Australian companies often feel they have a lot to offer their Chinese business partners, but as Robert Rath, Sensis CEO, China, tells Sophie Loras, the experience can be mutually beneficial.

The Sensis team in Beijing: Joe Tong, Sensis China President, Daniel Liu, Commercial Specialist, Luke O’Neil, Commercial Manager, Robert Rath, Sensis China CEO, Bruce Akhurst, Sensis CEO.

When Telstra acquired 51 percent of China's leading online real estate site, SouFun, in 2006, the last thing on the agenda was to start making major changes to the Chinese management structure. As a Fortune 500 company, Telstra was able to introduce better financial reporting, business planning and the disciplines that come with that, but essentially, management of the Chinese acquisition remained untouched.

It is a model Telstra, through its advertising arm, Sensis, has implemented with all its recent Chinese online acquisitions, the latest in June this year, of 55 percent shares in Norstar Media and Autohome/PCPop.

"Our goal is to field a large-scale operational business in China and be here for the long term," says Sensis China chief executive Robert Rath.

"And with SouFun, we like the CEO, we like the way they run the business and we see that our role is to support them - they know how to run businesses better than anyone else in China in our field. So we look for active partnerships to help them."

For the first half of 2007, Sensis spent its time understanding and forming good working relationships with its SouFun management. "It was in that process that it became very apparent that there was an opportunity for a two-way exchange for knowledge, technology, know-how, skills, expertise and people," says Rath.

"We always thought it was possible but to actually see real opportunities there was pretty exciting."

It has also been an opportunity to not only share in a commitment to providing skills, resources and capabilities into China but also use the opportunity to learn as much as possible from the Chinese expertise for Telstra's domestic business in Australia.

"When we look at the businesses we have just acquired and other interests we are fielding in China about technology, our observation is that the Chinese companies we have got to know and are familiar with are very good at technology, they are very skilled developers of software, they are very skilled developers of web design, they are very skilled at content management - so we think there is a great opportunity and scope over the next few years for us to learn from our Chinese partners how they run these large businesses."

To give a sense of scale, Sensis's online network attracts 12.5 million unique visitors each month. Compare that figure to the 142 million unique visitors to Telstra's Chinese businesses, (among them, SouFun, PCPop, Autohome and Che168), in June 2008 alone, and it is easy to see what the Chinese have to offer their Australian counterparts.

"If you just look at those numbers you see that our Chinese partners have learnt to deal with scale, they've learnt to deal with volume, they've been able to manage unit costs extraordinarily well," says Rath.

"One of the things that Sol Trujillo, our CEO sees, believes in and is passionate about, is the development of the China economy, the China environment and how sophisticated the Chinese are in terms of their use of technology and telecommunications," he says.

Telstra is ambitiously aiming to expand SouFun into 100 Chinese cities by the end of 2008. "If you think about how the Chinese economy is growing there is a lot of emphasis on economic development in tier-two, tierthree and tier-four cities, and that drives a lot of need for housing and when you have got a house, you furnish the house which drives the SouFun business," says Rath.

In the new businesses, Telstra has looked at the ever-increasing and lucrative Chinese automotive sector. "We see car ownership at a very low percentage penetration in China at the moment but within 2009-2010 it will be the largest automotive industry in the world. It's certainly already one of the most competitive, with around 150 different makes and models of cars... with cars come car accessories, car insurance, car finance and car servicing."

Then there is the information technology sector. The Chinese, says Rath, are very sophisticated users of technology and one need only look at the rapid turnover of mobile phones in China to appreciate that sophistication.

"The surveys we do, find that living online is not a research task, it's actually the way the
Chinese live their life - it's the way they spend time on blogs, the way they get their entertainment, they share information, they research products and services and so on."

The other area of mutual exchange has been around sales management. During exchange programs, SouFun staff sent to Australia have engaged in a range of activities including business needs analysis where they are encouraged to role play their sales processes and identify what the issues are.

"What we learnt in that process was how the sales processes in China work. There were a lot of similarities but quite a lot of differences as well," says Rath.

Not only did the exercise assist Telstra with its other Chinese acquisitions but also helped sales managers in Australia to think differently on how they run sales.

"A lot of Sensis customers are Chinese Australians... businesses that are set up in Australia that are run by people with a Chinese heritage... so we got a greater insight into how to position, how to build a relationship and rapport, how to maintain rapport and more attuned I guess to how to sell advertising to Australian businesses that were run by Australian-based Chinese."

Managing human resources has also been a focus.

"What are SouFun's HR practices and policies that help them go from being active in 54 cities when we acquired our share of the business in August 2006 to now being in 85 cities in June 2008? Now how do you recruit these people, how do you train them, what are the management techniques you do to have consistency of sales process and compliance and company policies?"

To better understand that process, SouFun's human resources general manager, Zhu Ye met with George Elsey, Sensis's general manager of HR.

"They do an extraordinarily good job at running a high-growth, complex, large business that is geographically dispersed. So those sorts of understandings and knowledge sharing sort of happen organically and really I think we are really only at the start of it," says Rath.

Richard Dai, the President of SouFun was also invited by Sol Trujillo to participate in the
Telstra Executive Leadership Development Program - a small group selected out of the
Telstra group to work closely with Trujillo for a period of a year or so on a specific project. So while Trujillo provides mentorship, Telstra also benefits from the expertise and knowledge of that group identifying further business opportunities or challenges.

"So the president of SouFun has actually given his expertise directly into the top echelons of Telstra about running businesses in China - so that covers every gamut of not only recruitment, but business models, advertising, sales processes, logistics, how you do rapid city expansion, how you manage rapid growth in an economy and I think that is a great example of Telstra wanting and being very willing to learn from our China partners and take that expertise into Telstra."

Rath oversees a Sensis team in Beijing of 11 staff, mostly Chinese recruits, and across the SouFun business alone, a further 3000 Chinese employees.

"It doesn't make economic sense to have hundreds of expats here," he says.

"I think in any business you have common goals and you focus on what is the business you are trying to achieve and that's generally the manifest of a good business plan. So our strategy coming into China has been to back the local management team," Rath says.

"I am not that familiar with how other companies have run their investments and I don't want to say we've cracked the magic formula, but certainly for our long-term strategic interests, our desire to be a strong partner in China, this strategy is working well for us." ■

FACTS AND FIGURES
> 2008 (Q1) Internet penetration levels China wide was 19%-20%
This is the largest penetration level in the world (250 million users).

> In 2007 China had 70 million new Internet users

> Online advertising is growing at around 30% compound each year.
Forecasts predict growth by 52% for 2008 and then around 30% for the next three years.

> The average Chinese spends around 19 hours a week on the Internet. In the US about 11 hours. In Australia about 10 hours.

* Source: Sensis