Chazen China: Companies, Culture, & Companionship

After a week stateside, it’s been hard spending the hours not surrounded by my forty-one closest new friends. I take solace in the late-night texts of “anyone awake?” and “I’m so jetlagged, looking through the pictures for the 50th time.” Yes, it is nice to be in control of my hourly schedule, but the packed days filled with company presentations and cultural immersions are missed. Transitioning back to the daily struggle of foraging for breakfast has me missing the second to none breakfast buffets. Beyond thinking about my new Seoulmates and breakfast dumplings, I’ve had time to reflect on the business lessons I learned.

We hear on certain news stations that Chinese companies have an unfair edge because the government subsidizes private enterprises. A firsthand experience is necessary to understand the extent of this intertwinement. As I referenced in previous posts, the opportunities the government bestowed on particular companies (e.g., free land or buildings and free capital) often defined their success. What was even more fascinating to witness was the lack of conversation around this dynamic. I actually attempted to broach the subject with an executive from Shanghai Pharmaceuticals Holding Co. by saying: “Apologies that I cannot understand this business fact, maybe it is because I’m too American, but…” After a couple minutes discussing the influence of Chinese government in business, I walked away with no better understanding of my original question. Rather, I started to question myself. Who am I to say their methodology is “wrong”? The American government funds basic scientific research via the NIH and then transfers the technology to private enterprises. The Chinese government funds basic scientific research and then transfers the technology to enterprises in which it maintains significant ownership. Personally, I don’t think this system can succeed in a modern global environment; however, it clearly is working for the businesses we visited.

The other tangible business difference I observed was the Chinese executives’ lack of stage presence when they were speaking to a packed room. This could be credited to the fact that English is often their second or third language. Nevertheless, they didn’t have the same control of the room as the executives I’ve heard speak in Uris. For better or  worse, the Chinese executives with whom we met were calmer, quieter, and humbler. Brilliant, yes, but not evidently able to arouse a crowd or motivate a workforce with a speech.

The Chinese healthcare companies we visited clearly are advancing technology, building business, and saving lives. Nonetheless, there was a consistent layer of the “Chinese way.” Maybe I’ve been too entrenched in American capitalism to recognize tangible examples of the “American way” beyond free market principles, but witnessing a government significantly influencing businesses was unique.

The friends I made and soup dumplings I slurped were unforgettable; however, I keep reminiscing about the inimitable experience of meeting with countless executives and touring their companies’ infrastructure. Executives took time from their busy days to present to us and answer our countless questions. As a business school student, there is no better way to understand a culture than to meet and question the companies growing within the benefits and limitations of that culture.

The Last Days of Chazen China

After a packed Thursday, including an evening alumni cocktail event overlooking the Bund, Friday was our last day of company visits.

Our first stop, Sequoia Capital, needs no introduction. As we walked pass the “Wall of Fame,” which included Paypal, Google, and Apple, we gathered around the conference room to hear Trency Gu eloquently describe the differences between Sequoia US and Sequoia China and TMT and healthcare investing. Unlike the US fund, Sequoia China does not exclusively invest in TMT; it also invests in healthcare, consumer, and industrials. While describing the healthcare investments, Ms. Gu said, “China is very good at the basic research science, but there are major gaps from basic science to translation into application and commercialization. China needs to put more effort into filling that gap, we need to get better at tech transfer.” This gap provides ample investment opportunity for Ms. Gu and Sequoia. After a moment for viewing pictures along the wall of fame, we thanked Ms. Gu for her time and traveled to our last group lunch.

Throughout the whole trip, the members of the Chazen group often found ourselves saying “Why don’t we do this in America,” or “We should bring this back home.” One of our favorites was the mass utilization of Lazy Susans. A Lazy Susan is welcoming in its efficiency, beautiful in its simplicity, and stunning in its functionality. Intellectual conversations are not interrupted by “Alex, can you pass the hoisin sauce?” or “Alex, can you pass the dumplings?” People are not embarrassed to eat the last piece of spicy Szechuan chicken because it is in Ernie’s reach zone, they can merely swirl the Lazy Susan and grab that piece of chicken. Ok, my ode to the Lazy Susan is now complete, had to share.

After lunch, we split into two group for a visit at iZhaohu. One group went to the corporate office and the other went to a care home. At the corporate office, we entered a room filled with flat screens tracking accident rates, the movement of elderly, morning wake up times, and various other metrics. We were shown IoT enabled home furniture and beds to track such metrics, the bed included an “Alexa” like screen that talked to senior citizens. We were impressed by the integration of AI and by all the technical advances on display. During the Q&A sessions we were told many of the objects shown in the promotional videos and in person were merely concepts and yet to be fully integrated. We were also informed that iZhaohu was able to grow from a handful to 70 locations in less than five years because the government provided cheap or free land/housing—another example of the intertwinement of government and private enterprises.

The two Chazen groups switched, and my group was off to the care home to see how much of the technology was implemented. The home is a short-term care facility for the elderly with injuries or those whom need monitoring for three to six months. As we walked through the facility, we saw vast similarities with US care facilities. The home was not for the mases, it was for those that could afford luxury. We were disappointed to see that many of the “wow” aspects of the videos were merely promotional and not implemented. Clearly iZhaohu has valuable ideas and technology, but implementation is not the norm. We look forward to following the iZhaohu story and someday adding their technological ideas to the list of “we should bring this to the US.”

At the end of the iZhaohu tour, we had a goodbye dinner for our fearless faculty advisor, Lorraine Marchand. Afterwards, it was time to entrench ourselves in the local culture and blow off some steam. We went out on the town and bonded as a group on the dancefloor and later in room 1012 over some late-night snacks. The next morning, a thin crew went sightseeing, but in the afternoon, almost everyone came to the lobby of the Shanghai Tower for the 45.8 mph elevator ride to the 118th floor observatory, 1791 feet in the air. We were fortunate that the smog and clouds were gone that day and we could see far into the distance. This was the last planned group event; standing on top of the world’s second largest building was a great way to conclude a wonderful trip.

Immersing in Chinese Healthcare Companies

After an epic day of sightseeing, we checked out of our hotel and headed to our last office visit in Beijing: DIH Technologies (“DIH”).

The pre-arrival bus discussion focused on how the scope, size, and geographic reach of DIH was not clear via publicly available information. The group was intrigued by how a company could focus on pharma and physical rehab innovation.

However, once we poured into DIH’s massive boardroom, our doubts were quickly squashed. The presenters explained the various rehabilitation machines and the separate pharmacy delivery machinery (the “Pharma Division” was more of a pill dispensing robotic division). We learned that DIH is indeed a global company with offices in Boston, Switzerland, and Hong Kong.

As with many growth stage healthcare companies, DIH referenced innovative use cases for artificial intelligence (“AI”) in combination with their currently available machinery. Typically, I roll my eyes when a company dedicates a significant amount of a company introduction to AI; while it has the capacity to be revolutionary, the revolution is not happening yet. However, there was something different about DIH. Maybe it was the numerous use cases or the multiple video clip examples, but it felt as if DIH’s AI revolution was just around the corner while most companies were barely ready to start. DIH believes that rehabilitation from injury should be a full body experience facilitated by their 360-degree full screen. AI puts the patient in the real world and has them perform tasks in a controlled environment (typically wearing a harness to avoid falling).

We left the boardroom  and wrapped up our visit with a quick show room tour of the various machines. Traditional Chinese Medicine (“TCM”) cares greatly about how the body interacts with the environment and this is a focus of DIH. Rehabilitation has always been a focus of TCM and it appears DIH will have a place in the rehabilitation ecosystem for many years to come.

Before boarding the bullet train to our next destination, we scattered around the train station for traditional train station food, Pizza Hut and McDonalds. After a clean, smooth, and enjoyable ride (a.k.a., the anti-Amtrak) we arrived in Shanghai. With no group dinner planned, we split up to dine at various locations and get a good night sleep before a packed day filled with three company visits.

The first stop was Shanghai Pharmaceuticals Holding Co Ltd (“SPH”), China’s number two pharmaceutical company. Many of us tangentially knew about SPH, roughly an $8 billion market cap, but walked away with a detailed understanding of how a Shanghai/HK dually listed publicly traded company that is 33.6% owned by the State operates in China. Regardless of the minority ownership, the State controls the board and thus, controls the company. The State, specifically the mayor of Shanghai’s office, must approve purchases above 300 million RMB. Regardless of this intertwinement of government and industry, SPH appears to be a successful pharmaceutical R&D, manufacturing, and distribution company. SPH might have the word “Shanghai” in its title, but it is a global firm with offices in San Diego and Philadelphia. Many pharma companies are global companies with headquarters in a certain location and domiciled in a certain country, but have a global culture, SPH clearly hopes to mimic such a model.

After a quick lunch, we headed to Lily Asia Ventures (“LAV”), one of the biggest early stage biotech-focused VC firms in China. Founded in 2008 as the corporate venture arm of Eli Lilly, it is now completely independent of its former pharma parent. There were rumblings that the Chazen group was feeling the angst of “case withdrawal” after a week away from school; fortunately LAV understood the needs of a business school audience and prepared three case studies to present. LAV did a phenomenal job at walking the group through actual investment theses without losing the group in deep scientific details. After learning about the biotech investing side in China, it was time to visit the Chinese arm of one of America’s innovative biotech companies.

Fosun Pharma (“Fosun”) is an integrated healthcare company with pharmaceutical, distribution, device, and aesthetic divisions. We met with the CEO of FosunKite, Fuson’s joint venture with Kite Pharma, part of Gilead Sciences after its August 2017 acquisition for $12 billion. Kite’s Yescarta is approved in the US; FosunKite is diligently working for CFDA approval. We learned the similarities and differences of the Chinese regulatory body. The CEO described how FosunKite is not merely a Yescarta in-licensed company, but also they are an R&D enterprise leveraging the intellectual talent of the Chinese universities and organizations. The group debated the cost of Yescarta, specifically where cost reduction could occur, and whether the Chinese market would react differently than the US market if a similar $375k list price is published. FosunKite provided a strong understanding of how an American biotechnology can symbiotically partner with a Chinese healthcare conglomerate. Based on what the Chazen group witnessed, many US companies would want to form similar ventures as FosunKite.

At the Very Center of Healthcare

China is a long distance from the Very Center of Business. The China Chazen group reunited for dinner on Sunday for a traditional Chinese dinner, lazy Susan included. We were excited to be together, but the energy was low because of a 10-hour tarmac delay on our flights and The Octagon. Regardless, we were looking forward to the real start to the trip, Monday morning’s first company visit.

We knew our anticipation was tangible when the Chazen leader complimented us on being on time for the morning bus. Our first stop was United Family Healthcare (“UFH”), China’s first US accredited hospital, founded by CBS alumni Roberta Lipson ‘78. For those of us that have spent time in hospitals, UFH appeared to be the same as any other US hospital. It was evident that Roberta’s business model was founded on importing the “American way” to the hospital (e.g., first hospital to broadly use Purell, first hospital to implement privacy dividers at the pharmacy, first hospital with a crash cart on each floor).

Roberta’s father-in-law died in a Chinese hospital when the physicians could not find the correct sized tube for incubation. Therefore, she’s made a number of innovations in her own hospital. For example, including a plastic, easily breakable lock on the crash cart to manage inventory throughout UFH. When something is removed from the crash cart, the lock is broken, which signals that inventory needs to be replenished. The simple lock is now implemented in numerous hospitals throughout China.

Roberta didn’t merely import da Vinci machines and Siemens MRI machines, she also imported a mindset far removed from the traditional hierarchical Chinese structure. UFH empowers nurses and pharmacists to question the physicians and express their views. Traditionally, in China, the physician’s word is taken as gospel and is not questioned. Roberta brought the American way to Chinese hospitals, but UFH needs to balance western medicine with the deep-rooted desire for traditional Chinese medicine (“TCM”). Roberta mentioned the difficulties of educating her patients on Western medicine. They utilize TCM as an adjunct therapy, not as a monotherapy. UFH can provide better care to their patients via the combination of imported western medicine and TCM.

Tuesday was a sightseeing day for the ages. As we walked pass the countless number of cameras, we entered Tiananmen Square and were amazed by the history of the place. We spent time taking pictures and admiring the omnipresent oil painting of Chairman Mao. As we posed for the group picture, Batman (our local tour guide) quickly sprung into action, leveraged his utility belt, and intercepted our CBS Chazen banner. He shook in fear at the thought of explaining to the Chinese military that “Chazen” was Columbia Business School’s institute for global business and not propaganda promoting revolutionary acts against the government.

After Tiananmen Square, we were off to the Forbidden City to walk through centuries-old history that makes American history seem pediatric. After a bus ride and a quick lunch, it was time for the big kahuna, the main reason millions of yearly tourists visit Beijing: the Great Wall. No smog-filled sky could keep us from walking on one of the new seven wonders of the world.

Logistics Now, China Later

              Tis the season of Columbia Chazen pre-trip meetings. While most groups are likely discussing the logistics of visiting vineyards in South America and the hippest restaurants in London, the China Healthcare Trip students had a very different conversation. Over delicious sesame noodles and dumplings at Han Dynasty restaurant, we chatted about the logistics of VPNs, the high security frisking students received while picking up visas, the annoyance of Facebook being blocked, and the necessity of avoiding sensitive government-related conversations. When we placed our Chazen bid points on the China Healthcare tour, we knew China would bring different logistical aspects. Nonetheless, the opportunity to meet with Lilly Asia, Shanghai Pharma, and Sequoia (to name a few healthcare companies) and have firsthand experience in the country referenced in all our classes seemed worth all the “hassle” of visiting a communist country.

              Admittingly, I am a healthcare nerd: since sophomore year of College, I’ve catered my academic and career choices towards the healthcare sector. Bias aside, the company visits on our upcoming trip are nothing short of impressive. Pharmaceutical, digital health, hospitals, and rehabilitation companies provide a diverse emergence into the Chinese healthcare industry. Now would be an appropriate time to publicly thank our hosts Chloe Li, Mingming Wu, and Tiffany Zhao. Without them, we would not be able to visit such a line up of companies. Maor Cohen and Daniyal Hussain deserve public acknowledgement for their leadership and dedication to bringing this trip to fruition.

              Some of us are lucky enough to make a pit stop in Seoul, Korea before the group reunites at the Renaissance Beijing Wangfujing Hotel on March 17th. We will spend the afternoon adjusting to the culture and walking around Beijing. We will start our company visits on Monday morning with a visit to United Family Healthcare. Stay tuned!