Rhea Liu in Beijing
Speaking at the NetEase Future Technology Summit in Beijing, Zhou Wei, managing partner at investment fund, Kleiner Perkins Caufield & Byers (KPCB), explained to the audience that Chinese startups will likely be more competitive than their American counterparts in the future faced with a more globalized trading environment.
Zhou compared the overall environment for startups in China and the U.S and argued that today’s fast changing Chinese society has fostered a batch of highly-competitive Chinese enterprises, able to hold their own in an increasingly internationalized trading climate. Below is a summary of his key points.
I. China’s rising younger generation demands new business models
Zhou said intergenerational changes in the U.S. were pretty significant but relatively trivial when compared with China, a country people once thought to be more conservative.The gap between the generations in China is increasingly widening as society has changed drastically.
“Intergenerational changes have introduced more uncertainties into business operations in China, especially for startups,” Zhou said. “Intergenerational changes have brought new variables to the development of new businesses and new future models.”
Zhou highlighted the new opportunities presented by e-commerce in China, especially with the millennial generation being more willing to pay for entertainment online.
II. The U.S. experiences standard evolution while China sees accelerated evolution
“Ten years ago, we joked about C2C, which means copy to China, but now businesses in China are evolving much faster than their American counterparts,” Zhou said.
He raised the example of Weibo and Twitter and talked about how Weibo evolved to include more sophisticated functions than Twitter, after learning from the concept.
Zhou used the analogy of evolution to explain the differences between the Chinese market and the American market. He said if we place two monkeys, one in the U.S. and one in China, the American monkey might evolve into a man at a rate 10 times faster helped along by fierce competition. The Chinese monkey might very well turn into a monster because the Chinese market is unstable and often does not abide by the rules.
III. Chinese companies believes the “wolf culture” contributes to their strong competitiveness in the global market
Fierce competition in China has ushered in a belief in the “wolf culture,” which means being acute, aggressive, assertive and collectivistic, or fighting together in a group. Huawei is perhaps the most well-known company to have promoted the culture internally.
“When group buying businesses first appeared in China, over 5,000 companies emerged in the sector within three months. In the U.S., even when group-buying was at its peak, there were only a few dozen regional group buying companies,” Zhou said.
Fierce competition in the market has pushed Chinese companies to adapt to the “wolf culture”, which, in Zhou’s opinion, enables Chinese companies to react impressively fast to all kinds of changes in the market.
Zhou thinks the characteristics embodied by the “wolf culture” will be key assets to Chinese companies helping them maintain future competitiveness on the international stage.
IV. Chinese state policy presents significant uncertainty for Chinese companies.
“A key reason why investors cannot bring themselves to giving Weibo a high valuation is because of state policy in China,” Zhou said.
The market has witnessed the impact of new regulations on the ride-hailing business. Top players in China, including Uber and Didi kuaidi, are seeking solutions to adjust themselves to the changed circumstances under the new regulations.
Zhou suggested that though it’s hard to determine with precision the fault lines of regulation, it should be easier to identify the boundaries of business ethics.
“When you’re designing your business model, you need to analyze the legal risks and ethical boundaries ahead and never step on the bottom line. Ultimately, creating long-term value and respecting ethical boundaries is the solution to surviving in this ever-changing world.”
(Feature photo from NetEase)