Mobilising China

Over the next days I will be blogging some points/facts from Ted Fishman's book China Inc. The book is a real wake-up call, even for those involved in trade with Asia and the next superpower.

Today, mobile, and a few astonishing facts:


- The largest mobile market in the world. The book quotes 300 million mobile users in China (one year since publication this has past 400m and is still growing).

- The most competitive mobile market in the world. There are 800 hundred handset models available in China. Compare that to your local high-street for choice.

- Chinese brands own significant shares. 40% of the domestic market is owned by local brands Ningbo Bird, Nanjing Panda, Haier... And on top of this, China manufacturers the majority of non-Chinese brands' handsets available. That's 100% dominance of manufacturing and 40% of brands.

The sophisticated R&D, engineering capability and production facilities involved in this operation is driven by Chinese. That's a great leap up the value-chain for China that cements it as an inventor and not just manufacturer. Looking for the next trend in mobile, look to China.

Related: When East Overtakes West (the Chinese Pear Pod)

Creativity versus the Green Back

An entrepreneurs dilema. Thinking Big. But thinking ordinary. Getting the balance between shooting for the most 'out-there', revolutionary product and finding the place where money is easily made.

Seth Godin's excellent post "I don't feel like playing tonight" flags the problem we all face.

Venture Capitalists want the big idea, they want you to think big, to create or 'take' a market. To do so usually means to take a radical approach to a product, service or industry. Not a marginal improvement on what's already in the marketplace.

The sweetspot is somewhere in-between the left-side of the curve and the right. Go to far right, and your into mass market competition and mediocrity - no one will invest in you.

Go too far left and the public may take a life-time to get to grips with your idea. And you're 30min (if not 1min) pitch to the VC will never get across your wonderful concept to investors.

I don't have an answer to where that sweet-spot sits, the 'tipping point' for product/service design. I suspect those that do spend too much time on yachts and at parties to write blogs about it. Find the sweet spot and combine Green Back with creativity.

Lessons from "now" for the future of Global Digital Competition

Over a billion people. Connected globally. Hundreds of millions of web-pages. With all this easy connectivity going on you would think that those of us that spend our lives in the wired world would be used to competition that transcends borders. Maybe not. And I think our offline colleagues could teach us a thing or two about globalisation.

Crowning its tenth year, the net has really only just got going in some parts of the world. A defining feature of Web 1.0 was that few companies succesfully broke into other countries. Sure, generic services like email and search engines spread, plus Double Click's ad-serving network, eBay.

Now we're early into Web 2.0 and good services are spreading much faster around the world. But few companies from East, West, North or South have truly established massive shares in many overseas markets. (Certainly not to the extent that we see in non-digital industry). It's still largely a fragmented business. At this stage there are many reasons for this:

- Too busy setting-up operations in core markets
- Language barriers
- Government restrictions on content, publishing licences...
- Underdeveloped internet in overseas markets (no ecommerce)
- Lack of internet/tech penetration

Now contrast this to; food produce, steel, computers. They're all well established industries with ubiguitious needs/wants in each market. And there is ferocious global competition for every $ spent in each market. China is steaming into the USA's textile market, Mexico and India equally want a piece of the action. At the consumer end the US brings us Gap, Hagen Daz, Walmart and Pampers. The Japanese brings us Muji, Toyota and Sony. The English bring HSBC, Vodaphone and Virgin.

All command truly global competition which sometimes goes so far as to spark trade wars, government tariffs, etc. This all points to an explosive competitive future in digital media.

In the next three years many of the barriers to "Global Digital Competition" will subside. Most developed or developing nations will have penetration levels worthy of supporting a thriving internet industry. And the costs of developing web apps will continue to fall with improved technology and greater competition from 'offshore' development.

So fast-track to 2010 and nations that we don't currently associate with internet innovation may just suprise us all. In the offline world it has taken thirty years for global trade and competition to reach this point. Online, it may take just three.

Quote of the week

"the horse is here to stay, but the automobile is a novelty"

On investing in Henry Ford's start-up, 1903
(borrowed from this months' excellent Fast Company)

The new world order - China, India and the E7

It seems the G7 has long been the smokey room'd old boy's club of the richest nations on the planet. Whilst swilling on fine whiskey they discuss how to steer the world toward greater democracy and wealth.

Then there was a little group called the E7. Grouped together in a noodle bar, they work out how to develop their countries over a pot of communal tea. Now, representing the world's fastest growing populations and economies, the E7 are stepping out of the rather negative 'developing country' label, they're turning into real competitive economies and dominant on trade routes. And suddenly the world is listening.

News this week highlights that GDP is not really a fair comparison:

"While China's economy is currently 18% the size of the US's in dollar terms, it is 76% as big on a PPP basis.

By 2050, PwC believes, it could be 43% bigger than the US by PPP - although it would still lag when measured in terms of dollar size.

Also on a PPP basis, PwC says the German, UK and French economies could end up smaller than Mexico's economy and similar in size to that of Russia."
Read this in full here

More on the story of how BRICs are set to give G7 a run for its money

The realisation that the E7 may dominate the world is beginning to hit home. The future will be influenced not just by their low-cost production, it will be affected by culture (1 in 5 American will be Hispanic in twenty years time), economies and global populations (1.6b Chinese and over 1b Indians). There are 29 baby Indian's born every minute, and 12m new Chinese added to the planet every year (watch the population clock rise).

According to PWC's recent survey the "Search for New Customers Displaces Cost-Cutting as Impetus for Global Expansion". Smart companies are not blind to where their futures lie. Faced with squeezing a single digit of growth per year in the G7 amidst fierce competition, the home purchasing power of people from China through to Latin America is beginning to shape products in ways it never could before. On and offline businesses have to pay attention to local needs, products made for western tastes just wont do anymore.

In a bordless online world, removing language as a barrier, the national origin of your business matters far less than the quality of your service. The online businesses that can harness not just the English speaking world stand to have true global brands, with global buyers in growing countries.

While you've been reading, 58 new babies were born in India.

Social Web: Eastern Promise

It will be interesting to see how the social web develops in Asia. By its very nature, the way Web2's social networks develop depends entirely on how users behave and interact.

Despite the collision of cultures online, we do still have our cultural differences, as nations, in regions and in families. So we can expect a different adoption and use of Web 2 in India to France, in China to the USA.

Firstly, the family unit plays an entirely different role and importance in Asia - with family members being naturally close (geographically) for much of their lives - their may be less need to 'connect' with family online. If you live in the same house it would seem fairly pointless. The flip side to this are the teenagers within the family unit who wish to express themselves outside of the watchful eye of parents. So community tools like myspace may actually be bigger in Asia than they are in the West.

Technology adoption plays an important role too. Whilst many books will have you believe in slowness of 'developing' country's people to adapt/adopt technology, my own experience and observation has been quite the opposite. Unhampered by 'old' habits (landline phones, ZX Spectrum's and Palm One's) many young Asian's naturally use IM, VoiP and all the features of these tools without so much as blinking ;-) They never had another way of communicating, neither did their friends. So their all using the same tools.

The traditional 'collectives', to be part of the crowd, to work as a team not an individual remain strong. This may play-out as strongly bonded networks/communities online but with less 'A-list bloggers' and individuals trying to make a point or name for themselves.

It will be fascinating to see how these world's develop, and eventually meet. At Ventures in PIXELS we're investing in this vision of the future.