Getting it right for success in China means choosing the right partner and getting the right information

-----By Jennifer Ding

China has seen an unprecedented level of foreign investment by European multinationals in the last five years. In 2005 for example, Bayer and Ericsson announced plans to invest US$1.8 billion and US$1 billion, respectively.

This comes as little surprise when one takes into account that China's already huge economy is expected to grow at an annual rate of 8.5 percent during the next five years, as announced by Xu Xianchun, Director of the Calculation Department of National Economy of China, during the International Forum on Productivity Development in November of last year. By 2010, China's gross domestic product (GDP) is expected to exceed RMB26 trillion (US$3.2 trillion), which is likely to put it in the world's top five economies.

To ensure maximized returns on investments, companies need to manage a variety of business information, ranging from market data on demand and growth potential through customer profiles, to distribution dynamics and competi-tive insights. The biggest challenge is to have the right information, in the right amount, at the right time.

For example, demographic and industry statistics may be useful for broad estimates of demand but often present a historical picture without taking into account current and fu-ture market dynamics. Customer surveys are useful for tactical marketing decisions, but only provide a snapshot frozen in time, with few insights into the likely future, and can be inaccurate due to over- or under-statement by interviewees. Competitor informa-tion is perhaps the most challenging type of intelligence to ascertain, and misled attempts can even result in legal action. Semiconduc-tor Manufacturing International Corp has recently been in the news for this and has been sued by Taiwan Semiconductor Manu-facturing in US courts for alleged corporate espionage.

So how can a company get reliable infor-mation in an ethical way without crossing swords with other industry players or the Chi-nese authorities? One answer is business intel-ligence (BI).

Business intelligence is the continuous and systematic process that produces knowledge, insights and forecasts on a company's operating environment. It first combines information on the industry, markets and competitors from multiple sources. This is then distilled and analyzed to cre-ate intelligence, based on which effective strate-gic decisions can be made.

Effective business intelligence increases the quality of strategic and operational planning, and reduces the time used for decision-making. This allows companies to make the best moves within their markets and in new markets, thereby keep-ing a step ahead of competitors, market changes and industry dynamics.

One should note that BI is often confused with market research. While traditional market research techniques have their merits in gaining a deeper understanding of demand side issues, BI differs in that it provides a more well-round-ed perspective. Good BI covers the industry or profiles, to distribution dynamics and competi-tive insights. The biggest challenge is to have the right information, in the right amount, at the right time.

For example, demographic and industry statistics may be useful for broad estimates of demand but often present a historical picture without taking into account current and fu-ture market dynamics. Customer surveys are useful for tactical marketing decisions, but only provide a snapshot frozen in time, with few insights into the likely future, and can be inaccurate due to over- or under-statement by interviewees. Competitor informa-tion is perhaps the most challenging type of intelligence to ascertain, and misled attempts can even result in legal action. Semiconduc-tor Manufacturing International Corp has recently been in the news for this and has been sued by Taiwan Semiconductor Manu-facturing in US courts for alleged corporate espionage.

So how can a company get reliable infor-mation in an ethical way without crossing swords with other industry players or the Chi-nese authorities? One answer is business intel-ligence (BI).

Business intelligence is the continuous and systematic process that produces knowledge, insights and forecasts on a company's operating environment. It first combines information on the industry, markets and competitors from multiple sources. This is then distilled and analyzed to cre-ate intelligence, based on which effective strate-gic decisions can be made.

Effective business intelligence increases the quality of strategic and operational planning, and reduces the time used for decision-making. This allows companies to make the best moves within their markets and in new markets, thereby keep-ing a step ahead of competitors, market changes and industry dynamics.

One should note that BI is often confused with market research. While traditional market research techniques have their merits in gaining a deeper understanding of demand side issues, BI differs in that it provides a more well-round-ed perspective. Good BI covers the industry or market by looking at supply, environmental, competitive and governmental issues, for example, in addition to ascertaining demand. By weighing, distilling and analyzing these various factors, BI allows users to gain a more comprehensive picture of the industry or market, and to develop actionable intelligence. One key benefit as a result is that companies can use the results immediately to develop strategies and therefore cut time-to-market.

BI in China

A recent study on the use of BI in the Asia Pacific region reveals some insights into how Asian companies compare with their European and American counterparts. (Chinese companies represented in this study included SINOPEC, China Mobile and China Unicom, among others)

60 percent of companies in Asia commission BI for use by their top management. This is the same as the world average.

They typically focus more on regular market and competitor reviews, rather than ad hoc projects or continuous monitoring, compared with the rest of the world.

Often, software systems are used much less for BI than all other regions in the world.

75 percent of the 48 large companies interviewed in Asia have a dedicated budget for business intelligence activities, one of the highest rates in the world. BI in China is developing and growing quickly, and a wealth of small consultancies offering BI services has sprung up, competing effectively with more traditional market research and management consulting firms by offering more pragmatic solutions to clients. As with any business activity, there are pitfalls to avoid while conducting BI. Keep in mind these tips for selecting the right BI partner in China:

1. Experience. It is important to assess the experience of the people (researchers, analysts, consultants, etc) in the firm. Have they had actual industry experience, outside of consulting? In what other industries have they had hands-on experience, and how can this be a benefit or a hindrance? Ensure that the senior members of the team are actively involved in your BI project, and do not just play a supervisory or advisory role.

2. Industry connections. Find out what local industry connections the team who engaged in the BI work has. Ask for specific referrals if necessary.

3. Sources. Check the industry knowledge and information sources accessible to the firm. This should not just include public sources in China, but also sources available only to industry insiders or from other countries.

4. Understanding. Check the firm's understanding of the strategic issues your company is facing. As an initial assessment, it helps to ask them to briefly provide implications of different scenarios resulting from different BI results to gain an insight into their understanding of the "big picture".

5. Resources. Does the firm have the necessary human resources and intellectual property, such as analysis frameworks, to address these issues via a BI project? Ask to be shown past sample reports (these should be first sanitized to protect their clients' identities) to determine what level of detail the firm provides and the quality of their strategic recommendations.

6. International exposure. It is important that the BI firm has a deep understanding of local market environments as well as international exposure.

This means that they are likely to be able to adapt knowledge or strategies that have been successful in international or other advanced markets for your company.More and more, Chinese industry leaders are beginning to challenge international players' positions on their own merit as the economy becomes more developed. This striking advancement has taken no more than one decade or so. Moreover, local companies have home advantage.

As competition intensifies it is critical for European companies, who wish to continue to be successful, to make the right moves at the right time based on the right business intelligence, provided by the right partner.

Jennifer Ding is a Strategy Director at Fusion Consulting, a business intelligence consultancy providing strategic advice on Asia-Pacific markets. With offices in Shanghai, Singapore, and Hong Kong, it has a network of 300 consultants in14countries. www.fusionc.com