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The Lean Gladiator

The copycat era has taught Chinese technology entrepreneurs more than just dirty tricks and insane schedule. The high financial stakes, propensity for imitation, and market-driven mentality also ended up incubating companies that embodied the internet's “lean startup” methodology.

That methodology was first explicitly formulated in Silicon Valley and popularized by the 2011 book, The Lean Startup. Core to its philosophy is the idea that founders don’t know what product the market needs—the market knows what product the market needs.

Instead of spending years and millions of dollars secretly creating their idea of the perfect product, startups should move quickly to release a “minimum viable product” that can tease out market demand for different functions. Internet-based startups can then receive instant feedback based on customer activity, letting them immediately begin iterating on the product: discard unused features, tack on new functions, and constantly test the waters of market demand.

Lean startups must sense the subtle shifts in consumer behavior and then relentlessly tinker with products to meet that demand. They must be willing to abandon products or businesses when they don’t prove profitable, pivoting and redeploying to follow the money.

By 2011, “lean” was on the lips of entrepreneurs and investors throughout Silicon Valley. Conferences and keynote speeches preached the gospel of lean entrepreneurship, but it wasn’t always a natural fit for the mission-driven startups that Silicon Valley fosters. A “mission” makes for a strong narrative when pitching to media or venture-capital firms, but it can also become a real burden in a rapidly changing market. What does a founder do when there’s a divergence between what the market demands and what a mission dictates?

China’s market-driven entrepreneurs faced no such dilemma. Unencumbered by lofty mission statements or “core values,” they had no problem following trends in user activity wherever it took their companies. Those trends often led them into industries crowded with hundreds of near-identical copycats vying for the hot market of the year. As Taobao did to eBay, these impersonators undercut any attempt to charge users by offering their own products for free. The sheer density of competition and willingness to drive prices down to zero forced companies to iterate: to tweak their products and invent new monetization models, building robust businesses with high walls that their copycat competitors couldn’t scale.

In a market where copying was the norm, these entrepreneurs were forced to work harder and execute better than their opponents. Silicon Valley prides itself on its aversion to copying, but this often leads to complacency. The first mover is simply ceded a new market because others don’t want to be seen as unoriginal. Chinese entrepreneurs have no such luxury. If they succeed in building a product that people want, they don’t get to declare victory. They have to declare war.

Posted by Dr. Kai-Fu Lee on Oct 02, 2018 in All Posts China Innovations AI & China

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