The Chinese Innovation Model

Mighty Things

For the Connected World

The Chinese Innovation Model

I really enjoyed this conversation between Yale’s Stephen Roach and Lei Zhang about China’s business and culture, the mobile revolution in Asia and the Chinese innovation model.

In less than 10 years, Lei Zhang has become one of the most successful investors in China. When he moved back to China in 2005, three years after graduating from the Yale School of Management, he launched his investment firm, Hillhouse Capital Management. Often compared to Warren Buffet, Zhang is actually more like a Silicon Valley’s venture capitalist. He was actually among the first to back Chinese mainland internet entrepreneurs, among them Tencent’s founder and chief executive, Pony Ma. Hillhouse Capital Management is now one of China’s leading investment funds, with $16 billion under management, specializing in consumer, media, industrial, and technology.

According Zhang, China has leapfrogged the US in many ways, especially mobile Internet. The scale and pace of growth of the Internet companies in China exceeds anywhere else. He noted that the country’s biggest Internet companies, such as Alibaba, VIPShop, and JD, are pushing into smaller cities and rural areas, bringing the consumer world where it hadn’t been before. In China, online retailers are already bigger than their offline counterparts.

“We are suddenly empowering 600 million people with the kind of selection a modern retailer would take decades to finish at the point of sale.”

Not only the “Chinese innovation model”, based squarely on mobile computing, is at the heart of the transformation of China but it also gives China an opportunity to leapfrog. China is today simply better at mobile than the U.S., which developed its Internet culture on the desktop.

“Facebook is much more easy to use on a desktop. But if you look at WeChat, you cannot even use it on a desktop.”

Finally, Zhang has some great business advice for U.S. companies operating in emerging markets.

“Empathy is the most important skill set to be a professional investor or entrepreneur. People are so much focused on the skill set of dealmaking and calculating that they lose the basic element of winning for the long run. How do you win? By learning and understanding people and their cultural heritage.”


Watch the full conversation here:


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