Why we need
to keep an eye on China
We need to follow developments in China. Simply because the effect of today’s technical capabilities will manifest itself there in the most pronounced way – especially in the field of data and AI. Also, the country’s hypercompetitive spirit and its different view on the role of the individual mean that there are fewer restrictions and limitations to exploring such new information technology. In other words: it’s the ultimate fertile ground for innovations. But what impact can we expect from the world’s most populous country? Our colleague Roeland Kuipers (CTO) explains.
“Silicon Valley isn’t the only epicenter of technological innovation anymore. China is the place to watch. And if western companies don’t wake up soon, they’ll risk falling far behind their Chinese competitors.”
Roeland Kuipers has been fascinated by China for years. He visited the country twice: once during a sabbatical, and again seven years later, together with his wife. On that trip, he saw with his own eyes how the country had changed in the intervening years. “The cities had become literally unrecognizable. Everything was different: the look of the streets, the people, the buildings. Everything. You could really see the enormous economic growth of those seven years.”
This rapid development of Chinese cities is mirrored by the country’s drive for innovation. Says Roeland, “We all know China as an enormous country with an immense population and a strong penchant for copying products. People sometimes speak of the ‘right to copy,’ as opposed to ‘copyright.’ But what many people don’t know about China is that the country has made enormous advances in the fields of data, robotics, and artificial intelligence. For example, in China they’ve practically skipped the credit card: the Chinese went directly from cash to contactless real-time payments using mobile phones and QR codes. This means that with every payment, valuable data is generated about consumers’ behavior. If you cross a street at a red light in China, facial recognition technology will identify you and it will immediately affect your credit rating. China plans to implement this social credit system based on big data nationwide in 2020. This is reinforced by the central government, which has identified tech entrepreneurship as one of the spearheads of the current five-year plan. In addition, the spectacular economic growth has created a healthy climate for venture-capital investors. So everyone is benefiting from the growth and everyone is making use of it.”
This high adoption rate can in part be explained by the strong integration of platforms and services, says Roeland. “Just look at WeChat, Tencent’s platform. This app combines the functionality of Facebook, WhatsApp, Uber, Booking.com, PayPal, Amazon, and Instagram, with an ever-increasing number of built-in and external services. With a billion active users, a third of China’s mobile internet usage runs through WeChat. And all those users are generating tons of data that can produce valuable insights, through the use of models based on AI or otherwise, into users’ behavior—and, in the case of Tencent, also into how people use a large set of services. These are all things that the large tech companies in Silicon Valley are extremely jealous of.”
A key consideration is that in China the interests of the individual are subordinate to the central interests. Privacy is valued differently and creativity seems to be given more leeway. Roeland: “Privacy is a word that Chinese people cannot place, because it suggests that you are entitled to ‘personal secrets’ vis-à-vis the collective. And the collective, and therefore also the government, are sacred in China. The Chinese have seen with their own eyes how in a relatively short span of time 850 million Chinese people have grown out of poverty—thanks to the government, in their eyes. As a result, the Chinese are more inclined to trust the government and also to give up more of their privacy.”
Those privacy issues make it uncomfortable for the Netherlands to look to China as an innovative nation. This is understandable, but we shouldn’t close our eyes to what’s going on in China, says Roeland. “All of these things make China feel a little alien to us. That’s why we prefer to keep our eyes on Silicon Valley as the central hub of innovation. It feels safer but it also means we may miss important lessons to better ourselves.”
The idea of ‘anything is possible’ is something we at Schuberg Philis want to instill in our customers.
As an example, take the ability to think big. Roeland: “It’s built into the Chinese DNA. Just look at the railroad they once built between Beijing and Lhasa (Tibet). That train track was a technologically bizarre endeavor in itself. Mountain precipices, earthquake areas… this project had every challenge imaginable for a railroad engineer. Foreign experts said: ‘This is insane, it can’t be done.’ And they were right in a way, but that didn’t stop the Chinese from trying it anyway. And they succeeded. Even today that train line is a man-made miracle that shows what you can achieve if you break through your limitations and dare to think and act big. This idea of ‘anything is possible’ is something we at Schuberg Philis also want to instill in our customers.”
Another important Chinese lesson can be learned when we look at short-cycle innovation. “The Chinese bring products to market incredibly fast, both on the software and hardware side. In China, startups sit on top of the largest electronics bazaar in the world. With short iterations, they can move down the chain quickly and gain access to all kinds of chips and know-how that will help them create the next iterations. It’s a way of working that we also promote for our own customers through Lab 271. In this lab, we use short-cycle experiments to make the impact of modern technology tangible. We need to do this because it’s not just technology that is changing faster than ever—so is our own business. And that’s yet another reason to keep an eye on China. It’s teaching us a lot about how to create impact through technology, and it would be a waste if we failed to use that knowledge for ourselves and our customers.”