What could be every woman’s worst nightmare? How about going to a cocktail party, private reception, or charity gala where you plan to network and impress and being one of two in the room wearing the exact same dress from probably the same mass retailer? This is not a far-fetched statement: Many women shun social gatherings important for them to attend because they don’t have anything suitable to wear. They can’t afford clothing with the exclusive, eye-catching flair befitting of the occasion, and they don’t have well-heeled, fashion conscious friends to borrow haute couture from.
Recently, I was interviewed by Peter Hesseldahl on Asia New Business Creation, an intiative sponsored by Danish Ministry of Science, Technology and Innovation.
One of the things I would urge of Western companies to be really careful when going to China, is to first pay attention to the IP issues, make sure they are well protected, make sure that when you make new IP in China that the rights are properly assigned, make sure you have a good CFO in China that understands how to do your books in China, and the most critical thing of all I think is to find a partner in China who has similar goals as what you are planning to do in China. In Chinese there is a saying, which essentially means you are sleeping on the same bed but have different dreams. That happens a lot when a foreign entity in a rush to enter China finds a partner but they have divergent dreams and goals and aspirations, and the partnership never works out. From the experience of certain multinationals it’s probably better to build on your own capability, build you own team, but of course that takes time. So if you do that in the first tier cities in China, you are too to the game, but if you take the time to build up your own capability in second or third tiers cities, there’s still hope, there’s still a window of opportunity, provided you move fast.
I suspect that the strength of Chinese businesses is to capitalize on those phases of innovation that have really reached maturity and are now being applied to the masses in China, and they often do it at low cost as well. It’s what I call the pressure point principle. They look at the foreign companies — Haier for instance, they look at the US multinationals and they look at where the armor is the weakest, and then they focus there by competing on cost, and then they chink off the weak points in the armor, and then they slowly move on up the value chain. So you see a lot of reverse innovation going on in China where they don’t necessarily have all the cutting edge features but they offer the same features at much less cost. Then subsequently, once they’ve captured the market base, they tap on their applied innovation and they move up the value chain.
In the US you see a lot of venture capitalist putting their money in companies which hardly have any revenue: twitter, facebook… they put a lot of promise on hope and future valuation. But in China, if you look at the top fund, Kleiner Perkins, they rarely put money in any company that is not revenue positive. So they always have some track record before they invest. That’s where you see a dichotomy in thinking. The second angle is that in China everything has to be taken in context vis á vis Western economies where it is taken as matter of fact, taken as an issue. But in China a lot of factors are contextual, they look at all the surrounding factors as a whole before thinking about a particular issue
China has the latent resources for domestically driven economic growth. Exports in China have been a major driver, but there are clear signs that a shift toward domestically driven economic growth is well under way.