The Elements of Success for Investing in China
“Many foreign businesses seek to enter China with a fuzzy expectation of what they are going to achieve, while others replicate what have been successful in other parts of the world. As we sit in the cockpit ready to take off, we bring with us the three keys, which are the first set of elements that would measure our corporate performance, as we set foot on Chinese soil. ”
— Mr Joe Poon, President, Asia Pacific, Xchanging
Xchanging plc (“Xchanging”) is an international provider of technology-enabled business processing, technology and procurement services to customers across numerous industries. As a truly international outsourcing specialist, the Company brings innovation, thought leadership and passion to its customers’ businesses so as to enhance performance and value. The Company has deep expertise in complex and critical business processing services, especially in the financial services and insurance sectors, with a strong track record in integrating critical business systems. Its procurement offering also boasts extensive configurability and flexibility with leading-edge expertise in the market. With over 8,000 employees in nine countries providing services to customers in 43 countries, Xchanging strives to be the best provider in its chosen markets by delivering services that are recognized for outstanding quality, reliability and innovation.
As the world economy gradually recovers from the series of global economic crises, many business leaders are earnestly looking for opportunities to invest. In particular, many companies are looking to increase their global footprints in the emerging markets despite the overall bumpy economic recovery forecasted by many economists. The BRIC (Brazil, Russia, India, and China) countries are often, if not certainly, within the radar of these business leaders because this is where prospects of continuing growth remain very positive.
“China provides growth opportunities for us, both in terms of conduciveness in having delivery capabilities to serve our global customers, as well as having a large domestic market that is still underdeveloped”, says Mr. Poon. As a company that is in the process of entering the China market, Joe shared with us Xchanging’s vision of a successful business in China from a foreign investor’s perspective.
The Three “Keys” for Operational Success
Xchanging is at the stage of building the foundations of its China venture. Mr. Poon highlighted that it is very important to be focused on the values that the Company would like to derive from its China venture. In his view, the three most important elements to business success in entering a new market would be Growth, Efficacy and Innovation, as well as Corporate Hygiene.
When the word ‘growth’ is mentioned in a business context, it is natural for many of us to instantly associate it with ‘top-line, revenue growth’. While revenue growth remains one of the most commonly used indicators in measuring the prospects of a business, Mr. Poon believes that there is another, if not a more important, dimension to the word ‘growth’.
“When we refer to the word ‘growth’ in China, we mean not just the growth in top-line within the China market, but also the growth in capabilities to serve our customers worldwide”, says Mr. Poon.
In Xchanging’s experience, the knowledge gained by the Company in any new market has been valuable in helping the Company create new product offerings that can be used to serve customers in other markets worldwide. This sets in motion a rigorous process of innovation in expanding the spectrum of its service offerings. The ability to leverage on prior experience to create ‘best of breed’ offerings that are of value to customers is inevitably important to any company nowadays. Growth in terms of both business and service capabilities, together, forms the foundation of Xchanging’s business objectives as they enter China.
Efficacy and Innovation
Sustainable business and capability growth do not happen overnight. In a successful business, they are often driven by efficacy and innovation.
To measure efficacy, Mr. Poon gave revenue-to-employee (full-time equivalent) ratio as an example of one of the metrics he use. “At this point of our development, efficacy and its related KPIs would tell us how China would fit into the Company’s global strategy,” Poon explains. Efficacy and its related KPIs often play an important role in the management decision-making process. This is especially true for multi-national corporations, where efficient and effective use of resources globally is always the key to success. Whether it is justified to devote more resources to an entity versus another, or whether a particular country is even worthwhile to set up a business, these KPIs may provide powerful insights to the decision makers.
Meaningful metrics and KPIs are very powerful management tool alerting and helping business leaders to make, and sometimes alter, business decisions.
The other part of the twin engine for sustainable growth is innovation. “China is not only a place for us to drive revenue, but also a place for us to drive innovation. This would help us generate comparative advantage worldwide, with China being part of the global equation” says Mr. Poon.
In order to achieve this, the rigor of utilizing market information is an important starting point. For example, customer satisfaction and insights are priceless in this highly competitive world. Successful business leaders cannot afford to ignore or inert to such information. It is much easier for companies to overlook feedback from customers than to actively respond to customers’ needs and wants. Xchanging has built an internal culture and system of effectively acting upon such information.
Mr. Poon gave a current example to illustrate the importance of innovation. One hot topic, as this article was being authored, is whether Apple will suffer Microsoft’s fate. Once praised as ‘tech giants’, ‘innovators’, and the world’s largest companies, these two companies have experienced dramatic drop in their stock values, although at different points in time, contributed by similar factors including the lack of substantive new and innovative product offerings. Sticking with the same products and offerings without adequate and proactive response to customer demand almost guarantees one’s business is en route to the south.
The third element of success that goes hand-in-hand with efficacy and innovation is corporate hygiene. “Ultimately our business is about innovation, and innovation comes from quality people,” Mr. Poon explains. Corporate hygiene includes job security, salary, fringe benefits, work conditions, and other extrinsic factors that may not directly increase the job satisfaction to employees; however, the dissatisfaction often results from their absence.
Efficacy and innovation are highly correlated with quality employees. “Therefore, retaining our talents and keeping them motivated are of high importance in our list of priorities” Mr. Poon said. In order to achieve high efficiency in a business, meaning an optimal output per headcount hired, corporate hygiene, especially staff attrition, must be maintained at an optimal level. It is only with good corporate hygiene can the objectives around efficacy and innovation be achieved. This will then drive growth for the Company in terms of both business revenue and service capabilities.
Taking off to China
There is simply no overstating of China’s importance to all of us as global citizens. Opportunities are abundant in the China due to its depth and breadth of this leading emerging market. “Although Xchanging is still at the start-up stage of its venture in China, indications are already very positive and encouraging, especially from the growth of capabilities perspective” says Mr. Poon.
Suffice it to say, by bringing the right ‘Keys’ and applying the right corporate performance management strategy, companies can have their goals better achieved. There is never a definite approach to corporate performance management, as much of it depends on the business context, the target customers, and the environment in which the company operates. In this ever changing world, there is still so much for the business leaders to explore.