A Hard Look At Microsoft’s Performance
In a final closeout post on his blog, MSFTExtremeMakeover takes a hard look at MSFT’s performance over the past eight years.
The picture which emerges is not pretty, but it’s true.
CHINICT Conference and Cocktail in Beijing
The CHINICT conference, hosted by the Beijing municipal government, will be held on May 22 and 23 in Beijing. This is a major event for IT stars, and is an excellent venue for new and rising IT companies in the area.
Kaiser Kuo, publisher of Ogilvy China Digital Watch, will moderate during the two days.
I will be at the Tech Week Charity Cocktail on the evening of May 23 which is sponsored by The China Business Network. Proceeds from the event will go to help the Sichuan earthquake victims.
Hope to see you there!
The Engineering Challenges of the 21st Century
Americans are at their best when they use their creativity to solve problems which most people believed could not be easily solved. In my generation, there was the challenge of sending a man to the moon, put forward by President Kennedy in the early 60s by the end of the decade, a challenge which was realized on July 20, 1969, when Neil Armstrong set foot on the moon saying those famous words, “One small step for a man, one great step for mankind.”
Even though many thought that the race to moon was a technological race with the former Soviet Union (politically, it was), we now know that the journey to send a man to the moon brought many economic benefits, not only to the US, but also to the whole world. Some of the technology led to the development of the microprocessor, which has helped and benefited billions of people on earth. Today, I write this article on a MacBook Pro notebook computer, which has more processing power than the Saturn V rocket which carried those men to the moon. In those days, the astronauts calculated their trajectories and re-entry angles with slide rules!
Unfortunately, following that great achievement, the country seemed to lose direction. In the field of science, different administrations questioned the value of a space program which seemed (to them) to offer no great economic benefit, and projects were funded in a very half-hearted way. The tragedies of Challenger in 1986 and Columbia in 2003 forced NASA to engage in some navel-gazing with no clear results. (In my opinion, space exploration and travel should be opened up to civilian competition, something which is only recently happening.)
Politically the US turned inward following the end of the Vietnam war and the politics turned highly divisive and poisonous, especially during the Clinton and Bush 43 administrations. All of this has achieved nothing.
Therefore, I was very pleased to hear that the National Academy of Engineering of the National Academies in Washington DC announced the Grand Challenges of Engineering for the 21st century. According to them, they are:
Make solar energy economical
Provide energy from fusion
Develop carbon sequestration methods
Manage the nitrogen cycle
Provide access to clean water
Restore and improve urban infrastructure
Advance health informatics
Engineer better medicines
Reverse-engineer the brain
Prevent nuclear terror
Secure cyberspace
Enhance virtual reality
Advance personalized learning
Engineer the tools of scientific discovery
When I read the list, I was very impressed. It made me think of the Saturn V project and the dream of putting a man on the moon. Each of the challenges are huge, even immense. But the benefits for all of humanity would be enormous.
This is all the more reason for countries like China and the US to work together. The Chinese have been much more willing to invest in applications which can generate returns in a fairly short time frame; Americans were willing to make investments for the long haul. It would be great if governments could set aside their mutual distrust so that the scientists can do meaningful research which would benefit all humanity.
Wouldn’t it be great if the US was respected again for its leading-edge scientific research instead of its weapons and military might? It would be nice to have a US which the rest of the world could look up to and admire, not out of fear but out of respect.
Maybe it’s all a dream, but dreams can become reality too…
Getting Into China for Foreign Tech, Biz Pros
More frequently now, US-based (mostly Silicon Valley) tech and business professionals are contacting me, asking how to find work in China. The business people usually want to get paid US salary to stay in the US and do some BD work for a US or Chinese company. The technology people usually want to find work in China.
For the most part, it’s very hard to find work which requires that you stay in the US paid at US salary. I have never heard of a Chinese company hiring someone on the recommendation of a senior recruiter without first meeting senior and executive management over a period of time. I know of one VP in a gaming company who came back to China, was hired and worked in China for nearly a year, and was then sent to open up their new US west coast office. Of course, a job like this requires working with a very Chinese company, which means that you need to know Chinese. And you need to prove yourself in the home office before you will be sent to the US. So, it is not easy…
For technology pros with 10+ years’ experience, my advice is that they take a few months off to come to China, and network as much as possible. Paul Graham puts it very well in this article about web startups. Beijing is a very vibrant startup hub and its tech grads from Tsinghua University offer the cream of the crop; generally speaking people are very friendly and open about what they are doing.
Shanghai is a more western style city, and the mentalities of the people are very different from Beijing. A rough analogy would be to say that Beijing is like Silicon Valley + Washington DC, and Shanghai is like Los Angeles or New York when it comes to mainstream media.
If you are a tech pro with 10+ years working in Silicon Valley, you really should be thinking more in terms of startup than about joining a company as an employee. There is an upfront sacrifice in terms of time, but in the end you will be happier, and at least you will own a piece of a company. If you are younger, you can afford to make a few mistakes in your early startups; if you are older, you want to choose more carefully. The good thing about doing a startup is that even if it fails, you are likely to make excellent acquaintances which will help you in the future.
One reader of my previous article Is It Possible For A Western-Managed Company to Succeed In China? mentioned that I made it sound very hard for a westerner to succeed in China. Well, yes and no.
Over the weekend, I came across an interesting announcement on Danwei from Praxis Language, the parent company of Chinesepod, an online Chinese-language learning program. The company is based in Shanghai and is headed by Ken Carroll. I met Ken in 2005 at the first Chinese blogger conference, which was held in November of that year in Shanghai. I have never used Chinesepod, but I have heard many favorable comments about it from westerners who want to learn Chinese.
The announcement, which is on Ken’s blog, mentioned that the Chinese government agency in charge of the government-operated Confucius Institutes, had approached his company about partnering to create an online presence for their institutes and helping to teach Chinese to non-Chinese using the Internet.
Think about it. The Chinese government partners with a non-Chinese headed company in Shanghai which knows something about language teaching online to help them promote the teaching of Chinese online around the world.
So, if you are good in your field, of course there are opportunities for western-owned startups in China.
Is It Possible For A Western-Managed Business To Succeed In China?
China’s increasingly important global role means that more and more businesses are coming to China. While there has been a significant presence among multinationals for nearly 30 years, now companies are coming in at earlier stages. Now some startups are even choosing to start in China instead of Silicon Valley.
This trend has been encouraged by venture capitalists, who now give a premium valuation to companies based in China.
This raises a very interesting question: “Is it possible for a western-managed business to succeed in China?”
First of all, a few qualifications. While there are many western multinationals in China, most of them have heavily localized their staff and management. The general trend in these companies is to localize staff and management as quickly as possible without sacrificing necessary management skills in the process. So, for the most part, while they are western companies, they are largely Chinese-managed.
Since most of my work is with startups, I’ll drill down in this field. Now the trend is for more American startups to start in China, even though they may not see China as their main market. In the gaming field, for example, China has a huge pool of people with talent and experience in the gaming field. This means that there is a pool of people with talent in programming and art, and understand gaming culture. The areas where the local Chinese population are weak is in product management. Chinese tend to gravitate to managing other people; there is a serious attraction to being able to say that a manager manages x number of people. Product management is more about managing resources, and coaxing cooperation from different stakeholders in the organization. Naturally, this requires more in the area of soft skills. And soft skills are an area where most technical people feel less comfortable with, and generally do not do as well in.
And unlike in the US, product management people in China are generally expected to be much more technical. So there is a difference here.
Hence the shortage of good product management people.
Naturally, this gives an advantage to startups which have experienced product management people. One mainly western-managed startup in Beijing which is strong in this area is ECitySky.
What about other kinds of companies, and what about the market for talent?
It all depends on what you are trying to do, and what audience you are trying to reach.
One tendency in the Internet field is that as the technology tools become more mature, the technology plays second fiddle to product marketing and marketing. Since the Internet has had just as long a history in China as it has in the west, it is getting harder for an experienced technology person to differentiate himself purely on technical skills alone. Increasingly he has to bring soft skills to the table, especially team management skills, to the table to be seriously considered. This means that for most technical people in China, the opportunities are becoming fewer, especially when you consider their significantly higher costs.
On the management and marketing side, it becomes more important to know how to communicate with your main audience in China. If the audience you are trying to reach is mainland Chinese, this means you must be keenly aware of social trends, the different social groups in Chinese society, government policy, what the different groups are thinking about, and the dynamics affecting the different groups.
The only way to get a deep feel and grasp is to know the language on a native level, including speaking reading and writing Mandarin Chinese. Basically, you need to become local. Assistants, translators and PR agencies will only get you so far because they cannot provide the social context to digest and understand the raw data to make good business decisions.
And then, even if you have a native command of Mandarin, that is no guarantee of success. I sum it up this way:
- If you don’t know Chinese (spoken, reading and written) and have not lived long in China, you don’t even know what are the right questions to ask.
- If you speak, read and write Mandarin on a native level, but do not socialize with mainland Chinese except on special occasions, you may know what you don’t know. More importantly, the most capable and intelligent mainland Chinese will not join the startup, instead choosing to start their own startup, often competing with the company they just left. (I’m thinking of many American-born Chinese, Taiwan and Hong Kong Chinese-managed companies which claim to be Chinese, but do not include mainland Chinese who have grown up in China in their management ranks. For the most part, they do not trust mainland Chinese and in private meetings, it is not unusual to hear them complain about things in China. In my opinion, they are doomed from the start.)
- If you have a startup which breathes, by which I mean that management does not have an inner circle dominated by any regional group or background, and freely allows people into senior and executive management based on their creativity, communication skills and ability to execute, then your startup will have the greatest chance of success. This is because a startup depends on moving quickly, and rapidly adapting to changes and competition in the marketplace.
So, in my opinion, when you get past the government regulatory issues, which are slanted to favor Chinese-owned companies in some sectors (especially media, where foreign companies are not allowed), it really is not any harder in China than many other parts of the world.
The biggest barrier for many startups is to get the management right so that it does breathe. Management needs to set the right tone from day one.
The best management hires the best people, empowers them, and let’s them go. At that point, it’s no longer a western- or Chinese-managed company; it’s just well-managed.
Get that right and China’s your oyster.
Investing in American Science and Technology
One of my recurring themes is that Americans have become too good at consuming, down to the point of consuming their children’s futures through deficit spending, and have not done enough to invest in the future. This is an important legacy of the current Bush administration which has repeatedly mortgaged the future in order to achieve their short-term political goals.
China has done a somewhat better job of investing in education and infrastructure; the recent snowstorms and transportation breakdowns in central and southern China have shown that even though large amounts have been spent, there is still a long road to go before China has a modern transport infrastructure which can serve the needs of its 1.3B citizens.
At one time, Americans were respected worldwide for their ability to make things. Now, these capabilities have been largely outsourced. Instead, American politics is much more focused on fractious issues which have little or no substantive meaning, but are manufactured to capture air time on television or on the Internet. The result: an increasingly polarized society where people increasingly talk at each other, instead of to each other.
For this reason, I was very pleased that a group of concerned Americans have set up a website to debate the future of science in the US, and the platforms of the respective presidential candidates on the issue.
If you are concerned about the future of American science, then you should take a look at it.
Mark Anderson Chimes In On Microsoft!
Mark Anderson of Strategic News Service has written an open letter to Steve Ballmer on Microsoft strategy which is posted at the new online version of The Industry Standard.
FYI, Mark Anderson is the owner of Strategic News Service, which publishes a newsletter aimed at technology executives. It’s full of insights and he pulls no punches.
If you read this blog, you should read SNS.
What’s Global and What’s Local?
With all the talk about globalization, as well as what is working and what isn’t about it, it’s time to drill down and find out what businesses are global by nature, and what businesses are local by nature.
For companies who are entering China, or are planning to go from China into international markets, this is a very important issue. There are some businesses which by their nature are global and others which are more local.
There are several businesses which by their nature are global. They are:
- Raw materials and commodities
- Transport, logisitics and distribution
- Manufacturing
- Commoditized services such as back-office operations and software outsourcing
- Finance, especially wholesale banking
- New technology development and research
Then there are other businesses which are more local/national in nature:
- Retail and brand marketing
- Most legal services
- Internet services
- Accounting services
- Foods and food-related services
My experience is that the businesses which are more wholesale in nature tend to cross national borders and become more global in nature, while those which are closer to end consumers tend to be more local and national.
If there is an irony, it is that the least sexy businesses are the most global in nature, while the more sexy brands and Internet businesses are in fact, local. I believe that there are several reasons for this:
Some of you may be surprised to note that I include Internet services in local businesses. If fact, they are. The struggle between Baidu and Google is largely a struggle over who has the larger local language search advertising market, Google, which gets most of its revenue from its home US market in English, or Baidu, whose services are almost entirely in Chinese. Even though China has four times the population of the US, the time when Baidu will overtake Google in terms of advertising revenue is still far far away.
One of my pet peeves is the amount of hype first-time visitors to China swallow, thinking that they can plan their retirement on a “China strategy” without in fact coming and living in China and making an effort to understand the people and culture and building relationships on the ground. More often than not, the people who have dollar (or yuan) signs in their eyes come from the services sectors, which are in fact, more local in nature. The ones who are making the money in China are the big wholesalers, but they have enough presence of mind to keep their mouths shut.
Lately, Dan Harris of China Law Blog has been talking about the opportunities opening up in the Chinese services sector because of policy changes. Most likely these changes will be led by another wave of service entrepreneurs coming into the country, or as is more likely, a new batch of local Chinese entrepreneurs offering services to China’s urban middle class. After all, they know the language, have the opportunities and can make the fast move.
For businesses which are local by nature, and are mostly in retail, the challenges come in several forms. The costs of crossing national boundaries to establish a name presence are always huge. This is an area global ad agencies are designed to address, even though their market has undergone huge changes.
The other huge challenge is human talent. How do you find the human talent who understand the needs of the parent company, and at the same time, can build relationships in a new market and understand what consumers want?
This is the real challenge of globalization.
Capital Has No Homeland
One phrase I have heard frequently from well-to-do Chinese business people is 钱无祖国. Roughly translated into English, this means that “capital has no homeland”; it largely goes wherever it can get the best return for its owners.
The flip-side of this statement is that the nation-state, this political entity which has been so important for the past 500 years, is gradually losing power and influence. As technology enables individuals more and more, governments and large organizations lose power, influence and attraction.
How many bright young people have you met who said “I want to work for a large organization?” In the tech sector, the number is small; most prefer to work at startups. I predict that this trend will soon spread to media and other fields. It’s just easier to get things done and you don’t need to share the profits among as many people.
This is what those who criticize the article about sovereign wealth fund stakes in Google and Apple don’t understand. When a corporation’s shares are traded on the open market, a corporation is no longer just a national entity, it is a global entity. Apple and Google are global corporations, not American corporations. Their owners, shareholders and employees are global, not just American. They just happen to have their main domicile in the US and were first incorporated in the US and are subject to US laws, but that’s it. Only if capital restrictions are put in place can you prevent anything like the scenario I have put forward from taking place. If the US were to do that, it would amount to the US government admitting that globalization, a policy that all US administrations have pedaled to the American people for the past 50 years is wrong and is bad for America.
Doug Rediker has an excellent article about the difference between how national banks and investment banks see this trend.
If there is one area where many Americans have fallen woefully short it has to do with educating themselves about the importance of managing your finances in a smart manner. Roger Ehrenberg draws an excellent picture of how the subprime mortgage mess grew, and how most Americans are responsible.
The same rules of economics which apply to individuals also apply to countries and nation-states. Foremost among these is the rule that if you remain a debtor over a prolonged period of time, you lose control of your own destiny, and become subject to the whims of others.
The pendulum has now swung in China’s favor; in the 19th century and first half of the 20th century, China was the economic basket case. For the most part, Chinese have learned the importance of savings and not going into debt. Will the next generation of Chinese remember this lesson? Time will tell.
Americans need to face up to this unpleasant reality, and the sooner the better. The first step to recovery is to recognize that one is in trouble and needs to change current behavior.
The old ways just don’t work anymore.
What’s Wrong with China’s Internet Developers?
In the course of my work, I’m often asked, based on my experience living and working in China, “What’s wrong with China’s Internet developers?” Unfortunately, I have never attacked the problem in a systematic way and organized my thoughts, even though I should.
Today, I was visiting the Signals vs. Noise website which is maintained by 37 Signals, who are Ruby developers. David Heinemeer Hansson, who extracted the Ruby on Rails framework works there. He also publishes his own blog, Loud Thinking.
If you have an interest in technology from a technology and/or business viewpoint, you really should read the 37 Signals blog; it’s really excellent.
When I read this posting on “Secrets to Amazon’s Success” , I said to myself “That’s it; that’s exactly what’s wrong with China’s internet developers!”
If Chinese developers just followed what Amazon has done, they would be in a much better place.
Read it and tell me what you think in the comments below.
