NEXT16: What we can learn from China

Panel with Patrick Boos (DGroup), William Bao Bean (SOSV & Chinaccelerator) and Anna Kostense

Warning: Liveblogging. Prone to error, inaccuracy and horrible abuses of grammar and syntax. Post will be improved over the next 24 hours

Panel

  • Patrick Boos, DGroup
  • William Bao Bean, SOSV & Chinaccelerator
  • Anna Kostense

Why are we talking about China?

It has 700m mobile internet users - more than the US and Europe together, says Patrick. The dimensions of China are just incredible - Alibaba has more volume than Amazon and eBay together. Didi has seen off Über in China.

China is clearly leapfrogging much of the west. Most people use mobiles - but they have never had landlines, dumb phones or desktop computers. They haven't had access to retail in the same way the west has. They're starting with less legacy.

They have 15 years of retail, not more that 150 like in Germany, says William. That's a lot less legacy. There are not enough stores for the major brands to cover the whole country - so they sell online. They don't have the same history of banking and credit, so they've been trained to use their phone. The habit has moved straight from cash to the phone. China is a "do it and ask for forgiveness" culture. Über's business model is "go into a city and break the law". That works well in China - but only enough for Über to reach a draw.  Their law is all grey areas. If people like it, it becomes legal.

China's Big Four

There's four big giants that rule the market:

  1. Alibaba
  2. Tencent
  3. Sina Weibo
  4. Baidu

They all work very closely with the government, says Anna. The decision making process is very short. Remember China has 1.3bn people - we're only at 50% internet penetration there!

Normal work hours are 9am to 9pm, 6 days a week. Overtime is over that, explains William. One week a year holiday. Western countries come in and they won't work that. You have to run the business from China, not Germany. Let it go - and expect things to break. You need to break things to succeed in China. China is investing in startups and 4.4 times the rate of Europe as a whole. 99% of companies do not below in China. You're under-funded, too slow and don't work hard enough.


When people talk about China, they talk about WeChat, says Anna. It's human behaviour - it's very convenient to have everything within the same chat app. The Western sites should be working together to get into this market.

Think of it as a world war, says William. Each of the big four were good at one thing in the beginning - and it was different for all of them. The first generation entrepreneurs didn't retire and become VCs. They stayed and crushed the competition. And now they're fighting with each other. Then they're go to the rest of Asia. And eventually they'll come to Europe and the US. And their game plan is to control ALL commerce.

We don't have the same willingness to fight, says Anna. China is hard, but it's a huge opportunity - but it won't come without a fight.

Cabs and food delivery have been a war, says William. Half of China has been eating 50% off for a year through VC money. Over $2bn has been spent on taxi subsidies per company. Über fought to a draw. They did well.

The Government game

The Government is a big part of the game in China, right, says Patrick. True?

Government sucks as an idea, says William. Wages are increasing 4x in the country. For a long time Government has spent money on infrastructure and housing. Thta's done. They don't need any more roads. Now how do they prop up the economy? Invest in startups - and that's a total mess. $250bn has been dumped into VCs by the government - and most of it will be wasted. The smart thing is that the state money has been combined with the private money, and the private money is making the decisions.

Yes, the Government is trying to create jobs, says Anna. But there's a shortage of the really, really smart people - and they're having to hire from outside now.  A lot of the talent went overseas, says William. What talent is left is super expensive. They hire  teams in Taiwan, because tehy're half the price.

Chinese innovation?

Brian Solis's definition of innovation is stupid, says William. In China, you don't see that massive, revolutionary innovation. But you see huge business model disruption. Yes, it's innovative.

China is innovative, but don't reinvent the wheel, says Anna. If they need real I ways, they buy the best trains from the best country - and they learn.

Chinese development is minimum viable product taken to a crazy extreme. Everything they ship breaks - but they iterate really fast. You only invest time in making something work if people actually use it.

What you can learn from China? Experiment more. Ship experiments to a subset of your audience, says William.

Be more adaptive, says Anna. It's hard for Germans, but if you want to go there, you have to. Take a chance, and if it doesn't work, take another chance. If we don't, we'll lose the race to China.