In search of the Chinese entreprenuer
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September 15th, 2011
08:00 AM ET

In search of the Chinese entreprenuer

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 TwitterFacebook 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 nationCheck 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.)

Read post 1: China as an innovation nation.

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:

They included;

– 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.

Read post 2: Why is innovation so important to China?

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.

Read post 3: Chinese innovation – paper tiger or king of the hill?

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.

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Topics: China • Innovation

soundoff (39 Responses)
  1. j. von hettlingen

    The real entrepreneurial spirit would be to face challenges. Go to those remoted areas in West and North East China, see what one could make out of the economic environment. Don't just be where everybody is and do what everyone does!

    September 15, 2011 at 10:47 am | Reply
    • Josh Barnett

      Good point. I'm so sick of hearing compliments and praise for things China hasn't done yet.

      China needs to decide if it's a world power, or a kid with training wheels. If it's a world power, then it should stop worrying about what the West thinks and projecting this fake image about how awesome it is. All the talk is becoming tiring. Just do it, like the Nike slogan. We in the West will not be easily fooled into mistaking talk for action. We will judge for ourselves without the help of propaganda (foreign or domestic).

      September 15, 2011 at 10:14 pm | Reply
      • common dense

        Hmm sounds like Europe and the US. We're so great, our democracy is so great, blah blah blah. But really you're full of debt and your economy is failing.

        china propaganda. more like US propaganda

        September 16, 2011 at 12:15 am |
      • Josh Barnett

        We don't talk about it, we just do it. So keep talking, this is really hilarious.

        September 16, 2011 at 1:40 am |
      • Josh Barnett

        PS posing as American to praise China is the most pathetic thing in the history of the world.

        September 16, 2011 at 1:42 am |
      • john

        Just do it. That's Nike's slogan.
        I thought the American's slogan should be: "Just say it". Or maybe "just against it"

        September 16, 2011 at 8:16 pm |
  2. achinese

    Please can somebody tell this Mr. Kao that it is already widely alleged in America that we Chinese cannot innovate. Why is he still trying to gut the closed debate in the West?

    What we do in China, innovate or not to innovate is clearly our own business. As far as America is concerned, of course we Chinese cannot innovate and will not innovate. And better still all we do is just to copy whatever that comes of the West, including their blonde facial hair, strange and weird hairdo, and butt showing dirty pants. That just suits us fine.

    September 15, 2011 at 11:29 am | Reply
    • Neil Cassidy

      Umm, I've lived here in China for six years. Your response is typically non-sensical: poorly organized and self-contradictory.
      Copying of the West is a favorite sport here. And I have never met or seen a Chinese woman who doesn't want to look more white. Skin-whitening is a multibillion dollar business in China.

      September 15, 2011 at 11:39 am | Reply
      • adam

        Alas, caucasian girls/women are more interested in getting a good tan than a pearl white skin.
        you just undercut your own argument.

        September 15, 2011 at 12:01 pm |
      • Johnny Tan

        Obviously this is typical of Americans who take for granted of what they do not know. Our old man 2400 years ago had already helped us with the notion that "To know what you know and to know what you do not know is real knowing". The milky pearl glowing skin is an reflection of a well-endowed chamber-bred lady, who reads, sews, and composes. In contrast, of course, to a poor peasant girl who labors in the sun to plant the next years rice or wheat and helps her husband with the farming choirs. In my long agrarian history, it had persisted.

        Eh, Americans!

        September 15, 2011 at 12:44 pm |
      • john

        I thought Americans should care more about their jobless claims and broken political system, not some kind of innovation of a country ten thousand miles away.
        In a old Chinese says: eat too much and have nothing to do. (meaning it's nothing to do with you)

        September 16, 2011 at 8:26 pm |
  3. Neil Cassidy

    The key point here, unintended, is the ending: that Chinese will continue to rely on learning skills from America. Most everything that has resulted in success during China's private business boom has originated in America, including its leaders, who are overwhelmingly Chinese who've been educated at America's superior universities.

    September 15, 2011 at 11:32 am | Reply
    • Ignorance is bliss

      Continue to believe that the Chinese are dependent upon America for their entrepreneurship and business skills, Neil. At least it'll make you feel better not having to face the truth that Chinese businessmen are outpacing their American counterparts at a stupidly fast rate. After all, its America, not China, that has a 10% growth rate, a powerful manufacturing base, and science, math, and language scores that are at the top of international rankings, right?

      /sarcasm

      September 15, 2011 at 12:59 pm | Reply
      • Guest

        Sure, when the average annual income goes from $1,000 to $1,100... you can call that a 10% growth rate. Now you can go from affording one pirated American movie to two per year.

        September 15, 2011 at 2:46 pm |
      • whatever

        $1,000 is not much, but still beats $50,000 of debt PER HEAD every single day.

        September 15, 2011 at 5:08 pm |
      • M.

        But to Americans, debt is wealth!

        September 15, 2011 at 6:22 pm |
      • c2

        Not to mention in China, those $1000 has about the same buying power, in terms of everyday usage for food and living expenses (not counting designer/foreign products). When you go to a typical local food shop, a bow of noodles is about $1 (5-6 yuan) after the exchange rate, same thing for a dozen dumpling buns. So your argument is pointless.

        September 15, 2011 at 9:38 pm |
  4. whatever

    Neil,
    Your point is taken. Well, if you really mean it, why don't you just leave the Chinese alone? Stay superior 🙂

    September 15, 2011 at 12:36 pm | Reply
  5. Kenneth C.K. Pan

    Notably missing from this piece, is the business-to-business e-commerce site alibaba.com. My understanding is that it is not only the FIRST B2B e-commerce site, but to this day, there is still no American equivalent to it.

    September 15, 2011 at 12:49 pm | Reply
  6. rick perrytwit ... slack jawed bible thumper

    Chinks from hell...

    September 15, 2011 at 1:16 pm | Reply
    • Pat Reardon

      F U racist.

      September 15, 2011 at 7:49 pm | Reply
    • c2

      Funny how your username insults Rick Perry, when you're a slack jawed redneck racist yourself.

      September 15, 2011 at 9:40 pm | Reply
  7. Gaadffly

    Innovation in China; Government finds new ways to monitor, control and restrict the internet. People find ways to recycle trash like cooking oil and sell it as new. Farmers use banned pesticides and growth hormones on crops they wouldn't dare eat themselves. etc. etc.

    September 15, 2011 at 2:11 pm | Reply
    • whatever

      Gaadffly, maybe that perfect country exists in your world. For the time being, Chinese will just settle with solid economic growth and steady social improvements one small step at a time.

      September 15, 2011 at 2:38 pm | Reply
    • Rocky

      China has a lot of problems, but Chinese people are working very hard, step by step to improve it. China has over 1.3 billion poople. You can only depend youself. Nobody can help you in the earth. China has a long way to go.

      September 15, 2011 at 5:12 pm | Reply
  8. BJJSchecter

    No searching needed. They are all in rehabilitation camps.

    September 15, 2011 at 4:48 pm | Reply
    • whatever

      Trivia of the day, which country has the world's largest prisoner population?

      September 15, 2011 at 5:13 pm | Reply
  9. david ph

    Creativity IQ
    If you can't understand this statement, you have low IQ but you may have high creativity.

    September 15, 2011 at 8:16 pm | Reply
  10. david ph

    Creativity IQ
    If you can't understand this statement, you have low IQ but you may have high creativity.

    September 15, 2011 at 8:16 pm | Reply
  11. Homer GoDaffy

    UUUUUUUUUhhhhhhhhhhhhhhhh, is that a guy or a chick. Hard to tell.

    September 16, 2011 at 2:01 am | Reply
  12. Pat

    In the end the Jews still dominate in both success, creativity and entrepreneurship that's who we should be following!

    In every country, in almost every industry there are Jews who either started the company or run it

    September 16, 2011 at 4:01 am | Reply
  13. imazis

    After 3 years in central China I would suggest "innovation" come in the form of better waste management, starting with personal litter. Then move on to maintenance of common areas in apartment buildings and the like to keep rodent infestation down. Then build a road that doesn't self destruct. Yes, some things are better in Shanghai and the other facade cities.

    September 16, 2011 at 5:21 am | Reply
  14. Andrew

    So, Chinese is not innovative. So what ?... As long as, the living standard improves day by day, the foreign debt holding increases day by day, the starving population decreases day by day.... i think Chinese will not give a damn what the White (in particular the American), Indian, Korean and the rest have to think of them !?

    September 16, 2011 at 5:59 am | Reply
  15. Almost ABC

    "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."

    "low cost manufacturing" is the key phrase. This implies sweat shop labor and when China's humanitarian standards catch up to the rest of the world we'll see a change in the nation's economy. Until then, billionaires will be pumped out of China on the blood, sweat and tears of those laborers.

    September 16, 2011 at 8:41 am | Reply
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