China is fast becoming an innovative economy, and one of the key changes is the improved climate for start-ups, tells author Shaun Rein of The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in Asia. Especially in mobile, China is leading, he tells Knowledge CKGSB.
Q. During your interactions with Chinese CEOs and entrepreneurs, how do you think their opinions on innovation have changed over the years?
A. I’ve been in China since the mid-90s and I was investing in tech start-ups in around 2000. When you spoke to entrepreneurs then, they were very desperate.. There were so many obstacles to innovation and making money in China that the entrepreneurs just wanted to go for quick easy wins. They just wanted to copy technologies and tweak [them] for the local market. For example, Sohu and Sina looked at Yahoo and the other portals at the time and said, “We can do that for China. We don’t need to focus on technological innovation. Let’s just take that business model and tweak it for the country directly.” It was safer, it was easier, the government approved it and you can get money from venture capitalists. Now when you talk to entrepreneurs, especially in the mobile space, people are not looking into the US or Western Europe for the technological lead; people are now saying, “Let’s develop the coolest, best stuff in China”, especially mobile devices, because there is a much larger mobile device community in the country. The entrepreneurs want to create innovative companies for China right now. They are still not looking at going global, but that’s going to happen in the next couple of years.
Q. How will innovation in the mobile sector drive up innovation in other areas?
A. It is going to help. But the issue is that there are still a lot of low-hanging fruit out there. There are still many ways to take technology from the western world to China and localize it. That’s not technological innovation, but business model innovation. For instance, Xiaomi didn’t invent the mobile phone, but there is massive business model innovation and that’s why they are doing well. I think the mobile space is going to see a lot of the best innovation, because it’s cheaper to produce. So when you get into some of the industrial innovation, which is happening in China, you need tens of millions or hundreds of millions of dollars and hundreds of engineers. In the mobile space, you can have four programmers, and because the market is so new, you can put something together in months, rather than years or decades. But I think overall you are going to see that many industries are going to improve from that. It’s going to happen for one major reason.When you see a mobile company like 91 Wireless, sold for $1.9 billion just a couple of years after it started, then everybody says, “Wow, we can innovate and make money.” So it’s going to create a sea change within entrepreneurs and venture capitalists, who now are not looking for the easy wins, but innovative deals because that’s where the most money is right now.
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