The Secret Behind How Chinese Startups are Winning
How my own flawed, worldview of Chinese Culture blinded me from seeing the truth behind their most innovative and successful startups
ICYMI: China’s startups are winning
The numbers are in. China’s startups are winning and they’re winning big.
China has 120 homegrown unicorns. That’s over 50 percent of 234 unicorns globally. Huawei is one of the world’s top three providers of smartphone without any footing in the US. Shenzhen’s DJI is the best drone maker in the world.
Tesla’s mission may be to “accelerate the world’s transition to sustainable energy.” But BYD is building 17,000 electric buses. That means Shenzhen will have more electric buses than all of America’s top cities have normal buses combined. The carbon-saving impact of those buses will be equal to that of Toyota and Tesla’s cumulative electric vehicle efforts.
Don’t get me started on how Alibaba and Tencent are revolutionizing online-to-offline experiences...
Why are Chinese Startups Winning?
This year, I was invited to the China Australia Millennial Project (CAMP) to run design workshops in Beijing. It was my goal to learn how the Chinese Startups are succeeding.
I learned a heap of things, like:
- It’s insanely competitive in China.
- The market is so large that startups can reach scale with niches.
- The government deploys (often) morally-questionable tactics to accelerate change.
- There’s a massive talent pool of PHDs (2X that of USA).
But in spite of this, there was something that was nagging at the back of my mind…
Does China have a set of “cultural deficits” holding it back?
As a kid growing up in Australia, with Chinese ethnicity, I had always felt that Chinese parents (in general) loved playing it safe. I felt that Chinese parents tended to be risk averse! I mean isn’t that why all the Chinese kids go on to become accountants, doctors and engineers?
“Go to a nice school, study hard, get a nice job”. — Said every Chinese Parent ever…
Throughout high school, I excelled in the Maths and Sciences by and large through plain hard discipline, and rote-learning, enforced through tutoring.
Throughout my working life, whether it was interacting with Chinese counterparts in the solar industry, or Vietnamese and Russian software developers at Mad Paws, I always felt as though the non-Western counterparts lacked initiative and creativity.
The impact of these life experiences developed an internalized worldview of Chinese “cultural deficits” that to me: repressed individual creativity, promoted rigid, hierarchical structures and was most importantly risk averse.
To me this set of Chinese “cultural deficits” was completely at odds with how Western startups approach innovation through design thinking, agile development and lean startups.
What happened to “individuals and interactions,” avoiding “group think” and “flat hierarchies?” What happened to “creative thinking” and “experimentation?”
Although it’s clearly an oversimplification to paint a whole population of 1.4B people under such broad brushstrokes. Nevertheless, for me the cognitive dissonance was real. That’s when I realized…
Simply put, the Chinese LOVE taking risks!
I was browsing Quora, when I discovered this article, which completely shattered my erroneous worldview.
It took a while for it to sink in, but then it all made sense just how wrong I was.
Let’s start with the simplest truth I’d known all along:
For all the safe bets my parents have tried to make for me, the elephant in the room is that they migrated here with nothing. That’s the most riskiest thing anybody would do.
They took all that risk to find a better life to raise their families. How ironic that I thought the Chinese people to be risk averse.
Then there’s Chinese culture’s cyclic view of time and its manifestation through the Chinese language and its history.
For example, the Chinese language lacks tenses. There’s less focus on a linear flow as opposed to a cyclic flow. This is reflected in the differences between the historically, dominant religions in the West and the East. Christianity’s take on life and death vs Buddhism’s reincarnation. Some people say this is related to why Chinese make such great money savers.
But if you don’t believe my little anecdotal data, then just check out Geert Hofstede Five Dimensions of Culture.
Compared to the US and Australia, the Chinese love uncertainty. Then there’s also the cold-hard, economic facts, around 70–80 percent of the businesses in China are SMEs.
Risk Tolerance is the Ultimate Catalyst
So for ages, this cognitive dissonance about how Chinese startups had succeeded in spite of the “cultural deficits,” had nagged and nagged at me.
But once I accepted that my worldview was fundamentally wrong, everything else fell into place. It was like a line of dominoes had been set up, and somebody finally tipped the first one over.
Through this new lens of risk tolerance, I started to see how other “cultural deficits” of “rigid, hierarchical structures” and “lack of individual creativity” start to have compounding positive effects.
Good Artists Copy. Great Artists Steal.
Every Western firm entering China fears that they will be copied. This phenomenon is called ShanZhai and it’s a reflection of the Chinese being ruthless and fearless experimenters.
Take this quote from Duncan Turner, (Managing Director, HAX) in this Wired documentary: “Shenzhen: The Silicon Valley of Hardware.”
“We don’t expect them to fight anyone who’s copying them, we expect them to be moving much faster than anyone who’s copying them… the only way to stop them copying you is to make whatever they’re copying irrelevant because you’ve come up with something much better.”
Top-Down Decision Making Is Fast
A deep respect for social authority and hierarchy combined with fearless experimentation mandated from the top-down means that things move extremely quickly.
This is illustrated by how competitive the Chinese market is but also more symbolically a reflection of how the authoritarian Communist party has brought hundreds of millions of people out of poverty in just a few short decades.
When the Chinese see an opportunity, they will take it. They aren’t afraid to fail, because they see life as a cycle of events. If they fail, they believe their time will come again. I love this quote by a good mate of mine:
“The Chinese have to be one of the most enterprising peoples on the planet, because if there is a penny to be made somewhere, a Chinese person will be there. They are opportunists by virtue of how hungry they are (both literally and metaphorically), and there’s this mindset that there is always someone who is faster, more agile, more ruthless or more shameless.” — Will Fong (Marketing Manager, MetCash)
Do Something A Thousand Times To Learn
In the West, we have all these great frameworks for strategic thinking. This is great for when you’ve got to make big decisions. But then we hear so often about analysis paralysis in startups. Don’t get me started on that guy who says “let’s just test it” to everything.
We tend to criticize rote learning, we think of Asian migrant “tiger parents” who put their kids into tutoring as “gaming the system.”
By contrast, the Chinese value learning via repetition. In this way, the Chinese have developed their own flavor of the “Lean Startup.”
Rather than careful analysis and customer development, they favor a “brute-force” method that combines ShanZhai and rapid execution to deliver validated learnings in record time.
This is the way many Chinese firms like Huawei and Lenovo built up that knowledge capacity — through reverse-engineering, building, shipping, learning and repeating.
It may not have been the most efficient mechanism for innovation, but if there’s one thing the Lean Startup teaches us, it is that the most effective predictor of success for startups is to optimize for the frequency of validated learnings. Nothing else matters.
Disruption is All the Chinese Know
I think in the end, the real shock for me, was just the discovery of this “unknown known” that had been nested in my own flawed, worldview of Chinese culture and identity.
I think as I mentioned above there are so many other factors that have clearly helped Chinese startups succeed (e.g. competition, size of market, etc.). However, to me, it is risk tolerance, that acts as an internal catalyst which lets Chinese startups succeed.
The simple truth is that disruption and uncertainty is all the Chinese know.
It’s rooted in their tenseless language, their dynastic history and cultural ideology that everything always comes full circle. Embracing ambiguity is a part of China’s DNA.
In an age of digital disruption, Chinese startups are hedging big risks, they’re hungry, and as a nation, there’s a collective fervor to see the Middle Kingdom rise again.
So as a Westerner, there are really only two choices:
- We can turn inwards, maintain the status quo and play it safe, while the Chinese “game the system.”
- Or, we can look outwards, embrace uncertainty and take a lesson out of China’s playbooks to take bigger risks.
I don’t know about you, but I know what choice I’ll be making.
Hope you enjoyed the read! Would love to hear your thoughts in comments below!
