Find here the China paradigm episode 94. In this interview, Yingzi Yuan, Executive Director at Europe China Foundation, discusses Europe-China business relationships and how her foundation is connecting Europe and Chinese leaders.
Full transcript below:
Hello everyone, this is China Paradigm, where we, Daxue Consulting, interview seasoned entrepreneurs in China.
Matthieu David: Hello everyone, I’m Matthieu David the founder of Daxue Consulting and its podcast China Paradigm, and today I am with Yingzi Yuan. You are the executive Director of Europe China Foundation and you have a very strong interest – I can see that with all your different positions from your LinkedIn profile and from the information we got – in innovation between Europe and China and in connecting Europe and Chinese leaders. Thanks for being with us, Yingzi. My first question is: what do you sell with the Europe-China Foundation? Who are your clients?
Yingzi Yuan: Yes, actually maybe it’s a little bit different from the other podcast guests from this show because the Europe-China Foundation is actually a non-profit organization. Our main goal is to connect Europe with China, connect Europe and Chinese leaders in terms of culture and innovation. So, currently, we are not selling anything. We do have this membership program that is either for individuals or companies. So, people who want to participate in our event, in our program, can support us with sponsorship and the whole amount will be used to implement and to optimize those programs in order to promote Europe-China business relationships. So, it’s not a for-profit business model, it is a non-profit organization.
Matthieu David: I see. So, in some ways, people will make you – help you run the business with resources. Our companies will sponsor your programs and your programs– I learned on your website – are supporting initiatives for young leaders for instance. Exchange, entrepreneurship, connecting Europe and Chinese leaders and from – you used the word Trans-Asian – I think I saw that on your documentation. Is it correct?
Yingzi Yuan: Yes, exactly. So, we have two focuses. One is culture, one is innovation. But around those two topics, we have different initiatives to not only talk about leveraging Chinese tech sceneor talk about cinema or theatre, but we have a very large scope to create Europe-China business relationships. So, we have different initiatives like connecting Europe and Chinese leaders. We encourage exchange between young people in Europe and China. So, we initiated this young leader program that is connecting Europe and Chinese leaders and 2020 will be the first year where we have this program. We have different other initiatives such as a research program in collaboration with Sciences Po (learn more about the project in collaboration with Sciences Po)! which is a university, a very famous university, in France. We are doing research around the initiative and entrepreneurship ecosystem in China, because everybody is curious about how things can grow so rapidly in China and a lot of European companies or individuals, they want to learn from it. So, we are doing this research and we are going to publish a reference book. Actually, it’s kind of a guide book, for all those people who are interested in the innovation and entrepreneurship ecosystem in China, either they are VC’s in Europe or they are, for example, start-ups, entrepreneurs or government officials in Europe. Also, we have these different events where we invite those leaders in different industries to talk about the Europe-China business relationships or talk about their experiences and share their stories in order to connect Europe and Chinese leaders. So, that is why we have this very regular breakfast conference and annual Europe-Asia forum to promote Europe-China business relationships.
Matthieu David: I see, Sciences Po. For people who are not familiar with France, it’s a very famous university, one of the oldest ones actually amongst the Grand Colleges as we say in France. Going back to what you organize, it is linked a lot to innovation as you said before, and you’re working with Sciences Po on innovation between China and Europe. My first question is; how China is different regarding innovation compared to the rest of the world? It seems that – we are in a podcast called China Paradigm – that there is a China Paradigm and if I can share a little bit more about what I understand so far, China has developed its ecosystem, innovation hubs in a bit of a closed environment because of what we know – censorship and the big players who are not present anymore, those who have failed in China such as Google, Facebook, and Amazon in some way. So, they have created their own ecosystem, their own innovation (listen to another podcast to learn about the innovation ecosystem in China) and of course because of the size of the country and the resources, they have the tools to make it. Besides that, why do we need to extract China and compare it to Europe? Why is it so different?
Yingzi Yuan: Yeah so, the research that we are doing, the definition of innovation we are using is actually around entrepreneurship (learn more about challenges for entrepreneurs in China). Meaning that we are doing research around other stakeholders around innovation and entrepreneurship in China. I think that this part is the most special part about innovation in China, because the government, for instance, plays a very important role in either pushing or restricting the development of innovation. Of course, during the last 10 years, either the central government in China or local governments in China are using every resource they can, to push initiatives such as start-ups and to leverage the Chinese tech scene. So, that is one point that I want to highlight, that is government policy. It is one part of our research as well. We have a group of two students who are doing research only on government policies in China for the last 6 months. Also, I think, the other stakeholders are interesting and as very special as well in this ecosystem. They are VC’s, venture capitalists and also incubators. So why are they different from, for example, their peers in Europe? Because in China those incubators are active and they leverage the Chinese tech scene. They are very active and also in Europe, we can see a lot of private incubators that are pretty independent but in China, a lot of incubators are supported either by local government or supported by Chinese internet giants such as Alibaba, Tencent, etc.
So, there are a lot of other specificities offered by China’s makerspaces opportunities that we don’t find in Europe but we find it in China.
Matthieu David: So what you’re saying that incubators – more specifically, VC’s maybe a different case, but incubators get the support of government and big firms, where in Europe or in the US it maybe has never been the case to get support from the government but also very recently only from big firms because we see as well in Europe and in the US – big firms creating their own incubators in the space. But you feel – what you’re finding here is to say that, it has been actually at the beginning of the incubator’s growth in China, it wasn’t linked with the government and big companies.
Yingzi Yuan: Yeah in China it’s largely linked with government and supported by the companies and also because of the internet landscape in China, a lot of start-ups they will be invested or they will be acquired by big internet companies in the end, at least during the last two years. So, that is also the reason behind the current landscape of incubators (learn more about the role of incubators for multinational in China).
Matthieu David: I see, so one of the first specificity you are telling us, which is differentiating innovation in China from innovation in the West, is the role of the government. Supporting at the start incubators – and we interviewed some entrepreneurs in the past, as far as I understand, the way the government is supporting is by offering free spaces and sometimes even grants in order to grow your business and you have to commit to hire people and to do specific investments in a specific locality. What else besides the role of the government – you were mentioning maker space, would you mind telling us a bit more about why maker space seems to be more advanced in China than in the West?
Yingzi Yuan: Actually, this is a very Chinese notion, because if you want to find a maker space in Europe or in the US – you wouldn’t find a lot compared to China’s makerspaces opportunities. Maybe you can find some coworking spaces, maybe you can find incubators but maker spaces are kind of a notion that is in between. So, it is meaning that people are kind of like geeky hackers, kind of cool people who want to create things but who are also incubated and supported by this space. So, because of the policies towards incubators, you have to – the barrier of entry to becoming incubators is pretty high. So, a lot of other individuals or companies can do maker space to not – to do a complete service as an incubator but are supporting the creators as well. So that is why the notion of makerspace is so special in China and that there are a lot of China’s makerspaces opportunities.
Matthieu David: Very interesting notion, would you mind we go a bit deeper into the concept of maker space. My understandings so far are that makerspace is to create products and that China because of the links with factories – biggest factories over the world, especially let’s say Shenzhen and Guangzhou have very good space for makers and my understanding was that it’s linked to 3D printing and to this ecosystem of being able to build hardware. Am I correct to say so or I am narrowing down to something too specific?
Yingzi Yuan: I think notion actually shifted as well, in the beginning – because it’s called makerspaces and it’s like people who are doing hardware, making prototypes, but as the time changes the notion of makerspace also changes. I think it enlarged into kinds of an incubator of not only hardware but also software and because the notion of incubators is just to give the start-uppers, entrepreneurs some support around administration, accounting and to link them with different resources, that is kind of the services that were added into maker space as well.
Matthieu David: So, we’re talking about the government – we talked about the notion of maker space as specificities of China innovation compared to the West. What else would you add if any?
Yingzi Yuan: Yeah of course, so maybe people already know that the venture capitalists in China, they’re very special as well – because during one period they were – there has been a lot of US or foreign venture capitalists that were investing in China. But recently, pretty recently –
Matthieu David: Yeah, like Sequoia, right? Sequoia and Plug and Play right which are of the US.
Yingzi Yuan: Exactly, but now China also has some local venture capitalists, but it’s a very recent phenomenon and they are still trying to find the right Chinese model of investment instead of copying the whole US model.
Matthieu David: My question could be naïve, but I don’t feel we talk about a European model. I feel we talk about a US standard for VC, and you are talking about Chinese standard, but I don’t feel we are talking about really European standards and your foundation is specifically about Europe China – is my perception correct?
Yingzi Yuan: We all know that currently there is a US-China trade war, we can’t avoid it – but I think it’s actually an opportunity for everyone, and also we observe that in the meantime, European start-ups they want to enter into the Chinese market and they want maybe more Europe-China business relationships – China investors to maybe invest in the as well, but they don’t have the resources or let’s say the impact to the resources in China. And also, Chinese companies, especially internet giants and big companies are trying to enter into a foreign market, especially the European market to boost Europe-China business relationships. But they don’t know how to do that, that is why we are initiating this global incubation program, it’s exactly between Europe and China to let Chinese start-ups be incubated in Europe and also European start-ups to be incubated in China so that they can get into the market, they can get in touch with the local venture capitalists and they can also work with each other among them – such as for example if we have a European start-up that can be the supplier of our Chinese start-up, and thus leverage Chinese tech scene that will be a perfect match and then they can be a global start-up – from the beginning. That is the whole point of our initiative and why we are connecting Europe and Chinese leaders.
Matthieu David: Okay. To end the conversation on the specificities of innovation in China, or maybe to go further – you mentioned the role of VC’s and they are different from the US – you said specifically the US, the West – how different they are? As far as I understand, VC’s have become big in the US, compared to Europe because of a lot of tax incentive , because you can put your loss into their accounting and you deduct from taxes and so on –and that had made VC’s big and VC’s take more and more risk and worthy people take risks because they could deduct from taxes. And, I understood that in Europe they wouldn’t take off as much because this tax incentive wasn’t that strong. What about China – I’m not specifically talking about taxes, but what makes VC’s in China different besides the fact that they are based in China?
Yingzi Yuan: I think VC’s in China they are as I talk about – they are still growing (learn more about the recent trends in the VC industry in China). They are trying to find their own model, but there are a lot of individuals that are in the Chinese VC firms, they were actually in foreign VC firms, especially Japanese or American VC firms. So currently we haven’t been observing a lot of differentiation of Chinese VC’s in comparison with foreign VC’s but I do think that in the upcoming years we’re going to observe more and more booming VC’s like super VC’s that are going to be investing in a lot of emerging start-ups in China.
Matthieu David: A report which is dating back I think now it’s a bit older than 8 years or something like this, from McKinsey. While saying that innovation in China is more social, basically the go-to-market is quicker, the markets are faster, where innovation in Europe and the West is seen as more fundamental innovation where the research took longer and the go-to-market would maybe not be considered in total initially and would be at least delayed. Do you think this is the case now, or do you think China is also investing in fundamental innovation and is taking the time to perfect a product before going to market?
Yingzi Yuan: I think China is definitely also investing a lot in R&D and various scientific researches. In comparison to Europe, things are going very – even faster in china because the whole ecosystem is more eager to achieve a certain goal quickly in comparison with Europe. In Europe, we observe that a lot of initiatives are either governmental or they are being done by bigger companies and historical companies such as energy company ETF or Airbus, this kind of company. That is why I think you were talking about fundamental research in Europe – because of those sectors, isn’t it? In China, it’s more B2C sectors and that is because we have a bigger market of course. That is why the go-to-market is faster as well and why it is easy to leverage the Chinese tech scene.
Matthieu David: Yeah, I keep being surprised by the fact that we talk about Europe as – actually I said as well, like more fundamental innovation with big firms, wherein China you have very big state-owned firms but still the private sectors and innovators of the private sectors have been very dynamic. That kind of paradox I have a hard time explaining. Do you have any explanation for that?
Yingzi Yuan: Yeah, I think the nature of the big firms is different. In China, we are mostly talking about tech giants like Alibaba, Tencent or even today Byte Dance (learn more on Chinese Tech giants) , but when we’re talking about big firms who are investing in innovation in France, for instance, we are talking about energy companies, we are talking about Total, we are talking about EDF – those are more historical companies, they are changing slower than the tech companies, that is pretty normal. So maybe that is also one of the reasons why things are going slower but more steadily in Europe, and things are going faster in when it comes to leverage the Chinese tech scene.
Matthieu David: I’ve been in China for 10 years and what I’ve seen is that Chinese innovative products are not succeeded only in China, which was the case till five or six years ago, but not world-wide. Xiaomi is present worldwide, Huawei, of course, is present worldwide, longer, higher yield as well – but what I feel is very new is that China is also successful for cultural products like TikTok, and TikTok (learn more about the strategy behind TikTok) is a cultural product. It’s a product where you feed with content that could actually be very different from one country to another, from one culture to another. What are the next frontiers for China innovation in your mind, or the Europe-China business relationships? I have in mind the fact that I feel that Europe is not leveraging all the innovation in China but besides this one, what are the next frontiers for you?
Yingzi Yuan: Yeah from my point of view, as you talk about a lot of hardware’s – we’re going overseas let’s say because in Chinese we say ‘chuhai’ so a lot of companies and brands they are going overseas to search for the international market during the last let’s say 20 years already. But a pretty recent trend is that a lot of software companies or let’s say – services and apps are going overseas as well. In terms of the next frontier, I will say cultural and entertainment applications are definitely going abroad. They are already trying to enter and already entered into the Indian and South East Asia market and I think in the near future they will be in the European and the US market.
As you mentioned, TikTok is definitely the best example to illustrate this, because Byte Dance has been deploying this international strategy and its working very well. But I think byte dance is not the only one and will not be the only one that will succeed in international markets.
In southeast Asia market, we also see a Chinese giant called Waiwai – is localizing a lot of its services and apps and are succeeding in Indonesia, in Malaysia and in India- such as a gaming and social app called Huggle and also some other different apps for different kind of segments.
So, to answer your question I think – you’re right, it’s definitely the next big thing that we have to observe, an opportunity that we have to seize. Europe-China business relationships and the relationship between China and the world in general will be closer and closer in this sense. So definitely we have to look into it.
Matthieu David: As your project, where do you feel through your research and the meetings you had in this sector – where did you feel Europe is strong to watch China? When Chinese think about innovation in Europe – where they should look at?
Yingzi Yuan: Yeah, I think Chinese companies are definitely very interested in European R&D, research, and development. A lot of European universities have very, very advanced laboratories around research such as biological or medical research. And also, for example, air flights – how do you call it in English – aeronautic research, in France it’s very advanced as well. I think those kinds of sectors are definitely the strongest sector that is attracting the most attention from Chinese companies and investors and in recent years we can also see a lot of Chinese companies, they are either acquiring or investing in a lot of technology firms (learn more about China’s tech acquisition during the Covid-19 crisis in Europe), especially in Germany.
Matthieu David: So, with the patterns, you are seeing with Chinese investment in Europe is more fundamental R&D and would you say hardware world because you’re talking about airplanes, you’re talking about I guess robotic with Germany and factories. Have you found out some patterns in what China is doing in Europe in terms of investment integration?
Yingzi Yuan: I can give a quick example, very recently Chinese internet giants Tencent invested in French start-up called Lydia. This is not one of those companies who are doing hardware, who are doing research and development but very go to the market app which is used by a lot of people for peer to peer payment. So, this actually is part of the going overseas strategy of Tencent, of WeChat pay to have a part of the cake in payment – international payment as well. So, it’s definitely great news for at the same time the start-up, because they’re receiving a huge amount of investment but it’s good news for Tencent as well. So, we can say that other than the examples that we are giving regarding those sectors that are more traditional medical sector, biological sector, robotics, we can also see emerging trends of the other kind of start-ups that are being invested in by Chinese companies thus creating Europe-China business relationships.
Matthieu David: What kind of deal was it with Linda – sorry Lydia, Linda is an online learning software bought by LinkedIn? What was the deal between Tencent and Lydia? It was a full acquisition, investment partnership?
Yingzi Yuan: Yeah, I think recently, In January this year – last month, Tencent invested in fintech company Lydia, so Lydia currently has three million users in France, which is a huge number for the population of France, so that is why it attracted the attention of Tencent and WeChat pay. So, we all know that WeChat pays already tried to enter into the Indian market and South East Asia by acquiring or investing in local companies and this definitely is part of the international acquisition as well. It is an investment of 40 million euro’s so it is a pretty high price for the investment.
Matthieu David: On the other hand, so we talked about the Chinese companies investing in Europe when we look at Europe investing in China – you mentioned before through your incubator and your surveys as an incubator, that it’s hard for European companies to enter the Chinese market and to catch the Chinese innovation. There are many difficulties, barrier language, and ecosystem and so on – but how do you analyze the fact that a company like Amazon, for instance, failed. We understand that Google, Facebook failed because of regulations on censorship, but amazon is different. There was no censorship issue (read our latest article on internet censorship in China). Similarly, for Uber. It’s not a censorship issue, it’s a business. Its operations. How do you see the fact that so many tech companies have failed in China and not only because of regulations?
Yingzi Yuan: Yeah, those examples that you’re giving were actually very interesting, but there is also another example of European company Carrefour – Carrefour exited China last year in October as well, because Carrefour was kind of the first supermarket in China that was succeeding, so it was a surprising fact that is actually failing in China and it chose to leave the Chinese market. So, the answer for your questions would be that – a lot of companies they have a hard time adapting their pace to Chinese market because when – I talk with people in Carrefour as well, but maybe it’s not an official answer – so basically when we have to do a lot of decision making in the headquarter in Europe and we have to adapt it to the Chinese market, it will take a long time for the decision making and for local adaptation and sometimes it’s very hard to stay in Europe and to understand how things work in China – how things are changing fast in China. So that is why a lot of decision making – they are not adapted to the Chinese local situation, to the Chinese market and that is why a lot of the companies are failing in China. It is the pace maybe for Carrefour and for other traditional sectors because they didn’t adapt e-commerce and offline delivery fast enough. For Uber and for amazon it’s kind of like a calculation right – they are making less money in China as they wanted and it’s better to be bought out or to exit the Chinese market, it’s more the return of investment is better for them if they do so. So, it’s a choice – it’s a mathematical choice.
Matthieu David: Does it make sense and would you agree with the saying that – when you go to China, whatever the size of your business, even if you’re a macho business in the West, you have to start again. You have to reconsider your product. You have to reconsider your distribution channels. You have to reconsider how you acquire clients – for instance, businesses which build their dominance on search, on Google, would not be able to do the same on Baidu because actually, people in China don’t look for the same information on search engines, they would not look for a product to buy – they would go directly on TMall or Taobao. Does it make sense for you or you think difficulties are more structural than this?
Yingzi Yuan: I think it’s definitely right what you said and that is why I think Daxue Consulting is doing a great job, by introducing people to the Chinese market by actually localizing all the services and adapt things to Chinese consumer’s demands and thus also creating Europe-China business relationships.
Matthieu David: Thanks for the mention – our guests are sponsored now. Thank you. But what’s your view on it – does it mean that on the opposite, is it worth going into a market if you have to reconsider everything you do? I remember Harmony coming to China and they painted doors in red, looking Chinese and actually Chinese didn’t want to buy Chinese. They wanted to buy Harmony and they actually didn’t go to this shop. So, on the opposite changing all your product can basically make you worthless, worth nothing and – if the products were changed for China, they wouldn’t be successful in China – what’s your analysis on this aspect that what needs to be changed – adapted, and what doesn’t need to be?
Yingzi Yuan: Depends on the factors of course, in terms of services I think your distribution channels, your marketing definitely have to change, have to adapt to Chinese users habits, that is pretty normal and if you have to change or not your product, that really depends on the product itself. Sometimes you have to, of course, localize your product, especially when it comes to culture and entertainment products, but sometimes you can just stay the way you are, especially for European brands (learn more about how to introduce a brand in China with Daxue Consulting), they always have this heritage and the brand image behind it and sometimes Chinese consumers they are buying the things for this kind of heritage and brand image, they don’t want a thing that is totally adapted to the Chinese style – Chinese market – such as for luxury brands, I think a lot of them have to do market research before implementing their product into Chinese market some brands actually failed because they were kind of doing a mixture of Eastern and Western style that wasn’t a very nice – even either for the European market or for the Chinese market, so it was a failure.
So, I think in terms of a product we also have to consider case by case.
Matthieu David: I think there is a keyword we have not used, its open innovation (get more information on open innovation in China). Have you looked into this topic through your research?
Yingzi Yuan: Yeah in our research with Science Po Paris, we haven’t been looking into open innovation, but I personally I’m very interested in this topic as well. It’s not in the scope of Europe China foundation yet but it will be a future topic that is interesting to look into. So, in terms of open innovation, I think a lot of European companies are making a great effort in doing so. Because as we mentioned, European companies they are – especially those historical industrial companies, they are very huge and they’re pace of innovation – doesn’t catch up with the evolution of innovation in terms of technology. So that is why they are trying to work more and more with different start-ups, to try to inspire their internal teams and also to learn from the start-ups, and also – that is also why we have this Europe China Incubation program so that big companies who are interested in the innovation in the incubated start-ups, can help the start-ups and can collaborate with the start-ups to get not only into the other part of the world or into the market, but also have the technology.
Matthieu David: For people who are listening to us and may not be familiar with the word Open Innovation – open innovation is for bigger companies to catch the innovation through smaller companies by opening up their door in one way or another, could be competition, could be investment, could be ascending people from this bigger company to the smaller company to interact with them in the office and see what kind of synergy they can have. That’s a very trendy topic ad actually we have been asked to work on this a few times and I feel that it’s getting bigger and bigger, especially foreign companies, not only Europe. Going through China and entering through open innovation by partnering with others, in the past we would call that joint venture, but here we are talking about more open innovation.
Now we are moving to the last questions I always ask –
Yingzi Yuan: What book do I like the most, right?
Matthieu David: Yeah, inspired you the most in your work, in your life?
Yingzi Yuan: Well I think a recent book that I really liked is the book written by Kai-Fu Lee which is about AI competition between US and China – it doesn’t mention directly Europe, I don’t think in the current trade war and AI competition between Europe and China, it’s definitely interesting for everyone in China and in Europe to read it. The book is called AI Super Power, China Silicon Valley, and New World Order. So, he mentioned not only historically how China advanced from a copycat to an innovation hub, but also mentioned the future, how China and the US will evaluate, in the AI sector.
Matthieu David: Yeah, the book has been mentioned by other interviewees. It has become a best seller. What do you read to be up to date on China?
Yingzi Yuan: In terms of websites, in terms of news, right?
Matthieu David: Yes, anything that could be useful for the audience to know, specifically in English, could be Chinese but more specifically in English.
Yingzi Yuan: Yeah, I think the website called 36KR is definitely very interesting. They have a lot of updated information every day about China and recently they have this going oversea special section, meaning that they are listing other news of Chinese companies or start-ups, the product who are trying to penetrate into a foreign market, either in South East Asia or in the world. So, for Chinese companies and foreign companies, it’s very important to read about those sectors because they are actually competitors or they are offers in the market.
Matthieu David: 36KR is in Chinese right?
Yingzi Yuan: Yes.
Matthieu David: Do you have other sources that the audience who may be English speaking could use?
Yingzi Yuan: Yeah, exactly this 36KR they have recently English version, the English version is called 36KR-Global, so it is the English version of the Chinese media.
Matthieu David: Yeah, the same as Taishin has Taishin Global. Do you know why they use 36KR by the way – why the name?
Yingzi Yuan: Actually, I don’t know, it’s a very good question, it sounds very geeky. It’s a technological medium.
Matthieu David: What book on China would you recommend for the audience?
Yingzi Yuan: For the audience – recently I was reading a book around the business ecosystem in China and another book about Four Types of different companies in China, both books have the same author – so, the author is Professor in a business school in Zhejiang – let me search for the book to see the author, so the book – Business Ecosystem in China talks about four companies – Alibaba, Tencent, Xiaomi, and LeEco – we all know that LeEco is not working anymore but it gives a very deep analysis, especially to Alibaba. So, this book I think it’s a great book that was written in 2017 for others who are interested in China. However, there is another book written by the same author called Mark J. Greeven that is around four types of innovators in China. It’s pretty recent, it was published in 2019 and the name of the book is Pioneers, Hidden Champions, Change Makers and Underdogs and it is about lessons from Chinese innovators and it’s written by the same author Mark and also George Yip and Wei Wei.
Matthieu David: If you had some extra time besides all you do, what would you work on?
Yingzi Yuan: Yeah so after helping other start-ups, after starting other start-ups, I’m very eager to actually create my own start-up as well, because I see others opportunities, I see others patterns, I think everybody who has a dream has to seize this opportunity to go global, to not only be a local start-up in Europe or in China but be a global start-up that is serving everyone. So, I think my next goal will be to do a global start-up from the beginning of the business.
Matthieu David: I see. What success in China you have witnessed and you wouldn’t have expected to be a success? I always ask this question – Peter Drucker the thinker of strategy says we can assess innovation and change through a success we were not expecting and similarly through a failure we were not expecting, which is actually assessing the best with a change in society.
Yingzi Yuan: Yeah, a success that I didn’t expect, I think many successes had their reason, but I’ve been witnessing a lot of young people, they are creating start-ups, they are setting up a business at a very young age and they are succeeding in the international market. I will just give a very quick example – but a very interesting example about a company in Shenzhen – it’s called Insta3060 – so they are doing this kind of 3060 camera, you can actually shoot a scene and then it can be shown in VR headsets for instance. It is let’s say a niche market and they are the leader – the top three let’s say in this market. And, a lot of video makers or amateurs or fans are using their different products and next year they might do IPO. So, they are a group of young people currently who are 27 years old or 28 years old, they created their company right after university, after a bachelor’s degree so around 22 years old. So, it’s a very tiny story, young people are collaborating, are creating and they’re growing very fast in the international market, and I think that is very surprising but well – no surprise either.
Matthieu David: So, what’s surprising to you is the fact that young people create start-ups or is it the fact that they go international very quickly?
Yingzi Yuan: I think both, are very young but they are growing very quickly internationally. At the same time, they have this support from investors in China, but also, they are benefiting from the fact that China is very strong in manufacturing so they have great suppliers and a very quick supply chain. Yeah.
Matthieu David: And the opposite, what failure in the Chinese market you have witnessed and you were not expecting?
Yingzi Yuan: Yeah, so I have a friend who actually has a traveling company, a tourism company in China and recently because of the coronavirus, the business was very well but it’s surprisingly failing because of the – irresistible factors. So that is one very sad story that I heard recently. Hopefully, everything will go better in China after this crisis.
Matthieu David: Yeah hopefully, we are recording on February 20th and it’s still going on. So, about failure, would you mind sharing a failure which is witnessing maybe something more long term – you mentioned one which is interesting is Carrefour, 10 years ago nobody would have thought that Carrefour would sell for such a cheap price, that all the hypermarkets and supermarkets in China and that the deterioration would actually come so fast. Do you have other failures that surprised you?
Yingzi Yuan: Well, in China I think as we say, 99% of the start-ups fail and we don’t remember those failure stories. I think not a very recent example but one example is Dong Dong website, so they were succeeding, they were supposed to be amazon of China, but because – they would have been Amazon in general by selling everything, but they kind of didn’t have the right strategy and now they are not the top ones when people are searching for books when people are searching for e-commerce, they are not looking at Dong Dong anymore. So that is one failure, and recently we also had the scandal between the founders so yeah – it’s a very interesting story that we don’t have time to dig into.
Matthieu David: Yeah, yeah interesting to see that JD.com which was not existing when Dong Dong was created, I think JD came later, took much more space and market share than Dong Dong at that time where it was the place to go to buy books, more than Taobao and TMall at that time. Thanks for being with us, it was very instructive on innovation and indeed we could do 2 or 3 hours on that.
Yingzi Yuan: Yeah thank you, Matthieu, for having me.
Matthieu David: Thanks and a few words for the virus, which is still actually heavy in China and we hope that things are going to back to normal very quickly and extend our support to people who suffer from it. Bye-bye, everyone.
Yingzi Yuan: Yeah, all the best to friends in China. Bye.
China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.
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