[Seeing the unseen] Why do Chinese tech companies fail to localise?

Last week, we mentioned about the whole slew of Chinese investors, entrepreneurs and company executives descending into Singapore, and rumours in the tech circle (especially in China) said that they actually drove up Singapore hotel prices. 

Of course, the reality is – there are so many other events happening in Singapore as well: Forbes Global CEO Conference, Milken Institute Asia Summit, Time100 Leadership Forum, etc. 

In fact, according to Singapore’s tourism board, over 90,000 delegates are expected to come to Singapore for 25 major events during the F1 week. 

This misperception actually brought up an interesting point: for tech investors and executives, many naturally assume that it is their peers driving up the prices, even if these only constitute a small percentage of the overall surge of business visitors to Singapore. 

A similar issue is when such investors, entrepreneurs and executives evaluate businesses outside their home market – they tend to use experience, especially from their wins, in their home market. 

• “This business model has been tried in China, many times, and it has proven NOT to work.”
• “Would this SaaS tool be able to monetise? I highly doubt so. Customers of similar SaaS tools in China never pay a dime.”
• “This sector in China is under high scrutiny from regulators, and it is very hard for any business to make a meaningful margin.”

I am sure if you are a founder, investor or JV partner of these Chinese counterparts, you would have heard at least one of the statements above. 

The universal problem of “path dependence” 

This, in fact, is the same challenge that many Chinese companies, when they expand into global markets, face. How do you form the correct judgement about the market, (based on which) dedicate the right amount of leadership mental space, put the right people, and steer the entire organisation to support this undertaking? 

For the leadership, and every decision maker involved in the process, a key risk is “path dependence” – using your prior experience and success to make judgements for the future. 

Quite often, this leads to wrong decisions about the market – where many factors could be different. 

And it is a problem not limited to Chinese companies – we all have experienced that. Ultimately, making decisions using existing understanding and experiences is all but easy (even lazy). 

Do the research

In “Seeing the unseen: Behind Chinese Tech Giants’ Global Venturing”, we mentioned that Chinese tech entrepreneurs are learning Chairman Mao Zedong’s key strategies and tactics. 

Mao, during his revolutionary years, had these two specific insights, which are very relevant to making business decisions: 

• “Those who have not done the research have no right to speak” 

• “… dogmatism and empiricism. They only see the one side, not the full picture. If we do not pay attention to the shortcoming of one-sidedness, we will go down the wrong path.”

For whoever is exploring a new innovation, a new product, a new business model, or a new market, we can’t be lazy and fall back into the easy path of using our past performance to predict the future. 

Especially in this fast changing world where the timeline for everything is compressed. 

Finally, for all of you who have been to Token2049 in Singapore this week, do you feel the warmth in the bear market? 

Have a great weekend, and for those in Singapore, enjoy F1!

Cheers,

Jianggan Li

P.S. We understand  “Seeing the unseen: Behind Chinese Tech Giants’ Global Venturing” was sold out at some major book stores in Singapore last week. The stock has now been replenished. You can also buy it online (Amazon or Wiley), where the Kindle version is also available.  

I am happy to answer any questions about the book, or discuss the topics covered. Feel free to drop me a note by replying to this email!