Paul French tracks down mysterious author and businessman Jack Leblanc to find out more about his new book, Why Your CEO Failed in China
Back in 2008, an anonymous foreign businessman in China decided to call himself Jack Leblanc and examine why so many businesses failed in the PRC. His thoughts back then were published as ‘Business Republic of China’, a warts-and-all take on running a foreign venture in China.
Now the book has been updated, expanded and republished as the somewhat more bluntly titled, ‘Why Your CEO Failed in China’ (Blacksmith Books). And so it seems Jack Leblanc, who first arrived in Chongqing in 1989, remains working on everything from selling plate glass to engineering dotcom dreams. He’s not entirely convinced foreign business has got China right yet, and indeed, in these trying times of trade spats, pandemics and diplomatic rows, perhaps we’re even going backwards?
Leblanc remains anonymous, but FOCUS has contacts that go back decades and Paul French was able to track him down in his hidden lair where he edits business plans, preps his IPO documents and pontificates on what we’ve all got wrong over the years.
It’s been over a decade since you wrote Business Republic of China. What brought you out of China book publishing hibernation to write another tome about why and how so many foreign businesspeople get China so wrong?
While working over the past decades with small and medium-sized Western technology companies wanting a slice of the China market, I’ve noticed a common thread: their entry strategy is often fraught with misunderstandings about the Chinese market and outdated concepts. In their Excel sheets and PPT presentations, there’s no trace of how the local market really works, how Chinese think, live and breathe business.
After muddling around for a while, the CEO will close down the China operations as it seems to be a bottomless money pit. Then, ten years down the road, a new CEO will appear on the scene realising that China is the market that needs to be broken into, either through direct sales or a production unit. Often it’s a vicious circle that repeats itself with similar mistakes and approaches, but now in a different market where local competitors have upped their game and customers have become way more sophisticated.
The main mistake is often the lack of patience to understand the peculiarities of the Chinese market on all levels
Looking back across 30 years of China experience, what are the major reason foreign CEOs have failed in China?
The main mistakes is often the lack of patience to understand the peculiarities of the Chinese market on all levels (it’s really different in many ways) and identify the key players that might be interested in their product or services. Patience runs out because local operations are only budgeted for a two to three-year run and with expected revenue streams completely off the mark.
Wanting to succeed in a demanding market like China, it’s really important to sweat it out for at least five years while gradually adapting to local sales/marketing/production methods for products/services that are really needed here.
Potential customers are not always easy to identify as there are so many buyers in the market that cater to different needs within a same industry or product type. It’s often looking for a needle in a haystack to pinpoint the one customer that is willing to pay a premium for a Western designed or made product.
As local competition doesn’t sit still, innovation and adapting to Chinese requirements often seems to be a major hurdle for Western SMEs. It could be because of financial restrains but also the attitude back home of “we’ll adapt our existing product range/designs once the volumes are really hitting the mark” or “this product has been working in other markets why can’t Chinese customers adopt this product too?”
Surely CEOs in 2020 are smarter than CEOs in 2010 or 2000 or 1990? Or are foreign CEOs simply doomed to keep making the same mistakes over and over?
The Chinese market of 10 or 20 years ago has turned into a completely different landscape where customers are now picky, more product savvy and clearly know what works for them. CEOs often forget that the Chinese market is fiercely competitive and only the best local companies will survive and reap the benefits of operating in a country of 1.4 billion souls.
Loads of Chinese studied abroad, came back 5-10 years ago with fresh ideas, knowledge, a can-do attitude and a taste of Western society. Today many of them have upped their game in niche markets, that were initially only the realm of Western SMEs. Now they’ve often become leaders in their field in China and beyond, thanks to innovative approaches in production, design, cost control and sales tools.
It’s often looking for a needle in a haystack to pinpoint the one customer that is willing to pay a premium for a Western designed or made product.
At their own peril, CEOs of Western SMEs often remain in their ivory tower of “we know best” and only dream of the riches and glory the Chinese market will bring without realising the long-term efforts and sacrifices that have to be made to break into and remain laser-focused on the market demands for the long-term.
The simplest of things a CEO could do is frequently fly into China and stay for at least ten days, travel with and listen to their local staff, trust that they know best and allow them to be at the steering wheel of the operations. At the same time, it’s important to gradually build up the SME’s presence in China to gain valuable knowledge on how this market really functions, what are the pitfalls and best practices. Coming all guns blazing might not be the best approach, as the ammunition needs to last for the long-run.
The shelf of ‘doing business in China guides’ – the good, the bad and the ugly – is groaning under the weight of so many titles. What has Jack Leblanc’s book got that the others haven’t?
Jack Leblanc only has stories to tell and doesn’t believe that this is a “how-to” book of doing business in China at all. It’s only one person’s experience and in the vastness of China, things might well be completely different from someone else’s. It’s up to the reader to make up their own mind. Jack just hopes that those stories will enable companies to understand that China is truly different and one should be ready to embrace the surprises, the failures, the unexpected, the abrupt changes in regulations and cultural differences, but also cherish the successes so that they can really stay afloat in this ever-mutating market landscape. From my end, the longer I’m in China the more I realise I really don’t really understand this place and will forever be an outsider.
They say the internet has changed everything – disruption. Why have China CEOs seemingly failed to really ‘get’ the Chinese internet and left it almost entirely to local players?
We went through the dotcom craze, and in the West, many of the wannabes fizzled out after the bubble burst. Meanwhile in China, deep-pocketed companies, combined with all those overseas graduates coming back to Chinese shores, had visions to cater to the masses that blossomed from a sheet of paper. Meanwhile, the Chinese government quietly kept on investing in infrastructure, in certain regions of the country – even fixed-line phones were leapt over to embrace mobile phones – and this brought the internet to every corner of the country. This, combined with world-class transport infrastructure, logistics and Chinese customers who are always adventurous and craving to try something new, helped build the internet giants of today.
Many Western companies failed to see the advantages the internet was bringing to China because they only looked at it with preconceived ideas and what was familiar to them: Amazon, Google etc …. and the belief that to buy something online spoils the experience or can’t offer a good service. But in China customers knew better. Instead of getting stuck in traffic jams, visiting far away shops crammed with people, suddenly, browsing, buying, entertaining, studying, going to virtual markets, making payments, was now only a click away. Even beggars on Beijing’s streets have their own QR code to receive money virtually. By the time the Chinese internet giants were well established, hurdles to market entry become unsurmountable because they’d built up a huge advantage.
You’re still a young man. In 2030, will we need another cautionary tale from Jack Leblanc about business in China or will we finally get it? What does the future hold for the newly minted, fresh-off-the-boat China CEO?
It’s difficult to predict what happens in China in ten years’ time as this market is evolving so fast that today’s business plan can be a shambles six months down the road. I hope that by 2030 more CEOs will finally change gear and get it but I wouldn’t bet on it. Today, Westerners are still thinking that they’re leaders in many fields and banging on about past experiences, while the Chinese keep on working out their dreams and needs of tomorrow.
But I’ll take a shot and make a couple of predictions:
- Most – especially those Western technology SMEs that failed to succeed building up a significant presence over the past two decades – will have been bought over by their competitors or will be a shadow of their form self.
- For Western luxury products and consumer technology, the Chinese market will be front-and-centre, as buying power here will only increase. The CEO will be most willing to focus on China as he/she will be more culturally sensitive to local buying behaviour & product preferences.
- Every CEO, even those not interested in coming to China, will finally realise the value of IP rights and how to scrupulously protect them by investing in modelled IPRs that are enforceable in China.
- By 2030, the new CEO venturing into China will already be familiar with the International technical standards that were defined by Chinese industries. Those are already slowly but surely appearing in all corners of the world and the Belt and Road initiative is a unique opportunity. The West will need to accept that there’s no longer a monopoly on setting out standards.
- As technology evolves and R&D cycles get shorter and shorter, Chinese companies will often becoming leaders in existing technologies and inventing new products that one day will become a common good in all parts of the world. Most probably the shareholders will have hired a culturally sensitive CEO.
Meanwhile, Jack Leblanc, while enjoying a glass of wine, will be looking back and wondering why, after 40 years, he still doesn’t get it.
