ROBERT Zou, founder and CEO of China’s first foreign-invested chain of dental clinics — Arrail Dental — was also among the first Chinese students to attend a university following the Cultural Revolution, when colleges were closed in China.
After eight years of working as a professional manager for a pharmaceuticals joint venture at Smith Kline in Tianjin, Zou attended Wharton in 1992, graduated in 1994, and then returned to China to start his business. Arrail Dental, founded in 1999, is now a recognised brand in high-end dental service with ten clinics in Beijing, Shanghai and Shenzhen. It employs 100 dentists to serve China’s increasingly wealthy urban middle class.
Zou sums up his successful career with typical modesty: “I am just lucky.” In an interview with China Knowledge@Wharton, Zou discusses his experience and makes some suggestions for would-be-entrepreneurs. Clarity of purpose is crucial, he says, as is the need to remain focused. “You have to defeat the feeling of loneliness when you start your own company,” he stresses.
Below is an edited transcript of the interview.
China Knowledge@Wharton: You were one of the first generation of students to go to college after the Cultural Revolution ended.
Zou: I think I am just lucky. As a teenager, I always enjoyed reading, even though I was not sure why. When the opportunity (to take the exam to go to university in 1977-78)) came up, I suddenly felt my passion for study was useful. So I was just lucky.
After graduation, I worked in a government organization for a few years, and then as a marketing manager for Tianjin Smith Kline & French Laboratories Ltd. (a joint venture by Smith Kline and a Chinese pharmaceutical company in Tianjin, started in 1984) for eight years, and then I went to Wharton in 1992. I started Arrail Dental in China in 1999.
China Knowledge@Wharton: What were the major drivers for you to start Arrail Dental ten years ago?
Zou: I think entrepreneurs tend to have very different driving forces and starting points. But they probably share one thing in common: A pursuit of something in life — maybe we could call it “idealism”?
I was a professional manager for nearly a decade, and then got an MBA degree and some experience in the finance industry. So what was next? Maybe something real? Something to keep me focused for the long term that could be developed into a sustainable business? I started to think seriously about these questions, starting from my days at Wharton.
China Knowledge@Wharton: Before you arrived at Wharton, what did you plan to do after graduation?
Zou: My aim was to be the general manager of TSKF after coming back from Wharton. That was what my application essay was all about. But after I arrived in the US, these targets began to be reconsidered and reviewed.
By the way, before the 1990s in China, we didn’t have any idea about entrepreneurship. We call it “Ge Ti Hu” in Chinese (which describes an individual who runs a small business). These were only people who had no other options in Chinese society (for example, people without proper jobs, or ex-convicts). But in the US, enterprises are all started by entrepreneurs, and the entrepreneurial spirit is highly respected.
So my idea to start a company basically emerged during my time at Wharton, though I was not too sure what to do. Then, by a coincidence, in 1998 I had an opportunity to start this dental service company, partly inspired by a strategic partner and investor.
So I began to do some research on the Chinese dental market. And I found it barely existed. There were almost no private dental clinics at that time. That was not right. The demand is obviously here — and according to our research is actually huge. So, after spending some time on market research, I came to the conclusion that this business model should work. What’s more, what we do is to help people to have a better life. Our company slogan is: “To Make You Smile More Confidently!” So that was how things got started.
China Knowledge@Wharton: In 1998, was it a problem for a foreign-invested dental clinic to get a licence?
Zou: It was a big challenge. Still, my analysis was basically that, since most business sectors were opening up to foreign investment, the health care service sector would surely follow sooner or later. And I thought dental services would be the first part of the industry to liberalise, as dentistry is hardly a “life or death” matter.
My previous experience in the pharmaceutical industry certainly helped a lot in getting the licence for Arrail Dental in 1999. Just one year later, China officially allowed private investment in clinics, especially dental clinics. Today, private dental clinics represent up to 40 per cent of the whole market, and you can find small clinics everywhere.
China Knowledge@Wharton: What were the major challenges in the beginning?
Zou: One main challenge was human resources. We greatly underestimated the difficulties.
China Knowledge@Wharton: Weren’t there enough qualified dentists?
Zou: There were many dentists. But the most challenging thing is that Chinese dentists were educated in a “cure the disease, save the life” ideology, which meant they didn’t care very much about how patients actually feel. Our idea is that dental service is by choice, so dentists have to acknowledge that health care is a service. But it really took a huge amount of effort to change our dentists’ mindsets.
So I spent most of my time in the clinic doing the training myself. The other challenge was that, although we expected huge demand from China’s middle class, the market needs to be nurtured. People don’t like going to the clinic unless they have a toothache.
On top of this, I have made a point of studying a lot companies’ histories, and I have found that what determines a firm’s success is not how good its technology is, or the sophistication of its business model. The key thing is whether the company has a healthy corporate culture.
China Knowledge@Wharton: How do you establish a company culture in a small start up?
Zou: It’s easy to say, and difficult to do.
The corporate culture is manifested in what you actually do. Since 1998, I have summarised it as: “Employee Oriented, Patients First.” Why employee oriented? If the people who provide the service are not happy, how do you expect the patients to be happy? So first of all, you have to make your employees happy.
Secondly, patients should be the centre of our work. If you visit a hospital, you see patients running around to find doctors, or the cashier, and the doctors just sit there waiting for patients to come to them. Our model is to make the doctors run around the patient, who just waits to be served. Everything is focused on the patients’ demands. I spent a lot of time chatting with our dentists to change their mindsets.
China Knowledge@Wharton: That could be a daunting challenge.
Zou: Yes, it’s very difficult. What we try to change is their way of thinking and doing things — the hardest things to change in a human being. But I think we did a good job. Now Arrail Dental is renowned for its good service,
China Knowledge@Wharton: How did you manage to succeed?
Zou: That has to do with my objective in starting a business. I didn’t want to do something just short term. My goal was to establish Arrail Dental as a sustainable clinic with a long tradition of its own.
If you want someone to have a commitment to you, you should have a commitment to him as well. So I make a commitment to my employees: We want to have you with us forever — I won’t give up on you. Half our people from 1999 are still with us today.
The same goes for our patients. We always place their long-term interests first, even if it seems to go against our immediate interests. We look at the long-term value, not the short-term effect. I believe consumers are smart: They can tell who is doing a good job for them.
China Knowledge@Wharton: Do you think this corporate culture springs out of your personality?
Zou: It might have some connection with my character, but I think it’s mainly about why you start your business. From the beginning, my objective was not just about making money, but to build a “one hundred year-old business.” So we have been cautious at every step.
China Knowledge@Wharton: For most start-ups, the toughest times are at the beginning. How did you survive those days, when demand was fragile?
Zou: We didn’t expand our business too rapidly at the beginning. One thing I still would like to stress is that the key issue for a company’s growth is people. If you can find the right people, and the right way of doing things, the business will soon enter on a healthy path.
China Knowledge@Wharton: How quickly have you grown in the past decade?
Zou: We have expanded cautiously. After ten years, we now have 100 dentists in ten clinics — four in Shanghai, four in Beijing and two in Shenzhen. But each individual clinic is fairly large.
China Knowledge@Wharton: Nowadays, some venture capital-backed start-ups may have a lot higher demands placed on them in terms of growth rates.
Zou: Yes, to make a profit and double it in three to five years, and to go public in five to seven years: We were relatively lucky in that regard. We have a number of investors, but no one asked me to do that. Mind you, our revenue growth rate has been strong, at 40 per cent to 50 per cent a year.
But it mustn’t be too fast. I am a big fan of mountaineering. I tell my colleagues that if your target is to arrive at the top, you can’t be too fast at the beginning, or you’ll get exhausted later on. Mountaineering is all about persistence.
On the other hand, the relatively slow pace may have something to do with our business nature. Healthcare is delivered by doctors. You have to recruit new doctors, and train them, and make sure they give high quality service. You can’t harm the brand, so you can’t take things too quickly.
China Knowledge@Wharton: It sounds like you haven’t come up against any huge obstacles along the way? What can would-be entrepreneurs learn from your experience?
Zou: I believe Arrail Dental has grown relatively smoothly. Nothing really dramatic has happened. It may have something to do with our expansion speed and our preparedness.
For anyone to start a business, I do think preparation really matters. Be prepared before you start up. In terms of business model, you have to be have a good idea about the market potential, how to grow your business and so forth.
At the same time, you have to consider this question very carefully: Do you really want to do it?
If you have thought it through thoroughly, you decide you really want to do it, and you are focused in doing it, there are always hope. Focus is the thing. Most people gave up halfway.
Frankly, at the beginning, it was a bit bumpy. When the business was not that stable, I thought about selling products to make up the cash flow. But when we tried it, I discovered that wasn’t an easy way to make money, either, because you also have to invest capital.
At the beginning, your resources are limited, so I had to choose where I was going invest — selling products, or in the clinic service? In the end, though it was painful, we cut back our efforts to sell other peoples’ products, and refocused all the resources and personnel on our clinic business. So I think being focused is really important.
China Knowledge@Wharton: But some people want to run several businesses at the same time.
Zou: You can do that if you have unlimited resources. But when the resources are limited, you have to ask yourself where you should invest. With the increasingly heated competition in every industry, it’s not easy to do even one thing well.
Being an entrepreneur is an adventure. Sometimes you have no choice but to put all your eggs in one basket — and then take good care of that basket. That’s the key.
As I mentioned just now, before you start up, you have to think over how you would like to grow your company. You have to build up a healthy company culture and mindset from the beginning. Of course, it will be difficult and even painful in the beginning, because the most urgent task for a start up is to survive. When humans face the challenge to survive, they often find it difficult to adhere to principles.
But you have to think of it this way: For what purpose do you want to survive? So you do have to stick to some principles, which can’t be given up for short-term objectives. You have to stick with it.
China Knowledge@Wharton: What is the biggest difference between being an entrepreneur and being a manager at a large company?
Zou: Being your own boss is lonelier. When I worked for SKSF, basically I only made decisions for one business unit. Most of the decisions were still made by others. Most of the time, it was team work. We would have a discussion, and then decide.
But as an entrepreneur, you have to make all the decisions yourself. You are the founder and CEO, and there is no one to share your feelings with. So you have to manage this feeling of loneliness … to defeat it.
In some cases, people start up a company with one or two partners, but in my case I was all by myself.
The other level of loneliness is that when you work for a big company, you can always go out with your colleagues, your classmates and your friends. But after your start your company, you suddenly find that there are less people around you than before.
One reason is that you will be much busier. The other is that when you talk to people, you find their priorities are different — they don’t share the same interests as you. And that’s when you feel lonely.
The other psychological challenge has to do with finance. Before, when you worked as a high-level manager for a big company, you got your salary every month and your balance sheet curve would always go up — you know, towards that top right corner. But after you start your own company, your bank balance would always go down — you know, from high left towards bottom right, which makes you really embarrassed at heart.
The point being that, before you start up a company, you need to be prepared psychologically as well as at the level of business strategy.
China Knowledge@Wharton: What other lessons could you share with us?
Zou: One other lesson is that you have to be ready to make changes. You must be able to adopt a different way of working at different stages of your development. You have to be clear about when you should restructure your organisation and change your way of doing things.
Some people suffer from inertia. They don’t want to change. One thing I have observed is that the reason why some of the successful companies failed was not because they are not capable, but precisely because they were. The fact that they could grow their companies to a certain size and win a certain degree of recognition is evidence of their early success. But when the company gets to a certain stage, you then have to change your old approach even though it was successful for you before. If you can’t deal with change, you will be doomed to fail.
China Knowledge@Wharton: How did your time at Wharton affect your business life afterwards? Should people who would like to start up their own company try to get an MBA?
Zou: My feeling is that Wharton’s education is quite effective. I learned to read and understand financial reports and construct financial models.
But, on the other hand, if you really want to start a company, you don’t need to go to earn a MBA in Wharton. All business schools are set up with the objective of training professional managers, although nowadays that objective is being revised.
That said, one of the most important things I learned at Wharton was a certain methodical way of look at things. Two years’ of study has an impact on your manner and mindset. You will come across as being much more sophisticated and professional.
China Knowledge@Wharton: How did you go from being a Wharton MBA student to entrepreneur?
Zou: Before I went to Wharton, I was planning to be the general manager of TSKF after graduation. So while studying at Wharton in Philadelphia, I visited the Board President of Smith Kline (also based in Philadelphia). My colleagues thought that was very unusual, because even they didn’t have a chance to meet him and I had only met him a couple of times in China.
But he had a very good impression of me, which is also destiny. He is a very influential figure in the pharmaceutical industry, and I really have great respect for him.
After his retirement, he acquired the biggest artificial denture manufacturing company in the US, and called me to ask whether I would be interested in exploring the China market. I said I would like to start up a dental clinic. He asked me, “Robert, do you really want to do it?” I replied, “Yes, I really want to do it.” And he became one of my first investors, and president of the board until today.
I tell my colleagues that I advocate a “fool spirit.” That means that you don’t ask too much; just do things. Especially for young people: Don’t ask for how much benefit you can get — just do it. This process of doing is a process of learning. Nowadays, people are so impatient and they don’t like getting their hands dirty.
Knowledge @ Wharton is the online journal of the Wharton School at the University of Pennsylvania. It provides insight into some of the top business minds on issues ranging from finance and marketing to human resources and business ethics.
http://knowledge.wharton.upenn.edu
