opinion


What can Western businesses learn from China’s digital innovators?

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Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this article Angus Ward, CEO, Digital Platform Solutions, BearingPoint//Beyond, takes a look at some of the ways in which China is more innovative than the West.

Over the past five years, China and its internet-born businesses have become a globally recognised force for digital innovation. This year, China’s retail market is set to become the largest in the world, exceeding sales in that of the United States and topping $6 trillion in 2020. Last year, it also had 186 unicorns (i.e.: a privately held start-up company valued at over $1 billion), with a combined valuation of more than USD $736 billion.

So, what’s the secret? What is China’s trajectory as a digital superpower and how far beyond Asia does it extend?

Consumers in Asia are voracious consumers of technology. They’re happy to switch to a new digital service (preferably mobile) if it offers a more convenient solution to a problem. They will concede on data privacy as a price for that convenience. That’s why Asia is a hot bed for innovation with digital players adopting a fail-fast mentality – rapidly taking an idea, launching a product to test the market to see if it flies and then rapidly building.

Through this approach, digital lifestyle app WeChat has grown from a simple messaging platform into an ecosystem of solutions for just about every customer problem – from mobile payments and e-commerce even to transport.

Western companies have a lot to learn from many of the Chinese digital heavyweights. Until recently, these firms were relatively unknown outside China, but this is no longer the case. With the launch of 5G in the UK, new smartphone models from the likes of Oppo and OnePlus are the first handsets to hit the market. US brands are nowhere in sight currently. Huawei is seen by many as a market leader in 5G technology and communications service providers (CSP) like China Mobile have set up European bases from which to expand. This suggests that these Chinese companies are innovative, ambitious and are ready to take the west by storm.

So, what can western players learn from their digital rivals from the east?

Eyes on the prize

For every western tech giant, there is a Chinese equivalent. Given China’s population, it’s on a scale that is pretty similar to the west. In the past 18 months, some of the best-known western technology giants have experienced a breach of trust with customers stemming from their lack of transparency into how the giant tech player actually use – and misuse – customer data. Facebook and Cambridge Analytica scandal are an example. The entire episode has left customers both questioning the integrity of the technology companies they’ve come to rely on for much of their online digital interactions but also it has weakened the bonds tying them to their customers.

While Facebook and its fellow FAANG companies face criticism over data privacy, the likes of Baidu, Alibaba and Tencent – known as the BAT companies – go from strength to strength in China. Thanks to investment and other support from the Chinese Government, Baidu dominates online search in China: Tencent is the country’s biggest gaming firm and is also behind the WeChat messaging and payments app: and Alibaba has used its success in China’s e-ecommerce market to invest billions in Artificial Intelligence (AI). With China’s plans to build a USD $1 trillion AI industry by 2030, the country is on track to overtake the US as the world’s leader in use of this technology.

And it’s not just in AI where China wants to claim the top spot. The country’s “Made in China 2025” strategic plan aims to move the country away from large-scale manufacturing and transition into high value product and services. China is also striving to take the lead in robotics, IT and clean energy, among other sectors.

Undoubtedly the real winners of 4G were the FAANG companies who dominated in handsets, social media, internet search, advertising revenues, content streaming and e-Commerce alongside gaming. But in the race to 5G, it’s China now ready to claim a material share of global revenues. With Government sponsored focus on the new technologies like AI and robotics, and a massive home market of tech savvy consumers with a voracious appetite, Chinese digital players will be much faster at innovating the new applications that will power technology adoption such as for 5G

Without as many areas of interest, and lacking the same levels of capital, customer base and support of national governments behind them, it’s difficult to see how Western players will enjoy the same success as Chinese firms. But while they can’t draw on the same resources as their Chinese peers, there is no reason why Western firms cannot adopt the same approach.

There is no “I” in team

Chinese companies’ willingness to work closely with global partners has played a significant part in the success of its tech start-ups. China’s decision to invest heavily in the tech sector, both at home and abroad, means that it is slowly but surely working its way up the value-added ladder. Western companies can learn much from this collaborative approach in order to innovate and better compete.

In sectors like e-commerce and the Internet, Chinese firms create ecosystems that drive innovation because of their size and also the advantages and benefits they offer to third-party partners, in terms of access to new markets.

For example, Chinese ride-hailing app DiDi outperformed its rival Uber in China on everything from marketing to speed to market, before finally acquiring Uber’s China assets. DiDi regularly introduces new features and services from its partner ecosystem, such as sending a driver for your car when you’ve had too much to drink: and an SOS feature to improve customer safety.

Partner ecosystems help to innovate new ideas, expand offerings, increase reach and grow revenue. An effective partner ecosystem solves customer problems through the exchange of ideas and combining contrasting capabilities to create new more functional, multi-faceted and compelling solutions. Nevertheless, ecosystems are complex to manage and so must always be underpinned by a digital business platforms to automate operational processes to bring governance, efficiency and control but also to secure and share the benefits across the parties. This is why both FAANG and BAT are also digital business platform companies.

According to a May 2018 study by consulting firm BearingPoint, 60 percent of Communication Service Providers (CSPs) expect partner ecosystems to drive cost-effective innovation, 59 percent expect ecosystems to help them remain competitive, 51 percent believe ecosystems will help them improve customer experience and 48 percent believe that ecosystems will create direct relationships with customers. This picture was replicated across almost every other industry covered by the survey from automotive to financial services.

The reality is that very few innovations – whether it’s an entirely new service or improving an existing one – are created solely in-house anymore. For CSPs to thrive in the expanding, fast-moving and hugely competitive digital market, cultivating and actively participating in a partner ecosystem is now essential.

 

Angus WardAngus is the CEO of BearingPoint’s digital platform solutions arm, BearingPoint//Beyond, appointed in September 2017. Angus brings 30 years of consulting and solutions experience to his role, supporting organisations across multiple industries in shaping strategies and adopting platform-based business and operating models with differentiating partner ecosystems.

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