I am relatively fortunate to have built up a patchwork quilt of connections through my work, writing, and friendship circle. While I’m not holding myself up as someone who sips tea with Jack Ma on Tuesdays, I do have occasional access to a handful of ‘movers-and-shakers’ within China’s tech scene including project managers, operations specialists, and department heads. We do our best to squeeze in coffees as our schedules permit.
The nature of these conversations has changed over the last year. We now gravitate toward difficulties in sustaining growth and making money. As you may have noticed, the eye-popping user growth and tech valuations which dominated headlines before have gradually receded.
The engines that drove spectacular growth in China’s mobile internet – substantial numbers of users coming online for the first time, sharp increases to time-spent-on-devices and an abundance of cash for companies to build products and fight for more users – have shifted down a gear. As a result, China’s digital players now face challenges relarted to user retention and undercooked business models.
When discussing these challenges, I often ask what solutions the company is considering, and where it’s looking for inspiration.
They look for inspiration almost exclusively in the Chinese market.
This, in and of itself, doesn’t surprise me too much. I often ask my own clients about their competitor set, and answers disproportionately skew toward immediate competitors in the same category. Few clients voluntarily offer up potential competitors in adjacent verticals, or seemingly unrelated companies who are re-defining consumer expectations across delivery, after-sales service, and loyalty.
Blinkered views are routine.
However, the rationale behind the all-Chinese competitor set is concerning. In contrast to the domain ignorance that I encounter from time to time (you don’t know what you don’t consider), there’s a selective almost arrogant ignorance at play:
“China’s internet ecosystem is too different.”
“There’s no one overseas that’s doing what we’re doing.”
“I’m not sure the US companies in the same vertical are on the same level as us; looking at how they monetize would be counterproductive.”
It’s this attitude that I’ve come to term as ‘Chinese Tech Exceptionalism.’
Exceptionalism, the belief that countries, movements, groups, or individuals are special or unique, isn’t exactly new.
In recent times, the term ‘Tech Exceptionalism’ has also emerged. It refers to the belief among Silicon Valley firms that they are instrumental to innovation and new value creation. This belief system has led some firms to skirt regulation, flout user privacy, and bend debt and equity financing to fund and expand their ventures.
In a similar vein, Chinese Tech Exceptionalism purports that China’s tech ecosystem enjoys a scale, speed and regulatory environment so unique, that its digital actors:
- Are naturally superior to overseas equivalents, in terms of product innovation or business models;
- Are destined to be dominant when pitted against overseas competitors; or
- Don’t have the same constraints as overseas equivalents
You may have previously seen examples of China Tech Exceptionalism. Breathless calls for overseas firms to give up the ghost and ‘Copy from China,’ claims that China’s tech startups possess unique advantages and stronger work ethic or proclamations that China’s innovation hotspots are primed to dominate the race for talent and funds.
Without getting all academic about it, Chinese Tech Exceptionalism has parallels and origins in the ‘China Model’ – an interpretation of China’s economic growth that ascribes rapid development and poverty reduction to a unique set of political and economic characteristics. Proponents of the ‘China Model’ contend China’s growth trajectory is sufficient evidence for a new form of development, one that delivers consistent improvements to living standards without increased political plurality.
Exceptionalism elevates (relatively) unique characteristics to some form of inherent superiority. Admittedly, the rapid rise of China’s digital economy is spectacular. It is worth the business community’s attention, study and occasional jaw-drop.
However, as China’s mobile internet enters a period of rising customer acquisition costs and less white space, incumbents and challengers shouldn’t blinker themselves. There’s plenty of room to learn across geographies. That’s because of how connectivity alters supply, demand, and market dynamics tends to be relatively similar.
Indeed, it’s plausible to say that how digital affects various economic levers is jurisdiction or economy-agnostic. McKinsey’s framework below captures this well. While differences exist in strategic landscape and consumer habits, supply, demand, acquisition, revenue, and cost models offer sufficient comparative scope.
Accordingly, it’s equally imprudent for Chinese firms to write off comparative analysis of overseas counterparts and overseas firms to write off Chinese counterparts, on the basis that China’s ecosystem is “too different” or “too unique.”
As I (sometimes successfully, sometimes unsuccessfully) put forward to my acquaintances at China’s tech companies, “different” doesn’t mean “unique” and “unique” doesn’t necessarily imply uniqueness all the way through.