If you’re in the electronics business, then Asia is far more of an opportunity than it is a threat, argues Hal Philipp of Quantum Research
As an American who set up, and still runs, a British semiconductor company, my perspective on business is influenced by cultures from both sides of the Atlantic.
To me, one thing has become very apparent. In the electronics industry, the Brits tend to see China, and overseas markets in general, as threats to their business.
Meanwhile, the Americans see those overseas markets as opportunities to reduce costs, open up new markets, become more competitive and grow their enterprises.
In particular, there seems to be a fear of being 'ripped off' in China. It's a reasonable fear - but we've seen attempts to copy our patented charge-transfer sensing technology in Germany and the US. You simply can't do business without some element of risk, and you can't insure against everything.
If you have a product you believe in, that's differentiated from the competition, and that inspires the people in your company, the only way to realise its potential is to get it patented and get it out into the world - and I mean the whole world - and sell it. This has been our philosophy and, after a few stumbles along the way, we now running a business that's doubling every year. Here are just a few of the things we've learnt as we’ve gone along.
From the outset, we learned to manage our business for cash. We kept away from bank debt and didn't take advice on how to run our business from accountants or banks - they have their own agendas and I’ve yet to find their objectives aligned with ours.
We did take advantage of advice from government agencies that, at a price, were able to help us. The results were mixed. The worst money we spent was in employing a Business Link advisor for a year. He added nothing to our business and simply wasted our time and money.
On the other hand, the few thousand pounds we spent with the British Trade Consul in Japan delivered what I can only describe as the best marketing analysis I've ever seen and led to the successful appointment of a distributor that’s now doing a great job for us there.
When it came to applying for government grants, we found these to be a waste of time. There simply wasn't enough on offer to make it worth all the paperwork. And there were too many strings attached.
The much heralded 'think local' message of the marketing gurus is something we took seriously. And it has paid enormous dividends, without much outlay. To improve access to the US market we simply got a couple of US phone numbers permanently diverted to our UK office - you'd be amazed how many Americans still struggle with international dialing!
These were East Coast numbers, so we are only expected to be around until about 10pm at night; most of the time we are, but when we aren't we use a professional answering service so the customer always gets to speak to a live person. West Coast US customers are happy to accept that the East Coast closes five hours earlier, but they can get puzzled by European time zones. The cost of this little piece of internationalisation is negligible with respect to our total overheads.
In Taiwan this approach was not possible - we can't work all hours, or speak Chinese - so we set up a direct presence rather than take the distribution route. Taiwan and China are such huge opportunities for us that we didn't want to get the partial attention of a distributor or rep.
The total annual cost of having our own office and sales manager in the region is only £80,00 to £100,000 - well within the reach of mid-sized businesses and a bargain for getting good access to the world's fastest growing electronics market.
What's been the biggest challenge? I guess it has been, and still is, recruitment. My philosophy is to pay good money for top people and let them to earn a stake in the business. I believe that the way to build wealth is to create wealth for those that work around you.
But it’s still hard to find seasoned professionals who are prepared to take on a global sales or marketing role. And the growing legislative burdens imposed by government makes the whole recruitment issue even tougher.
After just a few years in business, half our sales are to Asia, a quarter to Europe and a quarter to the US, although a high proportion of sales into Asia are from US design wins. If we'd restricted ourselves to the 'comfort zone' of the UK, we'd be out of business by now.
There's a world of opportunity out there - staggeringly large new markets that need servicing - and all it takes is a little 'get up and go'. It used to be what the British were famous for, but I wonder if it will be again in the future.
Hal Philipp is CEO of UK semiconductor company Quantum Research Limited
www.qprox.com