SDA Professor of Strategic and Entrepreneurial Management
We are used to many contemporary breakthrough technology-based consumer products and services imported from the USA: Apple’s iconic smartphones and tablets, social networks, Amazon, wearable technologies, shared services. The USA corporations are launching these innovative products and services to target consumers in all important global markets, and Asia with its growing population, increasing urbanization levels and average incomes represents one of the key growth engines.
The increasingly interesting phenomena are products and services arriving from Asia that directly counterattack the US product launches in Asia and then on other competitive arenas. And Asian companies start succeeding where their European counterparts failed in 1990s and 2000s: in challenging the US-dominated global innovation.
Asian companies challenging US innovation leaders
In 2014 Amazon, one of the largest online marketplaces, 20 years from its foundation reported USD 88,9 billion of sales. The company has now to deal with a challenge arriving from Alibaba, a Chinese ecommerce website. Alibaba, four years younger, accounts for 350 million of active buyers and USD 12 billion of sales (to note, Alibaba sales are not exactly comparable to those of Amazon as Alibaba acts mainly as an intermediator).
As Amazon, Alibaba is keen at introducing new innovative features to improve the customers’ experience: an example is the use of biometrics for the payment security instead of passwords. Alibaba is the undisputed leader in China, the world’s largest ecommerce market and is now building its offices in Europe to help Western companies in bringing their products to the Chinese consumers. The market capitalization of Alibaba with its USD 189,9 billion is approaching Amazon’s USD 263,75 billion.
Not only Alibaba is locking Amazon out of one of the most attractive growing ecommerce markets, it is also increasingly looking at the US and European markets as their next priorities, positioning itself as a marketplace for the Western small businesses targeting Chinese middle class. Moreover, while Amazon’s websites are built primarily as local businesses, the future promise of Alibaba to its clients is to “buy and sell anywhere”, aiming to guarantee a 72 hour global delivery.
Another example are electric vehicles. Since the launch of its first premium electric sports car Roadster in 2009, Tesla and its founder, Elon Musk, represented another perfect example of innovation implemented in such a mature industry as automotive which in decades did not see many successful newcomers. The product’s focus on design, sportive performance on the road, battery autonomy, driver’s comfort made Roadster a true “head turner” after its launch, very much different from Nissan’s Leaf.
While Tesla did not invent the technology, it completely turned around the way electric vehicles were positioned and perceived on the market. The environmental friendliness, while important, came as a second line benefit, it was not the reason for which Californians started acquiring Tesla’s Roadsters right after its launch. The customers were attracted by the sportive look of the car and performance. Electric engine was the benefit that allowed the car to be silent and to accelerate on the traffic light leaving other models behind. The idea that an electric car could be sold for its innovative premium design picked up in Asia. And not only the product is being imitated. Tesla’s start-up was made possible thanks to a network of several important partnership, for alliances for manufacturing and R&D activities.
So did Thunder Power, a Taiwanese technological company, that relied on a network of external collaborations too to launch its Thunder Power Sedan. The interior and exterior parts of new electric vehicle presented in Frankfurt in September 2015, were designed by Zagato, an Italian design company, while the battery technology was developed together with Bosch (Germany) and Dallara (Italy). The idea of a sportive electric car sounded appealing to the Chinese entrepreneurs too.
The future of electric sportive and premium cars from China and Taiwan competing with Tesla, as well as that of Tesla competing with BMW, Mercedes and Porsche in premium electric vehicles still includes a variety of multiple scenarios.
Mr.Jia Yueting, the entrepreneur behind LeTV, the Chinese most popular TV streaming service with 400 million monthly users, declared his intentions to build a competing LeTV Le Supercar. In 2015 Mr.Jia Yueting already launched Le Superphone, with the objective to improve the mobile streaming of LeTV content. Le Superphone and Xiaomi are now contesting the Chinese market against Apple for smartphones and smartTVs.
Europe: lagging behind, but moving forward
The worrying signs for innovators and start-uppers in all industries is the speed with which the ideas are picked up and developed globally by serial entrepreneurs from the emerging markets, with their dedicated teams, established brands, six and seven digit capital injections and cheering local audiences.
What about Europe? Despite its being busy dealing with leadership, macroeconomic and political issues, Europe is not limiting itself only to “me too” business models in contemporary technology-based products and services (like the famous Samwer brothers). The innovative peer-to-peer lending model launched by Zopa.com (founded in the UK) has recently arrived at the benchmark £ 1 billion lent since its foundation.
In Germany, the peer-to-peer insurance Friendsurance starts gaining momentum with price-sensible consumers. The idea is brilliant: a group of friends signs up and sets aside, via Friendsurance, a part of their premiums to cover the smaller claims. After the smaller claims are paid the remaining amount is paid back to the group participants. The second part of premiums is transferred to the insurance company which covers potentially larger risks.
New sources of competitive advantage in the global battle for innovation
As the “innovation map” is becoming truly global, the first mover advantage for innovative products and services is growing increasingly shaky and vulnerable, rendering the speed of entering the new markets crucial for the global success.
The global success of innovation will be directly related to the ability of companies to scale the business idea in a variety of business contexts with different cultural, legal, political and macroeconomic settings. New sources of competitive advantage will be needed.
The search for entrepreneurial talent is becoming global and one of the most important sources of competitive advantage. Not surprisingly a “can do” attitude and problem solving abilities are becoming among the most desired qualities among the new hires. An example is Samsung’s hiring an Indian-born inventor of “Mouseless” input device for computers, Mr.Pranav Mistry or re-attracting Korean talents who developed their educational and professional careers abroad.
Secondly, the entrepreneurial talent will not add any value without an appropriate corporate setting (see Stefano Cavallazzi's take about "Why Corporate Entrepreneurs are not enough").
Thirdly, even apparently domestic businesses (such as online sales of Italian books in Italy to Italian customers) cannot any longer foreclose the global competition by hiding behind the cultural barriers. It is time to acknowledge and to incorporate into the “domestic” strategic analysis the emerging global competitors that have already moved from cost leadership to differentiation strategies, and are now shrewdly implementing the innovation leap.