Chinese companies like Alibaba, Toutiao (a new’s feed app), and Didi (a cab service) now list amongst the world’s most valued start-ups, with valuations reaching over 50 billion US Dollars. But what lies behind the success of these companies.

Articles often features on how the Chinese government set laws to make it complex for foreign companies to operate inside China. But what that has not been mentioned much globally is how competitive the landscape is for those domestic players.

Competition in Chinese markets is a cutthroat environment. The Chinese market environment is relatively market driven when compared to Silicon Valley’s goal driven culture. Evidenced by the aggressive competition fought between QQ and Qihoo with antivirus software that alerted whenever their competitor’s product was in use, or when Renren fought with kaixin001 through possession of domain names.

Although in Silicon Valley, innovation and being the first comer could make revolutionary changes, in China, the market proved that innovation alone is not enough to thrive, for companies to succeed, they not only must be able to adapt their products to best fit Chinese customers but also had to find ways to outrun their competitors.

This dynamic environment is what drives relentless product development amongst these start-ups.

Simply cloning Silicon Valley business ideas into Chinese markets is not the key to success. As observed with Xiaonei (a network website designed based on Facebook). Another explanation why this does not work is because culture plays a part in product adoption. For instance, by tracking eye movements, there is a contrast between the eyeball heatmap between US and Chinese searchers.

Those that succeeded in the Chinese market as top performers like Alibaba and Meituan (a website which pushed Groupon out of the Chinese market), were not ones that simply copied from Silicon Valley models, but rather they were the ones that were able to best adapt those models to match user needs and cleverly out perform their Chinese counterparts.

Therefore, to succeed no matter how well the technology in their hands are, companies need to put users ultimately as their end goal.

Reference: AI Superpowers- China, Silicon Valley, and the world order (Kai-Fu Lee)

Date : 17/02/2020