We at ECSI Consulting are proud that our Faculty Partner and friend Prof. Mark Greeven recently published a widely regarded article in the Sloan MIT magazine called “Understanding China’s Next Wave of Innovation.”

In this article, Mark and his co-authors describe the challenge for western firms to look beyond the big Alibabas who dominate the news.

The landscape of Chinese innovation is much wider and can be classified into three distinct types of companies:

  • Hidden Champions
  • Tech Underdogs
  • Change Makers

1. Hidden Champions

Hidden Champions are highly specialized companies. Typically, they are among the top three players in their industries in China and globally. They tend not to be well-known and their revenues are less than $5 billion.

Consider Lens Technology, China’s largest producer of lens components such as sensor modules used in smartphone cameras.

Challenge for western firms:
Many Hidden Champions have leveraged their R&D capabilities and their rapid growth in the domestic market to achieve global leadership. They also tend to create several opportunities to expand their offerings or enter niche markets.

 

2. Tech Underdogs

Tech underdogs are small enterprises with revenues of less than $60 million. They focus on building Intellectual Property to create a stream of innovative products. Many of these companies were founded by people returning to China from overseas, having studied and worked in the United States and Europe.

Challenge for western firms:
The huge number of ventures makes it difficult to know which local companies represent a threat and which do not. Tech Underdogs tend to be increasingly based on cutting-edge technologies, and founders are getting more sophisticated.

 

3. Change Makers 

Change Makers try to gain advantage from digital disruption. Many of them are funded with large amounts of venture capital. They operate in a variety of industries, including media and information, ride-hailing, and retail. They are highly visible and their ranks appear to be growing.

Bytedance is a clear example; this young company is still private and is currently valued 75$ bn (more than Uber), with its two key businesses: Toutiao, provider of mobile customized news recommendations; and Douyin – TikTok, a short video provider, increasingly popular globally (with Facebook now trying to copy it).

Challenge for western firms: 
Change makers are entirely user-centered. They continually engage with users through social media to adapt products and, as necessary, revamp their business models. As the TikTok case shows, they are aggressively targeting also overseas markets.

 


Interested to hear more?

We at ECSI fully agree with Mark and believe that if you want to deal with “Innovation”, “Strategy”, “Digital” subjects, you need to deeply understand the “Digital China” phenomenon.

Contact Paolo today and learn how your firm can deal with emerging Chinese companies in your field.

Email: paolo.cervini@ecsi-consulting.com 
Tel: +39 02 36723950