china-business-trends

China Business Trends And New Business Models With Rebecca A. Fannin

For today’s session, we have with us Rebecca A. Fannin who is the founder, editor at Silicon Dragon Ventures, public speaker, and writer for NBC and author of an incredible book which is called Tech Titans Of China.

What drove your interest in Chinese tech giants in the first place?

Rebecca A. Fannin: When I started going to China as a journalist and I met many of the leading entrepreneurs like Jack Ma and Robin Lee and the story was really exciting and I just kept covering it as a journalist and writing many articles and then that led to my first book, Silicon Dragon, and then my latest book Tech Titans Of China.

Can you tell us a bit more about the current scenario for China’s tech giants?

Rebecca A. Fannin: One of the companies that I write about in the book is Pinduoduo which is in the social commerce space. So social commerce is a business model that originated in China and it combines social networking and coupons and groups and buying online.

It’s very popular in China and even in the rural areas are now… We don’t really have that model in the Western world yet. So I think that this is one of the tech innovators that has come out of China.

Now also I would Xiaomi the smartphone maker in that league as well as a tech innovator because they have combined their apps, investing in startups that become part of their whole ecosystem and their whole smartphone brand which has gone global, where they’ve gone international outside of China and so at a very low price.

So Xiaomi belongs in that league as well. There are several others that I write about in the book. Of course, we can’t ignore the mobile payments companies, which are so much more advanced in China and elsewhere such as Alipay and WeChat Pay that is just universally used in China, cash is gone.

Super apps are another invention out of China that combines all kinds of functions of an app into one app. We don’t really have anything like that in the Western world either.

What other Chinese tech companies are your following?

Rebecca A. Fannin: Definitely ByteDance. ByteDance is the maker of TikTok which is hugely popular now. That whole 15-second video app was really popularized in China and by ByteDance.

So I think that this idea of an entertaining, very short, self-created video that can be shared easily is an idea that’s traveled very fast and has taken off big time in the U.S. and it’s a new model that we didn’t have before.

At least it wasn’t popularized before in other markets and including the U.S. but now TikTok is showing the way. An interesting thing about TikTok as well is that there’s the uncensored version for the U.S. market.

Now there is another version of TikTok which is available in China and of course in China, as we know, the internet is censored. So it’s censored in China but the Tik Tok version in the U.S. is a different model.

Is Facebook TikTok’s copy enough as a counterattack?

Rebecca A. Fannin: Facebook’s copy is called Lasso and it’s really only accessed through Facebook so it hasn’t gained the traction that TikTok has and I think Facebook basically copied it entirely and that’s pretty well known.

I wrote about this whole TikTok phenomenon in an article, a really very comprehensive article in Harvard Business Review. So if your listeners wanted to take a look at that, it might be interesting for them (you find it here).

Where are Chinese tech companies investing right now?

Rebecca A. Fannin: They have been investing heavily in AI, artificial intelligence, both Baidu and Alibaba. Baidu very aggressively going into AI and autonomous vehicles and Alibaba is getting into AI as well. So I think that is probably the binary area that both of them are investing in heavily.

I think mobile payments are another area that both of them have invested heavily in as well. So Baidu not really e-commerce so much, but that’s the forte for Alibaba. So each one of them kind of has their own area.

Baidu with search originally, Alibaba with e-commerce originally and Tencent with gaming and messaging. Now what’s interesting about these tech titans is how they’ve powered up and gotten into all kinds of new sectors today and they have become these giants that go across many industry sectors and they’ve also gone outside China.

First looking pretty much in the U.S. and investing heavily in U.S. tech companies and tech startups. But now not so much given the whole issues around the oversight of China investments in the U.S. by Washington DC and also the capital’s restrictions on Chinese money going outside China.

So now what you’re starting to see is these tech titans are moving more money and investing more heavily into Southeast Asia. So that’s a new trend to watch.

China is also investing a lot in India, right?

Rebecca A. Fannin: India is a huge market and there’s a lot of activity now focused on India. China’s deal-making is down. The numbers are down and now India is having a real surge of venture capital investment and startup activity.

So I think it’s India’s time coming up, which has been coming for a long time and I wrote about that in my second book, Startup Asia, which was published back in oh 2011 and I highlighted that trend then, but now we’re starting to see this really happen, that India is becoming a force in the global innovation scene and taking its place.

Is there any template China is using to invest in India?

Rebecca A. Fannin: There’s a huge push by the Chinese tech titans to go outside of China and into Southeast Asia and into India and many of the business models are being copied.

For instance, the model of ride-sharing, the model of bike-sharing, mobile payments, e-commerce. A lot of these areas are getting copied. India is innovating in its own right and making its own localized apps and versions.

But these business models of e-commerce, social commerce, ride-sharing, they’re all being copied and these tech titans are helping to make that happen because they’re acquiring local companies in these regions in Southeast Asia, in India, and then helping those companies to scale up even further.

Why mini-programs are so important to understand the rise of super apps?

Rebecca A. Fannin: That’s something developed by WeChat. It’s really a mini shop within WeChat so that you can have a branded store and the user’s own WeChat can just go directly to that branded store and shop there.

So that’s an interesting development as well and it’s like walking down the main street in the past and being able to go into this store or that store. But it’s very innovative in that you’re on an app and you don’t even have to leave that app. It’s embedded within the app.

I guess it’s like the equivalent, the real-world equivalent would be a shopping mall where you enter the shopping mall and then you have all these choices. But yeah, it’s a little bit more than that because you’re adding in tech as well.

Are there examples of US companies that successfully entered China?

Rebecca A. Fannin: There’s probably more failures than successes in the tech world, but yeah well Apple has been successful in China. It’s a big company, a big U.S. company. eBay failed in China.

Amazon failed in China. LinkedIn is trying very hard in China and has gained some traction. Starbucks is using a new model to keep its place in China.

It’s been the leading brand, but now it has Luckin Coffee very much competitive with it in China and that’s again, another business model that came out of China.

The whole idea of coffee on the run ordered by your mobile app and instant delivery. So now Starbucks is copying that model in China.

What about companies that failed to enter the Chinese market?

Rebecca A. Fannin: An example of a company that really didn’t quite make it in China is Uber. Now Uber was acquired, its business was acquired by Didi, a local Chinese company that’s the leader in ride-sharing and interestingly enough then the same thing happened to Uber in Southeast Asia. Its business was grabbed up.

Gennaro Cuofano: I think the interesting part… I’m not sure if I remember correctly, but I was looking at the financials of Uber not long ago and I think Uber held like a joint venture in China but they kept some controlling parts of the joint venture.

Rebecca A. Fannin: Yeah, they’ve got an investment stake in Didi, the local Chinese company, in Didi Plus.

Are there upcoming China’s tech giants?

Rebecca A. Fannin: ByteDance is certainly, they have been very aggressive and innovative. I think Pinduoduo the same thing. It already went public. Pinduoduo already went public, ByteDance is not public yet.

Xiaomi has a lot more runway to grow internationally. I think DJI the drone company is already the world leader in drones. It’s been very promising. It’s not public yet and the growth of that company and the innovations out of that company based in Shenzhen have been remarkable.

Are there any business people in China you suggest following?

Rebecca A. Fannin: The fellow who was behind Xiaomi, Lei Jun, is a super angel investor and a serial entrepreneur. I would put him high up. There’s hard to find somebody who could be the next Jack Ma, but there are definitely a lot of innovators coming up with new ideas and business models in China that are gaining traction.

But, you know, the big personality people like a Jack Ma, not so many of those because entrepreneurs tend to be, especially tech entrepreneurs, tend to be sitting, coding, Like, they like to code, they like to… They’re engineers, they’re not celebrity type personalities. So yeah, it’s kind of difficult to pinpoint one person that I think is like a superstar tech titan coming up. But maybe Lei Jun although he’s probably already made it.

Do you have any suggestions for anyone who is willing to start a business with dealing as well with China?

Rebecca A. Fannin: To start off you need to go there first of all and see for yourself what’s going on and then make the right connections and have the right partner on the ground. So yeah that’s very, very important, to know the market and to work with people who know the market locally.

You must, must localize and you must adapt to the market and you must be able to work very quickly and implement things, new ideas, before competitors and keep ahead.

You have to be able to work really hard and work pretty much around the clock to compete with these Chinese entrepreneurs who are workaholics.

Final remarks

Rebecca A. Fannin: let me point people to Silicon Dragon and our events that we do, Silicon Dragon Ventures. We publish a weekly newsletter and we host events in global hubs and our next one will be in Sydney, March 25th and then we will also be in Los Angeles with a VIP dinner.

But we are out there in the community covering what’s happening editorially and I enjoy writing about this whole tech boom and what’s happening in emerging markets, and I’ve been doing this for more than 15 years now and set up Silicon Dragon in 2010 as its own media business with events and our media platform with a newsletter and a podcast.

So it’s been fun and I enjoy it. You know, you asked me in the beginning how I got into this. It was mainly through following the venture capital money from Silicon Valley into these emerging markets, primarily China and India in the early days and I’ve just been following it ever since and writing the stories and meeting the people.

Gennaro Cuofano:

Yeah, following the money, you can find interesting stuff. So, follow the money…

Rebecca A. Fannin:

Absolutely.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro is an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here