The Great China Tech Panic is just posh xenophobia
There's more to success than sweat and STEM
Comment Donald J Trump has been stoking xenophobia since he took office as President of the US, aiming his sharpest barbs at China. But he's not alone. Others, with better manners than the president, have too – they’re just more subtle about it.
Writing in The Times yesterday, WiReD UK editor David Rowan sounds the klaxon. We must "fear the great tech armoury of China" – note the martial metaphor – warning of "military, security and economic costs" to the West as we fall behind. Rowan cites mega projects such as "quantum satellites and hypersonic gliders" as well as the daunting Chinese diligence: long hours and hard work. In case you're in any doubt how to react emotionally, Rowan will tell you. He concludes: "It's time to fear China."
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I've been to China a number of times, and the scale of its economic miracle is truly awe-inspiring. But awe is not the same as fear. In the West we need to undertake a cooler appraisal if we're to respond intelligently. Fear is never a healthy response to foreigners, and it's strange to see it being peddled by journalists and white-collar wonks.
In the past, I've advised Western competitors to "be afraid" because of the skill of producing a better, or as good, product more cheaply, like this home IoT kit. But Rowan is invoking something bigger: economic ruin, prompted by the inability of entire sectors to compete.
The new Yellow Peril
In the 1980s, using identical language and reasoning to Rowan, policy nerds and opiniators were seized by another "Yellow Peril", a fear of Japan. The West wouldn't be able to match their engineering skills or work ethic, we were told. Japan was also snapping up American companies, just as the Chinese are buying or investing in American technology. Build that wall! But Japan has now been in a slump for over two decades, and its most famous innovation in that time is arguably the toilet that cleans your bum.
For all China's diligence and investment in STEM, and its amazing grands projects, it faces the same hurdles that all engineering-led companies or economies face. Those brilliant STEM graduates can give you a competitive advantage in today's market, but for tomorrow's success, you need to take risks and create new markets. That means being bold and sometimes failing expensively, it means building brand and reputation and trust with consumers, and innovating in services and marketing in foreign markets, outside China. Increasingly, it means writing great software and doing great design. That's a very wide skill set.
Where's China's crazy shit?
China's success today comes from mastering supply chains, from adding engineering excellence to an existing market. Top management at Chinese companies almost all have engineering degrees followed by a spell at a Western business school, and are up to date with the latest innovation theory. That combination has served them very well so far. The problem with MBA innovation teaching is that it can only look backwards, and cobble together a post-hoc explanation.
Rowan is right when he says Chinese companies don't slavishly imitate Western technology products. True, but they largely add innovation to products in existing markets, and those markets have been defined by others.
Huawei is an example of the success and limitations of being led by the Engineering/MBA combination. At the start, Huawei barefacedly copied Western products. Gradually it invested in its own R&D, and studied how to progress in a market. Today, half of the world's 4G infrastructure is sold by Huawei, and their network customers tell me they have an 18-month lead over the competition. Huawei is helping define 5G. But over in the consumer market, there isn't a single product that you can say is "Chinese" in the way that the Walkman was "Japanese".
China's vast domestic market provides it with a tremendous laboratory for companies to experiment with new products and new markets. But remarkably, so far, they haven't. Partly because of the nature of demand: the Chinese want what we have. The skills Chinese companies need to "conquer the West" aren't being honed. It's early days to compare the two, but Japan, an island culture, seemed to be far more willing to experiment. Japanese consumer technology became fairly synonymous with "crazy shit" – in a good way. You could buy a wristwatch TV in 1983.
Where's China's crazy shit? Rowan's examples of Chinese innovation draw heavily on gimmicky WiReD-style innovations for wealthy WiReD-reading urbanites – like "smog-eating" bicycles. Handy, perhaps, but not market-creating. And possibly not so necessary outside a smoggy Chinese city. It adds something to an existing market (the bicycle market), but it is not a Sony Walkman.
Only Huawei, arguably, has established something of a consumer brand beach head in the West - obviously not including the US where the administraion has effectively pushed public sector buyers to alternatives. And Chinese smartphones illustrate the shortcomings of the current skill set: beautiful cases, pockets of great micro-innovation at the component level (the fingerprint sensor) – but lousy software. There isn't much an OEM can add to a phone in which almost all the software is written by Google, but what little Huawei adds isn't really liked very much; every reviewer seems to hate Huawei's skin and intrusive tools.
For great Chinese companies to replicate Sony in the 1970s and 1980s it will need new skills. And for the West to succeed against China's STEM-led economic surge, it needs capital and businesses prepared to take risks in creating new consumer markets, it needs great design and great software – and it must be able protect the intangibles, like design IP, that prevents trailblazers here being ripped off (or giving their IP away).
And we need all those things. We can't rely on so-so products being rescued by brilliant advertising, or hope to sue our way to success through the patent courts. Personally, I can't wait for the Chinese hypersonic glider. In the meantime, we should be smarter than responding to Asian business with waves of fear. ®