First, a very big thank you to everyone who stopped by our new booth at LeadingAge 2015 in Boston. We had a great show and enjoyed the opportunity to talk with various executives from senior care operators, architectural firms, rehabilitation service providers, home healthcare organizations as well as a number of product and IT companies who are early into their exploration of China and markets in SE Asia. Reflecting on the people who stopped at our booth, three of the most common questions are worth reflecting on, in particular for those readers who are early into their discussion as to whether they should pursue a China strategy.
1. Is the market in China real and ready?
Yes, the China market is real and ready. It is, however, not mature. This means that companies considering a strategic evaluation of China need to understand what they will – and will not – encounter. They will encounter enormous deal flow from a number of very qualified potential partners in China. The country’s best, largest, and most competently run insurance companies, real estate developers, and investors are backing senior living. Is there too much capacity coming on line too soon? Yes. But this is a short-term problem wholly consistent with every other meaningful market that China has ever presented to western companies regardless of their market. Whether or not the market is ready for your particular product or service is where the answer to this question needs to become more refined. Product and IT companies in the senior care sector in particular are wrestling with this question, and the answer depends on how effective you are identifying the right fits in terms of potential partners in China. Going it alone, or simply relying on the conference circuit, isn’t going to provide you with the best way of evaluating the market in a disciplined and cost-effective manner. For senior care operators, home healthcare companies, and rehabilitation service providers, the most candid way of looking at China today is that the best Chinese partners are pairing off with western counterparts that can help them learn, train and scale in China. In other words, even if the market is early, the people you as a western company want to be partnering off with, are in pursuit of partners today. A smart strategy, even for cautious companies, is to make sure you have some basic due diligence processes and partner identification activities in place today, as the best partners in China are going to be otherwise blocked off to you unless you act soon.
2. How does the decision to go to China impact my company?
It is inherently dilutive. There is no way around this absent a conscious go-to-market planning process that identifies what going to China is going to take, the internal resources that will need to be re-tasked, and an identification of how you are going to buttress those parts of the company whose expertise going to China will inevitably draw from. Don’t trivialize this: we have seen on multiple occasions otherwise well run companies fundamentally misread what going to China is going to require in terms of money, time and the focus of their management team. This problem is made more complicated because China is such an important part of most business executive’s career path, which in many cases leads a handful of team members to say to themselves and those they report into “hey, I can handle both China and my current role.” They won’t be able to do this, and whatever they are currently tasked to will suffer. How do you avoid this? First, think very carefully about the project management role for this endeavor. Should it be internal or external? We have an obvious bias on this, but in our experience, a mid-term engagement that acknowledges the dilutive effect of building and executing the first six months of a go-to-market strategy for China almost always leads people to engage a firm like ours to provide the boots on the ground and overall project management services.
3. How do I get started?
First, get your hands on good information. Specifically details on the regulatory system, and commercially what is – and is not – working in China’s senior care sector. Second, set aside half a day during your next executive or board meeting to have a high-level presentation on the market, and how to build an effective go-to-market strategy given your particular firm’s focus. Third, honestly evaluate your company’s team, financial capabilities, and operating platform with an eye to where the cracks are, and how the effort to expand into China will strain those. Handled properly, going to China can be an extremely rewarding process for your team, your company, and your shareholders. Handled improperly, going to China can cause you to lose focus on your domestic market, burn out key team members, and dilute earnings for much longer, and more seriously, than you might imagine today. At each of these three stages, we have a pre-established process and platform that allows senior care companies to think this all through, and to execute on the idea if they choose that it is right for them. If your company is early into the discussion, reach out for a phone consultation on how to think through and plan your internal discussion about overseas opportunities.