Monthly Archives: January 2010

Disruptive cost innovation

Will Chinese high-tech firms take incumbents multinationals by storm? Not impossible if one is to believe Zeng and Williamson, authors of “Dragons at your door: how Chinese cost innovation is disrupting global competition“.

The authors’ central argument is that China’s real competitive edge is not [only] low cost but rather cost innovation. Chinese companies leverage low-cost R&D resources to deliver high-technology at mass-market prices by focusing on process innovation to breathe new life in technologies that Western companies have written off as obsolete or uneconomical, by developing innovative products at a fraction of the cost of their global competitors by recombining existing technologies in new ways, by riding the wave of open architecture to bypass traditional barriers to innovation, and by successfully rendering established Western competitors’ assets and experience obsolete by betting on low-cost, alternative technologies.

A number of questions come to mind:
- Can Chinese firms apply the [product] cost innovation to services?
- How much does cost innovation allow Chinese firms to be innovative?

Not need to look further than Huawei to have the beginning of an answer…

Giant Panda Genome Sequencing

The January 2010 issue of Nature features the results of the giant panda sequencing. More than 120 researchers scattered across the world are credited with the first reported de novo assembly of a large mammalian genome achieved using next-generation sequencing methods.

The research was conducted on Jinging — the female Beijing Olympics mascot. The genome consists of some 2.4 billion DNA base pairs. The high genomic diversity found in the sequence offers encouraging signs for keeping the species from extinction – only 2500 giants panda survive. The research has also uncovered that the panda has all the genes needed for a carnivorous digestive system but lacks digestive cellulase genes. Taste may also be a diet-limiting factor – pandas may not experience the umami taste associated with high-protein foods. In other words, the bamboo diet might be more dependent on its gut microbiome than its own genetic composition.

The researchers hope that, beside having now a better understanding of the Panda, their work will promote the construction of reference sequences for other animal and plant genomes in an efficient and cost-effective way.

Google's China strategy

Google is threatening to stop censoring search results and even to leave the Chinese market alltogether – the first action almost automatically leads to being forced to close operations.

One can easily imagine that if Google’s chief legal officer decides to take the affair public, it is probably because the firm is not able to get the necessary assurance from the Chinese government that such attacks would end – else why risk leaving what promises to be one the fastest growing market in the near future.

A number of things are surprising. First, officially, the threat comes after a series of cyber-attacks that hit more than 30 companies. Google’s response thus seems mismatched. Second, the US government got involved rather rapidly by making a public statement.

At the end of the day two questions remain. First, can China do without Google? Domestic companies would be thrilled to have the number 2 search engine leave its 30% market share for grabs. For sure, the pressure to innovate will diminish but the creativity of Chinese firms should compensate. The reason for Baidu’s dominant market is that the firm understand its market better. Second, can Google do without China? Analysts don’t seem to leave the idea too much (the share dropped by 1% solely on the news of the threat). More importantly though, Google can not afford to have the integrity of its data compromised, not for a company which plans to become the repository of all your personal information all over the world.

Web -1.0

The brief outage of the Great Firewall which took place at the beginning of January and allowed Chinese netizens to freely access banned Web sites - many foreign websites like YouTube, Facebook, Blogger or Picasa were blocked at the end of 2008 as a part of an anti-pornography campaign - is a reminder of the strong lid that the government maintains over the Internet in China.

That said, in spite of the sophisticated systems put in place by the government, some netizens are still able to use some of the banned communication media. There is no better example than Chen Yunfei, a writer and activist, who on New Year’s eve twitted from a policy station in Chengdu where is was held.  

In other words, not everybody is moving from the Web 2.0 to 3.0 at the same speed. Some countries – China housing for now and the foreseeable future the largest number of netizens in the world – actually seem to go backwards or at least sideways. Whether or not this will prevent citizens to communicate is another question: according to a report from the Chinese Academy of Social Sciences (CASS) among the top 77 incident that attracted wide attention in Chinese society, in 30% of the cases it was postings on the web that attracted great popular attention to the incidents.

Top 10 Internet Phrases in China

  1. Money is not a problem
  2. What brother is smoking is not a cigarette, but loneliness!
  3. Jia Junpeng – your mother wants you to go home to have some food
  4. Life is like a tea table – with bitter cups placed all over it
  5. Don’t be obsessed with brother – He is only a legend
  6. My debts of gratitude have been repaid with my body
  7. What makes you unhappy – Tell us to make us happy
  8. You are left behind the times
  9. Lei Feng does good without seeking recognition, but he records everything in his diary
  10. This matter cannot be explained in detail

Explanations for these phrases can be found at: http://www.zonaeuropa.com/20091230_1.htm