China is good at copying is not news. Many Chinese firms prosper because they successfully emulate foreign firms’ products and business models. In fact, one could argue there are more of these “micro-innovations” around than “original innovations”, and that “micro-innovating” firms are more likely to succeed because they have giants’ shoulders to step on. Hence the challenge: what would Chinese firms do when they cannot simply “copy and paste”?

This is essentially the challenge companies must face if they want to make a dent in the healthcare and pharmaceutical industry. Observers have noted that these industries are hotbeds for entrepreneurs nowadays, and things are only going to get more serious with the proliferation of mobile devices and government mandated changes such as electronic records.  Of course, to break into industries notorious for their conservatism is not going to be an easy task; essentially, today’s entrepreneurs have to succeed at where the legendary Jim Clark failed. And for an IT company to break into these industries, there are many, many pitfalls.

For Chinese companies trying to make things happen locally, there are even worse. The Chinese healthcare and pharmaceutical industries are so different from their American counterparts that it is extremely difficult, even impossible, for Chinese entrepreneurs to find role models to emulate.

Photo credit: Bing Image

Take HaoDaiFu (meaning “Good Doctor”), for example. The company’s goal is to become a Yelp for Chinese hospitals and doctors. Launched in 2006, Good Doctor arrived on the scene even before American companies such as Castlight that aim to make the healthcare industry more transparent in the U.S.

Yet while Castlight has received more than $100 million in financing, the Good Doctor is still searching for the ever elusive revenue. Seven years into the game, the founder of Good Doctor confessed that it’s still too early to talk bucks.What happened to Good Doctor is not unique. While there are many companies entering the healthcare industry, none of them have a clear business model.

The difference between the fate of Castlight and Good Doctor is the difference between American and Chinese healthcare landscape. The American healthcare industry is fractured, and it needs to be more top-down model a la the Cheesecake Factory. The Chinese industry, on the other hand, is almost the exact opposite. The Chinese government dominates almost every aspects of the industry. In fact, the government’s tentacle runs so deep that even Chinese doctors count as governmental officers according to the SEC.

Such an industry doesn’t need a yelp. Let’s say everyone is dissatisfied with the service quality of Peking Union Medical College Hospital. But what are going to do when you get really sick? You still have to go there, because it’s the best hospital in China, and you don’t have a second option.

The Chinese healthcare industry is much like the story about the gambling parlor in 19th Century America. As the story goes, a guy was gambling in a small town. A friend told him that the game was rigged, but the gambler decides to stay, remarking, “I know it’s crooked, but it’s the only game in town.”

Because of the government’s dominance, most of the American business model is obsolete in China. In fact, Chinese healthcare industry is so unique that you cannot even borrow wisdoms from other Chinese industries. The Good Doctor model is fine for dinning and wining (see Dianping.com), but it’s useless in healthcare. For Chinese entrepreneurs to make an impact, they must navigate uncharted territories. Now we can finally see if Chinese entrepreneurs have what it takes to truly innovate.