Technology and Business Innovation in China: Presentation and Discussion at Seattle University with the Graduate MBA students on opportunities and challenges for entrepreneurs, investors, organizations, education and society. Examples from Alibaba, Tencent, ChinaValue, Xiaomi, Huawei, Start-ups, Yuanfen. Experiences from Beijing, Singapore, Shanghai, Shenzhen, Hangzhou, Suzhou, Hong Kong from TEDx speaker Professor Mark Mueller-Eberstein

1. The context of
innovation in China
Guest lecture for:
Albers School of Business & Economics, Seattle University
Prof. Mark Mueller-Eberstein
@markmeberstein

2. ©Mark Mueller-Eberstein & Adgetec Corporation

3. ©Mark Mueller-Eberstein & Adgetec Corporation
2004 – 2014: Developments and Insights
 Innovation and Intellectual Property strategy for Microsoft
 Investor and Start-up mentor
 Teacher & Speaker at international events
 Executive connections and consulting
 Locations: Beijing, Shanghai, Hangzhou,
Suzhou, Shenzhen, Hong Kong
(…. and “model” Singapore)
 Industry focus:
– IT, automotive
– consumer products, some biotech
 Social & Digital Marketing
– B2C and B2B
TEDx talk on “Change”
www.Mueller-Eberstein.com

4. ©Mark Mueller-Eberstein & Adgetec Corporation
If a business is to survive,
it must aim to add value to
customers through continuous
innovation and finding new ways of
delighting its customers.
Steven Denning

5. ©Mark Mueller-Eberstein & Adgetec Corporation
China’s businesses: Copycats or Innovators?
 Massive numbers
 Massive talent
 Massive scale
 Massive amount of money
 Massive challenges and baggage
Cultural revolution, one child family, communism,
corruption, nepotism, aging population, education system,…
 Massive risks
 Massive opportunities
BOTH…and on massive scale

6. ©Mark Mueller-Eberstein & Adgetec Corporation
WSJ video: China tech companies take on us in innovation

7. ©Mark Mueller-Eberstein & Adgetec Corporation
HOW CAN WE BE MORE INNOVATIVE?
Thriving in the “Innovation Economy”

8. ©Mark Mueller-Eberstein & Adgetec Corporation
Process or results?
Siok Siok Tan’s Google Docs story
 Filmmaker (Discovery,
Twittamentary), Entrepreneur,
 CEO at Kinetic ONE
 … mentoring and guiding “regular
Chinese employees in the creative
world” from “high knowledge”
to “critical and innovative
thinking”

9. ©Mark Mueller-Eberstein & Adgetec Corporation
IP Protection or
responsive customer value delivery?
Alex Lin
Owner, ChinaValue.NET new media
“Speed of delivering value to customers
is key.
When we would have ‘protected’ our IP,
it was already outdated (and copied)
anyway”

10. ©Mark Mueller-Eberstein & Adgetec Corporation
Massive Investments
Culture shift

11. ©Mark Mueller-Eberstein & Adgetec Corporation
Heda / Hangzhou
“We are producing 50,000
engineering graduates every
year”

12. ©Mark Mueller-Eberstein & Adgetec Corporation
Shenzhen
Southern Chinese manufacturing city turned “High tech”
 First to open up under China’s economic reforms in 1978
 Known as a hub of low-cost knock-offs
 Home to the telecom-plus companies Huawei and ZTE
 Social messaging player Tencent (Wechat is one of their products)
 Supply chain manager PCH International
 Electronics maker Foxconn,
 Warren Buffet-invested electric car maker BYD

13. ©Mark Mueller-Eberstein & Adgetec Corporation
Self-image:
Is perception already reality?

14. ©Mark Mueller-Eberstein & Adgetec Corporation
What organizations should do… …
written by a Chinese outsourcing company

15. ©Mark Mueller-Eberstein & Adgetec Corporation
Investments and Startups

16. ©Mark Mueller-Eberstein & Adgetec Corporation
Yuanfen – flow
“It is meant
to be together”
798 - Beijing
http://www.yuanfenflow.org/

17. ©Mark Mueller-Eberstein & Adgetec Corporation
From investors &entrepreneurs in China
 Be in Beijing (or Shanghai for media)
 Big Numbers, baby: China is one gigantic accelerator
 The Government is all in – Federal AND Local
 Solo investor rounds are the norm
 Chinese will clone your product long before you enter China
 Chinese investors and entrepreneurs actively going overseas
 Look for leaders who know how to fail and learn (often western
educated)
http://www.techinasia.com/learned-year-
angel-investor-greater-china/

18. ©Mark Mueller-Eberstein & Adgetec Corporation
 At Shenzhen-based Huawei Technologies Co., the world's second-
largest telecommunications-equipment supplier by revenue after
Sweden's Ericsson, annual R&D expenditures rose fourteen fold in a
decade to $5.46 billion in 2013 from $389 million in 2003.
 But in the past decade, Huawei overtook Western rivals such
as Nokia Corp.NOK1V.HE -1.77% and Alcatel-
Lucent SA ALU.FR +2.26% in the telecom-gear market.
 Part of its success stemmed from Huawei engineers' creative ways to
upgrade wireless networks using software instead of a costly method
of replacing all hardware components (followed by e.g. Cisco and
Juniper).

19. ©Mark Mueller-Eberstein & Adgetec Corporation
Innovation pipeline
 2012 Setting up “Laboratories
15,000 engineers & researchers, 20% outside China - a heavy percentage from India
 Breaking functional boundaries
Established an integrated team of marketing, technical, research and development
managers to make sure products match requirements, working with suppliers and
customers
 Mobile
• Early 3G provider; worked with carriers in Europe to offer distributed system of
power supply allowing European customers to be first to enjoy 3G service and
became a world standard.
• Working on the technology for 5th generation networks, may be ready 2020
 One of the worlds largest patent filers. (Residue of protracted legal cases with rival
Cisco over intellectual property)

20. TRENDS
China is “Mobile”

21. Fundamental change
 Mobile was always much bigger than
technology, but always separate
 Smartphones mean technology and
mobile worlds have merged
 Internet and media are being dragged
along
 Tablets accelerate the change
 This changes everything
From Mobile is eating the world November 10, 2013

22. Fundamental change in scale
PC Industry
 350m PCs sold in 2012
 1.6b units in use
 Replaced every 4-5 years
 Shared
Mobile Industry
 1.7b sold in 2012
 1 billion smartphones in 2013
sold
 3.2b mobile users
 Replaced every 2 years
 One person
 Data plan penetration/ pricing
is only limit to growth
From Mobile is eating the world November 10, 2013;
BBC business http://www.bbc.co.uk/news/business-25923404

23. ©Mark Mueller-Eberstein & Adgetec Corporation
Enterprise IT Adoption Cycle
Business leaders who
see the value of tech
http://www.ascrewsloose.com/2012/07/25/enterprise-it-adoption-cycle/

24. ©Mark Mueller-Eberstein & Adgetec Corporation
Technology as accelerator
Unlocking China’s potential of innovators and creative
thinkers:
 Unlimited computing power and capital
 Resources and access to IT capacity and capability;
unlocking innovative potential (E.g. mobile gaming)
 Customer feedback and viral massive reach through social
media (e.g. Sina WEIBO; complaints turned into dialog
 Highly educated engineering workforce

25. ©Mark Mueller-Eberstein & Adgetec Corporation
Xiaomi Inc.
 Founded in June 2010
 “Work from the little things, instead of starting by striving for perfection”
 Xiaomi products sold directly via company's website
 Technology: from Google
 Marketing: from Apple
 August 2013: hired Hugo Barra from Google
 October 2013: Xiaomi the 5th most used smartphone brand in China
 Revenue: US$ 5.22 billion (2013)
 3,000 employees
 February 2014: officially entered the e-payment business
http://www.globaltimes.cn/NEWS/tabid/99/ID/841442/Xiaomi-forays-into-e-
payment-business.aspx
“Like Apple, Xiaomi designs and controls the software that runs on the phone,
creating a seamless end-to-end experience that places usability on a pedestal”
-- Hamish McKenzie (Beta China)
“Xiaomi does in a week what Apple does in a year”
-- Parmy Olson (Forbes)

26. ©Mark Mueller-Eberstein & Adgetec Corporation
Xiaomi’s expansion went like gangbusters
The company’s mid-priced phones sold out in eight minutes in
Singapore, its first market outside of greater China—part of a
strategy to convert limited supply into intense consumer demand.

27. ©Mark Mueller-Eberstein & Adgetec Corporation
Making millions in interests?
WeChat’s “Lucky Money”
The law of the big numbers

28. ©Mark Mueller-Eberstein & Adgetec Corporation
Largest online shopping day in 2013?
“Cyber Monday”… or “Black Friday”
… or even combined…?

29. Single’s Day in China
On 11/11, China’s
biggest online
shopping company
processed more
than $5.75 billion in
its online payments
system — a record
for a single day
anywhere in the
world.

30. ©Mark Mueller-Eberstein & Adgetec Corporation
Alibaba
 Online shopping &
marketplace
 Micro loans
 Cloud computing
 Big Data
  partner enablement
 Investment products,
insurance, infrastructure,
solutions, gaming,
animated movies,...

31. ©Mark Mueller-Eberstein & Adgetec Corporation
Trudy Dai
Chief People Officer
and Senior Vice
President,
Alibaba Group
Innovation requires learning
through mistakes.
“We are not like Microsoft"

32. ©Mark Mueller-Eberstein & Adgetec Corporation
Alibaba’s Shan (Trudy) Dai
 Serves the mass of people who can NOT afford to go to big trade shows or
operate large brick and mortar stores
 Rotate people with the total trust in management's intention of putting
people in place to deliver optimal performance and contribution
 Technology decisions driven by business requirements
 Discovering and solving unprecedented challenges:
 30 million people hitting sales website in first 30 seconds
 Managed $5.6 billion online transaction sales in 24h
with Alibaba cloud platform infrastructure
 Shipped 152 million packages. Alibaba built delivery team
 Alibaba is one of the few companies that has own infrastructure , makes it
available and believes in the value of data

33. ©Mark Mueller-Eberstein & Adgetec Corporation
Global innovation index
2013: CHINA RANKS 35TH
WHERE WILL THEY BE IN 2015 AND 2020?
http://www.globalinnovationindex.org/content.aspx?page=press-release

34. ©Mark Mueller-Eberstein & Adgetec Corporation
The purpose of strategy—or business is
to add value for customers and
ultimately society
Steven Denning
… and isn’t that what China
has systematically done for the last 20+ years… ?

35. ©Mark Mueller-Eberstein & Adgetec Corporation
The trick is being open to
changing your mind, and
more importantly,
knowing when to do so.
George Bernard Shaw
“Those who cannot
change their minds
cannot change
anything."
Rethinking within and about China…