Welcome everyone to another edition of my China Tech Law Newsletter. First, a proud milestone, the blog just hit over 3,000 subscribers here on Linkedin! Thanks to everyone for reading and for their ongoing support and encouragement.
Second, I myself recently read the book Seeing the Unseen: Behind Chinese Tech Giants’ Global Venturing by Guoli Chen and Jianggan Li. Dr. Chen is a professor of strategy at INSEAD. Jianggan Li is the founder and CEO of Momentum Works, a Singapore headquartered venture firm with a global emerging market focus.
Dr. Chen sent a copy of the book to me as a thank you, after I gave a guest lecture to his wonderful INSEAD MBA class on the legal environment for foreign companies in China and for Chinese companies going abroad.
Some points I found especially interesting that I wanted to pull from the authors [with very brief commentary of my own]:
(1) Local Protection. Even without the Great Firewall and legal restrictions on foreign internet businesses, local players like Tencent and Alibaba would have won the market anyway. And because of this wall, these companies face steeper learning curves when going out of China. Their advantages in China were also somewhat unique for China (and by implication, not necessarily transferable to other markets). [And my own two cents – we have seen the adoption of Chinese business models (Meituan super apps) but still local players in SE Asia putting those models in place (although often invested by those Chinese tech champions). We see it now in Latin America as well.]
(2) Quiet Leadership. Many prominent Chinese companies are ones that seem to come out of nowhere on the international scene. J&T is a leading, but very young, Chinese logistics company in Indonesia and S.E. Asia. Shein, is another example. More and more Chinese companies are run by very quiet leaders who (along with their company) take a very low profile as they expand overseas. [Understandable in today’s climate...]
(3) Lack of Formal Processes. On creating local leadership and empowering them: “Committed leaders, who spend too much attention will end up interfering with the functioning of local leaders and sow distrust. On the other hand, too little managerial attention from leadership builds up misunderstandings. Throughout Chinese history there has been a distrust of processes and institutions, success came from pulling the right strings around people in those systems. One Chinese tech leader once shared 'For the key people around you to work well with you, you need to deeply understand their motivations, and distribute both hardships and rewards accordingly.' He believed that ruling by processes, while seemingly fair, can lead to misalignment of objectives especially in a fast changing environment." [Multinationals pursuing objectives where process over substances grinds things to a halt. This is often MNCs' Achilles heel.]
(4) Consumer Understanding. "In many tech sectors, the evolution of China is far more sophisticated than that in many other markets. Local executives outside China, who have not been immersed in such development, tend to find it hard to appreciate or apply the learnings from there. For example, Chinese internet managers tend to understand consumer traffic, growth, and user operations very deeply, while it is harder for their counterparts in destination markets to be on the same page." [Tik Tok, Shein, PDD’s Temu, are great examples today].
(5) Organization. Organization qualities that make Chinese companies different according to the authors:
a. Continuous organization restructuring
b. Rotation of executives
c. Internal competition
d. Internally developed productivity and collaboration tools
e. Small, agile teams and the attempts of Zhongtai (strong middle platform with data, technology, and other resources to help small agile product teams make their own decisions)
I would highly, highly recommend reading this book. The authors' insights are deep and very relevant in today's world where Chinese companies are starting to become best in class in certain industries. Check it out, and again thank you everyone for reading and subscribing to this blog as well!
*This blog may be considered attorney advertising. It is for informational purposes only and does not constitute legal advice.