October 18th, 2016 Shanghai
China's Disruptors How Chinese Entrepreneurs–like Baidu, Alibaba, & Tencent–are Changing China (and Rest of the world)
Presented by Dr. Edward Tse, Founder & CEO October 27th, 2016 Shanghai
China's Disruptors
How Chinese Entrepreneurs–like Baidu, Alibaba, & Tencent–are Changing China (and Rest of the world)
Learn How Innovative 'Disruptor' Companies are Restructuring China's Economy
Dr. Edward Tse
• Founder & CEO Gao Feng Advisory Company • former Senior Partner & Chairman Greater China, Booz & Co. • former Managing Partner, China, The Boston Consulting Group • author China's Disruptors Non-state enterprises revenue and profit trump those of state-owned enterprises
Revenue by Company Type Profit by Company Type 1998 - 2013, Trillion Yuan 1998 - 2013, Billion Yuan
80 5,000 70 4,500 4,000 60 3,500 50 3,000 40 2,500 30 2,000 1,500 20 1,000 10 500 0 0 1998 ‘00 ‘02 ‘04 ‘06 ‘08 ‘10 ‘12 1998 ‘00 ‘02 ‘04 ‘06 ‘08 ‘10 ‘12 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 2013 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 2013
State-owned enterprises Non-state-owned enterprises Source: National Bureau of Statistics, “Monthly Industrial Survey”
Gao Feng Advisory Company 3 Waves of entrepreneurs in China
First generation Responses to Deng Emergence of the BATs Inflection point Post 80’s, Post 90’s Chinese entrepreneurs Xiaoping’s § “Grassroot” entrepreneurs § Entrepreneur-ship began to § More “Why not me?” § Little experience encouragement § Some overseas returnees take off § “Why not?” § Little training and education § Many ex-Govt officials § Began to embrace the § “Why not me?” § “What failure?” § Little legal framework § “Jumping” into the sea internet § Acceleration § High risks of failure
Liu Chuanzhi Liu Yonghao Chen Guo Jack Ma Pony Ma Lei Jun Richard Liu Mao Wenchao Wang Tao Lenovo New Hope Dongsheng Guangchang Alibaba Tencent Xiaomi JD.com Xiaohongshu DJI Taikang Life Fosun
Ren Zhengfei Xu Lianjie Tian Yuan Wang Shi Robin Li Charles Zhang Zhou Hongyi Wang Jingbo Cheng Wei Li Xiang Huawei Heng An CFA Vanke Baidu Sohu Qihoo 360 Noah Wealth Didi Autohome Management
Pre-1990’s Early 1990’s – Late 1990’s Late 1990’s – Early 2000’s Early 2000’s – Late 2000’s Late 2000’s –Present
Gao Feng Advisory Company 4 Exponential Organizations
Wechat’s Number Didi Chuxing Valuation, Oppo’s Smartphone of Registered Users Pre- and Post-mergers Sales Volume
Million USD Billion Million 800 35 700 50 30 600 Merger with 40 25 Uber China 500 in Aug 2016 20 30 400 15 300 20 10 Merger 200 announcement in Feb 2015* 10 100 5 0 0 0 Q2 Q2 Q2 Q2 Q2 Q1 May-15 Jan-16 Sep-16 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2016
* Pre-merger values are combined of both companies Source: Gao Feng Analysis
Gao Feng Advisory Company 5 China’s digital landscape by numbers
Total Internet users Total mobile Internet Monthly active users in China users in China of WeChat* 710M 656M 806M (51.7% penetration rate) (10.4% YoY growth) (34% YoY growth)
Number of Chinese Daily rides booked on Alibaba’s sales on companies in top 10 tech Didi Chuxing (May 2016) Singles' Day 2015 companies worldwide 4 11M USD 14.3Bn (based on market capitalization) (covering 400 cities in China) (310M orders shipped)
Note: *Combined MAU of Weixin and WeChat; Numbers are latest published figures Source: Gao Feng Analysis Source: CNNIC; Literature Research; Gao Feng analysis Gao Feng Advisory Company 5 Their characteristics
§ Why not me? § Fearless experimentation § Speed, agility, adaptability § “Triple jumping” § In and out of industry boundaries § Platforms; ecosystems; resource leverage
Source: Gao Feng Analysis
Gao Feng Advisory Company 6 The third way
2 Core Competencies 3 Multiple Jumping 1 Conglomeration
New Opportunity
Jump Competencies or not?
Capability Self-defined, Gaps confined boundaries Current Competencies Random business clusters
Source: Gao Feng Analysis
Gao Feng Advisory Company 7 Disrupting industry after industry
Dec 2015
Dec 2015 Jan 2016
Gao Feng Advisory Company 8 Cross-industry ecosystems
Alibaba’s E-commerce Ecosystem Xiaomi’s IoT Ecosystem
Source: Gao Feng Analysis
Gao Feng Advisory Company 9 Re-configuration of value chains and disruption of traditional players
Traditional Automotive Value Chain CASE EXAMPLE: Connected mobility
Product Sales & R&D Sourcing Manufacturing Marketing Service Development Distribution
Future Mobility Value Chain ILLUSTRATIVE
Intersection between the Automotive and Internet Service Value Chains forms the New Mobility Value Chain
Source: Gao Feng Analysis
Gao Feng Advisory Company 10 They are all over
Internet Technology Health Energy
Jack Ma Pony Ma Robin Li Lei Jun Richard Liu Diane Wang Wang Tao Wang Jian Chen Haibin - Wu Gang - Alibaba - Tencent - Baidu - Xiaomi - JD.com - DHGate - DJI - BGI DIAN - Goldwind Diagnostics
Consumer & Retail Auto/Connected Mobility FS
Zong Qinghou Liu Chuanzhi Zhang Ruimin Wei Jianjun Li Shufu Jean Liu Zhou Hang Wang Jingbo Ma Mingzhe Peng Lei - Wahaha - Lenovo - Haier - Great Wall - Geely - Didi - Yidao - Noah Wealth - Pingan - Ant Financial Management
Gao Feng Advisory Company 11 What drives China’s innovation?
▪ Decade-long, gradual transition from planned economy to market economy − Generating discontinuities ▪ Society’s “pain points” were exposed − Providing opportunities for entrepreneurs ▪ Intense and transformative competition ▪ Massive market scale − Allowing rapid scale up ▪ Prevalence of technology, especially the wireless internet ▪ Availability of VC and angel funds − Overseas and local
Source: American Chamber of Commerce China, European Chamber of Commerce China
Gao Feng Advisory Company 12 Example: Chinese leading innovators (1/2)
WhatsApp Vs. WeChat Feature Development Growth WhatsApp Functionalities WeChat
Instant Messaging; International Voice Messaging, Money Calling; Picture Sharing; Transfer; Foreign Nearby User Search Taxi Booking; Currency Average Revenue Per User E-Commerce Clearing; 2016, USD* Instant Voice Global WeChat Messaging; Messaging WeChat Pay 7 Picture Wallet; Sharing Game WeChat City Center Services; Video PC Client Chat; Social Network Voice PC Client Calling 1
2009 2010 2011 2012 2013 2014 2015 2016 WhatsApp WeChat
Note: Recent Estimates of WeChat’s ARPU are at least USD 7 Source: Literature Research; Gao Feng analysis
Gao Feng Advisory Company 13 Example: Chinese leading innovators (2/2)
Ant Financial ecosystem (affiliate of Alibaba)
Wealth Microloans Mutual funds Banking Insurance management & credit
Alipay (since 2011) Ant Cloud
E-commerce O2O apps / sites
Source: Literature research; Latest published figures
Gao Feng Advisory Company 14 China is not just complex but is also becoming sophisticated
Advanced Manufacturing Product Market Segmentation
Short-term Short-term transition
x x x 15 years ago Today Digital Disruption Business Thought Leadership
Multiple Jumping Ecosystem
Competency Gaps Current Competencies
Source: Gao Feng Analysis
Gao Feng Advisory Company 15 China for the world
Gao Feng Advisory Company 16 In China’s Disruptors, we chronicle power of the Chinese entrepreneurs
Key Themes (book released in July 2015)
§ The real force in Chinese economy is increasingly private companies, not SOEs § Leading private Chinese companies are innovative and ambitious
§ They are changing not only China but
increasingly also the rest of the world “ “Five of the best new books on innovation – China’s Disruptors’ public recognition by Fortune.com, April 2015
Gao Feng Advisory Company 17 Who is Gao Feng?
§ A pre-eminent strategy and management consulting firm with roots in China and global vision, capabilities and resources network § We help our clients address and solve their toughest business and management issues § Our behavior is led by our values − We put our clients’THANK interest first and foremost − We are objective and we view our client engagements as long-term relationships rather than one-off projects − We view our people as strategic assets and not merely “units of capacity” − We believe that everyYOU member of our team can contribute to problem solving for our clients, from the most senior to the most junior § Our seniors are former senior consultants at leading management consulting firms and/or senior executives at large corporations
Gao Feng Advisory Company 18 Gao Feng’s heritage and our deep roots in China
§ Our name Gao Feng 高風 is taken from the Song Dynasty Chinese proverb Gao Feng Liang Jie 高風亮節
§ Gao Feng denotes noble character while Liang Jie refers to a sharp sense of integrity
§ We believe this principle lies at the core of management consulting – a truly trustworthy partner who will help clients tackle their toughest issues
Gao Feng Advisory Company 19 Contact us
Please find below contact details for our offices in Beijing, Hong Kong and Shanghai or contact us at [email protected]
Beijing Hong Kong Shanghai
Gao Feng Advisory Company Gao Feng Advisory Company Gao Feng Advisory Company Suite 0707, Guang Ming Building Suite 33B, Level 3 Three Pacific Suite 502 42 Liang Ma Qiao Road, Place 119 Madang Road Chaoyang District 1 Queen’s Road East Huangpu District Beijing 10011, P.R. China Admiralty, Hong Kong Shanghai, 200021, P.R. China Tel +86 10 8441 8422 Tel +852 2588 3554 Tel +86 21 6333 9611 Fax +86 10 8441 8423 Fax +852 2588 3499 Fax +86 21 6326 7808
Gao Feng WeChat Official Accounts： Gaofengadv
Gao Feng Advisory Company 20