The Chinese and 创新
Recently, I wrote a post expressing irritation with those who seem to think that only people from “advanced economies” (the ones in serious financial trouble right now) are capable of innovation. Such a stance is often taken with China specifically. Too many people seem to think that the Chinese are only capable of the “grunt work” of manufacturing and unable to innovate.
That was followed by another post, more specific to China, in which I had an especially negative reaction to two sentences of an otherwise interesting article in Foreign Policy magazine by Dr. Vivek Wadhwa – “The Chinese are still busy copying technologies we built over the past few decades. They haven’t cracked the nut on how to innovate yet.” [my emphasis]
Of course, people in the North Atlantic countries (I call them the Old World) consider themselves to be extremely innovative. They certainly have proven it in recent years. Thanks to their innovations in housing mortgages, the US and several other nations have had their economies turned upside-down and inside-out, as we all know. But perhaps their real skill at innovating are the amazing “break-throughs” they have made in the creation of new and exciting financial products. The word “derivatives” comes quickly to mind. The day may come when we discover that those innovations make the mortgage innovations pale in comparison. Not a good thought.
I have worked in economic development in nations all over the world. I have had the pleasure of working and speaking with “overseas Chinese”, those who live in other Asian nations where they represent an important part of the business community and their societies. However, I have never had the opportunity to speak with someone with a professional background in innovation who lives and works in China.
So it was a surprise to hear from Haozhi Chen. Mr. Chen is the co-founder and Chief Executive Officer of Chukong Technologies. At 23, he launched his first of six IT start-ups which have become the leaders in their respective areas (Joyo.com, it168.com, Xcar.com.cn, SSSC.cn, Yeeyan.org, and Chukong Technologies). He began at 23 and, now at the ripe-old age of 36, he oversees Chukong Technologies as it expands its reach with operations in Japan and California.
Another interesting note is that he chose to ignore the traditional Chinese university system and just went to work on his own, aided at first by others who had chosen to avoid the universities and now with a mixture of people from all backgrounds. Not too shabby for a high-school graduate working independently in a highly structured society like China’s. I can’t comment on his tech work per se, but I can appreciate that he is a successful innovator with an entrepreneurial spirit. I was asked if I would be willing to speak with him. Of course I was.
It was a long and interesting conversation. I think we both gave the interpreter a headache once in awhile! We covered several topics and I will share some of the points that interested me most. I had heard that Haozhi, a bit like Peter Thiel, questioned the value of a traditional university education, so I asked him if he required such an education for the people working for him now. He was amused. Good question!
He explained that in the beginning he worked only with other young entrepreneurial Chinese who also had avoided the university system. They were not sure of exactly how the society and government were going to react to them and it was a challenging time. But as his companies succeeded and grew, eventually drawing investment interest from outside China, he had to grow in his approach as well.
So, yes, they hire university graduates. His point was that a university degree was just one factor in choosing an employee. You shouldn’t hire someone only if they were a university graduate, but neither should you ignore them for the same reason. The critical factor was their ability to get the job done well and their willingness to work together as a team. University degrees had their place, but they should not dictate employee recruitment. Innovation is not the product of a university, but the product of a human mind at work.
Another issue I wanted to raise was how he dealt in an economy that is, in great part, dominated by SOEs (state-owned enterprises, i.e. state corporations). He responded that there are three types of enterprises in China. There are the SOEs who benefit from state support and there are private businesses, like his own, who are funded and operated entirely privately. A third group were those enterprises that were private initially, but because of their perceived critical status in Chinese society, the government decided it had to influence their behavior, while providing them certain advantages in competition, but without owning them. Let’s call it a “mixed” approach.
Clearly, the SOEs have a valuable “owner” who can help them a great deal and the “mixed” enterprises have a valuable “patron” who can offer the same. Haozhi chose to remain in the private sector without state involvement. Instead, his firms partner with other firms of all three kinds and their relationships with SOEs and the “mixed” firms have been excellent. But Haozhi’s focus is tightly on private enterprise and that is working for him and his company, allowing them the flexibility to move quickly to adjust to market changes and retain control of their direction.
I asked him, if he was able to stand before the government and provide advice as to what they needed to do, what would he say? His three points were very familiar, I have heard them in many other nations, including my own.
- In its own investment activities, the government should focus on investing in ways that encourage innovation and creativity, and are supportive of all types of enterprise.
- Above all, the government needs to completely restructure the entire educational system. The traditional system is out-dated and is not supplying enough graduates with the skills they need in the modern world.
- The protection of Intellectual Property (IP) was equally critical. Enterprises need to know that their IP is not going to be taken by others and, if they do it, that they know they will suffer for it.
Yes, those are familiar recommendations. And good ones.
So, can this man innovate? Let’s look at things from a slightly different perspective.
You are 23 years old. You have finished high school, have worked on your tech skills, can go to university, but you choose not to. You see your university system and its “state exams” as perhaps useful in centuries past, but not worth your time now. So you bring together others like yourself and do what every entrepreneur must do – suck it up, get to work, and hope you succeed, despite lacking the resources others have who follow the traditional route.
Additionally, your society is going through a dramatic and rapid transition. There are no set rules. Those are being made and remade in real time and what they may be in the future is not predictable. There are serious “sensitivities” – social, economic, and political. If you aren’t careful, you can find yourself in big trouble without the resources to protect yourself. You have to find others to work with you, although they will see the potential dangers too. You have to find clients, although they will see the potential dangers too.
Some days, maybe many, you feel like you are walking through a minefield and, at any moment, a single misstep can be disastrous. Despite all this, you attract positive attention from users in your own society (95 million users, most of whom are Chinese, have downloaded their current software). Foreign investors approach you and you have to figure out how to work with them without losing control of your company and without causing problems at home. Your success grows and you open offices in Japan and the US. You have done it! You’re only 36 and you made it! But you have to always remain one step ahead. Technology does not wait for the slow to catch up. And now you have a huge audience, both private and public, who follow you, support you, but who could lose interest and turn away if you are not a leader in your field.
If you read that thoughtfully, you may agree with me that Haozhi Chen has had to “innovate” to an extent that other entrepreneurs in other nations do not. Is Haozhi Chen innovative? Yes, he most certainly is. Is Haozhi Chen Chinese? Yes, no question about it. He is just one example of why I get seriously irritated when I hear or read others who somehow seem to think that the “advanced economies” have a corner on innovation, or any other important human quality.
But a critic may say, so what? This is just one guy. His story is nice, but it doesn’t say much about Chinese innovation beyond his niche. Although I would disagree with that (when you are the one who is clearly “precedent setting”, it can say a lot), fortunately the folks at TrendWatching.com specialize in searching for innovation globally. They put together a brief overview of some of the innovations coming specifically from China. In finishing, I encourage you to take a moment to click on this link and take a look for yourself.
And what does 创新 mean? You guessed it. Innovation.
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