In the digital business world, success spreads quickly. Your startup may be gaining traction today, only to be mimicked tomorrow. Your app may be maxing out market share in the US or Europe, but locked out of China.
Now, Chinese apps such as WeChat are breaking new ground and inspiring Western companies to try and imitate their success.
If you want your digital business to grow, you need to understand how the game is changing and adapt your approach accordingly.
How China Rose to Prominence as a Digital Player
Ever since the Internet became a ubiquitous presence in our lives, the so-called “Great Firewall of China” has prevented huge players in the US and Europe from expanding their businesses into China.
Google, Facebook, and Amazon all have their Chinese equivalents. You might not know the names, but with a market of more than 1.3 billion people to compete for, you can be assured that they are major companies in their own right.
Until recently, the traffic has mostly been moving in one direction. Silicon Valley led the way, and Chinese companies adapted the ideas for their domestic market.
That all changed with WeChat. WeChat is a new breed of superapp. It’s a social platform, like Facebook. It’s also like PayPal, Google Maps, and dozens of other apps, all rolled into one. WeChat takes the place of Skype, Amazon, and Tinder in the lives of millions of Chinese people, but it also goes far beyond any of these.
Restaurants, for example, can display menus and take payment in WeChat, eliminating the need for waiting staff and cashiers. In the very same app, patrons can tag friends and write reviews.
Appointment booking systems, investment services, and heat maps that illustrate how crowded a location is all coexist within WeChat as well, along with a staggering array of other services.
Why does this matter? For the first time, the direction of innovation is starting to reverse.
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Instead of simply imitating the big guns of the Western Internet, WeChat is doing something few of them have succeeded in doing: combining all their services into a single app, and collecting mind-blowing quantities of data about the activities of the app’s users.
Suddenly, instead of shrugging their shoulders at their non-participation in the Chinese Internet, the giants of Silicon Valley are looking enviously at WeChat and wondering how they can emulate it and what they can learn.
How US Tech Companies Fit Into the Chinese Market
Uber is one of the most talked-about apps of the past few years, experiencing massive growth and breeding numerous competitors.
Only in China, however, has Uber come up against a competitor with the clout to go toe-to-toe against the ride-hailing giant and, ultimately, win out.
Both Uber and Didi have taken massive hits in the quest to become the undisputed number one app for taxi services in China, subsidizing drivers and fares to the tune of billions of dollars.
Didi, however, has benefited from an ability to win over taxi drivers by directing clients to them, as opposed to Uber’s strategy of drawing unique traffic to their dedicated app.
Now, the two companies have merged, with Didi clearly the more powerful force.
Arguably, even by striking a deal with Didi, Uber has outdone Google, Amazon, and Facebook in China, by using partnership with a Chinese company to bring its business model to China, and to share in the revenues of that success.
The merger sends a powerful message, however, that Chinese companies are capable of competing with even the biggest US-based firms in the domestic market. The perception of China as the world’s workshop, and primarily an imitator in the digital sphere, has become outdated.
Uber is a cautionary tale for any business with international ambitions. If you don’t establish yourself in international markets quickly, you leave yourself vulnerable to something much worse than simple competition:
You leave yourself vulnerable to duplication.
The International Business Environment and Vulnerability
Digital businesses are relatively easy to reproduce. They don’t require a lot of infrastructure, and they can be scaled at great speed.
Rocket Internet, based in Europe, uses these characteristics to literally recreate popular startups in new markets, turning previously proven business models into successful companies. These companies are then sold or floated on the stock exchange.
Some people criticize the company for unabashedly putting profits before the development of original ideas, but it’s hard to argue with Rocket Internet’s numbers. By focusing purely on execution, the company builds billion-dollar companies in as little as 36 months.
More importantly, the company poses a unique challenge to aspiring entrepreneurs and digital companies. If you don’t want to see your idea reborn in the guise of one of Rocket Internet’s companies, you need to find a way of protecting yourself.
Think Globally from the Beginning
The cycle of production and innovation moves so fast in the digital era that your potential reach is significant from the moment you found a company.
The bad news is that people in other regions will have access to your ideas. They may adapt them, repurpose them, or move into those regions before you can expand.
At worst, you may find yourself on the other end of the next iteration of your big idea, running to catch up instead of leading the way.
You have several options:
– Limit your scope. You may decide that you’re content to succeed within a specific region, and focus your energies there. You’ll have to accept that your ideas may be copied, adapted, and maybe even improved upon and sold back to your customers.
– Think big early. Perhaps you can expand rapidly and claim new territories before companies using your ideas get there first. This can save you a lot of trouble in the longer term, as Amazon, now struggling to displace FlipKart in India, can attest.
– Be Hard to Copy. This is the toughest strategy to follow, but it’s also the most effective. Trademarks such as Coca-Cola are extremely difficult to copy, as is their non-digital product. On the Internet, however, intellectual property rules are still evolving, making it difficult to significantly differentiate your product.
In a global business environment, products are evolving faster than ever. The traditional belief that Silicon Valley provided the intellectual breakthroughs, while China or India or other nations supplied the manpower, is breaking down.
We can expect more companies to follow TenCent (WeChat’s parent company) in presenting the West with previously unimagined possibilities.
Meanwhile, it’s never been easier for ideas to spread, even if their originators aren’t at the helm.
To maximize your impact, be willing to learn from everyone, and realize that, as soon as you start to succeed, everyone will be looking to emulate your success, even if it means copying you or your business model.
Startup Grind is a Silicon Valley-based organization that educates and mentors entrepreneurs through monthly business events and speaking series in cities across the globe.