This is China! BLOG

Don’t Quote Me on That!

Knock wood.

I’ve been approached by two magazines in the past week for interviews about the China marketplace. One magazine is the China International Business Magazine. The Magazine is working up an article about the nascent Business Process Outsourcing industry in China. Some of the questions included: What’s the current condition of China’s BPO industry? What are the weaknesses of the major Chinese players? When compared with their Asian rivals, in what segments of the market have Chinese players enjoyed success? There are other questions, of course, but this gives some idea of the angle the article will take. The issue should be out in August 2007.

The other magazine that interviewed me this week is the American Chamber of Commerce in Shanghai’s Insight Magazine, which focuses on government and business trends in the China market. The writer for the article is working on an article about the up-and-coming dynamism of the port city Dalian, in Liaoning province. Some of the questions the writer asked me include: Multinational firms from Japan, Singapore and Korea have recently announced investment plans in Liaoning and other northeast cities. What makes the northeast desirable for foreign companies’ strategic investment? Among these northeast cities, what make Dalian unique? What is the city’s role in the province, northeast and China? Northeast has long been the old industrial base of China. How does this provide foundation for Dalian ’s development?

The Insight Magazine article about Dalian should be coming out in its August 2007 issue as well.

And to leave you with a flavor of just how I answered one of the BPO-article questions, here’s a sample to whet your appetite:

Question: “Some experts say there is a lack of innovation in the BPO sector. In your view, should Chinese players use strategic alliances with their Asian rivals to gain the necessary know-how? Or focus on internal innovation?”

Answer: “That’s a really dumb question. Why don’t you ask something people are really interested in. Like, what really goes on in KTV clubs…”

ACTUALLY, THAT’S A JOKE (the answer, that is). What I really answered was:

Chinese business by definition at this time in China’s economic development is not innovative. China is where Japan was in terms of innovation in 1963, just before the 1964 Olympics. China is still learning to rationalize its own business processes, educate its workforce, modernize its facilities and equipment.

Chinese players have no choice but to form strategic alliances with Indian and American outfits to learn and to grow to sizes that will gain them entry to the global BPO stage. The Chinese do not have the benefit of a Y2K-sized event in the West to give them the training, credibility and access to Western business units the Indians have. Nor do the Chinese have the English-language capabilities – yet – to compete with the Indians in BPO-related services that require end-customers engaging human beings.

The Chinese will have to rely on strategic partnerships with Indian operations to gain the credibility, experience and access they inevitably require to succeed in the BPO space. They will – and have already, to a large extent – ride on the Indians’ coattails to gain visibility and the trust and respect of Western customers. It was the Indians, after all, that made offshoring economically viable for the West and gave the disciplines the credibility they now have in the West. The Chinese will also have to watch and learn from the Indians how to apply technology to solve the issues confronted by Western companies both in the West and in China.

Innovation for the Chinese will come after the Chinese have internalized international best-practices through the Indian veil and begin applying what they have learned with companies in the West to their own markets in China. Chinese values, business structures and ways of doing business are not intuitive to Western or to Indian service providers. Chinese operators, though, will be able to learn, understand and deal with their Chinese customers in ways that to Indians and to Westerners would appear innovative. The home-grown innovations will eventually make their way beyond China’s borders to business applications for customers in other countries.

Bill Dodson
SUZHOU, China