Even McDonald’s couldn’t quite figure China out. Earlier this month, the fast-food giant sold off most of its China business to a Chinese-owned firm, citing the need for a better understanding of the local market. Meanwhile, Uber lost $2 billion in China in two years before selling its operations in the country to fierce rival Didi Chuxing this summer. Google cut bait in 2010.
Little wonder: China is one of the most difficult environments for any outside entrepreneur, with opaque rules, distinct cultural norms and a government that can put its thumb on the scales in favour of local interests. But for outsiders who succeed, the business lessons can be life-changing.
I moved to Shanghai with my wife in 2005, with the idea of starting an online eyewear business. I discovered the Wild West in the Far East. For other entrepreneurs, here’s what I learned on the front lines that can make an impact whether you’re in Shanghai or Santa Fe.
1. Get comfortable with volatility
Governments everywhere set rules that affect businesses. In China, however, decisions are usually made behind closed doors with much less public input compared to Western democracies. New policies can cause dramatic, uncompromising changes in an instant. When I first started my business, China was a messy labor landscape with laws that were vague and unclear. The economy was largely cash-based, with little transparency or wage protections for workers. That changed suddenly on Jan. 1, 2008, when the government enacted sweeping changes in a labor law that many multinationals argued would harm business.
That experience made me much more flexible—I learned not to be too surprised by huge changes in policy, macroeconomic conditions or regulations. For disruptive companies who are running into new and unexpected regulatory hurdles, like the Airbnbs or Ubers of the tech world, these lessons would be good to take to heart. China taught me I can’t always fight the tide, so it’s wiser to become adaptable and focus my energy and resources on things I can control.
2. Learn what “long-term” really means
Chinese policy shifts may cause tectonic effects, but one virtue of their system is their big plans don’t switch with each election cycle. Planners don’t just aim for flashy results within four years, but can set goals for ten years and beyond for infrastructure, educational reforms or technological development. Chinese organizations learn to think with long timeframes—not just into the future but also the past.
This kind of long-term planning may seem out of place in the tech world, where conditions can change dramatically in a matter of months. But it’s precisely because of this volatility that you need a larger vision — a point on the horizon you can stay focused on despite unsteady seas. At Tesla, for example, it’s “to accelerate the world’s transition to sustainable energy.” In our case, it’s a simple mission to provide “better vision for everyone.” This kind of long-term, unwavering vision has helped me thrive in an optical space where new innovations in product, marketing and delivery are the only constant.
3. It’s worth going the extra mile to retain top talent
Of course, retaining top talent is critical to carrying a company’s culture, vision and best practices forward. To do that, I learned I had to be more creative and flexible than my competition. When I started in China, multinationals were fighting desperately for English-speaking Chinese talent to grow their businesses. My employees were prone to jump ship for even incrementally better pay from a bigger brand. It got to the point where I hired two people for every job opening, as a contingency for when one would leave. Surprisingly, competing for their jobs kept my hires continuously engaged and actually prevented many from leaving.
We also began promising long-term retention bonuses to key people if they stayed three years. Our hires tended to be fresh university graduates, but we made sure to wow them with bonuses that would change their lives. The people we hired in those early days are still with us today and are pillars for our company. We didn’t have the deep pockets to out-spend the Nikes, Disneys or other big companies but they didn’t have our ability to react and adapt.
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Many businesses challenges are unique to China. And I don’t want to oversimplify the on-the-ground realities. But I believe the lessons China offers entrepreneurs can be important and universal. For other founders, a stint in China may prove difficult but well worth the challenge: Think of it as boot camp for mastering the startup grind.
MORE ON DOING BUSINESS IN CHINA:
- 10 Tips for Cracking the Chinese Market »
- How to Sell to the World’s Largest Population »
- What It Takes to Set Up in China »
- The Rules of the Game in China »
- Lessons in Becoming a Chinese Powerhouse »