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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Meet the overnight tech success stories of China’s globalizing business landscape
In the last few years, we have seen a meteoric rise of Chinese tech companies across the world. Alibaba stock price movements unnerved investors globally, venture capitalists searched for the next Meituan or Pinduoduo in Southeast Asia and Latin America, and of course, Tik Tok, the most popular content platform in the world today, originated from China. The founders of such companies are typically credited with the “tenacity to rough it out,” the “courage to venture into the unknown,” and the “vision to take their companies to new heights.” However, the same can be said about Silicon Valley founders, or any successful entrepreneur. So, what gives Chinese founders and their companies the advantage in becoming multi-billion global enterprises? How does their leadership set strategies? How do they motivate their people? How do they move so fast and defend their turf in China’s hyper-competitive tech market? When they expand overseas, how do they determine what they keep and what they need to let go of? And most importantly, what do these things mean to you as a competitor, investor, regulator, or even as an executive or customer of such companies?
Seeing the Unseen: Behind Chinese Tech Giants’ Global Venturing answers these questions and delves into the fascinating world of Chinese logic that shapes how tech leaders make and implement decisions, many of which are seldom seen outside China.
In this book, you will gain an accurate, concise understanding of Chinese tech companies' reflections as they scale. You will understand the different generations of Chinese tech giants from Alibaba, Tencent, Baidu and Huawei to Pinduoduo, Meituan, ByteDance, Xiaomi and more.
In this Seeing the Unseen, the analysis behind the success and lessons learned is summarized into a unique framework that touches on People, Organization, and Product and Leadership (POP-Leadership). The book covers:
- How Chinese history, folklore and Mao Zadong’s political strategies have shaped the strategies of Chinese tech leaders, even today
- The mindsets of Chinese tech and internet companies and how they have evolved over the last two decades
- The unique business culture and leadership styles that steered these companies through uncertain and ultra-competitive periods
- How Chinese companies structure their organizations and products and how they remain agile as they scale
- The limitations of Chinese POP-Leadership, and what these companies must shed to keep up with international players in global markets
- How Chinese POP-Leadership is now becoming international, and how international players are leveraging these learnings
- How the worldwide expansion of Chinese companies will alter the business landscape in the coming decades
Chinese firms undertaking overseas ventures can challenge our thinking on global strategy and implementation. This book gives you a better understanding of these emergent players in the global arena.
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Veröffentlichungsjahr: 2022
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Table of Contents
Cover
Title Page
Copyright
Dedication
Preface
Acknowledgments
About the Authors
Introduction
WHO SHOULD READ THIS BOOK?
SCOPE OF THIS BOOK: WHAT ARE TECH/INTERNET COMPANIES?
POP-LEADERSHIP
BOOK STRUCTURE
NOTES
PART I: Understanding Chinese Tech Companies
CHAPTER 1: The Shark versus the Crocodile
YANGTZE CROCODILE GOES INTO OTHER RIVERS
THE RIVER THAT BREEDS CROCODILES
POLICY PUSH FOR ENTREPRENEURSHIP SINCE 2014
NOT MAGIC, BUT RIDING THE WAVES OF LUCK AND TIMING
NOTES
CHAPTER 2: Strategy and Tactics of Chinese Tech Companies
CHAIRMAN MAO’S STARTUP PLAYBOOK
COPYING, EXTREME COMPETITION, AND BEYOND
GET PEOPLE TO WORK TOGETHER
CHANGE IS THE ONLY CONSTANT
HARDSHIP IS A VIRTUE (FOR FOUNDERS)
CHAPTER 3: Everyone Is Going Global
GUERRILLA FORCES: SUDDENLY THEY ARE EVERYWHERE
SECOND WAVE: APP FACTORY FOR THE WORLD
NOTE
PART II: POP-Leadership
CHAPTER 4: Leadership
CHARACTERISTICS OF CHINESE LEADERS: LEARNING FROM HISTORY
IMPRINTS OF FOUNDERS OF CHINESE TECH FIRMS
HOW JACK MA AND PONY MA OVERTOOK BAIDU'S ROBIN LI
THE (INTERNATIONAL-MINDED) NEW GENERATION
LEADERSHIP IN GLOBAL EXPANSION
QUESTIONS TO LEADERS
NOTE
CHAPTER 5: People
FROM SCRAPPY GUERRILLA TEAMS TO TOP CHOICES FOR BEST GRADUATES: EVOLUTION OF PEOPLE IN CHINESE INTERNET FIRMS
SENIOR RANKS: THOSE WHO MATTER THE MOST
ALIBABA'S PEOPLE AND HR SYSTEM
PEOPLE ISSUES IN OVERSEAS EXPANSION
CRACKING THE CODE
QUESTIONS TO ASK
NOTES
CHAPTER 6: Organization
THE KEY ORGANIZATIONAL ISSUES
ORGANIZATION OF CHINESE TECH FIRMS
CHALLENGES OF ORGANIZATION IN OVERSEAS VENTURING
BREAKING THE SILOS AND HURDLES
QUESTIONS TO CONSIDER
NOTE
CHAPTER 7: Product
WHY IS EVERY CHINESE APP A SUPER APP?
START WITH IMPERFECTION, BUT IMPROVE FAST
LAUNCHING A PRODUCT OVERSEAS: THE QUESTIONS OF WHERE AND WHEN
LOCALIZATION: THE QUESTION OF WHAT
DIFFERENT APPROACHES TO EXPANSION: THE QUESTION OF HOW
PUTTING THINGS TOGETHER: SPEED, SEQUENCE, AND RHYTHM
NOTES
PART III: Resteering the Wheel
CHAPTER 8: The Inflection Point
COMMON PROSPERITY
RATIONALE BEHIND A SERIES OF ACTIONS
WAR OF A THOUSAND GROUPS 2.0
VENTURING OVERSEAS AS A NECESSITY, NOT A CHOICE
CHAPTER 9: The Global Chinese Community Fills the Gaps
SEA GROUP AND SHOPEE
LEADERSHIP AND STRATEGY
PEOPLE, ORGANIZATION, AND PRODUCT
FINAL THOUGHTS ABOUT SHOPEE
J&T EXPRESS
RESTEERING THE WHEEL FROM OUTSIDE CHINA
CHAPTER 10: Connecting the Dots
REPLICATING ALIPAY IN SOUTHEAST ASIA
THE CASE OF SOCIAL COMMERCE
MAKING ALL THIS RELEVANT
SUMMARY
CHAPTER 11: Cross-Pollination of Global Markets
A TRIPLET OF PIONEERS IN SEEKING GLOBAL TECH OPPORTUNITIES
CHINESE TECH FIRMS' GLOBAL MAP
THE CROSS-POLLINATION OF GLOBAL EMERGING MARKETS
Epilogue
Index
End User License Agreement
List of Tables
Introduction
TABLE I.1 Chinese Internet Firms versus US Internet Firms
Chapter 7
TABLE 7.1 Build, Borrow, and Buy in Overseas Expansion
TABLE 7.2 Ant Group's JV Partners in Its e-Wallet Business
List of Illustrations
Introduction
FIGURE I.1 The matching between companies in emerging markets and Chinese in...
FIGURE I.2 POP-Leadership
Chapter 1
FIGURE 1.1 Alibaba Group
Chapter 3
FIGURE 3.1 Google Trends keyword search: SheIn versus Zara
Chapter 6
FIGURE 6.1 Key issues in an organization
Chapter 7
FIGURE 7.1 Population density map (Imagery produced by the NASA Earth Observ...
FIGURE 7.2 Where do you need to be?
Chapter 8
FIGURE 8.1 Companies in each wave
FIGURE 8.2 Chinese crackdown on tech companies
FIGURE 8.3 Community group-buy players in late 2020
Chapter 9
FIGURE 9.1 Organizational structure of Sea Group
FIGURE 9.2 The Alibaba Zoo
FIGURE 9.3 Other ecommerce animals
FIGURE 9.4 Tencent's penguin and Meituan's kangaroo
FIGURE 9.5 Other sectors' animal logos
FIGURE 9.6 Plant-based logos
FIGURE 9.7 Animal logos familiar to early entrepreneurs
FIGURE 9.8 Amazon's and Shopee's strategies
Chapter 10
FIGURE 10.1 Alipay and WeChat pay
FIGURE 10.2 Different mobile payments and apps in Southeast Asia
Chapter 11
FIGURE 11.1 Six sizable economics in Southeast Asia
FIGURE 11.2 Healthy demographics for future consumption growth in Southeast ...
FIGURE 11.3 Major cities in Southeast Asia
FIGURE 11.4 Comparison between Southeast Asia and Latin America
FIGURE 11.5 Investment in Southeast Asia versus Latin America
FIGURE 11.6 Global diffusion of business models from emerging markets
Guide
Cover
Table of Contents
Title Page
Copyright
Dedication
Preface
Acknowledgments
About the Authors
Introduction
Begin Reading
Epilogue
Index
End User License Agreement
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Additional Praise for Seeing the Unseen
“The authors do a masterful job of demystifying the key factors driving the rise of world-class technology and entrepreneurship from China. Through first-hand experience as entrepreneurs, strategy leaders, and investors from China doing business globally, they offer insights and practical approaches for entrepreneurs everywhere to better compete both in China and abroad.”
—Blake Larson, global tech entrepreneur
“A standout in the multitude of works explaining what Chinese technology companies do and how, Seeing the Unseen expertly explains their ‘why’ and offers a practical framework for collaboration—or competition—with Chinese founders as they take on the world. Interwoven with well-placed forays into China's rich history, a delight to read.”
—Dmitry Levit, partner, Cento Ventures
“Seeing the Unseen discusses the past, present, and future of Chinese tech firms. It discusses why and how giants rose in the past, the challenges faced today in the global arena, and what we can expect in the future. The book provides deep insights to anyone who wants to know about Tech China and rising players from emerging markets.”
—Feng Zhu, professor of business administration, Harvard Business School
“Seeing the Unseen deciphers much of the philosophy in action on how entrepreneurs think and how they make crucial decisions. There are many gold nuggets in understanding why key events in Chinese entrepreneur history happened the way they did.”
—Jianfeng Lu, chairman, Wiz Holdings (wiz.ai), serial entrepreneur and investor
“My great-grandparents once told us to keep on learning all the way to China, as the rich history there offers a lot of lessons for our work and life. This book, which is very detailed and informative, shows just that. It is a strong combination of in-depth research and life experience of the authors in the tech industry. A must-read!”
—Kameswara Natakusumah, country leader and president director, Willis Tower Watson Indonesia
“For those who are interested in or embedded in the ecosystem of Chinese tech firms, Seeing the Unseen is a delightful and thorough guide full of information and insights. Reading it is not only a must, but a wonderful journey led by Guoli and Jianggan. Both have a profound yet objective understanding of the history and leadership of Chinese tech giants and how they impact the world.”
—Randolph Hsu, founder of Ondine Capital
“For anyone interested in Chinese tech companies, don't walk, but run, to get this book. As deeply embedded experts in the Chinese tech context, the authors raise the curtain on China and its rising tech giants.”
—Riitta Katila, W. M. Keck Sr. chaired professor of management science, and research director of the Stanford Technology Ventures Program, Stanford University
“Seeing the Unseen explains many of the enigmas that I experienced as an expat while working and living in Asia. If I could go back in time, I'd better understand why Chinese tech companies operate the way they do, and how to better work with them. Fully recommended reading!”
—Rodrigo Becerra Mizuno, chief technology officer, Televisa Univisión
Seeing the Unseen
Behind Chinese Tech Giants’ Global Venturing
GUOLI CHEN
JIANGGAN LI
Copyright © 2022 by Guoli Chen and Momentum Works Pte Ltd. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.
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This book is dedicated to my parents, Chen Xishi and Luo Yuzhen, and family members for their constant love and support.
—Guoli Chen
This book is dedicated to my dad, Li Yue; my mum, Jiang Meijuan; my uncles, Jiang Jian and Jiang Guo; and my aunts, Li Yinyan and Li Xiaoyan; as well as my extended family. Your support and encouragement over the years allowed me to be curious, explore, and ultimately share Chinese stories with the world.
—Jianggan Li
Preface
WE HAVE BEEN WORKING with each other through an INSEAD course, “China Strategy,” where participants and students increasingly took an interest in an emerging phenomenon: Chinese tech and internet companies expanding out of China. Through interactions at the course, we began to formulate a clear picture about what is really happening behind these waves of global expansion. The seed of co-authoring a book to put the strategies, stories, and lessons learned of Chinese tech firms' global journeys had been planted.
An increasing number of Chinese firms stepped out of China and became more active in the international market to pursue their global ambitions. For instance, in 2014, Tencent launched a large TV campaign across the world featuring famous footballer Lionel Messi promoting WeChat; in 2016, Alibaba acquired Lazada, then Southeast Asia's leading ecommerce platform; the following year, Souq, the Middle East's largest ecommerce platform, was sold to Amazon at a steep 45% discount—one of the reasons was the threat from a previously unheard-of Chinese ecommerce company called JollyChic; in 2019, Transsion, a Chinese smartphone player that became the largest (by sales) in Africa, went public; in 2020, TikTok became the biggest national security threat to the United States in the eyes of Donald Trump; in April 2022, China-based fast-fashion ecommerce player SheIn was valued at $100 billion in a funding round, worth more than H&M and Zara combined.
There are many more less-known companies, as well as companies such as Singapore-based Sea Group, founded by the global Chinese community and inspired by business models in China, that are making their presence felt in different parts of the world.
We have been receiving more and more questions from various audiences and clients from outside China on this phenomenon, its potential impact, and how different parts of the business ecosystem should respond to it. Senior corporate leaders participating in programs at INSEAD's France campus debated about the data privacy implications of Alibaba and its affiliate companies, including Ant Group, whose IPO was shelved by the Chinese government in 2020; executives of Fortune 500 firms raised questions about Chinese leadership styles and the myth of sudden rise, and tried to understand how the change of policies influences the competition and cooperation between Chinese and US tech firms; the scion of a large media conglomerate in the Philippines inquired how they could revamp their media assets and learn from Toutiao, the original success of TikTok parent ByteDance.
And across Southeast Asia, South Asia, and Africa, financial regulators have been working very hard to figure out how to regulate the array of fintech companies copying Chinese models, employing Chinese technical experts, and being invested in by Chinese groups.
We have also received a large number of enquiries from entrepreneurs, company leaders, and investors from China looking to expand into foreign markets. Where to start, what to prepare, whom to hire locally or send as expats, how much resources to allocate—for these Chinese tech leaders who are used to fighting big battles in a large single-country market, the variety and fragmentation of global markets are daunting.
The more discussion and debates we had on these questions with various parties, the more we felt that we needed to do something. The COVID-19 pandemic, which grounded us as well as our ecosystem interlocuters, became the catalyst for us to commit our efforts to synthesize all these observations, thoughts, and reflections into writing.
We hope that you find useful insights in this book—no matter if you're working with, competing against, joining, or regulating these Chinese tech firms (and those inspired by them), or being part of their global journey.
We are also embedding some traditional Chinese idioms and phrases that might help explain some actions and situations—we try our best to make them relevant and easy to understand.
As this is a fast-evolving sector in which changes happen every month, especially in the current global geopolitical environment we are living in, we look to update you with the latest happenings, case studies, and reflections as they happen. Subscribe to our newsletter at http://www.poplstrategy.com/. You can also reach us through the website if you would like to discuss these topics with us.
Acknowledgments
WHILE WE HAD THE idea for this book for a long time, our jet-setting lifestyles were prohibitive. When the COVID-19 pandemic and the lockdowns were enforced in Singapore, we decided to kick-start the project. To our pleasant surprise, so many friends and colleagues have come in to help, offering experiences, insights, perspectives, and reflections. Many have introduced us to their circle of friends and (ex)colleagues for us to get a deeper understanding of particular companies, episodes, or people.
Specifically, in formulating and compiling this book, we interviewed many investors, entrepreneurs, and executives of major companies, who have participated in the process of Chinese companies venturing overseas. In over 300 hours of interviews, we heard detailed accounts as well as reflections of journeys undertaken by many companies, but, more importantly, many more pioneers who led and participated in the process.
We are grateful that a few especially influential tech leaders shared their perspective with us, and allowed us to use their quotes, although all of them requested that they remain anonymous.
Andy Li, Canary Zhang, Dan Hu, Diane Weng, Harry Xue, Jonathan Zhong, Nick Duan, Qi Zhai, Shaolin Zheng, Tao Tian, Thomas Shi, Vincent Yang, Yongqing Li, Yun Zhang, Zhen Zhang, and many others, who prefer to remain anonymous, have shared their personal experiences and reflections.
We would like to thank Yorlin Ng, chief operating officer of Momentum Works, for sharing and reflecting real-life leadership and people lessons, which became valuable insights for the book; Steven Peng, visiting PhD candidate at INSEAD, and Deshui Yu, project manager at Momentum Works, who lent a big hand in attending interviews, organizing all the notes, and deliberating on the key points with us over many weeks.
We would also like to thank other colleagues at Momentum Works, without whose help this book would have not been possible: Crystal Yu, Nanette Litya, and Nurina Fhareza, for their respective experiences working with Chinese tech companies in and outside China; Aishwarya Valliappan, Vion Yau, Brandon Yee, and Yi Hu for their specific work at various stages of this project. We are grateful for colleagues at INSEAD, students in the classrooms, and participants in research seminars and conferences. We are also indebted to support from Quy Huy and INSEAD's China Initiative, which provides sources in developing China-related pedagogical cases.
We are sure we have neglected many more who have helped in this book in one way or another. Also, because of the limited space in this book, we could not accommodate many experiences from many other companies that were shared to us—we will continue to share some of these through other channels, including our blog, http://www.poplstrategy.com/.
Finally, we would like to thank all the investors, entrepreneurs, and executives with whom we have discussed the topic of Chinese tech venturing overseas over the years. Without your collective insights, we would not dare to touch such a big, complex, and fast-evolving topic.
Guoli Chen and Jianggan Li
May 5, 2022
Singapore
About the Authors
Dr. Guoli Chen is a professor of strategy at INSEAD. He received his PhD in strategic management from the Pennsylvania State University. Guoli's research interest focuses on strategic leadership and corporate governance in the context of mergers and acquisitions, IPOs, innovation, globalization, corporate renewal, and sustainability. He has published more than 20 academic papers in top management journals, and his articles and opinions also appear in many newspapers and magazines. Guoli has served in various leadership roles in the Strategic Management Society (SMS) and the Academy of Management (AoM). Guoli is a senior editor of the Management and Organization Review (MOR), the most impactful academic journal on China-related research. He is an expert in China strategy and has also published several pedagogical cases on Chinese companies, such as “Huawei's Smartphone Strategy,” “Uber vs. Didi,” “Ant Financial and Tencent,” “SheIn vs. Zara,” and “TikTok and Kuaishou.”
Jianggan Li is the founder and CEO of Momentum Works, a Singapore-headquartered venture outfit with a global emerging market focus. Before launching Momentum Works in 2016, he built and scaled internet and technology companies across Southeast Asia at Rocket Internet. Specifically, he cofounded Easy Taxi in Asia, and served as managing director of Foodpanda. In addition to Southeast Asia, he has lived and worked in Greater China, India, Europe, and Latin America. Now, in addition to building ventures, Jianggan leads a team on producing insights into new fast-moving industries that help individuals, investors, and corporations connect the dots and make an impact. He speaks at many conferences and corporate events.
Jianggan holds an MBA from INSEAD and a degree in computer engineering from Nanyang Technological University. Apart from English and his native Mandarin, he is also fluent in French and conversational in Cantonese and Spanish.
Introduction
IN MAY 2020, KEVIN Mayer, a seasoned media executive, resigned from the Walt Disney Company to join ByteDance, raising a lot of eyebrows.
For the first time, an established Chinese tech company managed to convince such a high-profile American executive to join—in the executive's home market. Even more impressive, Mayer's new role, CEO of TikTok and COO of its parent company ByteDance, made him the first American executive given the power to run a major and most critical business unit of a Chinese internet company.
He was obviously qualified: at Disney he was in charge of streaming businesses, international channels, advertising sales, and distribution, as chairman of Walt Disney Direct-to-Consumer & International (DTCI). There were rumors that his departure was because Bob Iger, the outgoing CEO of Disney, named Bob Chapek instead of Mayer as the successor of the Disney empire.
Commentators were, however, split. Some cheered this as a new era, where Chinese tech companies can tap into top global talent; others were more skeptical, citing the cultural fit that has crippled many other foreign executives (mostly of lower ranks) in Chinese tech companies. Either way, people agreed on ByteDance's boldness in international expansion, taking a step that East Asian companies rarely take.
Barely three months later, Mayer announced his resignation from his roles at ByteDance, leaving the company.
Even from the outside, the three months looked like a wild roller-coaster ride. The Trump administration gave ByteDance an ultimatum to either shut down TikTok or sell it to an American company. Intensive discussions happened with multiple acquirers and potential partners, including Microsoft, Oracle, and Walmart. Pressure probably mounted also from investors, internal teams, and the Chinese government. Only Mayer himself knows what he went through.
Some wondered, if Trump had not forced a sale, would Kevin have survived or thrived under Zhang Yiming, the founder of ByteDance, one of the most valuable private tech companies originated from China which is well known globally for its crown jewel app TikTok?
ByteDance, together with many other Chinese tech firms such as Alibaba, Tencent, Baidu, Xiaomi, Pinduoduo, and Meituan, have become more and more regularly hitting the news headlines in the past decade, not only because of their extraordinary growth, recent upheaval (due to China's tech crackdown and US–China geopolitics), but also their increasing international presence and market influence.
From copycats of Silicon Valley's trendy ideas to increasingly making their global presence known, Chinese tech and internet companies have come a long way, in a very short period of time.
However, beyond the media headlines and financial reporting from a few big-listed companies, little is known about China's tech firms: Who are they? How did they become what they are today? What are their real competitive advantages? What are their global ambitions? Can they achieve these ambitions?
These questions frequently surface in our discussions with various tech stakeholders across continents, and for the right reasons: companies need to figure out whether to compete, or collaborate, with these Chinese firms, and how. Experienced talent is getting recruiter calls from these firms, but the talent has heard little about these firms' culture or their financial prospects. Regulators need to figure out how to deal with hundreds of permutations of business models, some never seen outside China.
Media and analyst reports can also be misleading. For example, Didi was penalized because of its monopolistic behavior (the main concern is cybersecurity). Pinduoduo, which really started as a gamified version of Taobao, is often portrayed as “social ecommerce”; Ant Group's credit-scoring system (Zhima Credit) is credited with helping the company increase the performance of its lending products (it's not a full picture).
In this book, we seek to first give the readers an accurate, concise understanding of Chinese tech companies, and then, more importantly, we want to focus on their global expansion efforts. We have summarized the key lessons and future propositions into a POP-Leadership (POP stands for product, organization, and people) framework, which will be discussed later.
The journey has not been smooth for most of the companies, with failures more common than successes. However, it is important to note that as a whole, Chinese tech firms learn very fast, from their humble beginning as copycats.
WHO SHOULD READ THIS BOOK?
Who will find this book interesting? In a market that has only recently emerged, these Chinese tech giants are influential, yet understudied. While abundant media coverage has been produced about some of these companies, little information exists regarding their leadership thinking, strategy, organization, strengths, and weaknesses. Now is such a crucial time—with potential opportunities yet a lack of information—for regulators, potential partners, competitors, suppliers, customers, experienced professionals, and other stakeholders to better understand how these companies operate.
We believe you will find the book useful if you are any of the following:
A senior executive leading a company to compete or cooperate with Chinese companies, in or outside China.
A business owner embedded in the supply chain or ecosystem led by Chinese tech firms.
A budding entrepreneur who would like to replicate the business models outside China.
A consultant who advises on the strategies Chinese high-tech firms have used to rapidly grow over the past decades.
A professional receiving a call from a headhunter who is going to offer you a generous package to work for a Chinese tech firm in Phnom Penh.
A researcher aiming to write a report with a specific focus on the Chinese tech industry.
A government official who would like to formulate policies to attract and manage foreign direct investment (FDI) and new business models from China (and yet are bewildered by the recent regulatory crackdowns on big techs in China).
This is because, whether you are of Chinese background or not, a tech company or an entrepreneur, a researcher or business enthusiast, this book aims to fill a gap in understanding how Chinese companies create, compete, and venture into the international landscape. In addition to these companies, the global Chinese community has already been copying models from their cousins in China and achieving successes outside China—Singapore-based Sea Group (market cap: $159 billion on December 1, 2021) is a case in point.
SCOPE OF THIS BOOK: WHAT ARE TECH/INTERNET COMPANIES?
We use the terms “high-tech” and “internet” firms loosely, but what are internet companies? Before we get into more details about our framework, we would like to define the term and set the scope of this book.
A narrow definition of internet firms is those companies that rely on the internet (more recently the mobile internet) as the main distribution channel to reach out to their base of customers. A broader definition involves companies using (mobile) internet as a key differentiator that separates them from other firms serving the same demand (think about ecommerce as compared to traditional retail); it also includes firms that serve these companies using internet-enabled technologies, such as logistics, supply chain management, credit assessment, and cloud computing.
Internet companies generate revenues and profits primarily through:
Fees or commissions for facilitating transactions/sales (marketplace model)
Advertising
Charges for providing a piece of infrastructure or service (e.g., logistics, credit assessment, cloud)
Direct online sales
Financial transaction fees and interests
Ecommerce live-streaming
Payment for gaming/content and other in-app purchases
Among these monetization methods, 1 and 2 are mainly levied on businesses; 3, 4, and 5 are levied on businesses and/or consumers; 6 and 7 are usually levied on consumers.
Because of their nature as disruptors in a very fast-growing field, large internet companies tend to be strategically aggressive in fending off potential disruptors. One method is by expanding their customer offerings and providing additional value to attract more customers and retain existing customers.
FIGURE I.1 The matching between companies in emerging markets and Chinese internet firms
Source: Momentum Works.
This leads to what we call the “super app” strategy,1 as demonstrated by WeChat, Meituan, and Alipay: consumers can shop, order food delivery, make payments, and access municipal and other services, all on the same app. The strategy helps the firms deepen their moat and fend off potential competitors. It also helps the companies extract more value from their customers—this is especially the case in China where the average customer value is still considerably lower compared to their US peers.
Certain US companies are also taking the same approach, albeit with less urgency; companies in emerging markets tend to copy the Chinese model more, as the market realities they face resemble those of China more (Figure I.1).
The definition of internet companies given at the start of this section helps us generate a table of Chinese versus US internet firms in different domains of businesses (Table I.1). The purpose is not to show a comprehensive list, but to give an idea of what types of firms we focus on in this book.
TABLE I.1 Chinese Internet Firms versus US Internet Firms
China
United States
1
Shopping—Marketplace
Alibaba/Pinduoduo
Amazon/eBay
2
Shopping—Retail
JD
Walmart/Amazon
3
Shopping—Nonplatform
Youzan, Weimob
Shopify (Canadian), BigCommerce
4
Shopping/Vertical
VIPS
Etsy, Chewy, Wayfair
5
Social/Messaging
Tencent
6
Search engine
Baidu
7
Ride hailing
Didi, Meituan
Uber/Lyft
8
Food delivery
Meituan, Alibaba
Doordash, Uber
9
Short video
Tencent/Kuaishou/Douyin (Bytedance)
None—TikTok dominates
10
Online travel
Ctrip.com
, Meituan, Alibaba
Booking.com
, Expedia, TripAdvisor
11
Music streaming
Tencent, NetEase
Spotify (Swedish), Apple
12
Digital payment/wallet
Ant Group, Tencent
Square/Paypal/Venmo
13
Smartphones
Xiaomi/Huawei/Oppo/Vivo/Oneplus/Realme/Transsion
Apple
14
Video streaming
Iqiyi/Tencent
Netflix/Amazon/Disney+
15
Property
Beike
Zillow/Opendoor
16
Used car
Guazi
Carvana
17
Intercity logistics
Lalamove
None (Lalamove expanding)
POP-LEADERSHIP
Searching for a global market is not unique to Chinese firms. In their overseas journey, Chinese firms face some of the same or similar challenges that US, European, Japanese, and Korean companies faced in the past. However, the key differences faced by the current wave of Chinese internet companies include, but are not limited to, the following:
The pace is much faster, compared to traditional industry such as Unilever investing decades in cultivating the Chinese market, or Toyota investing in Indonesia.
Chinese firms have a large domestic market (compared to Japanese, Korean, or even European markets), which is a double-edged sword for their globalizing efforts.
Chinese internet firms have developed unique capabilities that specifically fit the Chinese market but may not fit other markets.
Chinese firms do not have a natural advantage like US tech giants when they expand globally.
These unique features of Chinese internet firms in their overseas ventures can challenge our thinking on the global strategy and implementation.
Keeping in mind the commonalities and differences of Chinese internet firms and other companies, we are using the POP-Leadership framework to describe and help you understand the key aspects of Chinese companies' overseas ventures (Figure I.2).
Leadership
Leadership is in the central place, because leaders make decisions on behalf of their firms, and their actions (and inactions) will be amplified through the organizational system. Leaders set the ambition and direction for their firms, make ultimate decisions to advance or retreat, allocate, or cut resources in different markets. We have seen firms become legendary because of their leaders' inspiring vision and determination. We also witnessed many other firms collapse because of their leaders' overconfidence, vacillation, and misjudgment at critical stages.
FIGURE I.2 POP-Leadership
To understand a firm's strategy, we first need to study its strategist. Indeed, leaders provide a shortcut for us to comprehend or even foresee the next strategic move, as decades of research have tried to understand how top executives' experiences, cognition, emotions, and psychological attributes influence organizational choices and strategic outcomes.2
Leaders of Chinese tech firms grow up in their unique environment, and thus have different imprinting effects on the organizations they create. Despite its relatively short history, the Chinese internet industry has experienced different generations of tech leaders, from early pioneers such as William Ding (founder of NetEase.com) and Charles Zhang (founder of Sohu.com) to recent iconic figures such as Yiming Zhang and Colin Huang. The newer generation of tech leaders has a more international mindset from the beginning.
However, overseas expansion for tech firms that have established a presence in China is a second entrepreneurial journey during which their leaders are going to face new challenges in a different environment unfamiliar to them. Meanwhile, these leaders have to deal with domestic Chinese businesses that are hypercompetitive, too.
Thus, in addition to being thoughtful strategists, relentless executioners, and resilient survivors, which makes them who they are today, what more is needed for the global expansion of tomorrow? We draw from prior experience of Chinese tech firms to unveil the leadership considerations in overseas venturing. For instance, how does these leaders' mental space switch between two markets (domestic versus international)? What resources and managerial attention will need to be invested or allocated in new territories? How do leaders navigate their firms through these complex situations?
People
People is the second element we discuss in the framework. Undoubtedly, people who make things happen are the core of the organization, not only in executing strategy, but also in formulating strategy and in adaptation (i.e., in the bottom-up process of responding to market feedback).
Chinese internet firms have a unique trajectory in the people they can hire, from a very humble beginning where no one really wants to join (think about the earlier days of Alibaba and Tencent) to the most attractive places where all the young talent wishes to be enlisted. Chinese tech firms have recently started aggressive global hiring of senior executives.
Experienced seniors are those who matter the most, but are also the hardest to manage in the organization. There are different issues for those veterans internally promoted through the ranks and those hired externally, especially in overseas markets. How do you get strong lieutenants to operate and tackle the challenges of global expansion? What can you learn from the people and HR systems that currently function well in China? More importantly, how do you fill the gap of people issues and crack the code in overseas expansion?
Organization
Organization is the third element in our framework. It addresses the issue of how to group people together to achieve a common goal. Doing this is never an easy task, especially when these people are strangers, and the goals need to be figured out along the way in a fast-paced tech environment. The challenge is further amplified when firms grow bigger, absorbing more people whose experiences, life goals, and ways to approach work are not necessarily fully aligned with each other.
Chinese internet firms and their leaders have designed their own systems to address the organizational issues in their journey to become the unicorns and then the tech giants. In other words, it is a selection process of survivors: firms that cannot address the organization issue have disappeared or become irrelevant in today's business landscape.
To keep organizational dynamism and agility, Chinese tech firms have developed several tactics, such as continuous organizational restructuring, the rotation of executives, and intense internal competition. However, what make these firms dynamic and agile to adapt to the changing environment in China will also create problems in their overseas businesses.
We discuss how the fundamental issues in the organization—decision rights, information communication, and resource allocations—arise if firms simply copy and paste the structure that works well in China to overseas markets. Again, drawing from the experience of many Chinese tech firms, we suggest several questions related to organization for leaders to consider in their overseas venturing.
Product
Product is the last, but not the least, element in our framework. The implications of leadership, people, and organization have to be translated into products (both tangible offerings or intangible services) to engage with clients, to generate and capture value.
In overseas expansion, product is related to a series of decisions that include three Ws and one H: what to offer, when to enter, where to enter, and how to enter foreign markets.
The Chinese internet is a relatively closed ecosystem and Chinese users have different behaviors that have also been evolving over the past decades because of high economic growth and new technology adoption. Such an environment breeds different products, such as supper apps.
Thus, in their overseas venturing, leaders need to decide what to adapt to the local market (i.e., the trade-off between localization and standardization in global businesses). We also discuss various perspectives of key questions of where, when, and how to enter. Proposing a one-size-fits-all solution is difficult; instead, we lay out key considerations in product-related decisions in overseas venturing.
To summarize, POP-Leadership covers leadership, people, organization, and product, which synthesizes key themes of successful overseas ventures, as well as the key challenges along the way. The framework facilitates strategists to dissect the ambitious goal into manageable pieces, guiding them to think systematically to identify the potential pitfalls and the key bottlenecks when they consider their own global expansion.
BOOK STRUCTURE
In Part One, which includes three chapters, we first introduce who these Chinese tech firms are and how they copy and innovate, compete, and grow. This information will provide you with a better understanding of these emergent players in the global arena.
In Part Two, which includes four chapters, we get into the details of each parameter of the POP-leadership framework, with Chapter 4 focusing on leadership, Chapter 5 on people, Chapter 6 on organization, and Chapter 7 on product. Although we illustrate the parameters one by one, all of them are essentially interconnected.
In Part Three, we reflect on the latest happenings in the China-US geopolitical tussle, the regulatory crackdowns in China in 2021, and the rise of Chinese-inspired companies globally, particularly in Southeast Asia. We also take the perspectives of the local players to understand the potential spillover effect triggered by Chinese tech firms' overseas investments.
Finally, we present Chinese tech firms' global map and a picture of cross-pollination of global emerging markets. We believe it is still in the early stage, and expect a few full blossoms in the future, despite the enormous challenges ahead.
NOTES
1
. G. Chen and M. Trocha, “Super Apps: How to Create a Mass Market of One,” INSEAD Knowledge, October 2, 2019.
2
. S. Finkelstein, D. Hambrick, and A. Cannella,
Strategic Leadership: Theory and Research on Executives, Top Management Teams, and Boards
(New York: Oxford University Press, 2009).
PART IUnderstanding Chinese Tech Companies
CHAPTER 1The Shark versus the Crocodile
eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose—but if we fight in the river, we win.
—Jack Ma, founder of Alibaba Group, 2003
IN 2003, WHEN EBAY, a leading US ecommerce platform, entered China, most analysts and investors were bearish about a new ecommerce venture a young company called Alibaba had just launched: Taobao. After all, Taobao's initial investment of RMB 100 million was nothing compared to eBay's market cap of more than US$30 billion, let alone the ecommerce know-how, firm reputation, and attractiveness to good talent.
Jack Ma, the founder of Alibaba, was determined to push through. He said that a crocodile will beat the shark in a fight in the river.
A year later, in 2004, Taobao was ahead of eBay in most metrics in China, defying the predictions of analysts and investors. The same year, another giant shark entered the Yangtze: Amazon acquired Joyo to enter China.
Since then, Amazon itself has grown from a $15 billion company to a $1.8 trillion behemoth. However, it did not win China as it had hoped. In 2019, faced with a less than 1% market share, Amazon pulled the plug and exited China's ecommerce market. Again, the crocodile had beaten the shark.
Jack Ma is a familiar figure globally, and his speeches before the failed Ant Group IPO in 2020 were carefully studied by investors and revered by aspiring entrepreneurs across the world.
However, little is known about why and how he, who in an earlier job search had been rejected by KFC, built one of the world's largest consumer tech companies, or about how the results of the competition in China turned out to be so different from all the rational analyses.
While many of the analyses were focused on Alibaba versus Amazon's tactics and on Ma's personality, we think the real answer lies in the following factors: people, organization, product, and, ultimately, leadership.
The David-beating-Goliath-type story is not unfamiliar to entrepreneurs in China. Mao Zedong's communist guerrillas beat the better-funded, US-equipped, and more numerous Chinese Nationalists in 1949 to proclaim the People's Republic.
Similar to Chairman Mao's guerrillas, Jack Ma and his 17 cofounders came from humble backgrounds. They did not turn down cushy job offers in order to change the world—rather, they simply did not have other options. In 1999, the year of Alibaba's founding, China's GDP per capita was merely $873—on the same level as Indonesia, and 5% that of the United States.
What's more, an early employee of Alibaba told us that he and his colleagues were working in the office over the weekends because they really did not have anything better to do.
Under Ma's urging, each person adopted a nickname, usually drawn from famous Wuxia (Martial Heroes) novels. Ma's nickname was Feng Qingyang, an elderly sword legend in Hong Kong novelist Jin Yong's The Smiling, Proud Wanderer.
The early employees of Alibaba were young and fearless, with nothing to lose and completely without an understanding of work–life balance.
Alibaba also put a lot of effort into its people and organization. Managers at each level were trained extensively for building a team, while chief people officers were appointed at the group, business unit, subsidiary, and department levels. Restructurings have been a regular occurrence to “embrace change,” as Jack Ma would put it.
Alibaba's early products were aligned with the key pain points of buyers and sellers: the B2B site Alibaba.com allows thousands of Chinese manufacturers to advertise their products to the world; Taobao's seemingly messy interface allows sellers more space and tools to display their products as trust online was low; Ali Wangwang is the instant messaging software facilitating the communication among all parties such that sellers know individual consumers' need; Alipay was created because banks did not want to provide escrow for small transactions.
And Alibaba did not stop there. When it encounters new challenges, it solves them by building a new solution that will lead to standalone products, companies, or even groups of companies. In addition to various ecommerce platforms, Alibaba Group's ecosystem currently includes a logistics platform (Cainiao Logistics Network), a fintech platform (Ant Group), a tech infrastructure (Alibaba Cloud), local services (Gaode map and ele.me for food delivery, Koubei for food and beverage reviews), lifestyle businesses (Alibaba digital media and entertainment group), and many others (see Figure 1.1).
