What is the Secret Sauce of Successful Chinese Brands?

Alibaba, founded by Jack Ma, dominates e-commerce and electronic payments in China, and its $25 billion IPO in 2014 was the largest ever. Its various sites account for around 80% of e-Commerce in China, and are worth more than those of eBay and Amazon combined.

Ant Financial Services Group, formerly known as Alipay - set-up by Jack Ma in 2004, is the highest valued fintech company in the world with a valuation of US$150 billion.

Pony Ma’s Tencent dominates messaging (WeChat). Robin Li’s Baidu (the equivalent of Google in the West) accounts for over 60% of Chinese search engine activity. 

Lei Jun’s smartphone company Xiaomi is taking on Apple and Samsung.

These individuals have built up these huge businesses through the power of their personality in a viciously competitive environment.

What is different about these entrepreneurs and these Chinese businesses compared to the West?

Is there a secret sauce that we can learn from Chinese brands?

What I have noticed from working and observing Chinese companies is one thing: speed.

Chinese companies jump straight into new opportunities, businesses and industries without fear – anything that could bring more revenue or profit.

Edward Tse’s book China’s Disruptors: How Alibaba, Xiaomi, Tencent, and Other Companies Are Changing the Rules of Business, gives us an insight into how Chinese entrepreneurs think: to succeed, companies must continuously generate new sources of advantage. Not for these folks the concept of ‘sticking to the knitting’ or ‘core competence’.

No five-year plans or decision making by committee. Instead, lots of iterating and launching new products; leaps of faith are the order of the day.

Edward Tse’s book explains how Chinese companies are “Competing on the Edge”. That phrase is a reference to a book of the late 1990s by Brown and Eisenhardt that proposes that IT businesses oscillate between order and chaos, with change occurring in unprecedented and unpredictable ways, barriers between previously unrelated industries erased, and hyper-competition leading to the fast rise and fall of companies.

As a result, Brown and Eisenhardt argued that businesses had three principal vectors to succeed:

1. Advantage can only be temporary: To succeed, companies must continuously generate new sources of advantage, and view change as the key source of new opportunities for growth.
2. Because the advantage is temporary, a strategy will have to be emergent and defy simple generalisations: companies must always consider a broad array of options, with resulting actions and overall direction being only semi-coherent. Plans should always be shifting in accordance with the opportunities.
3. Reinvention is the heart of all of a company’s activities: Businesses will have to constantly change how they operate, and efficiency will count for less than the ability to generate and test new ideas.

Brown and Eisenhardt also suggest that businesses should gain maximum benefit from existing products by extending offerings to new market segments – a process called “stretching out the past” – using existing strengths to launch new products and to test the market.

Almost all of China’s leading entrepreneurial companies exemplify these three trends because China’s markets are at multiple stages of development. This means constantly iterating and launching new products aimed at the immediate future.

No five-year plan or decision making by committee – or never-ending discussion of IRR and DCF models!

In summary, although the Chinese market appears to be so different from the West, it is just further along. China, therefore, gives us a glimpse into the future with its diverse strategies, reiteration and reinvention, a balance between systems, rules, and chaos, and a mindset against being locked into outdated competitive models.

Sounds like something we can all learn from for 2019 and beyond.