Clash of the Titans: Can China Dethrone Silicon Valley?
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Falls Church, VA, 22042 +61(0)2.9034.3000 +331.55.70.52.80 United States Simon Wardley +1 703.608.9489 Europe, Middle East and Africa David Moschella One Pancras Square London N1C 4AG January 2016 United Kingdom +44(0)203.696.3000 About CSC About the Leading Edge Forum The mission of CSC is to be a global leader in providing The Leading Edge Forum (LEF) is a global research and technology-enabled business solutions and services. thought-leadership community dedicated to helping large organizations identify and adopt Next Practices at the growing With the broadest range of capabilities, CSC offers clients intersection between business and information technology. We the solutions they need to manage complexity, focus on core believe that as business and IT become inseparable, virtually every businesses, collaborate with partners and clients, and aspect of work and the modern firm will need to be re-imagined, improve operations. and this creates exciting new digital opportunities. 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Authors Simon Wardley David Moschella Editor Anne Pappenheim Production Manager Keren Hayden Graphic Designer Andy Scrivner 4 Contents Executive Summary ..........................................................................................................................................2 Introduction .......................................................................................................................................................9 Purpose .............................................................................................................................................................10 Climate ..............................................................................................................................................................13 Landscape ..........................................................................................................................................................18 Doctrine ............................................................................................................................................................25 Analysis of Structural Factors ......................................................................................................................34 Leadership.........................................................................................................................................................35 Leadership: A Future View ............................................................................................................................44 Competing with China ...................................................................................................................................46 1 CLASH OF THE TITANS: CAN CHINA DETHRONE SILICON VALLEY? Executive Summary Over the last few years, much of our research has focused on helping clients in two closely related areas: understanding the myths and realities of digital disruption, and mapping the evolving nature of technology-driven competition. Thus far, virtually all of this work has sought to assess the impact of digital innovation on both the strategy of the individual firm and the structures of established and emerging industry ecosystems. Important changes are obviously taking place within both domains. But what if the biggest future disruptions and most important competitive dynamics will not take place between firms and industries, but between nations and cultures? The IT industry has been dominated by Silicon Valley for so long that it can be hard to imagine otherwise – at least for many Americans. But clearly the rapid rise of China (and to a lesser extent India) makes entirely different scenarios possible. To assess this possibility, at the beginning of 2015 we decided to develop a point of view regarding this potential clash of the titans. Given that there are many think tanks, pundits and consultancies that are much more regularly engaged with China than we are, this was a daunting task. But our belief was that if we could frame the rise of China within the context of some of our proven LEF models, we could get beyond the obvious strengths and weaknesses of both titans, and make an original and meaningful contribution to what will surely be a long-running debate. We believe we have been successful in doing this. When we combined our China analysis with the findings of our disruptive research, we were struck by how closely the timings of the expected maturation of Chinese technological capabilities coincided with our forecasted timings for the next major waves of disruptive change. In other words, it appears that, unlike the rise of other Asian tigers in the past, China is ‘skating directly to where the puck will be’, to quote the famous Canadian hockey player, Wayne Gretzky. Additionally, China’s rise is coinciding with the arrival of major new types of hardware – goggles, drones, robots, 3D printers, internet of things (IoT), etc. This also plays very much to China’s core strengths. These two observations are of potentially great importance because they suggest that major new global technology opportunities will emerge just as China becomes most ready to compete for them. At a minimum, this makes significant shifts in global IT leadership possible to a degree we haven’t seen since the challenge from Japan some 35 years ago. Our overall timeframes for disruption, as well as our sense of China’s ever-improving capabilities, are the focus of this Executive Summary. As always, we encourage clients to review our full report, which describes many specific Chinese plans, capabilities, companies and initiatives. This analysis makes it clear that the clash of the titans has already begun, even as the American and Chinese economies become increasingly intertwined. 2 CLASH OF THE TITANS: CAN CHINA DETHRONE SILICON VALLEY? Waves of disruption Anticipating the disruptions of the future Global Extent of science economic Web Biotech disruption Genetics Amazon Nanotech Google Mobile Robotics eBay Bio-manufacturing Skype Apple Printed electronics IoT Wikipedia Uber Machine intelligence Netflix Yelp Machine evolution LinkedIn Brain interfaces Fitbit Facebook Synthetic food iHealth Twitter Autonomous vehicles 3DP Pandora Precision farming Drones Lending Club Smart cities PCs Watches Main- AirBnb Fuel cells Goggles frames Microsoft ... Cyber warfare Thermostats Minis Intel China/India? Novell ... IBM DEC 1960 1980 2000 2020 2040 From the works of Kondratiev to Schumpeter to Perez, our economic systems demonstrate waves of change or business cycles. The foundation of such changes are usually linked to technological waves clustered in small groups. The figure above is taken from a recent LEF report1 and depicts our belief that disruptive change tends to come in waves. But in regards to the future competition between China and Silicon Valley, the most important message of the figure is the great wave of technology-driven changes expected over the longer term. In many ways, the mainframe, minicomputer, PC, internet, mobile and IoT eras can all be seen as part of the process of establishing a ubiquitous Matrix2 of digital capabilities