What are Chinese Entrepreneurs Thinking about Innovation? Prof. Bingsheng Teng Seoul March 4th, 2014

Levels of innovation?

New to the firm New to the industry New to the world Levels of innovation New to the firm New to the industry New to the world *Source: OSLO Manual

New to the firm

Home appliance industry 50-50 Joint Ventures in 1980s Home appliance industry Auto industry Auto industry

Copycat “山寨” -- shanzhai Originally, a copy of IPhone Product Service Store Now, the innovative brand in China

New to the firm Nimble followers that closely monitor their leading competitors, and create value through incremental improvements.

New to the industry

New to the industry: Local dominance E-commerce Local companies Chinese firms could define or dominate some industries in the local market Alibaba in e-commerce, Tencent’s WeChat in mobile internet, Baidu in search engine…, in which they are ahead of MNCs in China Facebook & Twitter did better in India

Lennovo’s innovation In 2013, Lenovo ranked first in the PC market, taking 17.7 percent of market share worldwide.

Lennovo’s innovation Innovation has always been in the DNA of Lenovo, and will help the company make a difference in the post-PC era Lenovo's innovation lies in its technology, products, business model and cultural management. We hope to become the champion in the combined field of PC and tablet PC, and in the 4G era, users will see better devices and more friendly applications provided by Lenovo," --according to Yang Yuanqing, CEO of Lenovo

AnyShare It is welcoming the post-PC era with 4G technology, Internet development and multiple terminal devices According to Yang, the recently developed application AnyShare now has 50 million users. It can send files or pictures between cellphones, tablet computers and PCs without the need of an Internet or wifi connection at a speed that is 50 times higher than bluetooth.

State-owned enterprises: High speed railway 纪录片《大国重器》 高铁和产业工人 SOEs will continue to play a big role in China, although more innovations will come from private companies.

Government-driven: Solar energy China’s solar- and wind-power industries are also taking center stage.

Mobile internet -- WeChat By developing discovery-driven people – Pony Ma of Tencent That success stems from Tencent’s capabilities in three specific areas: Internet user intelligence Micro-innovation Execution excellence WeChat is a good example of Chinese innovation. The free program, developed internally by Tencent, builds on the instant-messaging functions of earlier platforms like WhatsApp and the social media components of Facebook by combining these features into a single app and adding new functions. Launched in January 2011, the program has grown extremely rapidly, with more than 450 million users today.

Search engine -- Baidu fostering philosophies of innovation Mr Robin Li’s practice of this philosophy, along with his belief that every employee is responsible for innovation, helped Baidu successfully push into a wide range of additional Internet markets, including Baidu Knows (a Q&A service), Baidu Post Bar (message board) and Baidu Cyclopedia.

Diversification of innovation Not only indigenous, but Original innovation Integrative innovation Open innovation… *Source: The Third Plenary Session of the 18th Central Committee of the Communist

Haier: Integrative innovation Haier proactively engages customers to generate ideas. It develops new products and services based on superior end-user understanding. Its goal is to seek out both articulated and unarticulated needs, and then try to bring new products that address these needs to market first. 用户：空调太凉 海尔：环形出风，凉风能把空环出的自然风混合

The drivers of innovation Survival Increasingly fierce competition in every “open” industry, where multinationals, SOEs and private companies all try to capture a piece of the pie. Demand-driven Mobile internet Connecting people, products, service……

Jack Ma & Alibaba Founder and chairman of Alibaba Group 支付宝，现在看来也是一个很成功的创新，但在我这里，也是被“逼”出来的。 当年，淘宝做得很热闹，但是没办法交易，中国的网上诚信现状倒逼我们必须解决支付的问题。但是，这个事儿得国家发牌照，我们做还是不做？大的国有银行不愿意涉足这个领域，但是他们不做，花旗银行、汇丰银行这些外资银行就会做。那年我参加会议的时候，听一位领导人讲：“什么让你创新和做出对未来的决定？那是使命。”所以我告诉同事们，我们做“支付宝”。但是我会每个季度向央行等有关部门报告我们到底怎么做的。要做得干净，做得透明。 支付宝的模式其实也谈不上创新，甚至很愚蠢，就是“中介担保”。你买一个包，我不相信你，钱不敢汇过去，就把钱放在支付宝里面。收到包后，满意了中介就把钱汇过去，不满意就通知中介把钱退回去。和学者们谈到这种想法时，他们说：“太愚蠢了，这个东西几百年以前就有。早就淘汰了，你干吗还要做？” 但是我们不想去创造一种新的商业模式，只不过是为了解决很现实的问题，至于它在技术上有没有创新，那不是我们关心的话题。经过几年的“盲人骑瞎虎”，到今天为止，支付宝的用户已经突破5.6亿人。 我从来不谈“模式的创新”，因为我无法在我旗下每个公司创业第一天就规划给它成型的样式。我觉得我们的模式是“需求”出来的：根据客户需要来调整自己，甚至他要什么，我们就调整成怎样。很多人说我很聪明，计划得很好，但我不是计划好的，只是看好方向，然后走下来。 “No Money, No Technology, and No Plan”

Alibaba Group Jack Ma stated that “I don’t make plans,” referring to Alibaba's constant readiness to adapt to technological changes. Since Alibaba’s inception, Jack Ma always encouraged his employees to embrace change. These are the three reasons that Ma offered for Alibaba’s success. When he first arrived in Hangzhou, Ma was an English teacher with limited wealth and resources, but he had a vision of creating a company that would “make it easy to do business anywhere in the world.” He and his cash-strapped team thought carefully about the most innovative and cost-effective ways to build the business of their dreams. wrote a single line of code at Alibaba. He believes that it is because of his non-technical background that he was able to understand the usability and functionality of Alibaba's products from the customer’s perspective. Ma believes that to lead a technology company, one doesn't necessarily have to have technology skills, but one must respect them.

“Once in your life, try something. Work hard at something. Try to change. Nothing bad can happen.” --Jack Ma, Founder & Chairman, Alibaba Group

Listen to the Customers

Xiaomi & Mr. Lei Jun From zero in 2010 to a current valuation of $10 billion. Steve Jobs recognized unarticulated consumer needs and went ahead and served those needs with brilliant products. Mr. Lei Jun, on the contrary, believes that customers are the ones to know what products they want—he listened and then delivered.

Xiaomi & Lei Jun 小米路由器资料：http://www.miwifi.com/

New to the World China is fostering innovations beyond industry and national boundaries. The “China phenomena” is changing the knowledge balance of the world. China is trying to become a global innovation power.

Multinationals’ View 博斯咨询公司

Spotlights China is becoming more open and the government is pushing for more deregulation. These changes will serve to foster innovation. In telecommunications, supercomputing, life sciences, non-fuel energy sources and “green-tech” in general, there is already a vibrant innovation and R&D environment in China. Reverse innovation: MNCs apply innovations originated in the Chinese market to other major markets.

New to the World 1. XIAOMI--For launching low-cost, high-quality smart TVs and -phones to steal market share from industry stalwarts. 2. BGI--For making DNA sequencing mass-market. 3. CHINA'S LUXURY BRANDS--For greeting its booming middle and upper classes with distinctly native offerings. 4. HAIER--For letting its 80,000 employees self-organize and oust ineffective leaders—a bold approach to innovating the fridge and microwave business. 

Alibaba Update Alibaba will continue its mission— make doing businesses easy anywhere in the world. Alibaba’s SME-loans business aims to finance private enterprises that historically faced difficulties borrowing money. “In the industrial age, winning was determined by size and depth; in the information and technology era, it is ruled by innovation and individualism.” -- Jack Ma.

Summary: Priorities of Chinese Entrepreneurs Break regulatory restrictions to innovations -- Alipay’s money market 2. Truly understand Chinese customers -- Grassroots Innovation in China (Xiaomi) 3. Modifications of Existing Models and Products -- Borrow and remix (WeChat) 4. Instill a culture of innovation -- Compete for survival (Haier)

Thanks！