How Chinese companies organize themselves for speed and fluidity Laurence Van Elegem - July 5, 2018

China Hanson Lu 287260 Unsplash Cropped Min

During our last Innovation Tour to China, the most noticeable characteristic of all the companies we visited was their lack of focus. Though it's not something we would be inclined to feel comfortable with over here, it does make perfect sense: in market that moves this fast, what’s valuable one day, is obsolete the next. Which is why a certain type of stability is very hard to come by in China (tech) organizations.

People are the core, not products

But how do you build a company in such a fluid environment, where technology has a market value of no more than 6 months? Which parts will provide the stability you need to organize yourself? If not the products, the services or the technology: what then? For Alibaba's Jack Ma, this question seems to be a no brainer: it's the people. According to him, technology isn’t Alibaba’s core competency. It’s the company’s culture. Electrical car company Nio, the Tesla of China, seems to hold the same opinion: prior to launching their organization, they discussed and shaped the culture that should lie at the foundation of their company for 6 whole months. We heard something very similar at the Shenzhen Open Innovation Lab (SZOIL), where David Li told us that their ecosystem is their core and nothing else. 

In a market this unstable and fickle, a company is not defined by what it makes, does or sells but by who makes, does or sells it. 

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Diversification is the new focus

And if you realize that your employees and your network are the only core of your company, then you’ll be able to treat the market as your playing field and experiment on many side-tracks. Small bets, but in big quantities, that’s how Chinese entrepreneurs roll. 

It’s why Tencent is just as much an investment company, as it’s a “leading provider of Internet value added services”. According to IT Juzi, Tencent has invested over 422 billion yuan in over 350 companies since 2012: amongst which Nio, Kindred AI, Mobike, Didi, iCarbonX Zhihu and many (many (many)) more. (Considering the undisclosed deals, the actual investment amount is much higher.) Ctrip too, is not your classical travel company, but rather an ecosystem that offers, hotel rooms, transportation, insurance, visa services, etc. The same goes for Alibaba's platforms which are powered by millions and millions of small business people who sell who couldn’t do business any other way in China. 

In China, diversification is the new focus.

“We’re a data company”

That’s why a lot of companies don’t present themselves as sellers of atoms, or even services in China, but rather as data companies. We heard this time and time again during our visits. ICarbonX’s chief scientist Yingrui Li told us they weren’t a technology company nor a health company. Their business clearly consisted of data, that would let them become the world’s biggest analytical engine behind the entire health industry. One that would allow them to build a model for human health. Jingwei Kang, CEO of IngDan, China’s supply chain-based open IoT ecosystem claimed something very similar: he said that the data was the most important foundation of their ecosystem as it was what allowed them to know and understand its participants so that they could find and attract new ones. “We don’t sell the data”, he told us, “but embed it into our own business.” It’s a smart move, if you realize that when the blockchain - the new decentralized internet - will be adopted en masse, the companies will no longer “own” the data of the users and therefore not be able to monetize it.

Pascal Coppens also told us that there was a huge battle going on between Alibaba and Tencent in the retail market, because they realize that you need data to be able to personalize your products and if you don’t do the latter, you lose customers. Plus, data is also the fuel of Artificial Intelligence. If you want your AI to be smart, you need heaps of data. And seeing that China has set itself the goal to become world leader in AI by 2030, companies are gathering its most basic building blocks – the data – a we speak. They know that if they aren’t data companies when the era of AI arrives, they won’t survive.

The market, not the technology

Amidst this volatility, it should not come as a surprise that the Chinese value the market rather than the products, business plans or the technology. Especially seeing that the latter has no fixed value and a very fleeting shelf life. Over here, we think in terms of products, services and technology and how to sell that to the market, while the Chinese tend to start with market innovation, rather than product innovation: it’s a lot easier to find a product for a market, than to create a market for a new product. 

This is a huge opportunity for us over here, actually, seeing that a lot of Chinese companies are very interested in the European market and actively on the look-out for companies to partner with over here.

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Laurence Van Elegem

Laurence has more than 10 years of experience in marketing, communications and disruptive innovation. Passionately curious, she is fascinated by the impact of technology and...

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