Google | George Koo: Innovation from China bodes ill for Silicon Valley MNCs

George Koo: Innovation from China bodes ill for Silicon Valley MNCs

August 10, 2015 11:01 AM (UTC+8)

 

Last week the Technology section of the Wall Street Journal devoted three full pages on Asia, mostly on China.  The reports on technical advances in China should put to rest the often stated but erroneous conclusion that China can copy but can’t innovate.

We learned from interviews of technology luminaries in China that homegrown techno-entrepreneurs in China are proliferating exponentially. These are not returnees as was the case a decade ago. The new entrepreneurs cut their teeth working for established technology giants such as Baidu and Tencent, and are ready to strike out on their own. In contrast to Carly Fiorina’s silly Iowa stump speech, these young entrepreneurs haven’t been to Silicon Valley much less stealing crown jewels from America.

Kai-fu Lee used to lead Google’s effort in China. He resigned in 2009 to start Innovation Works as a boot camp to teach bright but basically greenhorn graduates on what it means to be entrepreneurial. Not any more now. As he said in the Journal, “The number of serial entrepreneurs is going up. People are not afraid of failing, they are ready to try again.” Not afraid to fail is what used to set Silicon Valley apart from anywhere else, and change is the one constant about China.

Besides Lee, two other former Google executives were prominently featured in this issue. Hugo Barra has been recruited to help Xiaomi battle for world market share in smart phones. Nikesh Arora has been designated heir apparent to Masayoshi Son at Softbank and is active in managing their investments in China and India.

These three accomplished individuals reflect a development not often mentioned, namely some are now finding more appealing opportunities in Asia than in Silicon Valley. (Incidentally not long after Kai-fu left, Google shut down their operations in China.)

China’s emerging success in technical innovation portends uphill battles for Silicon Valley companies. China has become a major market for high tech products especially in the mobile space. Most of the indigenous innovations focus on addressing their domestic market. One of their major comparative advantages is their intuitive understanding of how the market in China differs from the West — a grasp frequently eluded the MNCs (multinational corporations).

In the early days of China’s economic reform, Beijing understood that leading edge technology came from the West and Silicon Valley companies, as leaders in technical innovation, were warmly received. As China’s homegrown talent became increasingly successful and China’s technological development began to catch up, Beijing can feel more confident with policies favoring domestic companies over the multi-nationals from Silicon Valley.

Recently, IBM’s CEO went to Beijing to pledge on transforming their presence into a local company. Google, of course, went the other way; they picked up their marbles and went home. In between the two approaches sat some of the best-known names from Silicon Valley.

By way of one apocryphal story, a recent returnee back to Silicon Valley after a stint in China confided that his company’s revenue from China that used to be in the billions has fallen to just 35% of what it was at the height of its glory days. Not that the market has shrunk but that local companies are taking increasing bites out of the growing business.

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