Po Chi is a valued mentor and few people bridges the world of China innovation and entrepreneurship as well as he does. He gives a masterful outline of the development of ecosystems in China. Tan Yinglan
China Context, Ecosystems, and System-Thinking
“Ecosystems”, “system-thinking”, “design-thinking” – are all over-used, ambiguous cliches. Do we all share the same understanding of these terms? What is important is that these concepts describe changes in how we interact, our social contracts, our worldview. In this new context, what do we mean by “winning” or “losing”, “better”, or “worse”? How are “success” and “effectiveness” and defined?
China has “discovered” ecosystem-thinking and found its roots. The best and brightest in China realize they have one major asset no one else has. They understand how to harness the advantages of working in a system of scale that is so massive that almost everyone else in the world is bewildered. They know, in certain cases, how to leverage the scale in their strategic thinking.
The experience of China is adding new dimensions to the concept of “business ecosystem” through the power of scale. This may be one of the underappreciated aspects of innovation in China.
Why does the Chinese system of counting numbers jump by factors of 10 after reaching 10,000? Maybe because human minds can only intellectualize a number greater than 10,000? Even that is hard to conceive, but the eye can grasp 10,000 people massed in a public square. More than that – we simply can’t distinguish 10,000 from 12,000 people.
Why was the exponential notation method invented? What is the purpose of “normalized scientific notation”, e.g., 6.02 x 1023 = Avogadro’s number? Is it because we are really only comfortable counting on our fingers (and toes), i.e., up to 10? A number with 23 “zeroes” after it is definitely beyond my ability to visualize.
To bring some cognitive order to a social structure containing a billion people, linear management philosophies won’t work – one person’s direct influence is too limited. A decentralized model of management is better, but is still limited because the transmission of stories becomes imprecise after a number of iterations – the critical issues are accountability and responsibility. The typical decentralized model emphasizes very limited accountability – only to the “nearest neighbors”, people on whom influence might be direct.
Let’s consider the network ecology model as the next evolution of ways to envision a social organization. In this model, “Leaders” = “hot nodes”, people with a large number of effective connections. In the language of Harvard professors Iansiti and Levien, they are “keystones”, whose “double bottom line” is to preserve the health of the network, while thriving as individuals.
The key here is to be accountable to others, as broadly as possible, within one’s ecosystem. What follows has to include transparency and honesty, accurate data and meaningful actions based on rational interpretations of the data. The associated nodes will include individuals/entities whose values have at least some overlap. The boundary of alignment and hence, of a particular ecosystem, separates values that are totally distinct.
Microsoft understands its position as a “keystone”, in the US/international ecosystem, and especially in China. Simon L. K. Leung, chairman and CEO of Microsoft Greater China Region, cited data from the International Data Corporation to indicate the win-win between Microsoft and the software ecosystem: “In 2009, every time Microsoft earns 1 yuan in China, the other companies within the ecosystem earn revenue approaching 16.45 yuan. It’s for this reason we attach great importance to the ecological chain.”
Creating and maintaining a healthy ecosystem = creating value for everyone, including one’s self.
Leaders see themselves more as “platforms” (“visionaries”), whose purpose is to clarify, define, and sometimes extend the boundaries of the ecosystem, i.e., its collective purpose and meaning. Non-leaders are not necessarily “passive actors”, but their attitudes reflect a more limited set of values that may be focused on narrowly defined goals.
Does this remind you of how the Chinese social-political environment has evolved?
In the Agricultural Age, leaders helped their tribes find food and shelter – the most basic necessities for survival as individuals and as tribes. Their high value contributions: discovery and invention of new tools and strategies. In the Industrial Age, leaders built physical machines, equipment to deliver physical necessities to much larger numbers of people, using mechanical devices to multiply the efforts of thousands of human workers. The basic work and output actually did not change in a fundamental sense. Increasingly sophisticated financial systems evolved to manage the exchange of value.
In the “Information Age”, with its modern computing devices and powerful communications technologies, our tools began to fundamentally change how we relate to each other. Where are our “natural loyalties”? What tribe do we belong to? Now, we can and do belong to multiple distinct tribes, simultaneously. The power of our new tools has exceeded our individual and collective ability to comprehend their influence. We used to invent tools to serve us. We are now discovering how our tools are reinventing who we are.
The current “Knowledge Economy”, often referred to as a “Relationship Economy” can be described with “network theory”. Each of us, as individual and organization nodes, is connected, i.e., “related” to a set of nodes, mostly of our choosing. At any given time, there are multiple levels of these connections, some very “hot”, meaning intense or close relationships, some more “distant”, or “cold”. Indeed, two basic dimensions for characterizing these relationships might be “context”, and “perspective”. Within these dimensions, the strength or power of a relationship can be described as “effective distance”. For example, I might describe my connection with my wife as “Very Close”, i.e., a Context 1 (= family), Perspective 1 (=value). My relationship with my children would be the same. My relationship to a distant relative that I might see only once a year would be classified as “Distant”, i.e., Context 1, Perspective 5 (some subjective descriptor of “distance” in a relationship).
In a networked world where relationships are fluid, dynamic and complex, how can we define “leadership? Leaders, by definition, earn that title through some positive contribution to the group (“tribe”), so leadership is defined in some specific context or domain.
In the “Relationship Economy”, what is a “positive contribution”? Perhaps one of the most fundamental concepts is the ability to open doors to multiple new connections. A leader can be defined as a “hot node”, someone whose value is already validated by the fact of having many effective and active connections (Context).
The influence of this type of leader is manifested through inspiration, the ability to light up new connections in and for others. This style of leadership is less about directing others to follow specific orders and more about showing possible paths to achieving aligned goals. What is the leader’s responsibility, then? Leaders must have vision, be focused on achievable goals, and be totally obsessed with clear and precise values, a primary one being accountable to the group. The ability to identify and nurture future leaders is also critical, because a “next generation” is needed to extend their platform.
Leadership can thus be described as building a platform that can sustain itself over a relatively long period of time, even without the constant active intervention of the leaders! Consider the example of Wang Shi, the founder of Vanke, the largest real estate development company in China, if not in the world. Note that he has not amassed a great personal fortune from his work. His wife and daughter do not work for Vanke. “I’m not building a dynasty”, said Wang Shi.
For the near future, watch for developments in the “Internet of Things” – an industry area whose natural construct is a highly complex and inter-related network model. China will surprise all of us! Sooner than we think.
Po Chi Wu
Dr. Po Chi Wu is a highly experienced international venture capitalist who has lived and worked both in the United States and in Asia. He is an Adjunct Prof. in the School of Bus. & Mgt. and the School of Eng. at the Hong Kong University of Science & Technology. Prior to this, he co-founded DragonBridge Capital, a merchant bank focused on China. He has been a venture capitalist and entrepreneur for almost 30 years. Dr. Wu has a Ph.D. from Princeton University and a B.A. from UC Berkeley.
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