China’s New Innovation Advantage

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0:27Zak Dychtwald:Good sleep is everything. That's why OLLI's science-backed support is made with a blend of melatonin and L-theanine for both kiddos and grownups. So when your mind won't switch off, you've got something that can help. Erasing thoughts and restless nights won't stand a chance. Find OLLI's sleep solutions for the whole family at OLLI.com. That's O-L-L-Y dot com. The future of the Chinese economy lies in innovation, and everybody knows it. And the question that I often get asked is, well, can China innovate? I've spent most of my adult life in China. We may be asking entirely the wrong question. It's less China's ability to innovate.

1:07It's less the sort of heroes of innovation, the people at the heads of industry, and far more about the average person. That ultimately is going to create China's innovation advantage in the fast-evolving innovation Cold War. typically when we think of china and innovation together well typically we don't and that's for good reason for much of the last 40 years china was not known as an innovator was known as a copycat which is true and by the way everyone in china will happily own up to this over the last 10 years that started to shift dramatically and we're beginning to be peppered with headlines of these incredible new chinese technologies and an increasingly robust ecosystem of technologists product people, and just forward thinking, quote unquote, innovators.

1:54The problem is, when we in the West evaluate the global innovation capabilities, we focus too much just on these heroes, and less on the people who actually use these innovations. The great advantage that Chinese innovators have, they have at their disposal, a massive group of people who when they pick up their phone turn into users who are willing to adapt and adopt at a scale and speed without peer on the world stage. The aha moment for me when looking at China's innovation ecosystem was really just looking at young people. And there was one day where I decided to quantify the amount of change that people had undergone in their lifetime.

2:41So I'm an American millennial. I was born in 1990. Andy, in my lifetime, I've watched our per capita GDP in America, which is the basic measurement we have when comparing the quality of life globally. It's not perfect, but it's not bad. As an American, I've watched our per capita GDP increase 2.7 times in my lifetime. Pretty good. Okay, maybe the vacations we could take as a family, 2.7 times longer. The cars that your neighbor could drive, maybe 2.7 times nicer. And actually, if you look at the top 40 economies of today, you start to see a trend. In India, someone born in 1990 has witnessed around 6x per capita GDP growth in their lifetime.

3:19And then you look at this graph and you see something, one glaring outlier, China. If you were born in 1990 in China, my friends born in 1990 in China have witnessed 32x per capita GDP growth in their lifetime. many people i interviewed over this last decade have watched their their village turn into a town turn into a city but too often we we just fixate on skylines instead of people and the change that these young people have gone through in the last 30 years it is not only incredible globally but has absolutely fundamentally shaped who they are and how they see the world that sort of mantra for the population has been adapt, adapt, adapt.

4:09And so for technology that's translated into adopt, adopt, adopt. It's more fertile soil for these innovations to really take root and then blossom into something far more substantial, far larger, and again, impactful than we have really anywhere else in the world. You could have the best innovation in the world. You could be the greatest thinker in the world. You could have the sweetest black turtleneck in the world. But if no one is going to be using your innovation, then you're not going to change the way that our world spins. Well, in 2014, Apple Pay came out. Apple launched Apple Pay. Much fanfare.

4:49Incredible. In that exact same year, WeChat Pay came out pretty much at the exact same time. The tech was similar. The usage and the ways that people use these things was quite similar. Now, about a year ago, Apple recently announced that they had about 24 % Apple Pay penetration amongst iPhone users in the United States. Came out with much fanfare. They were very happy that they were starting to get that level of penetration. Even though it came out the exact same year, you had 84 % penetration for WeChat Pay. Pretty much everyone and their mothers was willing to pick up their phone, scan a QR code, and use it.

5:28So for Western organizations, typically what you happen is you have a product release and that's it. You sort of climb the hill, you plant your flag and that's it. In China, you have this willingness and capability to iterate at speed that you don't really have anywhere else in the world. The shifting tastes and desires of tech users in China is evolving at a speed that just doesn't really exist in global markets. These manufacturers are internalizing feedback they're getting from their users at warp speed. Much of the way that people are relating to tech, much of the way that consumers are wanting things and then are expressing that desire through actually paying or purchasing or seeking out new ideas, already exists in China.

6:16It's our job as global companies or people from outside of China to look at that, learn from that, and then be willing to copy the copycat. And by the way, it's already happening. Amazon is already looking at Alibaba and Taobao and seeing their sort of spending holidays. If you're wondering where Prime Day came from, it comes from Singles Day in China. If you're wondering why Facebook is suddenly so gung-ho about payment, they're looking at WeChat and seeing how the way that social payment has really revolutionized the platform in China. The best and brightest in U.S. and Western tech are already learning from China.

6:54I would be sending my product people, I would be sending the big strategic thinkers in my organization to go to China and understand how these companies are interacting with consumers, their process of iteration. what consumers are asking for, but being willing to harvest new ideas from an ecosystem, really that tech innovation greenhouse, that's already flourishing. The most overlooked, the most undervalued aspect of China's innovation advantage are the people for whom adapting and adopting new technologies at speed and scale is everyday life.

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