CHINA:

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The Background

In 2005 Tracy Crawford, Rain8 CEO, took a full-time assignment with the Automotive business unit (BU) of a leading US-based electronic components manufacturer. The firm maintained three BUs but had decided about 15 year prior to turn the Automotive BU into a cash-cow. At the time, the BU had about USD80MM in annual revenue, one engineer, no US-based sales people, about two sales people in Europe, none in Asia and no new products for most of this 15 year period. During the latter half of this 15-year period, revenue had remained nearly flat at USD80MM.

 

In the face of increasing competitive intensity, due to the expiration of some of the company’s patents, the company reversed the cash-cow decision to make investments to re-make the BU into an innovation/growth enterprise. A trusted and seasoned VP, “Dave,” from another BU was assigned who then assembled a team of 5 directors covering Sales, Engineering, Operations, and Marketing. Tracy was recruited as Global Director of Marketing to lead development of a 5-year strategic plan.

 

The strategic plan development was viewed as a critically important task that would either make or break the goals for the future and was intended to be highly actionable with high levels of accountability and control over the 5-year period. Plan development was spread over 6 months and ultimately involved 14 off-site days for the 6-man management team. After the plan was complete, actions were assigned to Directors, deliverables defined, and time-lines were set.

 

As the BU had no significant business in Asia (due to licensing agreements under the then-expiring patents), Asia, with primary focus on China, was a big part of the plan for growth. After a few quarterly review cycles, Asia was not making progress. The BU had recruited a couple of sales people but had established no local management or technical support. In hindsight, this was clearly a recipe for wasting investment.

 

As a result, Tracy was assigned an additional role as Director Business Development, Asia and was shipped out to China with a budget and close support of the VP and all of the other management team members and especially from the seasoned Global Director of Sales, “Brian,” who had lived for some time in previous roles in Asia.

 

The Results

Over the course of the 5-year plan period, the BU’s sales approximately doubled with about half of that growth coming from Asia (with China as the largest contributor). Gross margin percent declined slightly due to the fierce competitive intensity that Dave and Brian knew was coming.

At the end of the 5-year period the BU had captured about 90% market-share in China with all local and Western JV OEMs and Tier1 suppliers.

 

What Were the Keys to Success?

There were several:

 

Experience in Asia
Dave, Brian, and Tracy had significant prior experience in Asia. They knew what would work and what wouldn’t work. There were few qualms about what was required, and there was no resistance to the significantly different approaches. Indeed, the different approaches were embraced. Management was flexible and adaptable.

 

Investment
The company made appropriate levels of investment at the right times.

 

Partners
The BU embraced partners (in this case, traditional distributors) to leverage their starting small position, built up a network of seven distributors and provided them close support.

 

Strong Footprint
The BU relied on their sister BU for office space. Additionally the company had operations in China for many years prior. Well established services like HR, Finance, and Logistics allowed the BU team to focus almost exclusively on relationship and business development.

 

Local Technical Support
The BU quickly invested in local engineering resources to engage directly with client technical staffs.

 

Strategic Patience
The BU faced some local competitors who offered inferior product at lower prices along with certain incentives to decision-makers. Not accepting a “China-good-enough”  approach since the products were safety-critical, the BU adopted an educational strategy to share with clients why they should purchase the superior product.

 

Goodwill
Chinese clients expect a certain amount of “free” goodwill. To find a win-win in the face of this environment, the BU developed a strategy to offer free training in the technical field served by their products and services.

 

As there is often high turn-over of staff in China, and training of the constant in-flow of junior staff is a challenge for local firms, this offer was warmly embraced. The benefit to the BU was that their local engineering staffs responsible for the training formed close relations with all the clients’ new junior staff. Whenever a client staff member had a problem, they called the BU’s trainer, thus connecting the sales and business development people to a constant flow of new opportunities.

 

The Background

The Raineight team accepted a 12-month assignment to assist a producer of safety-critical electronic control systems to develop their market in China. Annual revenue was less than USD20MM. The client had 25 years experience in the market, and were somewhat established in a very small niche primarily in the US and UK, with some business in Europe.

 

The Challenges

The client was new to China. They had one seasoned, quite capable business development team leader with deep experience in the industry but also no experience in China.

 

We faced recruiting challenges for sales staff in China from the beginning as the target job description was one familiar to the West and which fit the profile of some of their similar senior Western staff. The problem, however, was immaturity of the market in China - such targeted senior staff don’t exist in China as the segment is still quite new in China. We finally recruited one senior business development manager, but he could not join for 4-5 months. Just before his joining-date, he had to decline due to personal factors.

 

Investment tolerance was low - that means no fixed office, no legal entity, no local technical support, no back-office staff, no inside sales support. Based upon our experience in China, we accepted the project with a budget considerably lower than most firms would budget for such an endeavor.

 

The Solutions

Staff
Faced with the recruiting challenges, we brought on a known new team member from another industry but with strong sales/relationship skills and began the professional-development process. Staff development will always need to be a focus in Asia.

 

Strategy
We developed a sharp strategy and mission for China that aligned very well with the 12th 5-year plan and that was highly differentiated against the entrenched suppliers and was very appealing to clients, creating significant goodwill and competitive advantage.

 

Localized MarCom
Primarily in this case we localized printed materials including about 10 printed pieces and several PowerPoint files specifically designed based on the firm’s value-proposition, localized fully to meet local clients’ needs.

 

Do the Work

Despite the limitations in resources from the client, we conducted perhaps around 150 face-to-face client meetings in 12 months for them.

 

The Results

Business results include:

 

Orders
Two delivered orders were secured, and two additional orders were in process by client-Purchasing. An additional offer has been accepted by client technical-decision-maker and was just subject to commercial negotiation with Purchasing. Total orders expected from the one-year effort totaled over USD500,000 for highly technical products normally subject to lengthy evaluations.

 

Technical Support
We established a technical support relationship with a 10-person engineering services-provider to fill the technical support gap.

 

Partner Development
We developed partner/reseller relations with two partner/resellers. We additionally developed close relations with an industry supplier who relies more than 50% on their partners who agreed to share all of their partner connections along with referrals to us. We have engaged one of their referrals, and one has accepted though the client has not yet accepted.

 

Competitors
We engaged two significant competitors and hired one of their junior staff on friendly, agreed basis.

 

Client Relations
We built and developed over 70 new B-2-B relationships and perhaps over 200 new P-2-P direct relationships.

 

Industry Relations
We engaged and built relations that have resulted in referrals, free trade-show space and so on with more than three major, established market-space providers including Kvaser, The Mathworks and Freescale Semiconductors, and with one client.

 

JV Partners
We developed two offers for business development JVs.

 

Manufacturing Partners
We developed three offers for manufacturing partnerships.

 

Opportunities Pipeline
We built >70 new leads/opportunities.

 

 

Low-risk, low-cost manufacturing in China;
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