The China experience - part 1

Fresh from my MDHUBAlpha trip to China. A fantastic experience - eye and brain opening. We started in Hong Kong - slightly tropical feel to the weather, bright lights and designer shops everywhere - stayed in The Langham which was fantastic and the staff were genuinely friendly as were most locals we met.

A couple of useful presentations from UKTI and HK Trade Development Council - the general message was direct trade with Mainland China was difficult particularly getting money (Rmb) out, IP protection poorish, legal system not what we would be used to. General view at this time - operate through a Hong Kong based company and find a good local representative.

Advantages of Hong Kong - British based legal system, currency linked to US dollar, free flow of trade, good IP protection and a low tax system.

Key figures from the presentations -
1.5billion people - 55% of them under 24
4 million graduates a year
100 million bachelors
200 cities with population of more than 1 million
20 new airports and 20 new underground systems being built
400 million mobile phones
320 million internet users
50% of the world's pork eaten
33% of world's tobacco consumed - forgot what it is like to be in a smoky restaurant or bar.
More people speak English in China than America
GDP growth 9.4% over 10 years
Trade Growth 21% over 10 years
$1.5 Trillion foreign currency reserve - no wonder the US is sweating!
Growing middle class 300 million (although this number varied from presentation to presentation) and 18,000 billionaires.

- that's the numbers, more about the trip later.

The New Normal and other phrases of the year

So "The New Normal" topped the list for most overused phrase of 2009. I have used it myself and it was a good shorthand for the "unprecedented events" (second on the list) of the last 18 months.

I saw the phrase as a way of stopping any conversations that wandered off into fantasy scenarios of things getting back to normal (whatever that is).

What entrepreneurs are good at is seeing what's going on and doing something with it - whether that is improving their business model, their service or product or launching something new or into a new market.

The best companies that I see regularly have done just this and are better placed now as a result and certainly the worst option when things aren't working is doing more of the same.

The start of the year is a great time to review what you do, who for and why they should come and get it from you - the foundation questions for any business.

As ever come and talk to us and MDHUB members to get an honest and pragmatic view of your plans.

Here's to a good New Year and the latest "New Normal" (first mentioned in 2001 by Warren Buffet, so not that new.)

or that other business model?

By that other one I mean the common concept that either you are in business to make money or you are there to serve a higher calling to staff, society and the environment. Lord Browne - Group Chief Executive of BP - in a lecture to MIT suggested that actually these are too simple. Pure profit is short term by nature and the higher calling is too often a PR gloss put on top or even distracting such as the "Triple Bottom Line".

The more complex idea is that a good business fulfills it's purpose "by supplying goods and services at a price people can afford in a manner which makes the activity sustainable".

So where does that leave the (serial) entrepreneur?

Growth - now?

Interesting discussion at a workgroup this week, which followed a theme from MDHUBAlpha. What is a serious expectation of growth for our businesses both in the current climate and going forward. We have seen MDHUB members achieving serious growth rates of 50%-150% per annum over recent years but is it realistic to hit an exit target of £5m-£10m over say, a five year period.
Many entrepreneurs have set up businesses in the last 10 years with a very specific "build and sell" model, I'm pretty sure that what would have to have been extremely strong business models, specialist market niches or just brilliantly marketed companies will now have to be truly exceptional businesses to fulfill that dream over the next few years.
The other angle of the discussion was not new, but perhaps being re-visited, the changes needed to move from a £500k turnover company to a £10m turnover company. The key thoughts being: How do we keep the atmosphere, the small company enthusiasm, the personal customer service and what kind of management team do we need? With perhaps a more focused question of - am I really the MD to do this move?
I know one MD who was absolutely rigid about his abilities - he could take a company from £5-£15m but after that he wasn't the right person. He had achieved it at least a couple of times but I could never quite get at what ingredients worked and what was missing.
So is the time right for "build and sell" or do we need something else?

St. George's Day & Shakespeare's Birthday

St. George's day and we hear that our Prime Minister is proud of what England has given the world - in particular our language and Shakespeare's phrases now in common usage. He particularly mentioned "a pound of flesh", something the ex-chancellor knows a lot about and a theme continued by his own chancellor yesterday.
The "green budget" barely raised it's head again beyond justifying an increase in fuel duty but there was a whack to those of you earning over £100k with reduced personal allowances and if earning over £150k an extra 10% income tax on the top slice from April 2010. Add in the messy return to 17.5% VAT on 1 Jan 2010 increased penalties when we get things wrong (although nothing for when they do).
The good stuff was restricted to the "Old Banger" relief for scrapping a 10 year old car, the stamp duty maintained at nil up to £175k, re-introduction of 40% capital allowances for a year from April 2009 and confirmation that we can carry back losses for 3 years (limited to £50k pa). Talk to your accountant about how all this affects you.
As for Alastair Darling - the IMF have already said that they don't agree with him - is he trying to put too positive a spin on things? You undergo too strict a paradox, Striving to make an ugly deed look fair. (as Shakespeare also wrote, Mr Brown).

Following another good MDHUBAlpha session some of Michael Porter's thoughts on strategy were discussed, I had a chat with another business who is focussing their strategy on "exceeding client expectations".
My view is we should first aim to agree expectations so we both know what that means and then strive to deliver what we've agreed to a very high standard. There is also an ongoing process of educating and being educated with the client to develop more ideas and ideally deliver more for them.
Certainly a strategy of exceeding expectations is neither a strategy - taking Porter's view that the worst error in strategy is to compete with rivals on the same dimension ie competeing to be the best rather than his choice competing to be unique - nor is it an easily achievable goal as so often we do not really understand our clients true expectations.

Keep on running

Great session with the Alpha group, sparked me into thoughts about leadership at the moment. I have often thought it's your bloodyminded stubbornness that marks the MDHUB Mds. Got an e-mail this morning that included a quote from Calvin Coolridge which seemed to fit the bill.

Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan 'Press On' has solved and always will solve the problems of the human race.
Calvin Coolidge30th president of US (1872 - 1933)

Obviously you need to know where you are "pressing on" to but most of you do.