Today I'm writing about America's most important and strategic trading partner. Not only is Canada our largest export market, but the US-Canadian relationship is the higest volume trading relationship between two countries in the world ($535 billion last year).
For American readers, here are a few facts you should know:
- Canada's GDP and population is roughly 1/10th of that of the U.S.
- Most of its population lives within 100 miles of the U.S. border.
- Canada has solid governance, with relatively low corporate tax rates, a low cost healthcare system, and have their national debt under control.
- Many industries in Canada are clustered in cities with university programs and local infrastructure to support local companies. For instance, the biofuels industry has a cluster around the city of Guelph in southern Ontario.
- The Canadian government has many grants for companies in industries it tries to cultivate. If your US-based company is lucky enough to be in one of these industries, then I recommend seeking out a Canadian partner to help finance innovation to keep on top of competition in your field.
- Canada has a progressive immigration policy that has attracted professional talent from all over the world. This talent pool may be particularly appealing to technology sector companies.
Entrepreneurs, I wish you the best success in Canada and any other markets you enter!
Friday, March 26, 2010
Wednesday, March 17, 2010
How to Keep Overseas Partnerships From Failing
Everyone has either experienced or heard of an overseas business partnership that fell apart. I find that most people I talk to tend to blame the foreign partner for the demise of the relationship. The typical story goes something like this:
We started the partnership to take advantage of opportunities in the local market. But they had issues that they never resolved. Eventually we lost trust in them. Finally we just ended it.
Partnerships Need to be Mutually Beneficial
In the best partnerships, each partner has taken the time to understand the other's business and finds ways to help the partner be successful. That means open communications when the partnership is being formed about needs, expectations, priorities, etc. And the more important the partnership is to the overall success of the company, the more that partner will invest in the success of the partnership.
Sign the Contract, Then be Ready to Re-Negotiate Many Times
Anyone who has managed a project of any size can tell you that one of the most important roles of the project manager is issue tracking and resolution. Too many times especially Western companies expect that a detailed contract specifies the roles of each partner. The reality is that once the contract is signed, the negotiations don't stop. Roles need to change based on changing business conditions in country. That doesn't mean that the foreign partner should dictate new terms, but that both partners need to work together to address issues as they arise to ensure a successful ongoing partnership.
There May not be a Messenger
In the US, we say "don't shoot the messenger" - meaning you shouldn't hold bad news against the person delivering the message. In many places, they just won't give you the message that there's a serious issue. Instead they'll try to fix it themselves. By the time the partner hears about it, the issue could jeopardize the project! This is where individual relationships are important. During periodic trips to the partner, talk to your counterpart in private (never in a group) about any issues you can help with. These informal chats could save the partnership.
I wish you all great success with all your partnerships!
We started the partnership to take advantage of opportunities in the local market. But they had issues that they never resolved. Eventually we lost trust in them. Finally we just ended it.
Partnerships Need to be Mutually Beneficial
In the best partnerships, each partner has taken the time to understand the other's business and finds ways to help the partner be successful. That means open communications when the partnership is being formed about needs, expectations, priorities, etc. And the more important the partnership is to the overall success of the company, the more that partner will invest in the success of the partnership.
Sign the Contract, Then be Ready to Re-Negotiate Many Times
Anyone who has managed a project of any size can tell you that one of the most important roles of the project manager is issue tracking and resolution. Too many times especially Western companies expect that a detailed contract specifies the roles of each partner. The reality is that once the contract is signed, the negotiations don't stop. Roles need to change based on changing business conditions in country. That doesn't mean that the foreign partner should dictate new terms, but that both partners need to work together to address issues as they arise to ensure a successful ongoing partnership.
There May not be a Messenger
In the US, we say "don't shoot the messenger" - meaning you shouldn't hold bad news against the person delivering the message. In many places, they just won't give you the message that there's a serious issue. Instead they'll try to fix it themselves. By the time the partner hears about it, the issue could jeopardize the project! This is where individual relationships are important. During periodic trips to the partner, talk to your counterpart in private (never in a group) about any issues you can help with. These informal chats could save the partnership.
I wish you all great success with all your partnerships!
Tuesday, March 2, 2010
How to Fail Miserably in Chinese Business Ventures
China represents so much opportunity for most industries, yet few business environments are as risky for many foreign-based business professionals. In this post, I'll focus on the biggest mistakes that I think entrepreneurs need to avoid in order to take advantage of the world's fastest growing market.
#1 Mistake: Underestimating Relationship Building
In China (& most of the world), relationships between individuals and organizations are the foundation of the business environment. A Chinese businessman will spend a significant amount of time getting to know their counterparts before making a sale or forming a partnership. Chinese will be judging you based on your behavior, your appearance, etc. Don't underestimate the importance of business cards, business dinners and sightseeing organized by your host and know the cultural rules. Many Westerners feel that "time is money" and their goal is to get a signed contract as soon as possible. This approach will sink your deal. Take your time and you should be rewarded.
#2 Mistake: Assuming the Deal is Done When the Contract is Signed
Many deals between Chinese and Western companies fall apart in the implementation stage. Contracts in China are more of a memorandum of understanding. They are rarely enforceable in the same way as in the West. That may scare the lawyers out there, but deals built on the foundation of a relationship instead of the law are normally more durable. Chinese companies are used to a rapidly changing business environment. They expect their business partners to be flexible to deal with changing conditions on the ground. When the Chinese business comes back to their foreign partner to ask for adjustments to the original agreement, the typical Western response is to point to the contract and take an inflexible position. This has been the beginning of the end to many business relationships in China.
#3 Mistake: Fighting for Intellectual Property Protection
This issue has kept many technology companies from wanting to do business in China. There is a real possibility that Chinese competitors will copy a Western product and nullify the patent or other intellectual property that is protected by law in the home country. The assumption is that the company's competitive advantage lies with patent-protected technology. I challenge this assumption. The strength of a company cannot rely on the borrowed time of a patent, but on the innovation and talents of its development team. The threat of copycats acts as a motivator to stay ahead of the competition with a better product. This improves the company's competitive standing in other markets, as well.
The most unconventional approach I've heard of was when an American software company operating on the Eastern coast of China actually tracked down the hackers that had been infultrating their system and talked them into joining their team as security experts. Talk about turning a threat into an opportunity!
China's high growth rate and large population make it an important market for many industries. Before engaging the Chinese in business, it will be important to prepare. If done right, the Chinese market could catapult your business to new heights!
Good luck to all your business ventures.
#1 Mistake: Underestimating Relationship Building
In China (& most of the world), relationships between individuals and organizations are the foundation of the business environment. A Chinese businessman will spend a significant amount of time getting to know their counterparts before making a sale or forming a partnership. Chinese will be judging you based on your behavior, your appearance, etc. Don't underestimate the importance of business cards, business dinners and sightseeing organized by your host and know the cultural rules. Many Westerners feel that "time is money" and their goal is to get a signed contract as soon as possible. This approach will sink your deal. Take your time and you should be rewarded.
#2 Mistake: Assuming the Deal is Done When the Contract is Signed
Many deals between Chinese and Western companies fall apart in the implementation stage. Contracts in China are more of a memorandum of understanding. They are rarely enforceable in the same way as in the West. That may scare the lawyers out there, but deals built on the foundation of a relationship instead of the law are normally more durable. Chinese companies are used to a rapidly changing business environment. They expect their business partners to be flexible to deal with changing conditions on the ground. When the Chinese business comes back to their foreign partner to ask for adjustments to the original agreement, the typical Western response is to point to the contract and take an inflexible position. This has been the beginning of the end to many business relationships in China.
#3 Mistake: Fighting for Intellectual Property Protection
This issue has kept many technology companies from wanting to do business in China. There is a real possibility that Chinese competitors will copy a Western product and nullify the patent or other intellectual property that is protected by law in the home country. The assumption is that the company's competitive advantage lies with patent-protected technology. I challenge this assumption. The strength of a company cannot rely on the borrowed time of a patent, but on the innovation and talents of its development team. The threat of copycats acts as a motivator to stay ahead of the competition with a better product. This improves the company's competitive standing in other markets, as well.
The most unconventional approach I've heard of was when an American software company operating on the Eastern coast of China actually tracked down the hackers that had been infultrating their system and talked them into joining their team as security experts. Talk about turning a threat into an opportunity!
China's high growth rate and large population make it an important market for many industries. Before engaging the Chinese in business, it will be important to prepare. If done right, the Chinese market could catapult your business to new heights!
Good luck to all your business ventures.
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