actions and choices a little.

Here’s the twist though, if you were the woman screaming for joy over the $30 thong you bought for $5, or if you were the guy who drove all the way from Vancouver to Seattle in order to buy an Armani suit that was discounted 50%, that’s fine. Savings matter, especially in today’s economy, and quite simply, who doesn’t appreciate big sales?!

What I’m asking is whether you’ve spent some time in a different line recently. Maybe the one full of people waiting to shake a Veteran’s hand in the pouring rain. If not, why not? Were you one of those people who, when asked, told their buddy they couldn’t afford to contribute $20 to a”Movember” campaign, or couldn’t spare a minute to even talk to the Habitat for Humanity canvasser on the street corner. Were you able to  commit to making a monthly contribution of even $5 a month towards any cause that was near and dear to your heart this past year?

So you see, this post really isn’t about the evils of shopping, and neither is this time of year. It’s a special time of year, a time when we are reminded to give thanks and are given ample opportunity to give back because its safe to say that most of us have more to be thankful for than we realize.

So next year when “Black Friday” rolls around, and you find yourself standing in an epic line, or watching  all the videos, and news stories about the general mayhem, remember to ask yourself which lines you’ve been waiting in all year.

As a footnote I read about “Giving Tuesday” after the fact and I hope it gains a little traction next year. Just one more opportunity to GIVE!

Teaching Tiananmen

One of my students is getting ready for his final year of High School here in Guangzhou, and like most Chinese youth his age, he loves three things: Basketball, Video Games, and Eminem. Also, like most youth his age, he knows only that which he has been permitted to know.

We had a two hour class this morning and the theme was Global IssuesI decided to show him the Kony 2012 video and one thing led to another. Soon we started talking about whether the Chinese population could ever exert the same kind of pressure on its government, as the Americans had with theirs (in the documentary).

Naturally, this led me to ask him what he knew about the most famous Chinese example of this, the Tiananmen Square Massacre. His friend had told him a little about it, but he hadn’t seen, read, or heard much about it at all. Since I have a VPN (Virtual Private Network) I am able to access the internet as if I was somewhere outside China and was able to show him these two videos:

We watched the videos and had an interesting conversation. He told me the official reason given for State censorship is that it is intended to ensure a “Harmonious Society”. He also told me that anyone born after 1990 would probably have no idea that anything had ever happened at Tiananmen Square at all. He went on to say that parents usually didn’t discuss it with their children, and students certainly didn’t learn about it in school.

All I can say is that sharing this piece of history with him was a powerful experience, akin to sharing  images of the holocaust with a German teenager who had never learned about it, or showing a documentary of the “Rape of Nanjing” to a Japanese student whose government still refuses to acknowledge any wrong doing.

In many ways, this is an example of why we should travel…and maybe even why we must travel. Because, despite all of the pressures, barriers, impediments, and limitations that governments, and institutions, may try to put on us, or place in our way, the power of human connection undoubtedly trumps them all.

“Travel is fatal to prejudice, bigotry, and narrow-mindedness.” – Mark Twain

Good Music + Good Lyrics = Music That Matters

I’ve come across a few songs lately that made me stop and think. Strange right? When was the last time you heard a song that made you think?All too often we hear someone (usually of a different generation) say something like, “That music is terrible…what a horrible message.” or “No wonder things like the Denver shooting happen, when kids hear this kind of thing on the radio.” Well I don’t disagree with that kind of sentiment, but I think its time to reframe the subject.

Listen to the three songs below and tell me you don’t FEEL something when you LISTEN to the lyrics. Like I said, lets reframe the discussion. Lets stop asking why there is so much crap being made (because the answer is…we like crap) and recognize those who are making music that matters. Stop criticizing those who are making music you don’t like and support those who are creating something you do like…and share it!

Talk about the issues that matter with your kids, and youth in general. You can’t control what they hear on the radio, or the videos your kid chooses to watch on YouTube, but you can point them in the right direction and teach them to think for themselves (Lesson 1: Brushing your teeth with a bottle of Jack is just disgusting).

Have a listen:

Macklemore & Ryan Lewis: Same Love

Lupe Fiasco: Bitch Bad 

Dan Mangan: So Much for Everyone