So many of us entrepreneurs think success depends on one critical factor in China: guanxi (relationship). The concept that “it’s not what you know, but who you know, that matters” is an international catchphrase, happily tossed around by business-minded go-getters with confidence that they do, in fact, know the “right people”.
But the reality – no matter where you are in the world, but especially in China – is that success in real entrepreneurship, in building a business from the ground up, depends on far more than rubbing shoulders in hopes of loopholes and favors.
Guanxi matters, but it won’t make your business profitable.
HIS STORY IS ONE OF EFFORT, INVESTMENT, AND CONNECTION.
In fact, success with a foreign-owned enterprise isn’t just about “who you know” or “what you know”. Smarts mean very little in successful entrepreneurship. It’s about establishing your idea, committing to your vision, and surrounding yourself with a community of local stakeholders.
SMART MEANS NOTHING
The real secret sauce to succeeding as an entrepreneur in China involves several factors.
Start with a small idea, something you understand. Solidify it in your mind, and remain aware of its value to the community. Expand your exposure and skill set. Enjoy the process.
An entrepreneur needs to be “all-in”, getting involved at every stage and decision of their business, knowing their team, and putting themselves out in the field instead of sitting behind a desk.
Build a team of locals, natives to the culture and community, who have a closer connection to your target market than an expat can ever have. Maintain a degree of humility and teachability because of that fact, and triumph your team’s expertise. This is especially important for startup leaders seeking growth in China: Your team is everything.
And for a foreign entrepreneur hoping to break through the inherent barriers for expats, providing real value to your stakeholders should be your priority, never an afterthought, if you intend to gain any real traction.
Grant shares his story of gripping onto his own idea – the human link to nature, and the need to preserve it – and connecting with people in the rural villages, not just metropolitans. For Grant, being willing to leave the comfort zone of many foreigners in China and establish trust and understanding with people outside Shanghai gave him the necessary leg up to get naked Resorts off the ground. He invested into the community, and in turn, they invested back into him.
In the big picture of entrepreneurship, “knowing” don’t matter nearly as much as building a business with your own two hands.
Click here or watch Grant’s full interview below, check out the interview transcript following, and subscribe to Collective’s YouTube channel to keep up with the “Entrepreneurs for Good” video series.
About Grant Horsfield, Naked Group
Grant Horsfield, a native of South Africa, is Founder and Chairman of the naked Group. Before coming to China in 2005, Grant worked in England and South Africa with more than 10 years of business ownership experience. In 2004, Grant received an MBA from University of Cape Town Graduate School of Business. Upon graduation, he decided to come to China as he saw China as the place where business opportunities lie.
After spending two years in Shanghai, he found himself overwhelmed by the metropolis and missed the natural beauty of his home. From this desire and need sprouted the concept for naked Retreats, which was launched in 2007.
Grant’s vision is to create sanctuaries that are in harmony with the environment, where people can appreciate the simple way of nature and embrace the naked lifestyle. Grant’s tireless efforts in promoting eco-tourism in the rural areas has not only created jobs, but also inspired pride for the local community.
For more interviews from Collective Responsibility’s “Entrepreneurs for Good” series, check out the playlist here. Stay tuned for more clips and full interviews in the coming weeks.
This article was prepared by Gabrielle Williams, Research Analyst at Collective Responsibility.
Grant Horsfield, Entrepreneurs for Good: Full Interview Transcript
Grant: I think all business should really come from your own need. So in that case, it was more of like a demand for my personal life just to get out of the city. I always grew up in the country, so – I was a farmer, and I just wanted to get out. So that’s what drove me to kind of get out of the city. And ultimately, it grew from there. More people wanted to stay at our house, and the whole idea sort of developed.
DRIVEN BY BRAND
Grant: I’m really driven by brand, by brand recognition. I made this statement twenty years ago in an interview, where I said: What matters to me is I’ll be sitting in a bar, and over here somebody next door to me – talking about the company that I’ve created, or the product that I’ve created, or whatever I been – saying how it influenced their life or changed them in some way or another. And that really motivates me. It’s like, I want to do something and people go, “I can’t live without that thing.
And we were doing that in the resorts, and it was fun – but the resorts take sometimes five years to realize, and a huge amount of money. So we’ve got seven resorts in the pipeline, and it’s a lot of work doing that, but it doesn’t give me enough instant gratifications. So the Hubs came along, and Discovery came along, and Sailboat is really just a personal escape to the water! It’s hardly a business.
But I think to answer your question, brand – and just being able to do something and you look at it, and you say, “Wow, we did that.” And I really enjoyed bricks-and-mortar, but I’m enjoying technology at the same time. And my wife and I get a kick out of it, so at the moment, we still love it.
Smart means nothing. Smarts are only one-tenth of what you need to succeed. Hard work matters, and dedication, and not giving up, and tenacity – these things are so much more important to success. All right? So if you come from a difficult background, so to speak, you inherently really have that. How many second-generation and third-generation hugely successful families have seen successful children? Doesn’t happen. Why? “Because I’m just too comfortable.”
LEARNING FROM FAILURE
Grant: I’ve always naturally learnt from my mistakes because I never listened to anybody. In fact, I still don’t listen to everyone. So typically, I have to fall down, and then figure it out, and go, “Why didn’t you tell me?”
And they go, “We did, Grant.”
And I say, “I didn’t— you didn’t!“ Just an arrogant idiot most of the time. But trying to teach that or mentor that through your company, and try and teach people to not fear making a mistake is really, really hard in China. People are nervous. And I’m a big personality, so when I walk into a room, everyone’s a little bit – even more nervous.
But what we try and do at naked is we’re trying to push, push, push, “Go make a mistake!” And then celebrate the mistakes. Because if we can give that feeling to everyone, that it’s okay to f*ck up, then we will be innovative. We will do cool stuff. If everyone’s just terrified of making a mistake, you’re really going to go nowhere.
So it’s so much easier spoken, like this, to tell you that story. To make it actually happen in practice is really hard in China. It’s just, personality-wise, these guys are not…
Greatest example was 2004, when I closed down e-Bites – was my previous company, it was a big company, I won a big entrepreneur award in South Africa. I sold some technology, I made some money, but ultimately I closed the company because it grew too fast and I made a lot of mistakes. And I chose to take a year doing an MBA after that – not to learn anything from an MBA – it was the greatest excuse to spend time introspecting on what happened. And I spent the whole year, and I wrote every single thesis, or essay, or whatever I had to do, always related to my own experience with my company.
So that whole year was looking back and trying to see, “What did I do right? What did I do wrong?” And then I guess – I now recruit people based on their self-awareness. Because people that are typically more self-aware are just so much easier to work with. “I’m sh*t at a lot of stuff, and I’m going to tell you all those things that I’m sh*t at, and it’s okay because I’m quite good at these things.” As soon as I hear that, dude, I’ll find any job for you somewhere in this company. But that’s another trait that’s not very easily found in China.
Rich: Yeah. One of my finance professors said, “There’s only one person better than someone that’s always right: someone that’s always wrong.”
WHAT AN ENTREPRENEUR DOES
Grant: I should tell you that we were able to sell some equity in naked last year, which is the first time that we’ve ever sold equity in our company. It was a small portion, but it gave us enough money to certainly retire for the rest of my life.
And then we decided to throw everything back in the pot, and build out these Hubs. All of our money. So going and throwing it all back in again, all the chips back on the table, I think that’s – an entrepreneur, that’s what he does. And my mum said I’ll make more money than anybody I’ll ever know – but I’ll die broke!
Rich: Got to keep trying, huh?
Grant: Yeah, so you know. It’s part of a cycle, and I’m not afraid of it. I’m not afraid of that failure, so to speak.
WE ONLY LIVE ONCE. DO IT.
Grant: If you have something, you should do it. You should try and do it. We only live once, and there’s no afterlife, in my humble opinion. So if you don’t try something and you’ve been dreaming of it, there’s something wrong with you, inherently. A lot of people are like that.
That was something that was really important to us from the beginning, was: How do we leave an imprint on someone that they might actually take home and do themselves?
We believe you can’t hard sell it. You really just can’t push your ideals on other people, and in China, they really don’t respond well to any ideals being pushed on them. But they like to follow and copy. So you’re just leaving it there, giving the content, making sure they can read it – we have a museum that showcases how we built stuff.
But China’s going through that learning process, and they’re the smartest people in the world. I believe that. And they will get through it, and then they will innovate, and then they will be better.
Rich: But are they the smartest, or have they just got the best hustle right now? Like, they’ll work through it.
Grant: Yeah, of course. Of course. If you grew up in hardship and difficult times, it drives you harder than anyone else.
I came here with a purpose to try and find something to sell to China. I got a job with a consulting firm in South Africa who brought me here – that was kind of a gig just to allow me to be here and explore what’s available in China. And then I looked at so many products to try and bring to China, but ultimately, supply was always a problem.
And then this idea came along, and I said, “Well, maybe this is what I’m bringing. I’m bringing the African safari or the weekend getaway – which is so normal in my country. So it kind of just–
Rich: So you were already thinking “getaway”.
Grant: Yeah, “getaway” was a personal thing, but the first thing, the most important thing was “sell to China”. Sell to China, not buy from China. Everyone in that year, in those years – everyone was buying China, buying China. You come here, source, buy, sell, to export. We were always the other way. I always wanted to make the Chinese – I wanted to build a brand that China liked.
It was both the best thing we did as well as the hardest thing: trying to do everything yourself. I mean, once you’ve done it yourself once, and twice becomes easier, three times become easier – but it’s extremely hard to do anything in China, let alone build a resort in the middle of the country.
I have many Chinese friends that still can’t believe it’s real, that I managed to do that, because they say they couldn’t – they wouldn’t even be able to do it. And that’s actually more true than anything: A city person would really struggle to go to the countryside and build a resort, with the complications of the village people and stuff like that. But I’m much more comfortable with the farmers and the village peasants than I am with the city people. So you kind of have it easier for me, I guess.
Rich: I mean, it’s interesting. You understand the country more than the city person will. Is that a competitive advantage? Like, as an entrepreneur, you just can see things clearer, you’re willing to put up with pain more, you can talk people different? Is that what makes you unique? Or, is that what made you unique to–
YOU CAN’T HARD SELL IT
Grant: Ah. Yeah, I don’t know if it makes me any better or worse, but it’s definitely a massive advantage that came from Africa and the countryside of Africa. A farmer, or a laborer on a farm, in China is no different from a laborer in a farm in South Africa. In fact, probably the same for America, too. But very few people get to interact with that sort of person, as well as the very rich guy that you’re trying to sell a house to or invite to your resort. So I think the advantage probably I had, maybe, over some first-world country people, is I really related to these guys a lot easier. I enjoyed it, actually. I enjoyed the evenings in their houses, drinking baijiu, making friends – from the peasant farmer, to the village chief, to the party secretary. All of that.
IS CHINA DIFFERENT?
Grant: Is it different from anywhere else? I think it is, because it’s so gray. And the amount of times you get told “meibanfa” [“there’s no way”], or “I can’t help you,” or “There’s no direction for that”, or “I don’t know how to do this”. “You’re a foreigner. You can’t do that.” The amount of times you hit a brick wall and nobody knows the answer, it’s kind of like you get numb to it.
So over the years, I used to get really stressed, to the point that I was like close to having a heart attack. In fact, I had a heart attack, in 2009 – a “mild infarction”, or whatever they call it. And I was really stressed, everything was on the line…
And that tends to happen for any entrepreneur – you have moments where everything’s on the line. But I think it’s a bit like therapy, because if you come out of it, you become the most calm dude in the world. It’s like nothing can faze you. You drive down the road, and someone cuts you off – it’s like, “Hey dude. No worries, man.” Just nothing fazes you anymore. And I’ve kind of reached that phase.
Actually, I’ll tell you a story, just a funny story that’s an aside – you can maybe cut this later. But the hardest thing in business in China is government. And it takes a huge amount of time and energy. And I often ask myself, “Why do I– why can’t I have bigger guanxi (relationship) in bigger places that can solve these problems?” Because it’s a lot harder for foreign companies. The hurdles we get given are far more complicated than local companies, and that makes it quite difficult to compete.
Grant: I think there’s a huge number of examples in Yahoo, and Google, and Facebook, and I could go on and name all their failures. And it’s largely because of hurdles, and it’s difficult.
And yes, China wants Chinese, homebred companies to succeed. That’s why we are not a foreign company. We are a wholly owned foreign company, but the government knows us as Luoxing, and the brand, the Chinese brand is far more important. But still, it is the thing that if only I could not have to have all those hurdles.
Grant: There’s two types of companies. There’s the quiet company that sort of operates and makes profits, and it doesn’t like the limelight. It’s in the background. And then there’s the company like naked, which is trying to be a Brand.
And that can also have two types. You can be a really big company where you’re powerful, and you can be a middle-sized company, and then the kind of small company. And a lot of people want to sort of operate in the shadows because it’s a lot easier. You get less trouble. But as soon as you’re in the limelight, there’s a bigger target to shoot at. And sometimes I think that the whole world’s against me here. The government’s against me, and why’s somebody complaining about this? And five-year-olds giving me this trouble, for what reason? Who’s making the trouble for me?
And yes, I’ve had many thoughts of conspiracy theories about “Is naked getting too big now?” And the party secretary was just outside – the Shanghai party secretary – standing outside our door, talking with a whole crowd of people. And my staff were taking photos out the window, and I’m going like, “Oh, sh*t. I don’t want the party secretary of Shanghai talking outside my door. That can’t be good.”
And that’s not a good feeling to have, is it? I mean, we should be like, “Yay! Cool, man!”
Rich: “We’re being noticed!”
Grant: “He might say something in his next speech!” And I’m going like, “No, no more attention! Who’s going to knock on my door tomorrow?” But that’s China. And I don’t think it’s a conspiracy, I do think that Chinese companies, too, like to stay out of the limelight. And it’s difficult. That’s why we’re in the opposite trend. We’re trying to make a brand – which is a new thing to China. How many China brands do you know of? There’s so few.
Rich: Right. Especially foreign-built.
Grant: Yeah, well those are very few.
Rich: And not a global brand coming in, but a domestic brand in it’s own right. Right?
Grant: Yeah. Those are few.
When you’re an entrepreneur, you have an outcome in mind, and that’s kind of what you’re driving towards. And if building a relationship is going to help me get to the outcome, then that’s the purpose of the relationship, first and foremost.
However, along the way, you do meet some amazingly cool, nice people. And I’ve made some real, true friends. They’re not a lot, but who’s to say more than five is a big number, or a little number, or whatever the case might be. But I’ve made a few very, very good friends in the process. In fact, people that I count as my best friends in the world – they were supportive either from government-side or private-side. But that would be the same anywhere, I guess, in the world.
But the process of building the relations to get to the outcome? That’s a non-negotiable in China. If you don’t do that, you will fail. Not because it’s like you a friend to – you need to bribe someone or something. It’s not that. There are insurmountable problems every single day in a project that you – no one knows the solution. And if you don’t have someone that’s trying to help you, genuinely trying to help you, you’ll fail. Simple as that.
OWNING THE PROCESS
Grant: At naked, we do everything ourselves. And that’s because there’s a problem giving business out in China. It’s still very unreliable, and you’ll get more failure than you’ll get success. So we have a huge design studio with 35 people. We have an IT department, software coding, 30-something people. We have project management, finance, HR, every single function in a company – even down to construction, we have some people. So we do everything ourselves.
However – now, this is the trick. naked Hub, the whole idea of this business, is to try to change that, and to say that by creating many companies under one roof – literally, under a physical roof – you create a trust. So I don’t want to have an HR department. I want to outsource to that little HR company down the corridor. Because if he doesn’t do his job, I’m going to walk down there and pull his ear – which we can’t do in China.
And the trust of service business amongst China is so weak that, typically, we don’t outsource as much as we should.
Rich: Right, right.
Grant: And I think that a Hub, and the whole co-working atmosphere – we’ll have 50,000 meters at the end of this year. That will be 9,000 members; that’s probably something like 500 companies. You’ll find any company you need under that roof. Then you start to create companies with much smaller people, much lower HR requirements and stuff – just outsource. And only if it’s under one roof, where you can create a little of bit of trust.
I think 50% of the foreigners here are running away from something somewhere else, and that’s why they’re here. And there’s another 50% that are half-decent. But I don’t think that the sample of foreigners here is equivalent to the sample of foreigners in London, or New York, or another city like that. So I’ve had a lot of failure with foreigners.
Rich: Is it a hunger thing? Is it a skills gap? Is it just like a “F*ck you, I’m foreign, and therefore I’m better than the Chinese”? Or they’re just unwilling to–
Grant: It’s all of those things, you know? The whole “I’m better than Chinese” thing – that really bothers me, because I say, “I’m sorry, mate. You’re not.” My stars in this company are not foreigners. They’re Chinese. The people that have done the most for this company, the most valuable in this company, are Chinese people.
And if you don’t create a company driven by Chinese people in China, then there’s something wrong with your brain. You really need to realize that they’re able and competent, and able to do so much more than the foreigner.
But a foreigner with good self-awareness can do well here. But too many of them don’t have that. Too many of them come with a “F*ck you, I know what I’m doing, and you should listen to me because I’m a foreigner, and I know.” And they don’t. Typically, they’re actually here because they’re not that clever in the first place.
CULTURE AND STRUCTURE
Grant: You know, the company needs to have a certain formality to it. And I do everything I can to stop that. I hate it; it breaks creativity. This whole Hub business has been the best thing I’ve ever done because it’s broken up our company into – like, beer is okay to drink at 9 a.m. in the morning, and I encourage everyone to drink.
And I say, “It’s okay to be drunk and do some work. If it’s going to influence your work, then you should think about it – make an adult decision. If you’re a creative person and it’s going to help your work, go wild. Get hammered. I don’t care. You’re an adult.
But we’re breaking up, and people are sitting around us, we don’t know who they are. They’re other companies, and we make friends, girls and boys are meeting each other and having fun things, and stuff like that. And that informality, in a way, is spurring creativity, innovation, pushing us to do cooler, new things – that’s what I’m in business for.
Yeah, I mean we might be bigger, and more structured. And there’s an HR department, there’s a marketing department, there’s a branding department, there’s all the departments, and they all have a VP of something, and everyone has some kind of role. But I spend most of my job trying to break all of that stuff down.
So yeah, it’s a good question. I mean, the first question about being on your own, lonely – it is kind of lonely at times. Most of the people we know work in multinationals and have no advice to offer anyone like me.
But we’d never looked at hospitality business – when we built naked Home, naked Stables, the first two resorts, we still never had anyone work for us who had worked even in a hospitality company. So when we were fitting out the rooms and designing it, it was purely how we thought it should be. And I think that was our biggest advantage, is we came with a completely clean slate.
And now that’s the same in every one of our businesses. I mean, naked Discovery – there’s nothing in China even close to what we’re trying to do at naked Discovery. Yes, the Hub business – there’s a similar WeWork company, but we still go about it our own individual approach. There’s not a WeWork in Shanghai yet to “copy”, so to speak. So we kind of do everything with our own blank piece of paper.
And I think that’s inherently what an entrepreneur is anyway. I mean, most entrepreneurs, anyway, like to do design their own logic and thinking to it.
You know, some days, you have a little bit of doubt and question whether you’re doing the right thing. Some days you think, “Oh, is there a problem with China?” But then you look at the fundamentals, and you realize that this is only going one place, certainly for the next decade, the fundamentals in this country are sound. The people are hungry. And if you’re in tourism and co-working spaces, or you’re in the right end of the curve, you can’t be doing bad stuff, it’s good for the world – everything’s right. So hopefully, when you tick all those kind of boxes, then hopefully the government realizes that you’re good, and that gives you the gap, so to speak.
Grant: We’ve done everything off our own skin. We had some early investors a long, long time ago with naked Home – but after that, it was just my wife and I for many years.
But how do I celebrate? I think the more the successful naked becomes, is giving me more freedom to spend doing the things that I’ve always dreamed of doing – which is typically on the water, sailing, and with my kids, teaching them to play the sports that I want to play.
As a company, we celebrate all the time. I think every day’s a party, and there’s a lot of idea amongst us that we should have too many milestone targets. We should just celebrate the journey as a bit of fun along the way, and if we’re having fun, we won’t even realize when we’ve reached a goal.
But in our business, often when the building is open, or the resort is opening, or the Hub is opening, you see that milestone. It’s so visible in front of you.
Rich: Yeah, yeah.
Grant: We typically always have a party, though. It involves getting drunk and misbehaving.
This interview was transcribed by Gabrielle Williams, Research Analyst at Collective Responsibility.