The Chinese Internet economy has grown to staggering proportions, but it is still hard to see from within Europe. Yes, our phones, tablets and computers are stuffed full with Chinese (and other Asian countries’) components, but the services we use still seem to be dominated by Silicon Valley. In the US, although consumers now enjoy the option of buying from Alibaba, it remains to be seen whether the company will be able to make a dent in the sales of Walmart and Amazon.
My guess is that Chinese companies will need to await a paradigm change to get a real foothold. The Internet of Things is, I suspect, that opportunity.
At the recommendation of a friend, Ray, I have recently started listening to the excellent Exponent podcast about the technology industry. I’ve be working through the back catalogue and was listening this week to the programme about Xiaomi. This young Beijing-based, smartphone company has attracted a lot attention for the rapidity with which it has amassed a devoted following, somewhat akin to Apple.
The presenters, Ben and James, discussed at length Xiaomi’s business model which starts with beautiful devices (like Apple) but sold at rock-bottom prices, meaning that services will be vital to achieving real revenue (like Google). And that service layer could well constitute a smartphone-based unification of connected consumer devices. Although Xiaomi today only makes phones, the presenters thoughtfully speculate that Xiaomi is well placed to extend its brand rapidly into connected consumer electronics, as millions of young Chinese fans move out from their parents’ houses to set up their own homes. By contrast, Apple only knows computers, and Google doesn’t have a compelling device strategy, so Xiaomi also has the potential to conquer new markets with what it learns in China. More on the original Stratechery blog.
Not all of the evidence is yet on the table, but we in Europe need to plan for Asia being a far greater force in the technology world. And the Internet of Things is a more than big enough change to open the door for new giants. Of course best of all would be to create an innovation climate that permits European players to scale up rapidly in a truly single market.
(The Xiaomi podcast then goes on to discuss patents, including the powerful observation that in tech / ‘winner-takes-all’ markets there is already often enough incentive to innovate fast, and patents don’t play a societally useful additional role. Definitely worth a listen!)