Planning on expanding into the Chinese market and implementing your cross-border digitalization initiatives? After helping clients to innovate digitally across borders, especially into China, for almost a decade, we learnt that the keys to success lie in the ecosystem. Building a network equipped with experienced professionals in the fields of research, strategy and production, inspiring leaders, and a well-connected community with know-how of the local ecosystem all help a lot in implementing digital innovation abroad.
In order to help international companies leverage the digital innovation potential of Asia’s rapid technological development, MING Labs formed a partnership together with Alibaba Cloud, IoT ONE and Ward Howell International.
Jointly we launched the Asia Digital Alliance to support industrial companies in developing digital capabilities, strategies and solutions in Asia. Each partner has been exposed to the Chinese market for an extended amount of time in different capacities and has witnessed the changes of the market, thus helping them to be very familiar with the current market dynamics in China. To support large-scale end-to-end Digital Transformation, each of the Alliance partners leverages its distinct strengths: By combining Alibaba Cloud’s cloud computing and AI expertise, MING Labs’ UI and UX design knowledge, IoT ONE’s industrial innovation research and enablement capability and Ward Howell International’s expertise in leadership solutions for the digital age, the Asia Digital Alliance is able to handle multi-faceted Digital Transformation and Innovation projects. To spread awareness of the possibilities for Digital Innovation.
The ADA collated some of the most popular questions the community outside of China has been asking with regards to innovating in the Chinese market.
Why Is China A Suitable Place For Companies To Drive Digital Innovation?
The Chinese economy is still undergoing large-scale transformation. Each new phase of development brings with it a unique set of challenges and opportunities for international companies. Following the setup of cheap, mass-scale and low-quality production, there has been a growing demand for high-quality, complex products to serve the rising Chinese middle class. In the last decade, the Chinese policy leaders have increasingly voiced their ambitions to become a world leader in many emerging industries, such as AI and mobile technologies. These ambitions have been fortified by hefty investments and infrastructure developments which are increasingly bearing fruit. In some cases, the policies have succeeded in creating fertile conditions for digital innovation that can surpass other countries. For example, the speed to market for new product innovations and the degree of customer-centricity now enable China-based businesses to rapidly launch products ahead of their competitors. Foreign companies in China can take advantage of these conditions to quickly develop new products in China, and then launch them onto the global markets with astonishing speed.
When it comes to innovation, the receptiveness of the consumers is an important consideration.
Chinese consumers are becoming more affluent and have a much higher household income than before. McKinsey predicts that the per-household disposable income of the Chinese urban consumers is expected to double in 2020 from 2010. Furthermore, a large number of Chinese consumers are willing to try new products, contributing to an increased growth in consumption. The Financial Times also reported that consumption has “outpaced exports and investment for the first time since the 1980s” and contributed 54% to the countries’ GDP in 2017. All these statistics prove that the Chinese are willing and able to try new innovations.
Why Should You Start Focusing On Digital Innovation In China?
Year after year, more Chinese companies developing cutting-edge technology gain recognition globally. It is not atypical for those companies to outshine international competitors in crucial success factors such as price / quality ratio and speed to market. With many industries facing fierce competition in China, it seems likely that innovative Chinese companies will increasingly be looking to foreign markets for business opportunities.
For foreign companies, this could mean that they will not only have to compete with Chinese businesses in China, but will also be increasingly challenged by them in other markets.
To adequately prepare for these new competitors, it is imperative that companies develop the ability to develop and deploy new products at a similar speed as Chinese companies are able to. Given the country’s unique Digital Innovation ecosystem, China would be a good place to start these efforts.
China Is Definitely An Exciting Market, But I Only Have One Concern: Intellectual Property. How Can My Data Be Secure?
Many companies are concerned about data security and cyber protection in China. In a report by the Centre for Strategic and International Studies, it is cited that China has conducted 108 cyber warfare attacks against government agencies, defense and high-tech companies since 2006. Hence, the concerns regarding cyber security are valid. However, cyber security measures are extensive in the country as well. There are many large tech firms offering cyber security services that could keep your data secure. These companies, including Anquanbao, Alibaba Cloud and 360 Enterprise Security Group, have been effective in preventing cyberattacks on companies. In 2014, a gaming app company was in the midst of one of the largest DDoS attacks ever recorded, but it was protected by cyber security companies. The attack lasted 14 hours and reached peak attack traffic of 453.8 gigabytes per second.
While it is true that some concerns regarding data security in the Chinese market do remain, China has also made steady progress in providing possibilities for manufacturers to protect their intellectual property. By adhering to certain protective measures (for example those put forward by the US-China Business Council), companies now have much better chances at keeping their IP protected.
How Receptive Are Chinese People Towards Digital Innovation?
Digital Innovation isn’t a very recent development for the Chinese people. For a good number of years now, Chinese citizens have been welcoming Digital Innovation and technologies to transform cities. One example is the City Brain project implemented in Xiaoshan District, Hangzhou in 2016. Since its inception, it has increased traffic speed by 15% and achieved average travel time savings of three minutes per vehicle. In July 2017, the trial was extended into the city center of Hangzhou and now covers Hangzhou’s busiest traffic arteries. The project has also expanded its functions to include identifying the quickest routes for emergency vehicles, assessing their progress to destination and managing traffic lights to make their journey smoother. In Xiaoshan District, City Brain has reduced the average time for ambulances to reach their destination by half.
Digitalization is all around the country and has become part of people’s daily lives.
What Piece Of Advice Would You Give Aspiring Business Founders Looking To Enter China’s Market?
Over the years, many companies approached us wanting to create a local version of their product for the Chinese market. The first step they took was often simply translating it. Yet, before even moving to this point, we suggest to first get rid of the assumption that product-market fit persists when entering the Chinese market. Assume that you have lost it and need to rediscover it. The best advice for doing business in a distinct market like China is to start with a beginner’s mindset and test out your current solution in the market.
Testing early, being open and adaptive will bring you far in China, as we’ve witnessed and experienced ourselves as well as with many other companies.
How Can I Start Digital Innovation In China?
The first thing is to understand the local market. The Chinese market works different from the rest of the World. The World uses Google, China uses Baidu. The World uses Quora, China uses Zhihu. These are just two of the many differences you would encounter in China. First and foremost, before starting your Digital Innovation plan in China, you have to ensure that your digital solution is localized to the market. That means translating your website into Chinese, localizing your web interface’s design to suit the Chinese audience, and taking into account local needs. One common issue with many international companies coming into China is the lack of a webpage or platform in the Chinese digital domain. Securing a Chinese domain for your company will provide you the first steps into the Chinese market.
Once localization has been achieved, the next thing you would want to understand is the Chinese culture. The Chinese community is very collectively minded — every context is about the group, the larger unit, and deviating from group norms or standing out are not desirable. China also has a high-context culture and every interaction cannot be taken at face value. In a low-context culture, a “no” is a “no”. In a high-context culture, it can mean “ask again”, “not yet”, or one of many other possibilities.
When you have a better grasp of the Chinese culture and your solutions are localized, you would put yourself at a better starting point for your digital innovation journey in China.
Asia Digital Alliance
With rapid Digital Transformation taking place in almost every pillar of society, industrial companies are seeing a greater need to transform their businesses before they get left behind by the pace of transformation. It is the urgency to address this need that brought Alibaba Cloud, IoT ONE, MING Labs and Ward Howell International together to form the Asia Digital Alliance. Building on the complementary know-how and core capabilities of the alliance partners, the Asia Digital Alliance provides end-to-end support for Digital Transformation in the areas of research, strategy, organizational enablement, production and technology adoption.
All in all, by connecting technology and domain experts, and simplifying the implementation of cross-border digitalization, the Asia Digital Alliance facilitates your Digital Transformation in Asia.
Alibaba Cloud
Alibaba Cloud is the number one cloud provider in China and Asia with the infrastructure and technology to help companies with this purpose, especially German companies starting and growing in China and Asia. Alibaba Cloud is among the world’s top IaaS and public cloud service providers, facilitating a comprehensive suite of cloud computing services to businesses worldwide, including merchants doing business on Alibaba Group marketplaces, start-ups, corporations and government organisations.
IoT ONE
IoT ONE provides structured insight, development support and research to enable you to build innovative solutions to win in the digital economy, as well as providing a Smart Factory for the demonstration of IIoT solutions, and the hosting of Industrial IoT events to drive awareness and facilitate business. By focusing on IIoT technologies and providing proprietary insight based on bottom-up research and a strong partner ecosystem, IoT ONE delivers rapid and tangible results that support strategy execution.
MING Labs
MING Labs is a truly global Digital Innovation and Transformation company, using Design Thinking and Lean Business to launch impactful digital products and ventures. Based in Berlin, Munich, New York, Shanghai and Singapore, MING Labs works end-to-end with their partners across strategy, design, development, launch and support, building digital businesses that deliver and digital products that delight and change mindsets and behaviors.
Ward Howell International
Ward Howell International is a global leadership and management consulting firm, and the world’s second oldest leadership solution provider. For almost 70 years, Ward Howell has worked with boards and senior management to deliver immediate performance gains through better leaders, teams, and organizations. WHI’s global technology and innovation practice supports clients to adapt their leadership and organizations to today’s digitalized world.
MING Labs is a leading digital business builder located in Berlin, Munich, New York City, Shanghai and Singapore. We guide clients in designing their businesses for the future, ensuring they are leaders in the field of innovation.
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