Disruption is coming, whereby the centre of gravity is shifting eastward. Which means you should study the East. Culture, philosophy, language, business methods, companies, technology, etc. Hence “Tech Titans of China: How China’s Tech Sector is Challenging the World by Innovating Faster, Working Harder & Going Global”.
The title says it all
- China is creating a tech universe that is a counterweight to the long dominance of the United States.
- China’s game-changers are already on par with and, in some cases, ahead of the United States.
- China’s mobile, savvy millennials and Gen Z youngsters mostly in their teens, twenties and thirties, who make up more than half of China’s population compared to one-third in the United States,
- China has bypassed credit cards just as it did the personal computer for mobile phones and retail stores for online commerce.
- The most significant trend to watch is copied from China, meaning US companies duplicate Chinese innovations.
China is going to eat Silicon Valley’s lunch
- China’s Soviet-style thirteenth five-year plan for 2016–2020 to boost economic development by accelerating indigenous innovation, mass entrepreneurship, research and development, and patents to burst open as an innovation nation by 2020 and a technological and scientific world powerhouse by 2050/
- “Made in China 2025,” is the blueprint to close the gap in technology leadership by building national firms into globally competitive tech champions and gaining technological leadership in emerging sectors including robotics, new-energy vehicles, biotech, power equipment, aerospace, and next-generation information technology—all to achieve supremacy.
- The nation’s “Internet Plus” plan to build up China’s companies as world-class competitors in mobile internet, big data, cloud computing, and the Internet of Things.
- Chinese president Xi Jinping’s Belt and Road initiative to build a twenty-first-century Silk Road land and maritime trade corridor that could outdo America’s postwar reconstruction Marshall Plan to foster economic integration with neighbouring countries.
- A state-led $15 billion China New Era Technology Fund to invest in startups and cutting-edge technologies
- China’s venture capital market that nearly equals Sand Hill Road in size and impact, and measures up with mega-financings, and growing share of unicorn-financed startups globally.
- China’s gains in national R&D spending to $409 billion, catching up to the United States at $497 billion
- China’s climb in patent applications—from seventh place globally a decade ago to second today,
- China’s new lead over the United States in academic scientific research papers to 18.6% of the world’s science and engineering publications
- China has outspent the United States on wireless infrastructure and cell sites by approximately $24 billion since 2015 and plans to invest more than $400 billion in 5G testing and development over the next 10 year
- Of the world’s 40 best venture capital bets of all time, 12 are Chinese tech startups.
- China had 86 unicorns in 2018, topped only by the United States with 151.
- China has become the largest e-commerce market in the world, $1.1 trillion in 2018, and will reach a projected $1.8 trillion by 2022, more than double the US market of $713 billion.
Competing with the four
Already Tencent’s and Alibaba’s rank in the top ten publicly traded companies for market valuation, in the same league as Microsoft, Apple, Amazon, and Facebook. Huawei’s is fifth-placed worldwide in R&D investment, ahead of Intel and Apple.
The book becomes a company watch list:
- Baidu is emerging as a leader in AI with driver-less-car technology and AI voice-activated smart-home devices.
- Alibaba has opened more than 100 self-operated Freshippo grocery retail stores in major Chinese cities, and it plans more.
- Alibaba affiliate Ant Financial is a one-stop financial services giant that uses big data and machine learning to dominate in money market funds,
- Alibaba and JD.com have pioneered cashless and cashier-free stores and a digitalising China’s retailing and logistics with efficiencies in merchandising pricing, and marketing.
- Chinese startup DJI is the world leader in drones.
- China’s mobile payments market led by WeChat Pay and Alipay already exceed US credit and debit card usage.
- Video streaming sites from Baidu’s Netflix-like iQiyi and digital entertainment innovator YY are booming
- Makers NIO and Xpeng Motors of full-featured and well-funded Chinese electric cars with self-driving capabilities and built-in entertainment apps are being propped up by government subsidies to promote clean energy driving and push China to be the Detroit of electric vehicles.
- In one recent major deal, Meituan acquired Chinese bike-sharing startup Mobike for the large sum of $2.7 billion to add more delivery options to its service.
- Nifty Pinduoduo lets shoppers buy directly on their mobile from merchandisers, get coupons, win prize drawings, and earn discounts when they buy.
- Smartphone maker-plus Xiaomi holds 7,000 patents international.
Other companies to watch are China’s ride-hailing leader, Didi Chuxing, Chinese smartphone maker Xiaomi, food services app Meituan, shopping app Pinduoduo, AI news aggregator Toutiao, video app TikTok, services super-app Meituan Dianpinga, SenseTime for facial recognition, iFlytek for speech recognition, LAIX in edtech, WeLab in fintech, LinkDoc in healthcare
The rise of ‘super apps, such as WeChat, Meituan, Ele.me, and Didi, have spawned a different model of app design versus Silicon Valley. WeChat is becoming a default operating system and is fueling another wave of growth. Making Chinese apps are more advanced in content, social networking, and commerce.
Few make it in China
Starbucks has localised the China operations, are partnering, and embarking on new digital frontiers. It is a formula that is working for a few other American tech standouts that have entered China: LinkedIn, Airbnb, WeWork, and Evernote. What separates the winners from the losers? It comes down to several factors:
- Understanding the Chinese culture
- Customising services for Chinese consumers
- Find a local Chinese partner; don’t go it alone.
- Hire a local team experienced in China business and tech.
- Give the local team autonomy to make decisions to build their own business model and operate independently of US headquarters.
- Strategise and then move on acquisitions that can jump-start the business.
- Learn to negotiate with demanding Chinese customers and don’t expect to win every time.
- Aim for high growth before profits in China’s supercharged markets.
- Develop out-of-the-box, fun promotional strategies that can stand out in a cluttered environment.
- Doing business in China means following the rules.
- Be prepared for sudden rule changes in China.
- Keep the long-term vision and perspective; don’t expect to go public tomorrow.
- Have the guts to compete with China’s ferocious entrepreneurs.
Global game changers
There’s no legacy of outdated personal computers or dial-up internet. It is straight mobile all the time, and 5G super-speedy connections are on their way. That means that game-changing technologies are being invented in China at a rapid rate, and they’re going global. The future of tomorrow is being driven by (Chinese) new economy breakthroughs, mainly in high tech, which is transforming our world.
The only thing that strikes me as a reader, is that the Chinese companies are isolated from American competition thanks to the Chinese government ban. That means that American companies can’t get beyond the Great Firewall of China’s internet censorship and reach Chinese consumers directly. It is unfair, and it will become an issue. That does not mean these competitors are not coming your way, and you need to be ready.
Reminds me of “Digital disruption“. Big-bang disruption fuelled by coder dojo on steroids. Millions of them. Using free tools, better than Bill Gates had, using global platforms to scale overnight. Using “free” to permeate the idea. And now with the backing of the Chinese government.