China Daily | Finding a Third Way Forward

By Edward Tse | China Daily Asia

Agile Chinese entrepreneurs are emerging as business thought leaders with their ‘multiple jumping’ expansion strategy

Ever since Deng Xiaoping hit the gas pedal on China’s economic reform when he made his famous Southern Tour to Shenzhen in 1992, companies in China — big and small — have been looking for ways to better manage, develop strategies and capture value.
For the first 30 years of the People’s Republic of China, the country was organized under a planned economy. There was no notion of companies, shareholder value, management or strategy. So when China’s economic reform started and when entrepreneurs first emerged, they by definition would not have had any formal education in modern management or prior experience in actually running a company.

The rapid growth of China’s market and the emerging competition drove many of these entrepreneurs to look for ways to better plan and manage their businesses.
The first wave of management consulting firms and business schools came to China from the West in the early to mid-1990s, and brought along established knowledge, theories and frameworks. Chinese businesspeople were attracted to these new ideas as they searched for ways to help run their businesses better.

In the West, from the 1970s to 1980s, the notion of conglomerates was dominant. Companies like ITT and Tyco in the United States and Hanson Trust in the United Kingdom grew into large amalgamations of businesses, often across a range of unrelated sectors.

The notion was that “big is good”. After a while, the capital market decided that conglomerates were not such a good idea after all, because of the lack of synergies across the various businesses.

In 1990, Gary Hamel and CK Prahalad from the University of Michigan published an article called The Core Competence of the Corporation, focusing on this trend. They argued that well-performing companies compete based on their strengths, or what they called core competences or capabilities. This theory caught on quickly in the Western business community and became the governing thought for companies’ strategy formulations.

Today it is still the case. Using this theory, the capital market suggests that companies should focus on their areas of strength. And, by implication, companies should not expand arbitrarily beyond their areas of strength.

When management consulting firms and business school academics first came to China, they brought along these concepts and used them as guiding frameworks to advise Chinese clients. However, the Chinese executives, while intrigued, quickly came to the realization that something was missing.

While useful, these frameworks could not quite explain the overall context of doing business in China. The consultants and academics also quickly realized that business in China is somewhat different, although they could not explain exactly what the difference was.

In the meantime, the external operating environment was evolving fast, both in the world and particularly in China.

China’s fast economic growth, its gradual but consistent transition from planned economy toward market economy, the emergence of highly intensive competition in the open sectors, and the increasing prevalence of technology and the availability of angel investing and venture capital funds, all contributed to the emergence of waves of entrepreneurship and innovation in China that the country had not seen before.

In their search for growth strategies, these Chinese entrepreneurs were typically fast and agile. Some of them developed diversified conglomerates, and there were others that decided on a narrow focus, taking the core competence approach. The results have been mixed.

Interestingly, some of them, through trial and error, discovered a third way of strategy development. We call it “multiple jumping”.

When these entrepreneurs see new opportunities evolving, even if they do not have all the capabilities to fully operate the new business, they decide if they should jump over or not.

So far, some of the companies that have jumped have been successful in latching onto the new business sector. Often, they will repeat the process when newer opportunities turn up. When these companies jump, they try to fill their capability gaps either through their own efforts or by collaboration with other companies, or by using both approaches.

This multiple jumping approach to strategy is different from a conglomerate approach because, despite their involvement in multiple sectors, these companies generally keep their original heritage as their core.

On the other hand, multiple jumping clearly defies the core competence approach, because these companies are willing to enter new areas of business without having the expected core competences established.

So, this multiple jumping approach is another way to think about strategy beyond the conglomeration and core competence approaches. We call it The Third Way.

It provides another way for companies to decide how they should develop their business strategies in a fast-growing, discontinuous operating environment abounding with fertile opportunities.

A prime example of a company that has successfully adopted this approach is Alibaba, which has interests in industries including healthcare, the media and consumer finance as well as its core e-commerce business. Coincidentally, US companies such as Amazon and Google have also grown through this approach.

As China’s operating environment continues to rapidly evolve, innovation and entrepreneurship are thriving. Companies are looking for even more inspiration for growth. Many entrepreneurs continue to look at the West, especially at the US, for inspiration in technology, management and investment models. Some are also examining Chinese historical philosophies for guidance.

Today, in addition to a growing number of consulting firms, business schools and training companies in China, many corporations have also set up their own “universities” or “academies”. Business executives, successful or not, are eager to share their experiences in running businesses and some have turned into modern philosophers.

Conferences and seminars organized around themes of business, innovation and transformation take place regularly in different cities throughout China. Airport bookstores, where business traveler traffic is heavy, stock a proliferation of business books. Videos showing various “experts” talking about the secrets of successful business are now commonplace.

Social media, in particular, has become a popular medium for people to share their points of view — freely critiquing others’ successes and failures, with or without any real business experience of their own. Online celebrities emerge from the corners and some have captured many eyeballs with their opinions on business trends and remarks on individual businesspeople.

A fair number of Chinese entrepreneurs are still relying on brute force and guanxi (relationships) to run their businesses, but increasingly, some regard knowledge as the key source for building their companies’ sustainable competitive advantages. To this end, they actively search for new ways of building businesses.

On the surface, these attempts may seem unsystematic and perhaps some will prove futile. But some are creating new patterns that could become cutting-edge thinking, and they could form a new cornerstone for business thought leadership that will bring about future inspirations for the rest of the world.

Edward Tse is founder and CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in China. He is also the author of China’s Disruptors (2015).


SCMP | Common Goals : the US and China should Collaborate instead of Simply Focusing on Competition

Original published by South China Morning Post on May 6, 2019. All rights reserved

Embroiled in a trade war with China, the Trump administration, in February, signed an executive order aiming to spur the development of artificial intelligence, in response to the rising fear in academia and government that the US is losing the race for global AI leadership to China.

Such fears are not entirely unfounded. China has a well-funded commitment to the development of AI. The leadership in Beijing has outlined its ambitions in various development plans, including the initiative to build “advanced manufacturing”. According to Tsinghua University’s China AI development report, released last year, China has secured a leading position in the AI echelon in both technology development and market applications. China ranked first in the total number of AI research papers and AI-related patents, and second in terms of the size of its AI talent pool.

There are several key drivers of China’s progress. First, it enjoys a fundamental system advantage. In the past four decades since its “reform and opening up”, China has somewhat unconsciously evolved its own “three-layer duality” development model. At the top, the central government’s guiding hand sets goals and directions for the country, giving the rest of the nation clear targets to follow. At the grass-roots level, private-sector entrepreneurs have re-emerged and become a major force in driving economic growth.

In the spirit of driving the development of advanced manufacturing, provinces and cities across China have instituted preferential policies for AI start-ups. For example, Tianjin, a major port city in the northeast, launched a US$16 billion fund last year to bolster the local AI industry. Tech companies collaborate with local governments on AI initiatives such as smart city, health care and autonomous driving. Alibaba’s ET City Brain project uses AI to tackle traffic jams, reducing traffic delays by 15.3 per cent in parts of Hangzhou, the city in which Alibaba is headquartered.

Second, the massive size of the Chinese economy allows companies, especially AI companies, to rapidly scale up. China now boasts more than 800 million internet users, roughly 58 per cent of its total population and three times larger than the number in the US. According to the China Internet Network Information Centre, 98 per cent of them are mobile internet users. The large online population generates an abundance of data, on which algorithms can conduct large-scale research and experiments much faster and more intensely than is possible in the West.

For better or worse, Chinese are more relaxed about data privacy than Westerners, at least for now. What may be viewed as a violation of privacy by some could be advantageous for AI developers wanting to extract a large amount of data. This situation allows Chinese AI developers to achieve more accurate machine learning models in areas such as facial recognition, voice and gesture recognition, consumer behaviour analysis and robotics process automation.

Third, a “why not me” mindset drives Chinese entrepreneurs, who are eager to show that they too could succeed. Today, younger entrepreneurs view their successful predecessors as role models and want to replicate their success. China’s hypercompetitive environment harbours cutthroat commercial activities and transformative business models, allowing the fruits of AI to quickly spread across the economy.

China tops the list of the number of active AI companies and venture capital investment. Leading players, such as Baidu, Alibaba and Tencent, are investing heavily in AI technology. For example, in 2018, Tencent invested about US$120 million in Shenzhen-based humanoid robot designer UBTECH Robotics. Baidu not only poured US$1.5 billion into its Apollo Fund for autonomous driving, but has also developed a neural-network-based machine translation system that has at times achieved speech recognition accuracy higher than that of humans.

Rising start-ups, on the other hand, have created tremendous value. Among those is the previously mentioned UBTECH Robotics, the world’s highest-valued AI start-up at US$5 billion. ByteDance, the company behind AI-powered news and information content platform Toutiao and popular short video platform TikTok, has grown 230 per cent in revenue in the past two years.

While the Chinese tend to favour applications of existing technologies, the West focuses more on the science and infrastructure behind AI. Fundamental research is high-hanging fruit that would take much more time and risk to achieve results than commercial applications.

However, there are signs that this is also beginning to change. The Chinese government is planning support for AI education, research and development. One of the newer projects, the Next Generation Artificial Intelligence Development Plan, offers a forward-looking blueprint for basic theory and common key technologies. Another project on brain science and brain-inspired research is comparable to Europe’s Human Brain Project and the US’ BRAIN Initiative. Inevitably, some of these technological experiments will fail but others will make it. It is through experimentation that progress can be made.

Should we simply focus on the winner of the “race” between China and the US? “Race” implies a zero-sum game, as if the two countries must treat each other as “strategic competitors” and acknowledge a mutual threat. While there is competition, there is also plenty on which to collaborate. In today’s increasingly interconnected world, we need organisational means to address issues that transcend national borders, including those of AI development and governance.

Some level of collaboration in AI among American and Chinese researchers is already under way. For example, the Partnership on AI, an organisation founded by Amazon, Google, Facebook and others, announced last year that Baidu would join its network. The consortium of companies recognised the importance of global discussion around the future of AI and showed a desire to counter the arms-race narrative. There is a need for China and the US to focus more on similarities and common goals for the betterment of the entire world.

Picture Source | Google

头条 | 《外商投资法》的启示


《外商投资法》不容许“强制技术转让”,“强制技术转让”是一直以来被美国政府方面用以推动中美贸易摩擦的主要理由之一。 新法律还强调保护外国投资者和外商的知识产权,鼓励技术合作。其他激励政策包括建立具有税收和商业制度吸引力的经济特区、允许利润与资本收益外移,并缩短外商投资项目的负面清单。除此之外,中国还将鼓励外国投资者积极参与国有企业的“混合所有制”改革。















Clariant | What Drives Business and Innovation in China?

What Drives Business and Innovation in China?

We are pleased to share with you an interview report on the topic of What Drives Business and Innovation in China?, which was published on Clariant Integrated Report 2018. It includes an interview with us that covers our perspectives on China’s innovations.
Q: Edward, what’s the biggest misconception Western companies have about China?
It’s the presumption that China’s development will follow the path of the West, and that they can simply copy and paste their strategy and business model to China. The typical Western stance is, ‘If this cookie-cutter approach results in success, that’s great and we know what we are doing! However, if it doesn’t, then the problem has got to be with China, and not our strategy’.
Q: What makes China so different?
It’s an ancient civilization going back 5 000 years, but its modern business development is exceptionally young. Only since the reforms and opening of the late 1970s has China started to reconnect with the rest of the world. That development is far from perfect, but it has lifted 700 million people out of poverty. The China that you’re seeing now comes from a rather unique background and makes for a very different context compared to that of the West.
Q: Is the role of the government as big as we think?
Going from a Soviet-style planned economy to a market economy takes time, and China is not entirely there yet. But today, relative to the state sector, China’s private sector is by far the bigger job creator and contributor to the country’s GDP. It’s also the primary source of business innovation. The reemergence of the Chinese entrepreneurial spirit is probably the most profound development in China’s recent history.
Q: It led you to write a book in 2015 about ‘China’s Disruptors’ What contributed to their success?
What certainly helped was the size and growth of the China market, which allowed for rapid scaling of their business models. The prevalence of digital technology, specifically the wireless internet through smart devices, was the critical enabler.
Q: What chapters would you like to add to this book today?
What’s special today is the fact that entrepreneurship is not just for the privileged. It has become the fabric of Chinese culture today. State-Owned Enterprises (SOEs) still play an important role, but many young people have realized that starting a business or working for a start-up rather than an SOE is a path for them to get where they want to be. If I were to write a new book about Chinese innovation today, it would be about the new era we’re entering with technologies like artificial intelligence, the internet of things, blockchain technology, and 5G. Those will have a profound impact on China’s innovation and business. The Chinese entrepreneurs will be at the forefront of that.
Q: Are Western executives in China less open to innovation?
Western executives are very keen – I would even say indoctrinated – to base their strategy on the doctrine of core competencies: ‘Focus on what you are good at and don’t divert your attention to anything else’.
Q: Why is that bad for innovation?
Because it limits what the company is willing to consider. Chinese entrepreneurs don’t necessarily have that ideological baggage. Many of them are happy to develop multiple business ecosystems even if they don’t have all the capabilities in place themselves. When they feel a new opportunity is worth pursuing, often they would rather jump before anybody else does and then fill the capability gaps along the way.
Q: Are the gold rush days over for Western companies in China?
China continues to evolve and to open up. China today is very different from China ten years ago, and it will again look very different ten years from now. There is major potential for more growth. But if you want to make the most out of that, you need to put China at the core of your global strategy and organization, which means making China a part of your corporate brain. Including the ability to evaluate opportunities and to design, innovate, and execute new ideas. It’s impossible for a corporate headquarter that is thousands of miles away to fully appreciate what’s going on on the ground in China.

新浪财经 | 谢祖墀:边界 = 机会 vs 能力


有限的游戏 vs 无限的游戏















二、单客经营(Segmentof One):针对每一个客户的个性化需求,提供定制的产品与服务组合,提高体验感。例如通过数据分析,实现定向推送推荐。





商业的根本在于对客户抱有“以客户为中心”的理念。许多人都很羡慕亚马逊的业绩表现,但有多少企业和企业家真正理解贝索斯所推崇的“对客户的疯狂热爱”(Customer Obsession )的信条呢?





谢祖墀博士(Dr. Edward Tse)是高风管理咨询公司(Gao Feng Advisory Company)的创始人兼首席执行官。中国管理咨询业的先行者。过去的20年里,他创立并领导了两大国际管理咨询公司在大中华区的业务。外界评价他为“中国的全球领先商业战略家”和 “谢博士之于中国企业界就如大前研一之于日本企业界”。他曾为数以百计的公司(总部设在中国及其它地区)咨询过所有关键战略和管理方面的业务,涉及中国的各个方面和中国在全球的地位。他还为中国政府在战略、国有企业改革和中国企业走出国门等方面做过咨询。他已发表200多篇文章并出版了4本书,其中包括于国际获奖的《中国战略》和《创业家精神》。谢博士获得了加州大学伯克利分校工程学博士、MBA以及麻省理工学院的工程学学士、硕士。