Editor's Note: John Kao, dubbed "Mr. Creativity" by The Economist, is the chairman for the institute of large scale innovation and author of Innovation Nation. You can follow John on Twitter, Facebook and at www.johnkao.com. This post is the fourth of six pieces by John about his recent trip to China. The first post was China as an innovation nation. Check back each morning this week at 8am for the next installment.
By John Kao – Special to CNN
A famous East Asian saying goes something like this: 'It is better to be the head of a small chicken than the tail of a large ox.'In other words, it is better to run your own show than be a part of someone else’s. Today tens of thousands of China’s best and brightest are following this advice, with tremendous implications for China’s future innovation agenda.
Some are lured by the prospect of tremendous riches. China’s pumps out billionaires faster than any other country in the world at this time (this is, admittedly, a somewhat dodgy statistic, but it's still useful). Evidence of entrepreneurial activity is everywhere in China. (A couple of cute examples include a WiFi telephone booth and a dispensing machine for live hairy crabs, a particular culinary delicacy in Nanjing.)
These is also evidence of a typical Chinese entrepreneurial approach. That approach operates incrementally. There are many examples in China of being a “fast follower,” i.e. improving on innovations that originated elsewhere. While the Chinese may sometimes compare what they are doing to Silicon Valley, nowhere yet is there a comparable crucible for disruptive or game-changing innovation in China.
The critical difference is mentality. The Chinese entrepreneur tends to be highly pragmatic because of the uncertain environment in which he or she operates. Therefore the tendency is avoid unreasonable risk, start from a known set of parameters, focus on survival and engage in short-term thinking.
Back in 1993, I wrote an article for Harvard Business Review, called "The Worldwide Web of Chinese Business." In it I described a set of “life-raft” business principles characteristic of Chinese entrepreneurs worldwide, some of which are worth repeating here:
– Thrift ensures survival.
– A high, even irrational, level of savings is desirable regardless of immediate need.
– Hard work to the point of exhaustion is necessary to ward off the many hazards present in an unpredictable world.
– The only people you can trust are family - and a business enterprise is created as a familial life raft.
– The judgment of an incompetent relative in the family business is more reliable than that of a competent outsider.
– Obedience to patriarchal authority is essential to maintaining coherence and direction for the enterprise.
– Tangible goods like real estate, natural resources and gold bars are preferable to intangibles like illiquid securities or intellectual property.
Incrementalism is the current Chinese model of entrepreneurship because it is a risk management strategy seen as appropriate to the times. Right now there are no Apple Computers or Facebooks in China, but there is Baidu (an e-commerce platform) and there is Aigo, which proliferates a vast array of consumer electronics and has become something of an icon of Chinese entrepreneurship. Aigo claims to have the largest global market share of digital picture frames, produces a tremendous variety of USB appliances and has just launched a 3d digital camera. It should be noted that none of these products originated new industries or were based on disruptive technologies. Rather, they were improvements on existing platforms with a Chinese design spin, feature addition or cost advantage.
However, what is particularly significant about Aigo is its CEO, the hyper and charismatic Feng Jun who famously started the company with a $150 loan from his mother. If innovation is about purpose, he is the poster child. Feng seems motivated by nothing less than the opportunity to reshape Aigo as an instrument of China’s economic development. In fact, one of many activities under the Aigo umbrella is the Aigo Entrepreneurs Alliance. A glossy brochure breathlessly proclaims a “mission to advance to the center of the universe,” by promoting China’s 100 national enterprises to Fortune 500 status.
Sundia, a biotech company, has a different kind of entrepreneurial model. The CEO and founder Xiochuan Wang is a U.S. citizen who returned to China to start Sundia. She is an an example of what the Chinese call the "sea turtle phenomenon" for the tendency of these creatures to return to their homeland, just like Chinese talent. As a contract research firm with 600 scientists in the drug discovery and development business, Sundia embodies best practices enabled by local assets. It is by its own description a “customer focused and innovation driven” contract research organization founded in 2004. Neither Aigo or Sundia is an Apple or a Genetech, but if one takes the long term perspective, the seeds are being planted for future innovation.
So what is the future of Chinese entrepreneurship? How will they evolve out of an incremental mindset? Right now, it makes eminent sense for a Chinese entrepreneur to reap the benefit of being in an environment of capital abundance, low cost manufacturing and high levels of global demand by taking orders from international companies and fulfilling them. This is seen as a reliable way of making money, while the risks of introducing a radically new product are seen as excessive, particularly in an environment in which the power of an international brand like Apple far outshines local brands, at least for the present.
There is also the question of creativity in relation to the Chinese entrepreneurial mindset. One of the entrepreneurs I interviewed for my Harvard Business Review article stated, “In Chinese culture, you have to respect your father and mother. This respect kills creativity. If you have to respect what your father says, then you tend to kill your own thinking.” It remains to be seen what will happen when Chinese entrepreneurs by the thousands begin to move from survival to self-actualization and harness the skills learned from American style venture capital and Silicon Valley collaboration to create the next wave of value-creating ventures.
The views expressed in this article are solely those of John Kao. Check out more on innovation at www.cnn.com/innovation.