Over-Promise, Under-Deliver and the realities of the Chinese Market

Everyone that's ever had a job in the West learned very early on the value of Under-promise and Over-deliver, especially if you wanted to get ahead, keep clients happy and make a name for yourself. But since I've been in China, I've been convinced that this just doesn't work in China. Not only is it not really understood, it's not believed and no one would dare try it. Let me explain.

No one in China that I've ever told this theory too believes that it could really work here. And believe me when I say I've told it to every factory that has ever provided a golden sample and then was not able to recreate it in production - meaning, I've told every factory I've ever worked with in Asia. They won't believe that they could ever get any foreign orders with less than absolutely perfect samples. And they're probably not wrong.

First, there is so much competition in China that if you don't have the very very best sample you're not going to even get the chance to bid on the job let alone get the job. You're just not even going to be considered. In China the number of potential suppliers for all but the most specialized products is almost unlimited. The numbers here are like nowhere else in the world. If you're a foreign buyer this can be a very good thing for your bottom line. But it can be a very bad thing if you're expecting a factory to choose between making money and being loyal to you (read: IP violations).

Second, not only is there a huge number of competitors they're not all playing on a level field. Like one of the arguments against government health care in the US this summer, government sponsored options do not have to meet the same profit standards as private companies do. (And, when you don't have to meet profit goals there is no reason to meet quality standards either.) In China, prices from SOE's are notoriously lower (often below cost) than anything that any other company can do. The reality for privately owned factories is that there is no logic to under promising if you can barely even compete when you incredibly over promise.

Third, there is more to it than domestic pressures too. Foreigners, for our part, perpetuate the problem since we typically won't even talk with factories that don't provide perfect samples. (And why should we?) I talk with factories about managing my expectations, but they always counter that I chose them because of how good the sample was...so why should the factory believe that it's true!?

Fourth, the larger idea of proactively managing client expectations rather than just managing internal production (costs) is not a concept that I see anyone actively following. (I mean, unless you count hiding mistakes, cooking the books and passing off lower quality components as client management, I don't see this.) Instead of managing expectations, factories always claim to be able to do everything at the highest possible quality levels. Chinese suppliers are infamous for never saying no, believing that if there is money then they can either figure it out or sub it out. My theory is that if the factory is so honest that they're willing to lose business by telling me 'no' then that's someone I want to work with in the future.

This proactive management is then the same as other concepts like the "if-then" propositions (I've been told it doesn't translate very well in Chinese—it's not a literal direct linkage scenario like it is in English), forecasting real expenses and extrapolating new solutions based on previous problems; these are just concepts that are getting completely lost in translation. Either Chinese are not understanding the ideas coming from the West or the foreigners are not understanding the implementation of these ideas in Chinese businesses. Either way, expectations are not being met on either side of the agreements.

Here's one example from our work this week.

We are managing the production of furniture for a client in the US right now. The factory we are working with is honestly quite good. We really like working with the management as they seem to be willing to solve problems and have helped significantly with design and development. On the whole a good experience. But we've had some painting issues recently and the response from the factory hasn't been as cooperative as we'd have liked or have come to expect. (See, we're spoiled—expectations were not managed well!)

Everyone that has ever worked in China and raised questions about quality has no doubt heard the line "No one can match sample 100%" or something similar. Well we got a newer version this week when questioning painting quality. The boss told me "If you were as professional in woodworking as we are you'd know that this really isn't a problem." I laughed out loud.

Now, I can admit that he's partially right. I'm not a woodworking professional. But I do know when I can see and feel that pieces don't have lacquer on the top of the paint. I do know when paint is too thin and when I can see the wood through the paint. I also know that the samples had more layers of both paint and lacquer than the production pieces. And finally, I also know that paint and lacquer are expensive and the costs of an extra coat or two of each is a lot of money when you’re making 7 containers of furniture.

The actual problem is solvable-more paint and more lacquer (and more cowbell! yea!)-and they eventually agreed to fix it. But the frustration getting to "solved" was significant for both sides in terms of time and money and emotion. One of the factory people mentioned to us "We thought we would have problems with you since your QC is so strict." Of course we never had this discussion until after there were problems-and if they really did think this, why didn't they prepare for it or mention it to us?

Another manager mentioned "We knew that we couldn't do the order as good as the samples. We thought you knew this too." This is the whole point—how are foreign buyers supposed to know this without being told? Are we buyers just too optimistic and stubborn? After years of difficult buying experiences shouldn't we know this already? Conversely, should factories know that after years of fights over QC with foreign buyers that this time isn't going to be any different either?

I suggest to new buyers that they proactively let factories know what to expect. For example, we try to lay out very clearly before we pay deposits that we really are going to be VERY strict and we're expecting to follow our agreements and standards exactly. We spend a lot of money and time to get people into factories BEFORE we pay any monies just to make these things clear to multiple levels of factory management. We want factories to know that we are not going to under-deliver in anyway on our promises to be really strict when it comes to QC and getting everything as close to 100% as physically possible. I figure I may be a pain in the butt, but at least I’m going to be honest and upfront about it.

I just wish that factories would do the same. But they won't; they're sure it'll cost them deposits. Ironically, getting orders with golden samples they can't match is what will cause clients to seek out other supplier options.

Three other goodies this week.

1. Printing, painting, product colors and packaging are some of those little things that can make good product look great. If you can get your colors and your printing right you can really dress up average product to meet infamous "international" standards. (Just look at what lipstick does for Sara Palin!)

   I spent the last week working with three different printing factories (each doing a different kind of printing) for three different clients. I was told the same thing at all three different factories-"wow, you really know about printing." Now, usually compliments from Chinese are about as insincere as Chinese contracts, but when every one said the exact same thing I asked, "What do your other client usually do?" Again, all three basically said some version of this same thing, "Usually nobody ever comes to check printing. But if they do come they are the ones that made the product, they don't know anything about printing."

   It's amazing to me that foreign companies will spend tens of thousands of dollars on product development and then do the packaging as an after thought. No professional QC on the one thing that everyone will see, the packaging, is just like wasting money!!

2. A couple of funny comments from factory bosses this week:

   Plastic injection factory boss to me when I told him that we were not going to accept the current level of product quality. "Plastics is not like wood or printing. It takes skill and it's very difficult to get right. You can't get 100%."

   Wood factory boss to me when I told him that we were not going to accept the current level of product quality. "Woodwork is very difficult. It's not like printing; it's very complex. You can never get 100%."

   Print factory boss to me when I QC’d my own printing. "Printing is difficult. It's not like mold injection stuff where you just make a mold and then let the machine do the work-you have to constantly watch printing."

   These three comments together this week reminded me of another one of my (crackpot?) theories about "business people" in China. Here goes:

   Nobody in any office under the age of 25 has ever had a job before the job they’ve got now. Chances are, Chinese people under 35 have only ever worked in one industry in one city since college. They have never had part time or after school jobs or had to put themselves through college. They never rebuilt their first car (or any car) when they were 15. The can't change a tire, the oil, wiper blades or a taillight. At home, they don't know how to change the lights, build Ikea-type furniture or wire a stereo/TV or fix anything when it breaks. Why?

   The One Child Policy and Low Cost Labor.

   First, if you have one child and 4-6 adults in every house, the kid isn’t going to do anything but go to school, eat, play and complain. School is more important than anything else because he (usually a he) has a lot of people to take care of and school is the ticket for all 7 people to retire happily.

   Second, it only costs 10RMB to have someone from the apartment management office come up and fix anything/everything for them. So why do anything yourself? (For a $1.25 I don't do anything here either.)

   Third, there is face in NOT doing manual labor type jobs and paying other people to do it for you.

   Finally, because there is so much cheap labor everyone is incredibly specialized (limited) in their variety of job skills. Basically, everyone does their own (one) job very very well but no one has a clue about anyone else's job here because they’ve never had another job and chances are their parents were farmers (meaning they didn't learn business from their parents/environment growing up).

   Just one more reason why you shouldn't just blindly accept sub-contractors or factories offering to make things they've never made before.

3. And finally, partial comments from readers to the SRI blog this week. I’m only posting partial comments since this is a family show.

   "This isn't unique to China at all." Yea, you're probably right, but that doesn't mean that it isn't true in (my) China. I'm sure that tons of the things I write about China could be said about 50 other countries-thing is, I'm not writing about those 50 other countries. Just China. You want to make the cross-cultural comparisons? Knock yourself out!

   "Not all Chinese are dishonest." So true, so true. But there are enough Chinese who themselves recognize serious ethical issues within Chinese business culture that warnings for foreigners are, I think, warranted. And I don't think that it's racist to say that the system here is amoral and significantly different from what many Westerners are used to. And why, in this glorious, Obama post-racial paradise can-t I say this anyway?!