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haha,yes, It's all about education.

Sanjay Dalal

I read your story on Misconceptions, Comments posted above, and also read about the growth of Education and Innovation in China in the book "The World is Flat" by Freidman. There appears to be an education revolution brewing in China -- one wherein Creativity and Innovation are getting emphasized. I briefly touched upon this in my blog at:
http://creativityandinnovation.blogspot.com/2006/09/education-driving-innovation-in-world.html>Education driving Innovation

However, Freidman's book has much more on the growth of Education and Innovation in China.

I do believe that original ideas at times in new economies begin with Imitative Innovations and Entrepreneurship. So it is a good thing that more companies on the Edge are trying out new ideas or retrofitting old ideas.

Chinesepod.com is a solid site.

David Scott Lewis

John, Ken is dead-on. You need to live here, work for a Chinese company, see what really goes on. I've been the VP, BD for the two largest U.S.-focused China-based IT outsourcing firms, Worksoft and Beyondsoft. Worksoft even dupped, IMHO, $30 million in its Series B -- which was led by Sequoia (no less). Innovation? Sorry, you're not to going to find much (if any) in the ITO sector.

And look at the China Web 2.0 Review blog. Take something from Techcrunch, add six to twelve months, and it appears on the China Web 2.0 Review blog. What amazes me is that there is not only a lack of innovation, but the domestic (in China) firms often grab higher market caps upon funding.

In your reference to SOEs, there are various flavors of SOEs, too. Not all are created equal. But, like you said, they are often laggards in innovation. However, this really depends on how one defines "innovation". How would you rate the innovativeness of Haier or Sinopec (and how would you measure this, by R&D expenditures, patents, ...)? Yet, to say that Western companies are most likely to have had interaction strictly with the "second China" (as you call it) is simply not true, at least not in the ICT sector (in Valley terms, "ICT" is IT + telecom; it's the favored acronym in China).

Fact is, when visiting different cities, each will showcase a wide-range of companies, both SOEs and privately-held firms. Over the few years that I've lived in China, I've visited over twenty 863 prime locations: I've seen the same show over twenty times!! However, this kind of hypercompetition between cities and regions isn't necessarily a good thing for China. The result has been a lack of geographical critical mass in many growth sectors.

In the final analysis, I would agree that a "China strategy" might be too broad. In general, I'd recommend Bohai Bay, Yangtze River Delta and Pearl River Delta strategies. But this really depends on the industry; in many cases, a broad "China strategy" is quite sufficient to start.

A couple of closing comments. First, chinesepod.com is a superb site!! If someone wants to learn Mandarin, this might be the best place to start. Second, you might actually remember me. When you were still at McKinsey, my boss and I tried to pitch a McKinsey engagement (that would have been led by you) to Ray Lane. I was Director, E-Business at Oracle back then. The three of us broke bread at the cafeteria in 3OP (building 300). The numbers you came back with were way too high and we were going to get too many recently minted MBAs for the $$$, so we opted out. What we wanted was you, but you didn't have enough cycles available for us. Instead, we picked up Patty Seybold, which was an excellent choice considering that our major problem back then was with Oracle apps, and more specifically with everything and anything coming out of 6OP -- where the CRM/SFA teams resided.

Let's hook up next time you're in China. I split my time between Beijing and Shanghai. Our company helps U.S. firms set up research centers in China; our CEO is also the head of outsourcing at Tsinghua. We're VERY close to what is happening in the high tech sector. MOST (Ministry of Science and Technology) golfing buddy kind of stuff ... at very high levels. I'm becoming something of an unofficial voice for the R&D sector in China.

Last remark: Ken and I are two very loyal readers, after all, it's the October national holiday here (kind of like Independence Week) and we're both reading and responding to your post, Ken in SH, myself from BJ.

Ken Carroll


I think the oeverall thrust of your argument may be valid. I will have to go out now and buy the book!

However, as a 12 year veteran of the Shanghai business scene, I can testify to a serious lack of original business ideas around here. It seems you have observed it in the provinces, amongst some of the heavy industries, but it remains invisible to us in the fields of training, IT, services, and other areas. Is it a case of them simply copying? Do they generate original ideas/models? That is rare in my experience.

It's all about education. It still hasn't recovered from Mao and the cultural revolution. It seems almost designed to crush any sense of creativity and leadership in the young.

I think there are deep seated problems facing China in this regard. This is not to say they won't do it - there were deep seated problems in Japan, Taiwan, Korea, and the rest, and they all overcame them.

Btw, if you want to see an example of an edge perspective, have a look at my www.chinesepod.com - we're a Shanghai start-up, with an international flavor!

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