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.

高风简报:《重塑中国汽车业》中文版报告

尊敬的高风朋友们:
我们很高兴与各位分享一份名为重塑中国汽车业: 制造开发互联网汽车及相关智能汽车技术的报告。这是由高风咨询公司董事总经理及汽车行业责人罗威先生 (Mr. Bill Russo在近期上海花旗集团汽车会议上所发表的内容。
随着汽车工业的发展以及无线网络与移动设备的日益普及,我们可以预见车联网将为汽车工业的产品和商业模式创新提供大量机遇。
中国拥有世界最大的汽车市场,同时亦拥有世界最多的互联网和智能手机用户。中国将成为此类创新快速商业化的孵化器。中国的城市交通面临的挑战,互联移动设备的高普及率,再加上替代性交通工具的大量快速引进以及新的行业进入者带来的车辆所有权的概念,这些最终会缩短智能互联汽车技术以及相关服务商业化的时间。这类发展不仅会极大地改变车辆的特征,而且会给汽车工业的商业模式带来一场革新,以移动服务的用户为重点的商业模式将会出现,颠覆传统的”车辆所有权”模式。
欢迎您对这份报告或者我们公司的任何评论与反馈。这份报告仅是对此话题的一个概括想法。我们非常愿意当面与您全方位分享我们的数据以及观点,如果您对与我们会面感兴趣,请一定联系我们。
高风咨询公司致力于研究企业管理领域前沿之智力资本,不断与您分享最新的商业和管理思想,特别是关于中国以及中国在全球的影响等重要信息。

致以最诚挚的问候,
谢祖墀 博士
首席执行官
edward.tse@gaofengadv.com
罗威
董事总经理
林志强
总监

ck.lim@gaofengadv.com

Presentation on Internet of Vehicles at Citigroup China Auto Conference

Shanghai, China, November 14, 2014

Gao Feng’s Managing Director and Auto Practice leader Bill Russo will join a panel discussion titled Opportunities and Challenges of the China Auto Industry at 11:15am, and after this will deliver a keynote speech titled “Reinventing Mobility in China” at 12:15pm.

Topic:  Reinventing Mobility in China

With the auto industry developments and the increasingly prevalence of the wireless internet and mobile devices,  the Internet of Vehicles will create discontinuous opportunities for product and business model innovation. 
 
The conditions in China – the world’s largest auto market and the market with the largest number of both internet and “smart phone” users – will likely make it the incubator for rapid commercialization of such innovations. 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. Such developments will dramatically alter not just the feature content of vehicles, but may also usher in a revolution to the business model of the automotive industry – where a model focused on “users of mobility services” could emerge as a real alternative to the traditional model of “car ownership”.
 

Conference Agenda

8:00 – Breakfast / registration

8:30 – 8:45 – Opening Remarks

8:45 – 9:30 – China Economic Outlook: Moderation, Mobility and a New Normal

9:30 – 10:15 – Tri-dimensional view of the Automotive Landscape –  China, Asia, Global

10:30 – 11:15 – The Global M&A Context

11:15 – 12:15 – Panel: Opportunities and Challenges of the China Auto Industry

12:15 – 1:00 – Lunch and Keynote Session: Reinventing Mobility in China

2:00 – 3:00 – Key Developments in the China Debt Markets

 

Venue: Mandarin Oriental

Mandarin I + II LG I

111 Pudong Road (South)

Pudong, Shanghai

200120, China

+86 21 2082 9888

 

Bill Russo to Brief US Investors on China Auto Market Trends

New York & San Francisco, October 1-3, 2014

Bill Russo will brief institutional investors on the recent developments and trends in the China Automotive market.   Topics addressed in this customized briefing will include:

Part 1: Status of the China Auto Market
Part 2: Auto JVs in China
Part 3: Competitive Landscape of China Auto Market
Part 4: Emerging Trends of China Auto Market
Part 5: Plausible Scenarios in 2025
Part 6: Key Insights

Mr. Russo and his colleagues at Gao Feng Advisory Company are experienced experts on doing business in China, and would be happy to develop a customized briefing on the industries or topics you view as critical to your business.

For further discussion, please contact:

Bill Russo
Managing Director,
Gao Feng Advisory Company
bill.russo@gaofengadv.com