China may have grown into a technology powerhouse by following the example of the west, but the country is now carving out its role as a global leader in mobile Internet; setting trends in telecoms, mobile devices and social commerce, writes Katie Matthew.
Working for AsiaInfo, it stands to reason that I would promote China as a centre of innovation. It would be remiss if I didn’t believe that Chinese innovation is leading the way in the mobile internet; creating credible – and, more importantly, profitable – solutions to the challenges communications service providers (CSPs) in the west are now facing.
It is now starting to feel as if our industry is finally waking up to China’s influence, having dismissed the country as a Shanzhai – copycat – nation for far too long. Indeed, it is those in the west who may find themselves copying – or taking inspiration – from China soon.
China – an innovation nation?
At AsiaInfo we have seen this tired, old stereotype of China as a follow fast market perpetuated on a daily basis. In reality, it is a hugely outdated image because China has, in many ways, defined markets such as search, commerce, social and entertainment, while the nation is light years ahead in mobile, having already tackled many of the challenges that CSPs in Europe are now facing.
The balance of power is already shifting from west to east. This was flagged up earlier in the year when Chinese e-commerce firm, Alibaba, began public trading, and immediately joined fellow Chinese companies, Baidu, Tencent and Xiaomi, in the world’s top ten largest internet companies by stock market value. Headlines such as ‘Internet Power Balance tilts towards Asia’ (Wall Street Journal) showed that people were finally waking up to the power drain from Silicon Valley.
But still, many people questioned whether this dominance was anything to do with domestic innovation. For a start, skeptics argue that Chinese internet firms benefit from some serious scale – and they do. Joseph Chen, chief executive of Renren, has acknowledged this himself saying that the size of the market is a serious advantage to big market-cap companies – “It’s the same technology but when you put it in China it’s worth more,” he has said.
The user base is vast and the facts speak for themselves: with a population of 1.35 billion, there are currently around 642 million internet users in China, which is only 45% of the population. It also has the largest smartphone market in the world – with around 630 million connections, reports GSMA Intelligence, Q2 2014.
The numbers are certainly staggering but sometimes distract from the other story: how advanced and dynamic the consumer market is. China’s market has moved much more aggressively into mobile than the US and Europe. This was highlighted recently in Google’s Consumer Barometer, released last month, which showed that Asia is the only continent to have gone mobile first, where smartphone adoption has overtaken computer adoption.
Secondly, critics point out that a high proportion of China’s market-leading companies are based on ideas copied from their Western counterparts – Baidu vs. Google, Renren vs. Facebook, Weibo vs. Twitter, Xiamoi vs. Apple, WhatsApp vs. WeChat, and others – and they therefore challenge the concept of China as an innovator.
It’s true that most of China’s major internet companies started life as pretty obvious clones of popular foreign sites. But all the companies listed above have grown into innovators with products and services very different – and, in many cases, entirely superior to – those offered by the companies they once set out to imitate. After all, consumers living in a mobile-first world need new products and services built with mobile in mind, not as an after-thought or a nice to have.
Take WeChat as an example. Already, WeChat, a mobile messaging service with over half a billion users, has gone far beyond a social media or instant messaging tool. WeChat combines the best of Facebook and WhatsApp — and then adds a whole host of monetising innovations of its own. From playing mobile games and hailing taxis to posting videos, sending voice messages and making online payments, WeChat is an all-you-can-use mobile service. There is nothing comparable in the west.
Meanwhile, smartphone manufacturer Xiaomi is busy upsetting the Apple cart with its $50 mobile phones and innovative marketing techniques, leaping into the international spotlight as the third largest smartphone vendor by shipments. Xiaomi is commonly described as China’s Apple and founder Lei Jun as the Chinese Steve Jobs, yet the company is only four years old and did not release its own smartphone until 2011. And an important side note here: while Apple is rightly a much-celebrated brand, it did not invent the mobile phone or even the smartphone; rather, it recognised unarticulated consumer needs and went ahead and served those needs. That is innovation.
The CSP/OTT challenge
While the applications are more advanced, so too is the CSP strategy for engaging with these innovative internet players. We may finally be starting to get on top of this challenge in the west – or, at least, we’re certainly talking about getting on top of it – but the Chinese CSPs have been visionary about this threat, and have taken strategic steps to sandbag their businesses against the OTT wave. They are a market that we in the west can really learn from in that respect.
China Telecom is a good example. The company recognised the threat faced by the OTTs long before many of its counterparts. China Telecom knew it had to turn this threat into an opportunity, and saw serious merit in partnering with these players, and reselling converged products into the marketplace. It was a hunch that paid off, with annual incremental revenues of more than US$2 billion coming through partners using China Telecom’s open operational platform. That’s a relevant take away for CSPs in the west.
The landscape for innovation
In the west, our industry has tended to navel gaze, which, combined with an infamous lack of agility when an opportunity is not spotted, means the west has a habit of letting other players and markets get ahead. However, the challenge of operating in a fast moving digital ecosystem is forcing CSPs to rethink business models, and everything else that entails.
That might explain why prejudices about China are finally starting to subside in the west, because CSPs recognise that the nation has a thriving digital landscape that is sometimes way ahead of us in terms of business models, applications and infrastructure. The market is changing so rapidly that Chinese companies have to be agile, nimble and innovative to keep up. In other words, copy/manufacture/undercut is a model that is not only entirely out-of-date, it’s just not practical in this incredibly competitive and fastmoving market.
Europe and the rest of the world will need to keep a close eye on China’s innovations because, as well as threats, they will bring with them opportunities – including ideas that may just be worth taking inspiration from.
