Would Walt Disney be rolling over in his grave at the sight of Disneyland Shanghai? When Walt created the first Disneyland theme park in California he would kneel down at various spots to understand what it would look like from a child’s perspective…he wanted to make sure that even the kids had a great view. Disneyland Shanghai has taken that to the next level by making everything substantially larger than any other of their theme parks. The Shanghai Disney castle is now the largest actual castle in the world. Scale and bigness is everything in China.
Unlike the ever growing popularity of western style TED talks which emphasize gripping storyline and vivid visual presentations Chinese presentations tend to emphasize sterile facts and numbers. The bigger those facts and numbers that describe the company the better. A typical presentation sequence would look like:
- 40 engineers with 5 PHDS and 10 Master degrees
- R&D floor space of 3000 m2 and factory capacity of X widgets per hour
- 100 product lines with X and Y performance specifications
- In business for 10 years
If you were to walk into the office or factory of most traditional businesses in China you could find a very very large room full of 100’s of their products lined up on their walls. Bigness and numbers establish the message that the company has the capability to do anything that the customer requires whether it might be relevant to their business or not.
As consumers and business customers (both in China and America) get more sophisticated and have less patience to set these requirements, Chinese businesses that are winning are going from a “here is what we have” personality to “here are the problems we can solve for you” personality. Although bigness and scale might never really go away because of its embedded meaning of credibility in Chinese culture, you can be sure even the Chinese consumer likes to save time and are looking for new products that help to solve their everyday problems.
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Shenzhen was the Chinese epicenter of a massive economic shift to manufacturing in the early 1980s and the attraction to most foreign manufacturing companies setting up there was the promise of inexpensive labor. On a visit to Shenzhen City (near Hong Kong) a couple of years ago I was surprised to learn how much that is changed when a large US optical manufacturing customer was in the process of moving its operations to Vietnam due to the rising cost of labor in China. The shift of manufacturing from China to other countries has also signaled a shift of Chinese companies focusing more on technology and business innovation. Nowhere is that more obvious than in Shanghai where smaller districts are all setting up innovation hubs and incubators to build the foundation for this innovation economy.
Impact10x had a recent opportunity to speak at one technology park called Keiji50 in the Jiading area of Shanghai. The main focus of this park was IOT/wearable devices and housed probably 10-20 companies on its campus. Companies building versions of Google glass, Smart Mirrors and even Smart Coffee machines adorned its demonstration room. Especially interesting was the fact that the center also did China based VC investments through a quasi-government funded organization. We had an opportunity to talk to their Partners to find out a little more about how their VC investments worked in China. It seems most investments were made after a working prototype had been demonstrated and with maximum investments of 3M RMB (approximately $500K USD). Seed capital financing did not seem to be something that they were particularly comfortable with as some of the frameworks/tools they used to evaluate innovations were based on mass appeal to a broad consumer audience. Most true breakthroughs start with a small core of leading edge customers which then lead to growth.
Another piece of their investment approach was the emphasis on patents or other more basic scientific intellectual property which could be a competitive barrier to entry. Although this has traditionally made sense 5-10 years ago, with the massive shift to more open source platforms, crowd sourcing and any new innovation being circulated around the planet at light-speed…basing your competitive advantage solely on protection of information is quickly being eroded. As Bill Gates recently said “intellectual property has the shelf life of a banana”.
Stay tuned for the next couple of blog posts as we will be posting some more of our discoveries on China and Shanghai based incubators and technology parks.
The enormous transformation of China from the starving Chinese farmers of the 1960’s to having skylines full of gleaming skyscrapers in 2016 is a testamount to the incredible power of perseverance and experimentation. Deng Xiaoping who rose to lead in China in 1978 is generally accepted as a key figure who lead and drove this transformation. His philosophy was a simple one “to experiment, to take risks, and to not be afraid of making mistakes; when you make them, just correct them”. In Ezra Vogel’s biography of the leader “Deng Xiaoping and the Transformation of China”, the word “experiment” happens no less than 78 times throughout the book. This book was recently promoted by Bill Gates as one of the best books to read on China.
The Impact10x team had an opportunity to share our views on innovation to China tech entrepreneurs and engineers on invitation from IC CAFE, a technology incubator and china venture capital fund located in the east part of Shanghai. The best known innovators of our time like Steve Jobs and Elon Musk were the standard part of our discussion but Deng Xiaoping took a special place as an example of a leader who emphasized execution over guessing. It maybe the hottest thing now in Silicon Valley to be a “lean startup” but lets not forget that this idea of experimentation and fail fast was what started the incredible transformation of China over 30 years ago.
Thanks to Xiaoming, Sean and Yixin from the Impact10x team in joining and supporting the seminar!
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Shanghai literally means “On the sea” (shang: on, hai:sea) which shows up in its very distinctive flat coastal landscape. In fact, the highest hills you will see are the roads that lead up to massive bridges in the city. But go about 2 hours driving west to a city called “Hangzhou” and you get to see some of the greener more mountainous areas of China. Known for its tourism and lake district this city is now getting known for its new innovative technology companies including the global giant Alibaba which has its headquarters there.
The Chines government recently built a massive technology incubator there under the “High Tech Zone Plan-5050” initiative which is to create even more tech companies. The incubator finances IOT, Internet and software tech companies through competitions and local china based venture capital. The young companies that we met were impressive doing innovative App services to companies serving the up-and-coming DIY generation of Makers.
What was clear on our visit is the government still seems be the main actor in most financing and promotion activities but that there is definitely a generational reversal going on between older workers concerned about money, health, emotion and entertainment (in that order) and the younger generation being more concerned about entertainment, emotion, health and money (in that order). Those innovative tech companies that can satisfy these emerging Chinese needs have the potential to be the next big winners.