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China’s commitment to innovation impresses the world


The recent volatility in China's stock markets, and the untraditional steps taken by Beijing to calm them, is yet another reminder that China is, well, different.


At least so far, the Chinese experiment is still working when it comes to the red-hot information technology market. Even as Europe tries once again to reboot its Internet economy with a new Digital Single Market initiative, China continues to make dramatic progress pursuing its own brand of public-private partnerships. In the last 20 years, China has launched some of the most valuable Internet companies in the world, including Baidu, Alibaba, Tencent and JD.com.


While some of these giants largely serve the enormous local market, Chinese companies such as Foxconn dominate the assembly of computing and consumer electronics devices worldwide. And now Chinese companies are evolving from the manufacture of other companies’ products to become leading-edge designers themselves.


The commitment to innovation, at least within China’s growing class of entrepreneurs, is genuine.  Everyone we met seemed to be involved in at least a few start-ups.  From Shenzhen, China’s semi-open Silicon Valley, to Qingdao, a coastal city best-known for its eponymous beer, we met determined entrepreneurs who, from what we could see, mirrored the values and working methods of their Western counterparts.


The Silicon Valley culture, for example, is very much alive at OnePlus, a smartphone start-up with a cult-like following, a charismatic leader, and an international staff of over 400. The CEO Pete Lau started OnePlus after serving as vice president for Oppo, one of China’s largest smartphone makers. The company’s first product, the OnePlus One, is a design marvel, with high-end components and a premium form factor, which the company sells worldwide for only about $350 unlocked.


Both to minimize cost and maximize customer interaction, OnePlus sells its phones directly to consumers, and, until recently, only through an invitation system that allowed the company to micromanage production scheduling and inventory control. The company sold one million phones its first year.


OnePlus's embrace of the disruptive innovation philosophy is inspiring, but nowhere near so much as that of Zhang Ruimin, CEO of Haier, the world’s largest manufacturer of durable goods including air conditioners and kitchen appliances.


Zhang, now 66, was a local government official in 1984 when he was assigned to resuscitate a moribund refrigerator factory in Qingdao, and famously rounded up defective refrigerators he found in inventory and personally smashed them with a sledgehammer. From that unconventional beginning, Zhang oversaw Haier’s remarkable rise.


Now a revered business visionary in China, Zhang refuses to leave well enough alone, and is in the midst of smashing Haier’s business model once again.  Recognizing the disruptive potential of such emerging technologies as the Internet of Things, 3D printing, and embedded software that can reconfigure traditional durable goods such as those Haier produces, Zhang recently undertook to restructure the company as a collection of competing start-ups.


Employees have been grouped into small teams, who work on product design in collaboration with real customers, sometimes racking up millions of social network communications in a matter of months.  Lower-level employees who believe they have better ideas than the leader can take over the team, and all employees share in the success of new product launches.


CEOs of stalling U.S. industrial giants rarely express Zhang’s level of creativity, humility, or candor. They prefer to dismiss the Internet as irrelevant to their business, or at best as a frustrating source of unfair competition.


Don't know what will happen to China's stock market, or whether the country's hands-on industrial policy and social engineering can really work in the long-term. But Chinese entrepreneurs, new and old, are at least asking all the right questions.



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