Ron Gifford's (boringly titled) Blog

Chances are that you've probably never heard of SMC Corporation, or if you have, you probably don't know much  about the company. So you might wonder why four of us spent half a day calling on SMC's executive leadership in Tokyo.

Let me tell you something: it was time well spent. 

First, a bit of background on the company: SMC is a $6 billion enterprise; founded 50 years ago in Japan, it now has 320 subsidiaries and affiliates in 50 countries around the world. The company is the world leader in pneumatic control technology -- high tech devices increasingly found in the automotive sector, medical diagnostic equipment, food processors, machine tools and thousands of other places.

While SMC has been in the Indianapolis area since the 1970's, the company broke ground three years ago in Noblesville to establish its North American headquarters, also known as the U.S. Technical Center.  The facility employs 130 engineers and numerous support personnel in an 800,000 square foot facility just off Exit 10 in Noblesville.

So that's why four of us -- Noblesville Mayor John Ditslear, city Economic Development director Kevin Kelly, Theresa Kulczak of the Japan America Society of Indiana, and me -- paid a courtesy call on SMC Chairman Yoshiyuki Takada, President Katsunori Maruyama, and Executive Managing Director Ikuji Usui at SMC's corporate headquarters in Chiyoda-ku, Tokyo.

Mr. Takada founded the company 50 years ago; a distinguished and soft-spoken man, he's exactly who you'd expect central casting to cast as the senior executive of a leading Japanese company. His trip to the Noblesville facility groundbreaking three years ago was his last visit to the continental U.S., although we did learn he loves to take golf vacations on Oahu.  

The meeting went great, just about as you'd expect. Mayor Ditslear did an excellent job expressing the community's appreciation for the company's presence, and offered to be of additional assistance in helping the company grow and succeed. Through an interpreter, Mr. Takada expressed the company's thanks to the community for its support. Lots of small talk, pictures, hand shakes, etc.

And then the fun part began.

Our group piled into a company van and followed the execs to Zakura, a restaurant a couple miles away. Relieved of our shoes, we were ushered into a private tatami mat room to sit around the low table (fortunately, a leg well below the table meant we didn't have to sit cross-legged for two hours).

"Would you like Western-style food or traditional Japanese fare?" Takada-san asked.

Traditional Japanese style, we quickly replied. "How about a beer?" they asked.  Ah, yes: beer, the universal language. Didn't want to be rude and make our guests drink alone, so of course we said yes. 

And then the first dish appeared. The barbeque sauce nicely highlighted the rings of the octopus tentacles as they sat on the plates before us. For just a moment, I wondered if we might not have overstated our zeal for an authentic Japanese dining experience. But what the heck; there was no going back now. With a silent shout of "banzai!" I dove into the octopus with gusto.   Quite tasty, it turns out; tastes nothing at all like chicken, but was nonetheless very delectable.

Next up: a course of blowfish. Yes: the fish that can kill you if prepared improperly.  Hmm.  I made a quick risk assessment: Takada-san was going to eat the same thing as the rest of us. It would be very bad for business if the restaurant injured the chairman of a major Japanese corporation during lunch. So I figured they'd be careful. Turns out I was right. And guess what: the blowfish did kind of taste like chicken.

Two hours later we'd gone through sashimi (tuna and snapper); soba noodles with raw quail egg; spiced beef and vegetables; green tea ice cream and sherbet. More importantly, we'd spent two hours getting to know the top management of a growing company that has its eyes on additional opportunities around the world, any of which might bring more benefit to our region. Sitting on a half billion dollars in cash reserves and with an eye toward bargain shopping in this economy, SMC Corporation might well become much better known in our community in the coming years.

We concluded a wonderful meal with new friends, and made our way back to the company van.  Our parting image was of the distinguished Takada-san and his executive leadership team, lined up on the sidewalk, bowing as our minivan pulled away from the curb.  When was the last time you saw an American CEO do that after a business lunch with strangers?

What do you hope to accomplish as a result of this trip? (any tangible ROI in mind?)

We decided to invest in this trip so we could begin building relationships in those Chinese business sectors that are on the verge of making significant investments in the United States -- sectors such as advanced automotive and life sciences, for example. Chinese companies will begin investing in the U.S. for one of three reasons: access to technologies and innovation; access to customer markets; and access to a better platform for global marketing (in other words, "Made in the USA" carries more brand value than "Made in China.")

In China, business opportunities are driven by "guanxi" -- that is, relationships. If there's no guanxi, there's no deal. So we see this as a long-term investment. People have asked me if we're going to bring any new deals home, or have any new business announcements from this trip. As much as we wish that the world worked that way, frankly, that's just wishful thinking. Deals don't happen from one-time visits in the States, and they certainly don't happen that way in China. This is a long-term strategy, not unlike the successful strategy that the state has followed in attracting Japanese investment. Contacts originally made back in the 1980's have borne recent fruit; and we plan to cultivate long term relationships that we hope will eventually lead to a series of "overnight" successes.

Our specific strategy is to create a network of business and government contacts in these key sectors; keep those business advisors, officials and other "influencers" well-informed about the opportunities in the Indianapolis region; and invite Chinese business leaders to visit our community to experience its assets first hand.

So at 8:00 o'clock this morning, the delegation boarded the bus and began the three-hour drive from Shanghai to Hangzhou. Governor Daniels called shotgun; yes, sometimes it's good to be governor. I sat next to Mayor Wayne Seybold of Marion; yes, sometimes it's good to be mayor. Anyway, I had a great conversation with the Mayor about the innovative things they're doing in his community to spur economic growth. This is his third trip to China in the past 9 months, and each time, he's following up with companies and contacts to make the case for investing in Marion. It sounds like his community has some great opportunities as a result of his hard work, and we all can benefit from Mayor Seybold's example here: be strategic, committed, and focused on the long-term. (In case you're wondering, this is an unpaid, unsolicited commercial for Mayor Seybold; I just think it's important to give credit to creative public leaders).

After sitting in Shanghai rush hour traffic for about an hour (trust me, after sitting in this stuff for two days, the traffic on I-69/I-465 each morning should be embarrassed to call itself congestion), we hit clear sailing for our next destination: Hangzhou, the capital city of Zhejiang province.

Our tour guide, a native Shanghainese, cracked us up when she referred to Hangzhou, with no sense of irony, as a small bedroom suburb of Shanghai. Small, as in only 6 million+ people living there (compared to Shanghai's 20+ million residents). 

For all of its modern ways -- nice charter bus, new highways -- China can still surprise you with a throwback to days gone by. We stopped at a rest stop after a couple of hours for a coffee and restroom break, and just as we were about to hop off the bus to grab a snack, the tour guide reminded the women to take their own toilet paper with them. Yeah, that's right, it's BYOTP in most public toilets in China. (And now you know why pocket size Kleenexes were on the suggested packing list for the trip).

So on one hand, you have to pack your own paper for a public restroom that looked like it was channeling the 1950's. But a mere 100 meters away, running parallel to the interstate, work crews were building huge concrete pilings and supports for a high-speed rail track that will connect Shanghai and Hangzhou. So here's the question that interests me: do you think they'll have toilet paper in the bathrooms of the 265-mph bullet trains that will run on those new tracks? Who knows; maybe it's just easier to hold it when you're going that fast.

I simply can't describe all the construction activity we saw on the drive into Hangzhou. At one place, at least 20 sky cranes were lined up in a row, lifting midrise office or apartment buildings of 10-20 stories each out of the ground.

We arrived at the Hangzhou Shangri-La with just enough time to grab a bite for lunch before heading over to a special event on the hotel's grounds: the public launch of Hangzhou hybrid transit buses powered by Cummins engines.

The Hangzhou Transit Company has nearly 1,400 buses -- a third of its fleet -- that are powered by Cummins diesel engines. Today the company launched 50 new buses that employ hybrid technologies along side the diesel engine, that will permit fuel savings of 20% or more. Check out the Governor's website for more coverage of this event, if you're interested.

What's the Indiana connection, other than a great Indiana company doing good things on the other side of the globe? Cummins is a key partner in the "Hoosier Heavy Hybrid" initiative, working with Delphi, Duke Energy and Allison Transmission, among others, to create heavy and medium weight hybrids. You can check out a nifty little video on the program on the Central Indiana Corporate Partnership's website. Part of my focus on this trip has been talking about that initiative and many others, including a meeting tomorrow with a Chinese auto manufacturer to talk about electric and plug-in hybrid vehicles.

One last note: today was a very lucky day in China. The number 9 is considered to be a lucky number, so the date of 9/9/09 (or 09/9/9, as the Chinese might write it -- year, date, month) will only be surpassed in 90 years as the luckiest date on the calendar. That made it a good day to get married in China. As far as I know, none of our delegation participated in that local custom today. 

(It's 3:00 a.m. and I should be asleep; unfortunately, I think my bio-rhythms have finally figured out that I've been tricking them for the past couple days. So, as long as I'm up, I might as well tell you about my adventures in making new friends (or not) this evening. A word of caution: I'll have to cut this short if I get that phone call that Hillary Clinton warned us about.)

So, for awhile tonight, I was the most popular guy on Nanjing Road East.

It had been an awfully full day. If you've been following my tweets (I'm sure I've never used that phrase in a sentence before), you know that I bummed a ride with Governor Daniels early this morning (technically, I guess, yesterday morning as I write this) and headed over to the Shanghai World Financial Center for the second day of "Greentech: A Call to Action" -- a summit on clean tech issues sponsored by the American Chamber of Commerce in Shanghai and others. (You can read more about that in a separate blog post I'll put up, probably sometime after I take a nap today).

I went straight from the conference to the "Friends of Indiana" reception here at the hotel. Yes, the name aptly describes the event. Folks with a connection to our great state joined our delegation for some good old fashioned gripping and grinning (for some, the connection may simply have been the open bar and good hors d'oeuvres; they were gripped and grinned at nonetheless).

Anyway, as the reception wound up, I decided I needed to do some shopping for my two daughters. While others headed out to dinner, I headed to the concierge to get a recommendation for where to shop. "Bao Da Xiang Children's Store," came the reply -- a store just a short cab ride from the hotel in the midst of a shopping district. I knew this area had to be the place when I looked at the map the concierge gave me: the primary landmark marked on Nanjing Road East was "No. 1 Department Store." Hard to argue with that.

The cab ride took 10 minutes and cost 12 yuan -- about two bucks US. The streets were bustling as I hopped out of the cab and walked a block over to Nanjing Road East. It's a wide pedestrian mall, with ornate historic facades interspersed with sleek modern buildings lit up like the Las Vegas strip. As I stood in the street, looking at the card from the hotel and up at the signs, it occurred to me that reading Mandarin would have been a handy talent just about then.

"You looking for something?" I looked down at the young woman who had just asked me the question while invading my personal space just a bit too much. Oh well, they told us in our trip orientation that the Chinese tended to do that. "Yeah, I'm looking for this children's store . . . ."

"Oh, you don't want to shop," she interrupted. "You should buy me coffee."

Hmmm.   No, I don't want to buy you coffee.

"How about you buy me dinner and then I help you shop."

No, I'm not buying you dinner and you're not going shopping with me.

"Why, what's wrong with you? Don't you want to be my friend?  I just want to be friends. We have good time."

Okay . . . buh-bye! A few quick strides and I was about half a block away (one advantage of being 6 feet tall) when a young man grabbed my arm. "You need a new watch." Uh, no, no new watch. "How about a bag for your lady?"  No.  "You need a CD? DVD? Your shoes ugly; you need new shoes."

Nope, don't need anything; xie xie,  thanks for asking, gotta go now. And I left him in the wake of my quickening pace.

So I'm standing at a cross street, waiting to cut through the motorbikes and cabs like a contestant in a human Frogger game, when I feel another presence at my elbow. Different young woman, same spiel.   "You want to buy me coffee?"

No.

"I just want to be friends. Don't you want to be my friend? If we be friends, we have good time."

No, not happening, not interested in being your friend . . . . hey, you see those German guys over there, I bet they want to be friends. And off I go; but guess who I run into?

"Hey, mister, you need a new watch. Wow, those some ugly shoes."

THEY ARE NOT UGLY SHOES, THANK YOU VERY MUCH, AND NO, I DON'T NEED A WATCH.

"Don't have to be cranky about it." You're right; sorry. "You need CDs? DVDs? How about some shoes or cute girl?" Arrrggghhhh.

It pretty much went on like this for 4 or 5 blocks; I kept wondering, am I wearing some logo that translates as "Easy Mark" in Chinese?

Maybe the deepening scowl on my face dissuaded them from coming up to me anymore. The last young woman who wanted to be my friend kind of took the brunt of it.

"Look, lady, unless you're the CEO of a major life science research firm or the majority shareholder in an advanced technology company, no, I do not want to buy you coffee, have dinner with you, let you shop for me or be your friend. GOT IT?"

"Wow, you crazy man."

You better believe it, kiddo; go tell all your friends.
 

• Experienced several new and interesting food dishes, some of which I can't describe more specifically than animal, vegetable or mineral.
   
• Learned that you apparently cannot get Chinese food in China: sweet and sour chicken has not been served at any meal.  I wonder if these banquets have a takeout menu . . . .
   
• Discovered that the ritual of offering formal toasts can get you pretty toasted if you aren't careful -- and that was just at lunch.

• Met incredibly interesting people at the Cummins supplier conference, the Zhejiang Chamber of Commerce in Shanghai, and the Hoosier Club reception.  Significant follow up opportunities on numerous deals.
   
• Spent a lot of time driving slowly through crowded Shanghai streets, watching as our bus driver defied the laws of physics to get the bus into places it should not have fit.
   
• Marveled at the growing Shanghai skyline and the Chinese's seeming fascination with building the tallest building in the world. 

If you've spent any time around a swimming pool and kids, you know that inevitably you're going to start hearing "Marco . . . . Polo . . . . Marco . . . . Polo." You know how it goes: one kid closes her eyes while the other kids swim away, and then starts yelling "Marco" in hopes that she can blindly find her buddies as they practice water-ventriloquism while shouting "Polo."

The real Marco Polo, of course, helped introduce Europeans to central Asia and China in the late 13th and early 14th centuries. The Venetian explorer Polo spent 24 years in Asia, and the anecdotes of his adventures were catalogued in the popular book, The Travels of Marco Polo.

So what does the children's pool game have to do with the intrepid explorer and trader? I have no clue. Can't really get a definitive answer on that one (although someone in northern Indiana claims to have invented the game in the 1960's).

But here's something I do know: When you go on a business development trip to China, you really want to be more like the merchants of Venice than the kids in the pool. I suppose you could wander around the country, blindly calling out for deals, hoping to hear a lucky response that would give you something  to take home other than nice pictures of yourself at the Great Wall. But that doesn't seem to be such a good strategy.

So here's the plan as I join Governor Daniels on the state's trade and investment trip to China and Japan, starting tomorrow. In addition to attending several of the substantive meetings and networking events that the state has lined up, I'm going to be meeting separately with Chinese business leaders, investment consultants, development companies, and venture capitalists to talk about business opportunities in our region. We've done our homework and know exactly who we're going to talk to.

My goal is straightforward: target those Chinese business sectors that are on the verge of making significant investments in the United States -- think automotive and life sciences, for starters -- and look for opportunities to work together to establish relationships in China and Indiana. This trip is all about building "guanxi" -- relationships.

I'll be blogging about my meetings, our experiences, our reactions, and whatever else seems appropriate to share. It's my first trip to Asia, which is very exciting, and I promise to avoid most  activities that could create international incidents. And as if that's not enough, I'm going to be tweeting my way through it all:  you can follow me at twitter.com/RDGifford.

We leave Indianapolis at 1:22 p.m. on Saturday, and after a short layover in Detroit, take to the air for 14.5 hours until we land in Shanghai at 7:00 p.m. Sunday evening (7:00 a.m. Sunday for those of you staying here).  As I told my kids, I'm going to the future. And I'm taking two suitcases, but not a single swimsuit. No pool games on this trip for me.

Bright Ideas

Bright Automotive is another company trying to get a foothold. Launched by people at the Rocky Mountain Institute, idealistic home to well-known energy guru Amory Lovins, Bright Automotive hopes to market a hybrid-electric van that would get six to eight times the mileage current fleet vans get.

It wants to start production in 2012 and sell 50,000 vans in 2013. Using other companies' components and its own design, Bright says it can make vans that would travel about 30 miles on a battery and as much as 400 miles on a charge and a tank of fuel.

Based in Anderson, Ind., it has collected about $20 million in support from companies like Google, Alcoa and Duke Energy. "We have hundreds of trucks," said Duke Energy spokesman Tom Williams. "We could buy as many as 200 off the bat."

But Bright Automotive, which currently employs more than 30 people, needs much more and is seeking about $450 million in loans from the Energy Department authorized by the 2007 energy bill. If the money comes through, Bright wants to ramp up to a thousand people and will employ many more at supplier companies.

Many of Bright's engineers and executives are bruised veterans of the electric car business. Bright chief executive John E. Waters was the battery pack engineer for GM's EV1, an electric vehicle briefly produced in the 1990s that inspired a loyal band of followers but was eliminated by the company. Waters is proud of the vehicle and said "my phone never rang from one customer complaining about the range or performance of the battery." The disappointment at EV1's cancellation, he said, still stings. "Those of us who lived through that are cautious about experiencing that again."

Since leaving GM, Waters has worked on lithium ion battery technology at auto parts maker Delphi and EnerDel. He developed the lithium ion battery system used in the Segway Human Transporter.

Waters says that Bright's small size is an advantage, not a handicap. He says most major auto companies have relatively small teams of 200 or so people designing cars with parts from disparate suppliers.

In Bright's case, its car's interior will be made by Johnson Controls from recyclable materials. Alcoa will provide aluminum for the rust-free exterior. Door handles and brakes will come from the major manufacturers. Bosch will provide the rear axle. Several companies are hoping to make the batteries.

Keller says Bright's business model has a better chance of success because it is planning to sell to big companies with big fleets, most of them leased. For those companies, buying an electric van is a matter of dollars and cents. And they are easier to service.

Waters adds that once a car battery needs replacing, it can still be used by utilities for the storage of renewable electricity, thus giving the used batteries some value.

"This is a mission-based enterprise that makes environmental sense as well as economic sense," Waters said.