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ShareGlobal tech giants, including Google, Yahoo! and eBay, which faltered with their entry strategies in China, may have fared better taking survival lessons from the World of Warcraft (WoW), the massively multi-player online role-playing game, than from traditional biz-school wisdom.
That's because the Chinese internet and technology space is an alternative universe -- much like WoW -- and to survive there requires a mindbend, a different template from the one the rest of the world is familiar with.
"Even the word 'innovation' means something else altogether in China," says Paul
Denlinger, a Chinese-American who's worked in the Internet space in Silicon Valley and China for nearly 20 years. Typically, 'innovation' is associated with patentable technology and intellectual property rights, but in China, innovation is "perhaps more iterative and less patent-based. It's more about taking a model that already exists and building on it."
Denlinger points to the experience of Shanda Interactive Entertainment, a gaming company he helped start up in 2000. In the late 1990s, China had opened up to the world, but import of game consoles like Playstation and Xbox were not permitted. PCs, seen as "educational devices", could be imported. "So Shanda loaded the console games on PCs; then they made them available online. Now, that's innovation with Chinese characteristics."
The big difference between the Internet in China and elsewhere is that in China, for a large number of users, the Internet serves as a free entertainment medium, not necessarily as a productivity application. "Even the definition of e-commerce is different," notes Denlinger. E-commerce transactions don't get consummated online.
"Often, Net users research a product online, and may place an order -- for, say, a book -- but the payment is madewhen the book is delivered."
There's also tremendous diversity within China: it's often said that China is like "North America, Europe, Africa and South America -- all rolled into one". It also has a strong regional character, with some local start-ups supported by local governments.
It was an inability to "go native" in China that may have tripped up the global tech giants when they first forayed there. "Most American companies, even when they hired local engineers, tried to manage their business from the US," says Denlinger. "That's because typically, in these companies, a country is given importance depending on how much revenue it generates." Because China generated little revenue, at least initially, it ranked far below in the company organisation. In any case, local Chinese companies faced no such pressures. "They understood the local market, spoke the same language, and didn't have to explain their decisions to somebody in Silicon Valley." This meant they could weave circles around their bigger and stronger American competitors.
Indian software outsourcing companies in China, looking to use the current downturn to acquire local Chinese businesses, might face the same dilemma, reckons Denlinger.
"I've seen some poking around by Indian companies, but even if you acquire Chinese companies, how do you manage them?"
Chinese management styles are very different from Indian models, "and not many executives understand both the commonalities and the differences." A common complaint about China is that workers tend not to share information well. So, the bigger a product becomes, the more difficult it becomes to architect a good application if the information isn't shared freely. "That's where Indian companies and professionals continue to have an edge."
