Want To Go Global?
Entrepreneurial Spark & DIA Power Hour – Going global
The 2020 Design Intelligence Awards provides reward and recognition for risk takers and in support of this opportunity Entrepreneurial Spark hosted a Power Hour for UK entrepreneurs, innovators and designers on how UK start-up and scale-up firms can grow their business in China. UK scale-up firm Open Bionics are leading the charge winning £115,000 with Hero Arm in 2019.
At Entrepreneurial Sparks’ weekly Power Hour – Going Global – John Mathers, Chair of British Design Fund and Chair of UK DIA judges and UK DIA judge Mat Hunter, CEO of Plus X Accelerators led the conversation on this important subject for entrepreneurs
The growth context
Market adoption has become easier due to globalisation and the move towards more homogeneous consumer tastes, plus the rise of the massive middle class in China has driven an appetite for western products and services.
While middle and upper-class households account for 59% of households in tier 1 and 2 Chinese cities, these same income levels are increasing in tier 3 and 4 cities at a faster rate. Upper aspirant and mass affluent households in the lower-tier cities grew at a 38% compound annual growth rate between 2010 and 2018, compared to the 23% growth experienced by tier 1 and 2 cities.
Like young US and UK consumers who make more transactions than any other generation, young consumers in China are also opening their wallets. In particular, McKinsey identified a subgroup of “Young Free Spenders” – digital natives mostly from tier 2, 3, and 4 cities – who are increasing their spending across a host of categories. In fact, this segment, which makes up about one-quarter of the population, accounts for 60% of spending growth.
Against this buoyant consumer backdrop, five key themes emerged from the Power Hour discussion that can help entrepreneurs get started on their China planning with confidence.
1/ Know your customer
It sounds obvious but you’d be amazed how many businesses invest time in exploring a market without getting under the skin of their users first. It’s vital to develop a deep understanding of your users – their habits, needs, demands and objections. This insight will give you a solid platform to identify the segments in China that are likely to buy, so you can develop a picture of your market dynamics, growth and competition before taking the plunge.
Big data utilised from in-country e-commerce platforms can help you understand this at macro level, but don’t underestimate taking time to visit the country and get to know the people and their lives intimately. And don’t be surprised that things that are natural to western customers may be less motivating to Chinese customers.
“The standard of judges was exceptional and tested our metal, demanding we know our consumer inside out and that our design approach needed to achieve the highest standard.” DIA 2019 winner Open Bionics Founder and COO, Samantha Payne
2/ Think creatively about relationships
Look to your network and beyond of partners, collaborators and advisors as you can probably already get connected to the right people who can help you get to China. Increasingly manufacturers or service partners understand the challenges of small UK firms entering the market and are adapting to help firms going far beyond simply making things. They can help you understand your market, open you up to sales networks and support you to tap into in-country opportunities.
In China there is a trend towards manufacturers funding the cost of innovation and up front product development in return for a share of sales revenues through in-country e-commerce platforms such as Alibaba. This is paving the way for UK firms being ‘invited’ to develop their products in China and protect their IP, that has been a concern in the past.
“In some ways we were pioneers and undoubtedly the experience has reduced risk for us and helped us carefully consider our go to market strategy to maximise investment. We learnt a lot about the ecosystem in China and our eyes have been opened to the nuances and challenges of selling into the medical device market.” DIA 2019 winner Open Bionics Founder and COO, Samantha Payne
3/ Find your partners
Businesses entering this market can get tripped up when it comes to the back and front end of their supply chain. Fulfilment, support and logistics to help you source, make, sell and distribute products are just as vital as the quality of the product or service itself. Partnerships are key to supporting overseas networks and de-risking the expansion process, so invest time in researching partners and trial and pilot with them before committing to contracts.
Take up references and use existing international networks to help you through government resources such as the Department of International Trade services, network of international trade experts, China Britain Business Council (CBBC) and professional services consultancies established to help firms get established and find local partners.
“You can’t go into China in a half-hearted way and it gave us the opportunity to fully understand how much we needed to invest and the importance of intermediaries in dealing with distributors.” DIA 2019 winner Open Bionics Founder and COO, Samantha Payne
The last word
These three insights reflect China’s ambition to move from ‘Made in China’ to ‘Designed in China’ that presents big opportunities for UK businesses with aspirations to break into Asia. And still enables UK entrepreneurs to trade on the equity of “Innovated in UK”.
Going Global Power Hour here: https://www.youtube.com/watch?v=6hjRBaTl18s&feature=youtu.be
Entering DIA is simple. It’s quick, easy and free to apply. Deadline: July 6th 2020
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