China’s predicament with disruption

At the very latest since we witnessed the largest-ever initial public offering of Chinese internet giant Alibaba in 2014, the world has realised how capable Chinese entrepreneurs are of positively disrupting China’s business landscape far beyond the country’s borders. Disruptive business models can easily be hyped as a panacea to tackle current economic and social challenges such as the stumbling economic growth engine, the inequality gap between low-paid and skilled workers, the mismatch between job market demands and the educational system, urban pollution, and demographic change. But is it really that easy? Disruption causes friction that breaks existing patterns and by doing so the country puts its overall stability at risk. The 8th reception of the St. Gallen Symposium in Beijing addressed the notion of disruptive innovation in China more deliberately and tried to explore ways how the learnings from successful Chinese business disruptions can spill over to fields where improvement are urgently needed.

What it takes to be a disruptor

There is no such thing as “technology first” – disruptive innovation starts with the way of thinking. Hence, what kind of people will survive in the age of disruption? It is primarily the underdog, the little entrepreneur from the village who has all reason to be innovative, the ones who do not need to comply with business rules. In other words, disruptive innovation is very likely to start from the bottom, from the grassroots. In order to be a successful innovator it is important to stay on top of things: to know first, produce first, sell first, and profit first. For example, the market for bike sharing was disrupted several times within less than a year. Moobike, the current market leader and fastest growing provider of shared bikes in cities like Shanghai or Beijing, might be disrupted just as they disrupted the previous existing leaders.

Business disruption starts with thinking differently and often is driven by crazy guys. Radical innovation may emerge when ordinary people, the underdogs, are empowered to do extraordinary things. That is why Jack Ma seeks exchange with people who are different, folks he might not even like. If someone only talks to likeminded people, no “healthy friction” occurs needed to break the status quo and to drive novel ideas. When Ma decided to split his company due to increasing competition from global players such as eBay, a team was built and completely detached from the current business appointed with the challenge to build a new company from scratch. He sent the team to a remote place, completely isolated from the outside world, to work very hard on the task until they founded what we know today as one of the world’s biggest online market place, Taobao.

Radical innovation may emerge when ordinary people, the underdogs, are empowered to do extraordinary things.
Academic experts, business leaders, and young entrepreneurs discussing disruptive innovation in China.
ZOU Yue, Head of Anchors Team, CCTV International, hosting the panel discussion of the 8th St. Gallen Symposium Beijing Reception

Manufacturing – China’s greatest business disruption so far

China’s economic performance in the past three decades since it opened trade boarders is unquestioned. Part of this success story is China’s manufacturing capacity. Although the economy suffers from its copycat reputation, the outside world seems to overlook or even ignore China’s outstanding capability of taking existing models and not only adopt but improve both quality and efficiency.

One reason for that outside misconception might be the fact that many products made largely in China get finalised or packaged in other countries and are declared by the country with the better reputation in producing quality products.

Students, young entrepreneurs, professors and senior business leaders challenging the speakers on disruptive innovation.
Embassy of Switzerland, St. Gallen Symposium, moderator, and speakers of the 8th St. Gallen Symposium Beijing Reception

Disruptive innovation beyond China’s business world

The notion of disruptive innovation can serve as a source for inspiration or even an approach to solve some of China’s greater challenges outside the business world. One example is how China is currently rethinking education. There is a new generation of business schools emerging, aspiring to focus on teaching how to take opportunities of the “unknown” and how to teach “uncertainties”, rather than building on existing strengths like the quality of knowledge transfer and networking. As a result, the new approach does not define any course curriculum but redesigns its programme structure constantly according to market and students’ needs. It involves architects, artists, and designers to learn creative thinking from its purest source, and it allows students to address critical questions and comments on the programme and teaching.

However, although there was consensus at the reception that disruptive innovation can serve as an approach to solve some of China's bigger problems, there still is no solution in place tackling them in a broader sense. The crucial questions to solve for example the demographic challenge, the lack of healthcare, or urban pollution, remain the same: Who is going to pay for it? Who is going to be the disruptor in these fields? What are the incentives that may cause the disruptive idea to appear?

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