Sage finds way into China

The lessons learnt here should be noted by all Australian SMEs thinking about entering the world’s hottest market. By TIM LEVIEN.

By Tim Levien

If China really is a tough place for small Australian companies then someone forgot to tell Andrew Downs (right). While attending a conference on airport construction and management in Beijing last year he picked up a contract to automate a cool drink bottling line.

What Downs discovered is that the reputation of his business, Sage Automation, had travelled ahead of him – a function of today’s world of high-speed communications, coupled with the benefit of doing business with globalised corporations.

The lessons learnt by Downs should be noted by all Australian companies thinking about expanding into the world’s hottest market.

“It was a long shot, but while in China I thought it was worth investigating business opportunities,” Downs told SmartCompany.

“We do work for Coca-Cola in Australia on its bottling lines, so I figured there was no harm in locating a Coca-Cola representative in China. The Coca-Cola business there is Chinese-owned, but the manager said he was already aware of some of the work Sage had done in Australia, so he said why not come and have a look at what’s needed.”

Downs, who has built Sage from a two-man, backyard start-up in 1994 into a business employing more than 200 people and turning over $40 million a year, said he remained doubtful even after paying a visit to a Coca-Cola factory in southern China.

“I was dubious. I said let’s do it as an experiment. It won’t hurt the company to get a little bit of exposure as to how to do business in China.

“‘Let’s put in a price’, I said. ‘We’ll probably get it halved. But let’s just go through the process’. To our total surprise we put in a submission, and we came back with an order, and started work on the job in July,” Downs says.

“That experience really changed my perception of China. It’s not all some of the stuff you hear about getting ripped off, and agents taking 10% of your price, and other bad things.”

Downs experience contains a number of valuable lessons:

• That China need not be a difficult place to do business.
• That a viable entry point is to go in on the back of existing customers in Australia.
• That Chinese business owners are receptive to suggestions from Australia, even in areas regarded as their speciality, such as automation of manufacturing processes.

For Downs, a year 11 school leaver who started his working career as an electrical apprentice at the Uniroyal tyre factory in Adelaide, the China experience represents his first step into the international market.

Until now, Sage has concentrated its operations in Australia where the company handles jobs as diverse as automating car parts assembly lines, hay baling, water treatment, rubber mills, bottling lines, and automated airport lighting for the RAAF.

“When I left school I wasn’t the sharpest tool in the shed,” Downs says. “The highlight for me was simply getting a start as an apprentice.

“It didn’t take long to see that some of work we had done by outside contractors wasn’t up to scratch. I thought if I can’t do better than that myself I’d be very surprised.”

His first freelance jobs, using his skills as an electrician, were helping automate a bottling line, and then a polyurethane foam facility. The objective was simple: “I wanted to earn beer money,” he says.

From that experience grew a backyard business, and a double dilemma for Downs.

His first problem was that his boss at his “day job” would only tolerate limited “moonlighting”. It wasn’t long before the ultimatum came: limit the extra-curricula activities, or face the sack.

The second crisis came largely because Downs was too busy to recognise the importance of some of the mail he was getting from his local council. If he had he would have avoided a crisis that almost brought down the curtains down on Sage before it had a chance to grow.

“After about eight months at home I was faced with an order by the local council to stop work,” he says. “I’d apparently been dobbed in for making too much noise in what was a residential area. I had probably gone past the boundaries as a home business.

“I was getting summonses, but I really didn’t worry about them. The next thing I knew I was in court. Luckily I found a lawyer who got me off the hook.”

From home, Sage moved into a single rented unit in an industrial park in Adelaide. Sage today occupies six units in the same park.

Downs says Sage started as a pure contracting business, fully exposed to surviving by winning more contracts. More recently he has pursued a deeper relationship with clients, including involvement at the early stages of design of manufacturing systems, and a service division that is available 24-hours a day to fix faults.

He has also streamlined the ownership structure into a public unlisted company, which has led to greater financial disciplines and enables him to issue shares to key staff to ensure Sage retains their services.

Future growth, he says, is assured.

“The beautiful thing about the automation business is that it is extremely transferable. We do a lot of work for the automotive industry. We do work for Mitsubishi, General Motors, and we’ve just won jobs for Toyota, and Ford.”

“I could go on for hours listing the type of work we do, because automating is all about making a process more efficient, and that’s something everyone wants.”

Even in China.

For more Hot Innovator stories, and lessons from their experiences, see our Growth Resources Innovation section.