Scale and speed: China’s USP in cleantech. Solving urban wastewater challenges.
For some years, we have been monitoring the growing number of examples of where Asian and western organizations are coming together to address environmental challenges for mutual economic benefit.
In the past 12-18 months, we have felt that there is a definite uptick in the activity levels. This has been confirmed by an analysis we just completed on the 100 companies we will release as the latest edition of the Global Cleantech 100. In the 6th edition, 20 of the European and North American companies in the GCT100 had at least one Asia-based investor. Two years later, in the 8th edition, that has risen to 34.
Wherever I can, I am trying to interview CEOs of western technology companies for which China, or at least Asia, is a key part of their global growth story, to tease out some thoughts for others to learn from. Scale and speed is the recurrent theme I am trying to highlight to our wider network.
Richard (CTG): Going back to the formation of the company, when did you imagine that China might become a significant part of your company’s future?
Ari (Organica Water): Around 2007-2008 it was clear that the rate of urbanization is such in China that there will be a lot of demand for a sustainable solution to the urban water cycle. From 2008 and 2011, we focused on establishing a couple of small scale references. It was only in mid-2012 when we started to really focus our resources on developing the China market, and we opened our office in Shanghai in 2013.
Richard: How did you get the first foothold into the Chinese market?
Ari: Our early contacts came through the government. High-level Chinese government delegations to Hungary were introduced to Organica and showed keen interest in having the solution introduced in China. Following the establishment of the first references, we made a very concerted effort to establish ourselves in the country, which included many trips to meet potential EPC/BOT partners, ultimately culminating in our hiring a Senior Sales Director and the Co-Founder of the company moving to China.
Richard: How different was your entry point/strategy from what you imagined your China strategy would be?
Ari: In the wastewater treatment industry, having references in a new market is crucial before real commercialization can begin, and China is no exception. This is especially true when you are putting the wastewater treatment plant in the middle of population centers, near high value real estate. Accordingly, we employed different strategies for establishing the first references, and then for actually developing the market once that happened. Once we got to the stage of focusing on the market, we were very clear about our strategy and we stuck to it.
Richard: How long did it take from the formulation of your China strategy to making your first sale?
Ari: Around 1.5 years.
Richard: How is China different than other overseas markets you do business in?
Ari: One interesting difference is speed. There is this term, “China speed,” which we use to indicate a super-fast, unconditional dedication to immediate response to clients’ often seemingly impossible requests. When close cooperation with partners on infrastructure projects is part of the go-to-market strategy, the ability to engage at this speed is a key to success. This speed ultimately results in faster sales cycles.
Richard: How has China fit into your wider Asian and global growth?
Ari: China and South Asia (including India) represent the largest and fastest opportunity globally in the municipal greenfield and retrofit space. The high rate of urbanization, ability to substantially reduce the cost of sewer networks (91% of total treatment costs), and limited land availability continuously generates the demand for the solution Organica has to offer. For this reason these markets represent the majority of our global growth, with China representing about half of the opportunities between the two.
Richard: What are the top 3 challenges you’ve faced throughout the “getting going in China” process?
Ari: Here would be my three:
- People. In my view, 90% of the final determinant of success or failure in any business is people. It was very hard to find and maintain the right team in the China market, as it is in most markets!
- Cultural differences. It takes time, sensitivity and humility to understand a very different culture. It requires an open and nimble organizational culture to understand the differences and adjust as necessary.
- Convincing the highly competent local experts. Wastewater treatment is a rather conservative and risk averse industry with very much a “I’ll believe it when I see it” attitude. Getting the decisionmakers to adopt a new solution for large size projects took a concerted effort of Organica’s top notch international team of professionals.
Richard: What are the top 3 suggestions you have for other small companies that are considering expanding to China?
Ari: Try these:
- Learn the market by experiencing it personally, develop clear goals and make sure you have all the resources necessary to execute.
- Don’t do it halfhearted. It is a large market with tremendous potential but can only be done with “all in.” There are plenty of opportunities for things to go wrong, and if the focus and the resources are not there, things will go off track. That means moving there, not flying in and out.
- Be ready to share. Independently of how good your technology or product may be, the Chinese partners are likely to put a higher value on the access to the market (which they provide) – at least on the long run. Be prepared to engage in a relationship where there is a clear path for the Chinese partner to gain more and more benefit from the relationship as time progresses.
Richard: Thank you, Ari, for your time and for sharing. Lots of good nuggets here.
If you wish to meet Organica Water, they will be at Cleantech Forum San Francisco, January 23-25, 2017 and are speaking at the Water Summit (within the Forum) on January 25th.
CTG is accepting applications for its fifth China Tour, March 20-23, 2017 to help more companies and investors meet some of the right people and get your China plans moving.