Nation No Longer A ‘Wasteland’ For Entrepreneurs

China Daily, July 7, 2015

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China’s Xiaomi Redmi 2 smartphones are displayed to the media during their launch in
Sao Paulo, Brazil, June 30, 2015. [Photo/Agencies]

Rising generation of business leaders creates value-added solutions

People unfamiliar with recent developments within China generally believe that the nation lacks innovation capabilities as well as the infrastructure to support entrepreneurship. The stereotypical view, often fueled by Western media, portrays China as an “innovation desert” full of copycat companies that make shanzhai (fake) products.

They describe a China that lacks innovativeness due to an inadequate system of intellectual property protection, a rote-learning educational system that stifles creativity and a business landscape dominated by State-owned enterprises.

This perception is based on China’s history, but it does not reflect current realities. Worse, it fails to recognize the emerging wave of innovation from China.

Understanding innovation in the context of contemporary China requires a broader definition of innovation, beyond the classic product or technology-centric view espoused by Western management theory. We suggest a broader interpretation of innovation that includes solutions that offer added value to customers or businesses, which may be manifested in a variety of forms, but are not limited to low-cost disruptions or technological breakthroughs.

To better understand this broader view of innovation, we should look deeper into examples coming from China.

Three layers of innovation

In our view, there are three essential layers of innovation: people, organization and market.

At the core are people. Large corporations often find it difficult to maintain the same level of creativity and freedom, both of which are conducive to the innovation process, as exists within startups. In China, a growing culture of mass entrepreneurship and relevant favorable policies are emerging. As a result, we are witnessing rapid growth in startups, which serve as the breeding ground for creative entrepreneurial minds.

Inspired by successful examples of private entrepreneurs, a “why-not-me” mentality motivates aspiring young entrepreneurs to create solutions that deliver value. This new breed of young entrepreneurs are adept at identifying new and creative ways to add value to consumers’ lives within a volatile and sometimes sub-optimal environment.

Among the entrepreneurs who were born in the 1980s and 90s, there is a strong sense of entrepreneurial zeal and optimism ignited by recent successful examples of Alibaba Group Holding Ltd’s Jack Ma, Xiaomi Inc’s Lei Jun, Tencent Holdings Ltd’s Pony Ma and many others.

There are other factors in play that are creating a more favorable environment for innovation. These include China’s grassroots’ openness to the world, experienced returnee entrepreneurs with expertise and access to a global pool of resources gained from their experience abroad, and simply China’s scale that allows good business ideas to scale up rapidly.

China’s large population base also helps increase the probability of success from “trial and error” experimentation with new solutions. Many grassroots entrepreneurs are able to spot market imperfections and leverage that contextual understanding to create relevant solutions.

Lei Jun is a case in point. Xiaomi’s approach to innovation relies on a deep understanding of customer needs and continual feedback to tailor products for specific usage requirements.

Second, organization. Organizations typically resist change when they become successful. As markets mature, market leaders often lose their competitive edge as they fail to anticipate change, typical across numerous global industries.

As we know, China’s market changes fast. Many Chinese companies are very young and have a higher risk appetite for opportunities and radical innovations. A well-known case is how Haier Electronics Group Co Ltd achieved significant growth when it introduced a washing machine capable of cleaning not only clothes but also potatoes.

This demonstrates Haier’s awareness of indigenous demand from China’s lower-tier cities and the company’s customer-centric management philosophy.

Entrepreneurial Chinese organizations can be described as hungry, agile and nimble. They continually push for growth because there is no legacy of success to protect. This innovative character results in higher levels of patent activity and investment into research and development.

Third and last is the market. Critics often point to the flaws in China’s lack of market-centricity when expressing concerns about the future. These criticisms often dwell on the dominance of SOEs in certain sectors, a lack of transparency, the abundance of government incentives pushing for technological change without oversight mechanisms and the heavy presence of government investment to drive the economy.

SOEs will continue to play a major role in China, but private companies have emerged across multiple sectors (including foreign entities in China) and will become the dominant forces of innovation and economic expansion. In open sectors, competition has become intense as foreign corporations, SOEs and local private companies vie for a piece of the pie. Deregulation has been a major driver for China’s growth over the past couple of decades and that will remain the case.

Over the past couple of decades, China’s market has experienced unprecedented economic expansion, aided largely by government policies that provided top-down support at national and provincial levels. Tangible benefits include science and R&D parks as well as industry clusters throughout China. The supporting foundation for continued growth and innovation is also falling into place, including fast consumer adoption of the Internet, creation of startup incubators, and increased sources of funding for new businesses from venture capital, private equity and angel investment.

Innovation breeding ground

China is a complex, diverse and dynamic market, characterized by intense competition. Chinese companies are emerging with unique capabilities to win the bases of competition through lower cost, better quality and faster execution.

Innovative Chinese companies such as Baidu Inc, Alibaba, Tencent, Xiaomi, Haier and others have demonstrated unique capabilities and an innovation mindset well-suited to China’s unique context. Such businesses have proven capable of building cross-industry ecosystems for collaborative innovation and a willingness to “boundary jump” across traditional industry lines. These ecosystems exhibit “biodiversity”, which makes the entire value chain more robust and sustainable; of course, up to certain limits.

The China context can be described as a highly complex, diverse, dynamic and discontinuous environment accentuated by time-space compression. Within this breeding ground, innovative Chinese companies are leveraging this market context to deliver exponential growth.

Edward Tse is founder and chief executive officer and Bill Russo is managing director of Gao Feng Advisory Co, a global strategy and management consulting firm based in China.

Bill Russo Chairs Auto Panel Discussion at J.P. Morgan Global China Summit

Beijing, China. June 3, 2015

Bill Russo chaired a panel discussion with the the China CEOs from the top 3 premium carmakers at the 2015 J.P. Morgan Global China Summit.  The topic of the session was The Next Golden Age of China’s Automotive Industry.

Day 2 - Plenary - The Next Golden Age of China's Automotive Industry Safari, Today at 4.52.48 PM

Panelists:

  • Hubertus Troska, Member of the Board of Management, Daimler AG; Chairman & CEO, Daimler Greater China
  • Karsten Engel, President and CEO, BMW Group China
  • Dietmar Voggenreiter, President, Audi China
  • Chair: Bill Russo, Managing Director, Gao Feng Advisory

Click here to watch the video recording of the panel discussion

Click here to see the introductory slides

31°North and Gao Feng Advisory Company Form a China-Israel Business Advisory Partnership

Shanghai, China – May 25, 2015 – 31°North, an Israel-based venture advisory firm, and Gao Feng Advisory Company (“Gao Feng”), a global management consultancy with roots in China, today announced that they have signed a strategic partnership agreement.  Both firms will seek to combine efforts to deliver a unique and comprehensive set of services to their global clients.

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This partnership is intended to accelerate the commercialization of technologies related to the Internet of Things (IoT) from their incubation stage to full-scale deployment.  Israel, dubbed the start-up nation, is known for its disproportional number of successful start-ups, doctors, scientists, engineers, registered patents and NASDAQ listed companies.  Over the next decade, IoT related businesses are expected to grow exponentially, and China will likely become be the largest market for commercialization of these technologies.  The sheer size of its population and industrial infrastructure, the high rate of user adoption of social networking and mobile/connected technologies, along with the commercial aggressiveness of the companies competing in the IoT market, will result growth rates higher than that of other global markets.

China’s urban transportation challenge, the high rate of adoption of connected mobile devices, combined with the rapid and aggressive introduction of alternative mobility and vehicle ownership concepts from new entrants, will ultimately compress the time needed to commercialize smart, connected car technologies and related services.

31°North and Gao Feng will partner to provide services to help their clients leverage these forces to achieve competitive advantage.  The combined services portfolio will encompass topics including smart city, connected mobility, vehicle electrification and network management, among others.  The Strategic Partnership aims to play a significant role in assisting public and private sector organizations to accelerate commercialization of innovative new technologies.

“The Israeli technology ecosystem has grown to be one of the most advanced globally with leadership in cyber, industrial technologies, big data, billing systems, sensor development, mobile applications amongst others. China represents an exciting market for Israeli firms and we look forward to leveraging our strong partnership with Gao Feng to help facilitate between Chinese global and local industries and Israeli technology”, said Uri Kushnir – Managing Partner at 31°North.

“Gao Feng is a pre-eminent strategy and management consulting firm”, said Dr. Edward Tse, founder and CEO of Gao Feng.   The conditions in China – the market with the largest number of both internet and “smart phone” users – will likely make it the incubator for rapid commercialization of IoT innovations.  The partnership with 31°North allows Gao Feng to offer our clients a broad set of capabilities and deep expertise in the area of IoT and Connected Mobility”, he added.

Gao Feng Advisory Company is a pre-eminent strategy and management consulting firm with roots in China and global vision, capabilities, and a broad resources network.

31°North is a venture advisory firm positioned at the cutting edge of the Israeli technology eco-system, assisting global corporates with strategy and implementation of technology.

 

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About 31°North  

31°North is a venture advisory firm positioned at the cutting edge of the Israeli technology eco-system, assisting global corporates with strategy and implementation of technology solutions. We work with global players looking to integrate new technology solutions into their existing technological platform, often also dealing with technology road-mapping, regulatory support and standards work. Our day to day is spent analyzing hundreds of technology companies ranging from startups to mature firms, with the aim of customizing the best available solutions for our global clients. We specialize in the automotive industry, smart cities and cyber security and have worked extensively with OEMs, Banks, Governments, municipalities, Industrial firms, Global integrators and Venture firms

Our founders bring experience from both the financial/venture and technological corporate world with experience as executives in global listed companies, technology startups and major tech integrators. Our in-house expertise is extended by deep partnership with Venture and Advisory firms.

Connect with us on www.31degreesnorth.com
For Further Queries: 
Guy Pross | Managing Partner  – Tel Aviv, Israel | Email: guy.pross@31degreesnorth.com

About Gao Feng Advisory Company

Gao Feng Advisory Company is a pre-eminent strategy and management consulting firm with roots in China and global vision, capabilities, and a broad resources network. We help our clients address and solve their toughest business and management issues — issues that arise in midst of fast-changing, complicated and ambiguous operating environment. We put our clients’ interest first and foremost. We are objective and we view our client engagements as long-term relationships rather than one-off projects. We commit to helping our clients to not only “design” the solutions but assist in implementation, often hand-in-hand with the clients. We believe that every member of our team can contribute to problem solving for our clients, from the most senior to the most junior.

Our seniors are former senior consultants at leading management consulting firms and/or senior executives at large corporations. We believe clients would benefit the most from a combination of consultants with substantive experience in consulting coupled with line management professionals.  In addition to our team in the Greater China offices of Beijing, Hong Kong and Shanghai, we have a global network of collaboration partners with a wide range of experience, capabilities and resources.

Connect with us on www.gaofengadv.com 
For Further Queries: 
Bill Russo | Managing Director – Shanghai, China | Email: bill.russo@gaofengadv.com