May 2006 Introducing high-technology products into the Chinese marketplace First in the five-part series: "Courageous Business Development in China" by Mark D. Cisneros, Ph.D. While the Chinese market offers tremendous business growth opportunities for high-tech products, most companies think twice — perhaps hesitating indefinitely — about introducing their new high-tech products into Asian markets. Why? China is thought of as a "stirring dragon," powerful, dangerous and unpredictable. As Midwestern companies, how do we tame this "dragon" and capture value for our local business and economy? Increasing the awareness and the understanding of the Chinese culture, language and economy will give us the edge to sell our products into this large and rapidly growing marketplace. Even the most sophisticated multinational clients need to be reminded occasionally about the intricacies of the Chinese marketplace. Here are some critical pointers: • Do your homework to understand the Chinese market before your product launch. • Identify and work with trusted partners. • Be thorough and provide full disclosure. • Proceed carefully to protect your innovation. Each of these points will be explored more fully in this five-part series entitled "Courageous Business Development in China." Above all, in dealing with our Chinese friends, remember that culture is the driving factor. Smart businesspersons will make every effort to "get into the shoes" of their counterparts in China to understand its commercial environment before moving ahead. This will help assure a successful product launch. Mark Cisneros is President and CEO of Life Plus LLC, an international firm that assists U.S. companies in marketing their products and services in Asia. With headquarters at Purdue Research Park in West Lafayette, Life Plus and its Asia-based partners are positioned to commercialize high-technology chemicals and medical devices by moving them through China's extensive testing and regulatory notification process, by assessing the marketplace and by guiding products into China's distribution channels. Clients range from those on the Fortune 50 list to much smaller firms. For more information, go online. It's about their market and their rules Second in the five-part series: "Courageous Business Development in China" by Mark D. Cisneros, Ph.D. Midwestern businesses considering entering the fast-growing Chinese market must proceed with caution, gathering necessary information beforehand. The reward will be worth the effort. As you move through the process, you'll need to: • Do your homework to understand the Chinese market before your product launch. • Identify and work with trusted partners. • Be thorough and provide full disclosure. • Proceed carefully to protect your innovation. We will discuss the first point in this segment. The Chinese market is complex and rapidly changing. The up-to-date market research information so readily available in the West simply does not exist in China. The successful entrepreneur will need to take on the task of identifying and gathering local market data before making a major product-launch decision. Diligent effort to understand the targeted marketplace is critical. The Chinese know the value of their marketplace. And they want to build it carefully with the appropriate rules in place to ensure development of a robust economy, just as Americans do. To accomplish their goals, they are involved in a steep learning curve, particularly when it comes to building a framework of regulatory guidelines. The rules they are developing are dynamic and constantly being changed to reflect their desire to become a successful part of the international framework. In many cases, the Chinese use European rules as their model. It is important to understand these rules and regulations and to appreciate that they are works in progress and may well change. It is to the advantage of multinationals to play by Chinese rules, lest they face costly delays or problems in getting goods into the system. The successful company wanting to do business in China must respect the nation's current status and work with them in a challenging but supportive manner. Together, they can build a strong partnership that will last for generations to come. Mark Cisneros is President and CEO of Life Plus LLC, an international firm that assists U.S. companies in marketing their products and services in Asia. With headquarters at Purdue Research Park in West Lafayette, Life Plus and its Asia-based partners are positioned to commercialize high-technology chemicals and medical devices by moving them through China's extensive testing and regulatory notification process, by assessing the marketplace and by guiding products into China's distribution channels. Clients range from those on the Fortune 50 list to much smaller firms. For more information, go online. Work with trusted partners Third in the five-part series: "Courageous Business Development in China" by Mark D. Cisneros, Ph.D. In the world of commerce, some concepts are universal. In practicing sound business, working with a trusted partner is essential. But good business partners are hard to come by, and trying to find one half a world and a total culture away is a daunting task. Identifying and working with trusted partners is the second step in achieving success in the Chinese market. • Do your homework to understand the Chinese market before your product launch. • Identify and work with trusted partners. • Be thorough and provide full disclosure. • Proceed carefully to protect your innovation. Choosing a trusted partner is the single most important decision for a successful product launch in China. Believe it or not, as Midwestern companies we have a lot in common with our Chinese friends. Business in the Midwest occurs through relationships and networking. In China, 'guanxi' or relationships, is the norm for conducting business. It is not a guarantee of success or free access, but it is a requirement for entry. Building 'guanxi' with a partner takes time and effort. It is the basis for establishing a trusted business relationship. The secret to establishing that relationship is effective communication. Again, understanding the Chinese culture is critical here. Chinese businesspeople operate differently than we do. • They prefer to meet face-to-face rather than relying on the telephone, fax, e-mail or other means of communication. Whenever possible, plan to meet personally with your prospective partners or, at a minimum, arrange a videoconference. This will provide the opportunity to show them you understand and respect their culture and provide an opportunity for social interplay — a necessary underpinning for a successful relationship. • The Chinese have a sense of immediacy. Whereas their American counterparts may be more likely to schedule a time to discuss an item, the Chinese are more likely to want to seize the moment and conduct the discussion at that moment. Be ready for this very real possibility by making sure you have time for an extended conversation and that you are prepared to participate fully. • Always treat your prospective partners with respect and deference. When faced with the opportunity to approach them informally or formally, always opt for the latter to reinforce your respect for them. • Take advantage of every opportunity to let your prospective partners know in subtle ways that you understand and are sympathetic to the business environment they are operating in, particularly as it relates to bureaucracy, testing and regulation. Once the relationship is established, building trust between the partners is the "bricks and mortar" that make the partnership strong. It is similar in our country. Americans prefer to work with those they trust. The most enjoyable partnerships are those that occur through a handshake, and it is the same in China. And, as in America, Chinese business people have strong friendships and networks, some forged as they went through the Cultural Revolution together. It will be important for multinationals to respect that and look for common ground as a first step in developing relationships with trusted partners in China. Likewise, the Chinese follow the American custom of referring business to those they know and trust. Again, it is important to develop relationships and become part of this referral process. Carefully practicing our own business etiquette with our friends in China will take us a long way toward establishing trusted partners to do business with. When you practice this with Chinese business people, the distance and cultural gaps fade away. Mark Cisneros is President and CEO of Life Plus LLC, an international firm that assists U.S. companies in marketing their products and services in Asia. With headquarters at Purdue Research Park in West Lafayette, Life Plus and its Asia-based partners are positioned to commercialize high-technology chemicals and medical devices by moving them through China's extensive testing and regulatory notification process, by assessing the marketplace and by guiding products into China's distribution channels. Clients range from those on the Fortune 50 list to much smaller firms. For more information, go online. Provide full disclosure Fourth in the five-part series: "Courageous Business Development in China" by Mark D. Cisneros, Ph.D. Getting your high-tech product approved in a foreign marketplace is a tall order. Understanding the rules and regulations is the first order of business. Compounding this with cultural and language differences makes the Chinese marketplace a tough nut to crack. Being thorough and providing full disclosure is the third point in pursuing a successful product launch: • Do your homework to understand the Chinese market before your product launch. • Identify and work with trusted partners. • Be thorough and provide full disclosure. • Proceed carefully to protect your innovation. In the listing process in China, it is important to provide full and complete disclosure around the critical points of interest, such as testing data. Providing expert statements goes a long way to describing the importance of a critical point. It clarifies the importance to the importer, allowing the regulatory agency to understand the seriousness of the importer's business practices. This item points out a key difference in the cultures of China and America. While the Chinese are hungry for details, Americans are often satisfied with less information. It is important to keep this in mind and, as with other cultural differences, be prepared to defer to the Chinese way of doing things. One way to convey greater detail, and yet stay within the confines of a briefer document, is to provide an addendum with extra information you believe the Chinese will want. They will note your courtesy and appreciate it. The Chinese are also interested in product stewardship. They want to be assured that a stewardship process is in place for your product to protect human health and the environment in their market. Excluding information, or worse yet, using a short and inappropriate snippet in Chinese, may cause delays in the approval process, costing your business precious time and money. The old adage, "When in Rome, do as the Romans do," applies with our Chinese friends. Do as the Chinese do in both culture and language. Make sure that full disclosure of the critical points to the product is stated clearly. Mark Cisneros is President and CEO of Life Plus LLC, an international firm that assists U.S. companies in marketing their products and services in Asia. With headquarters at Purdue Research Park in West Lafayette, Life Plus and its Asia-based partners are positioned to commercialize high-technology chemicals and medical devices by moving them through China's extensive testing and regulatory notification process, by assessing the marketplace and by guiding products into China's distribution channels. Clients range from those on the Fortune 50 list to much smaller firms. For more information, go online. Practice careful engagement Fifth in the five-part series: "Courageous Business Development in China" by Mark D. Cisneros, Ph.D. It is the nightmare of every U.S. product innovator to develop a patented product, have sales take off, then later find a knock-off grabbing a large market share. Realize that in China, copying innovation is seen as a great honor being bestowed on the innovator. Even the Great Wall has "real life" copies as tributes to its magnificence. Moving ahead cautiously is the next step in our checklist for a successful product launch in China. • Do your homework to understand the Chinese market before your product launch. • Identify and work with trusted partners. • Be thorough and provide full disclosure. • Proceed carefully to protect your innovation. The different attitude toward intellectual property is a reality that we cannot avoid, and it is to our advantage to respect it and work around it by practicing careful engagement. The first step is to understand what is really special about your innovation. Make sure you keep that secret at all cost; it's your competitive advantage. Second, protect what is feasible by using the Chinese regulatory framework. Intellectual property protection is rapidly changing in China and, although it is still in its infancy, this framework should be used to the American company's advantage in order to protect the intellectual property it develops. Remember it's about their rules. Also, take steps in the Chinese marketplace carefully. Make decisions based on sound data and due diligence. As was noted earlier, there is little framework for commerce in place in China compared to America, and this makes the Chinese fearful. To allay their concerns, make an extra effort to communicate clearly and simply. Do not rely on their being familiar with complex, American-based legal or financial concepts. A cautious but diligent approach will reap benefits for your business, as well as your local economy. We conclude this series with a salute to Purdue University President Martin C. Jischke, who has championed development of commercial applications for American innovation in world markets. Through the Purdue Research Park, where Life Plus, LLC, is a member company, the university pursues its mission of discovery, learning and engagement. We congratulate Dr. Jischke on his recent appointment to the President's Council of Advisors on Science and Technology. Mark Cisneros is President and CEO of Life Plus LLC, an international firm that assists U.S. companies in marketing their products and services in Asia. With headquarters at Purdue Research Park in West Lafayette, Life Plus and its Asia-based partners are positioned to commercialize high-technology chemicals and medical devices by moving them through China's extensive testing and regulatory notification process, by assessing the marketplace and by guiding products into China's distribution channels. Clients range from those on the Fortune 50 list to much smaller firms. For more information, go online.   To the Purdue Research Park web site