Why Michael Moritz is right



Having lived and worked in China for over 9 years helping US technology companies enter and expand in the China market I can appreciate Michael's comments and agree with his conclusions. From my perspective this is not a result of systems but is that natural outflow of what each country naturally rewards. Silicon Valley for better or worse is obsessed with creating the newest and most innovative technology whether or not there is a business model attached to the technology. I am not here to criticize this approach as it continually generates fantastic technology and is the envy of the world.

However in China the VC community is still quite immature compared to the US and while there is massive amounts of capital going into start ups they tend to pile large amounts into the few companies that already have secured their leading position in their own domain. This results in a much more competitive environment where a business model and satisfying the consumer is much more critical to survival than in the USA which rewards the best technology “feature” and the volume of users. The leading technology companies in China are significantly faster at product development and are continually developing or acquiring other companies and technologies that make sure they are always one step ahead of their competitors in providing the consumer with everything they need to stay loyal to their own brand. This strategy has paid off handsomely for these large Chinese internet companies that are flush with cash and are hungry.

Americans’ love to talk about innovation and how China cannot be a true global leader without a similar focus on pure innovation. I personally think it is time we reconsider this premise. Many books have studied this topic and they typically reach the same conclusion that it is not the pioneer but the fast follower that is most successful. We can debate all we want if Tencent or Alibaba are truly innovative but this is a false question. What they don’t create they can buy (I am not going to say steal because the truth of the matter is this happens in both directions and all over the world). I think is important that US technology companies figure out how to not only create innovative technologies but also to learn how to grow them into multiproduct multiservice companies that really provide a value consumers are asking for. It is a competitive world and companies that sit back and rely on patents for protection or only create “features” will wake up one day with Chinese owners.

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About The Author

Chris DeAngelis is a Partner and the General Manager of Alliance Development Group (ADG). Chris is considered a leading expert on the Chinese technology scene and is regularly cited in leading media including The Wall Street Journal, The Financial Times, Forbes, TechNode, MSNBC, Digital Trends, China Economic Review, International Business Times, Thomson Reuters and others. He has BS in Accounting from Lehigh University and an MBA from Columbia Business School. He has two daughters and has been living in Beijing since 2005.