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4 Tips to remember when Outsourcing to China and beyond

Behavior, Economy, Investments, Management, Outsourcing, Partnerships, Risk Management, StrategyEdward Kiledjian

I have spoken and written about outsourcing to China for a couple of years now. Although China does require special handling, many of the high level recommendations are the same as regardless of where you decide to outsource.

So here is a summary style high level overview of some of the important considerations:

Ask Why: Ask yourself exactly why you are outsourcing. It is because you want to reduce your costs, access specialized skills or as a risk management exercise? Understanding exactly why you want to outsource should be your first question. Take the time to get granular and as detailed as possible. If you want to save money, then decide exactly how much and how? Time spent thinking about this will help your decision making and later negotiations.

Ask Who: Once you’ve decided why you want to outsource, then the next logical question is who. What type of provider is best positioned to meet your why requirements? What is the ideal size of the provider? What is the ideal geographic footprint of the provider? What type of experience or client list does the ideal provider have?

Ask How: If I had to pinpoint one reason why most outsourcing deals fail to meet client expectations is SM&G (aka Service Management and Governance).  You should have as much SM&G that you need to keep the delivery adequate and the relationship healthy but no more.  Think about how you will measure successfully delivery and how you expect the vendor to report on it. What methodology should they use? How will you periodically check their reporting? Some aspects of SM&G that get forgotten are data privacy, IP handling, financial performance, etc. When dealing with offshore providers (India, Malaysia, Philippines, China, etc.), this can get doubly complicated because many times the small to mid size providers won’t have local presence and may have communication issues. Make sure all of this is clearly thought out and documented in your contract. An ounce of prevention is worth a pound of cure.

Chinese Model Cities: The Chinese government has built the concept of Chinese Model Cities. These cities are locations where government encourages a specific type of product or service. When dealing with China, it is important to consider this fact and deal with organizations that deliver the product or service you want from the designated Chinese model city for that product or service. Failing to do so may lead to huge headaches.

This is not an exhaustive list but hopefully it has given you food for thought. If you have questions, feel free to contact me using the Contact Form.

Weather Trends 360 predicts weather 1 year out

Apple, Environment, IOS, Management, Risk Management, Strategy, Travelling, iPad, iPhone, technology, websitesEdward Kiledjian

My local news station weatherman seems to have a 50/50 success rating predicting the 5 day forecast. Imagine my surprise when I learned about a company called Weather Trends International that claims to provide weather prediction for up to 365 days into the future.  At first I thought this was another fly by nights hocus pocus type website, then I checked out their client list. It includes names like Walmart, Loblaws, Target, Coca Cola, Heinz and many more.

The prediction

As expected, the mechanism used to predict the weather is a closely guarded secret. What we are told is that they use a constantly refined trade secret algorithm (using statistics and cyclic patterns) and the results are checked by a team of meteorologists. For what it’s worth, the company claims an accuracy rate of 80%.

Interestingly, they provide predictions for over “720,000 locations, all 195 countries, islands and territories”.

Many professional meteorology services have contested that this is a “forecasting service” and say there is no scientific evidence that proves WTI can predict weather that far ahead.

How to use the predictions

Weather Trends International is quick to point out that the best way to use their service isn’t to determine the absolute weather 6 months out but rather to determine the best time period for your planned activities. If you’re planning a trip to sunny Mexico sometime next July or August, then you can use the tool to determine which week seems to be the hottest and driest during your window of opportunity.

The mobile app

They now offer a 0.99 IOS app that is basically a mobile front end to their free website. Interestingly, they seem to listen to their users and in newer versions of the app have added requested features like UV Index, sunrise/sunset, etc.

 

Considering the purpose of the app, I would love to a historical summary of the weather (like what WolframAlpha currently provides). Coupling the historical with their prediction would make an excellent combo.

Some of the features like animated world maps are well done but the overall app interface seems a little clumsy and not well thought out (like a date slider which doesn’t work all that well on a small iphone screen).

 This is the main screen   

This is the 10 day weather forecast screen

My tests

I tested the app using 3 week long prediction periods at 30, 60, 90 and 120 days out. My unscientific testing showed that their overall period prediction seems to be close enough.

Right now they are predicting the first “light snow” for my area on November 20 2011 (Montreal , Quebec). I will see if they hit the mark with this or not.

Who should use this?

Although the 0.99 price is low which makes the purchase decision easy, I don’t know what the value of the app is when the website is free and provides the same information. To make the app truly worthwhile, they need to add some app-only features.

Setting this point aside, this is a cool tool for anyone planning a family vacation or event. Even small to medium business owners, that can’t afford the WTI commercial product but that could benefit from weather predictions, will likely find this useful in their strategic planning process.

 Positives

  • App interface is easier to use than a Safari site for this
  • Many of the graphical features are pretty
  • Simple easy to understand interface
  • Seems to be fairly accurate

Negatives

  • I would love to have the measurement scale change depending on location (Celsius for most locations outside the US automatically)
  • Rethink some of the interface design elements to make them more small screen friendly
  • Don't expect accurate daily forecasts

DEALING WITH CHINA (PART 3)

Behavior, Management, Marketing, Risk Management, StrategyEdward Kiledjian

The importance of “Saving Face”

Having spent many years in Asia, I quickly learned the importance of maintaining “face” when dealing with Asian businessmen. This becomes important when engaging in negotiations (for example). You must always allow the other participant to have a little wiggle room [even after submitting their best offer]. Even tough the new offer may be only minimally better, it should allow the Chinese participant (whether customer, partner or other) to have the final say and maintain face.

Interesting read : Wikipedia 

Working with imperfect information

It’s no secret that information does not flow freely in China and local culture dictates that negative information should be suppressed as much as possible. 

The National Bureau of Statistics publishes a giant manual called the China Statistical Yearbook. It contains all kinds of goodies for interested parties from the amount of residential floor space built to the amount of cargo carried by Chinese shippers. All wonderful and interesting stuff… 

Foreign statistical experts I have spoken to question the validity of the information contained therein. They state the pressure on local officials to constantly show improving performance thus the motivation to “inflate or deflate” the published numbers. The delta from reality is sometimes small and other times extremely large. There is no way to tell for sure.

It is believed that a better source of information is the World Bank and Asian Development Bank reports.

Conclusion

Even with all of it’s pitfalls, China is still the land of possibility and most business’ will choose to embark on the path of the Dragon. Remember to measure twice and cut once. Spend as much time as you need at the start of your endeavor to ensure it ends up the way you want. 

DEALING WITH CHINA (PART 2)

Behavior, Management, Marketing, Risk Management, StrategyEdward Kiledjian

... continuation 

Intellectual Property

The previous paragraph highlighted the difference between laws “on the books” and the extent to which business people are willing to bend them for profit. As a foreign company entering into the Chinese market, you should be thinking about how you will protect your Intellectual Property. 

A common example of this is that of Will-Burt. Will-Burt is a company that manufactures and sells Night-Scan telescoping masts for police or military use. They entered the Chinese market and sales boomed. Then all of a sudden, the sales stopped. It seems a local company had reverse engineered their products and was selling perfect replica fakes. They went as far as printing Will-Burt’s name on the counterfeit products and presenting them at a local Chinese trade show. The irony is that its prime customers are law enforcement and military who seemed to be choosing the cheaper counterfeits. 

Because of international pressure, the Chinese government is trying to fight IP theft and counterfeiting but it is an uphill battle. There are well entrenched officials and powerful Chinese business leaders who like things just the way they are. As a company entering the Chinese market, it is important to understand that you may have to spend buckets of money to defend and safeguard your corporate IP assets. 

When in Rome, do like the romans

Anytime you are dealing with a foreign entity (partner or customers), it is important to learn as much about their local customs as possible. In North America, when I hand someone a business card, they likely take it with one hand and shove it into a pocket. In Asia (particularly in China), the custom is to accept someone’s business card with 2 hands, then read it carefully and present a genuine compliment related to it, the business or the neighborhood the business it located in. 

There are also topics that will be cheerfully welcome and others that will be shunned (like Taiwan, Tiananmen Square, Tibet, Japan, etc). It is important to work with a local contact who can provide guidance and support as it relates to this section. 

Many western educated Chinese are now returning home and taking  prominent business positions in local companies. You will find it much easier to work with these younger Chinese managers as they are more likely to accept your western ways.

 

... to be continued

Dealing with China (part 1)

Behavior, Management, Marketing, Risk Management, StrategyEdward Kiledjian

If you have spend any time at a multinational company, the one topic that comes up is how to benefit from the rise of the dragon (aka China). 

Over the next couple of entries, I will provide some information about China that I hope you will find useful. 

The socialist impact

Although it is easy to overlook China’s socialist political system, it is important to understand that it influences every aspect of their business style. As an example, they have very little creditor protection. They would never allow a big capitalism company to throw poor helpless citizens out of their homes because of missed payments. This is one of many such examples where companies are disadvantaged because of the ingrained policies and beliefs. 

A police state does not equal a lawful state

It is important to understand that most of China is in a state of lawlessness. Corruption is rampant and businesses routinely ignore laws. One of the most obvious examples is software piracy. Although China has software anti-piracy laws, they are rarely enforced. 

In a partnership setting, I warn companies to be cautious when dealing with Chinese businessmen. It is common for them to use the complicated Chinese legal system and culture to their advantage (eating the investment without giving you anything in return). To be clear, partnering with a local entity means you get know-how and contacts very quickly and this can be a huge strategic advantage. It is important to be extremely careful when conducting your pre-deal due diligence before entering into the agreement.

 

... to be continued