Chinnovation: Lessons for the West from China

Yinglan Tan’s new book, Chinnovation: How Chinese Innovators Are Changing the World, offers many lessons for the West. Tan explores several dozen case studies of entrepreneurs from small and large companies with roots in China. Some of the lessons counter popular Western perceptions about business in China and others point to broadly applicable lessons in entrepreneurship. The book is well written with key takeaway points highlighted throughout.

A common theme is that Chinese innovators are finding success in spite of highly limited initial resources by taking risks intelligently but aggressively, pushing for cash flow early in the process, and growing rapidly with the help of a healthy network and quick learning. Opportunities are being found in numerous spaces, both low and high tech and with novel or basic business models. Contrary to some stereotypes, integrity matters a great deal in the rising Chinese economy, with respect for others playing an important role in how business is done.

Tan offers much useful advice to Western entrepreneurs to help us find success more rapidly, Chinese-style. For example, he wanrs against the “focusing effect” in which entrepreneurs get too focused on one aspect of an event or business. Falling in love with a project, as often happens to engineers, can lead to losing sight of the larger mission, he warns. Ultimately, he urges entrepreneurs to consider taking a “good enough” approach rather than striving for perfection. “Many products can be built much more quickly and cheaply in China bu settling for good technology plus a bunch of hacks–human editing, partnerships, and outsourciing–instead of trying to create a perfect technology from scratch.” (p. 76)

Chinese companies are also gaining a competitive edge by being able to retain and attract top talent. It’s not just through good salaries, but also through many factors that build trust and loyalty. For example, Wayne Dai, CEO of Verisilicon Holdings, explains that they pay attention to the corporate cafeteria to make sure there is outstanding food. “The first thing I look at in a Shanghai company is the quality of the cafeteria. Without a good lunch, there is no productivity. Two vendors compete in our cafeteria.” They also offer stock options to many in the company. The receptionist, for example, has stock options.. Such steps build loyalty and increase productivity of employees.

The rise of entrepreneurship in China is now being followed with the rise of strong IP rights. There is much progress to be made, but companies are learning that IP matters and that failure to respect the IP of others can result in painful surprises. China is now on the path to surpassing the United States in terms of patent applications. It is a myth that China’s competitiveness just comes from being a source of low cost labor. They are leading the world in R&D in many high tech fields and are becoming the intellectual powerhouse of the planet, not just the source of labor. Between low cost resources, high tech IP, and a Wild West spirit of entrepreneurial adventure, the innovation potential of China cannot be overestimated. The West has many lessons to learn if it is to remain competitive in the global economy.

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