I had some discussions on whether China would surpass United States on innovation with some entrepreneurs during last weekend's APEC. The conclusion is United Stats has advantages on innovation today, but in the future, China's innovation will be more widespread and successful. For the next 10 years, what advantages do United States and China have?
Actually United States has obvious advantages, especially on innovation structure and innovation culture.
Technology -- It's undoubted that United States has technology advantage. Besides technology, Unites States has maturer research funding system and more excellent research team. They can continuously create leading technology. In contrast, Professors and research team in China's universities are not so prominent in the world. They are short of vision about projects and technology trends, also there are issues on fund allocation.
Education -- Education system in United States is more advanced than China, People are taught to develop critic mind, curiosity and creativity.These characteristics are essentials for innovation. While in China, kids are trained to take exams, some of the talents may be ruined.
Open business environment -- Politics and businesses have different roles in United States, there are few state owned companies. While in China, politics are related to businesses. The end result is dominance, business giant lacks innovation incentive.
Investment environment -- Venture capitals in United States are maturer and more patient. It's highly possible that they can help develop creative startups. In contrast, China's banking system is designed to serve big companies, small companies cannot get much benefits.
Culture -- American culture encourages individuals develop their own interests, they are generous about wackadoodles as well. China's culture focus on stability, they are less willing to tolerate failures.
Information transparency -- In United States(especially in Silicon Valley),information sharing is transparent and fast. Its open environment allows people to join different companies freely/ This kind of environment encourages people to try new things.
But in recent years, China's innovation grows fast, it also has some advantages:
Diligence -- People work longer and harder in China's technology companies and Chinese startups are more keen to success.Some startups even think startups in Silicon Valley are too comfortable.
Focus and efficiency -- American may be more creative, they have advantages in breakthrough innovation such as Apple, while most startups are iterative now such as Facebook and WeChat. Iterative innovation focus on users and iteration speed instead of creating new breakthrough.
Huge market -- United States owned the biggest IT market, but now China owns the biggest IT market.
Information asymmetry -- In China, people are keen to know the technology trend in Silicon Valley, they are happy to learn from Silicon Valley. But Silicon Valley thinks that China's trend and products are not worth studying. Some products in China may have grown big but Silicon Valley may still not know about them.
Low cost -- Human resource cost in China is only 1/4 of United States. This is very important when starting a new business. Companies with the same market value can only hire 2-3 person in US but can hire 10 person in China if they spend 20% of their shares.
Sustainable business model -- China's cut-throat competition and copy culture helps create a sustainable business model. The leaders in Internet auction, security software, games and IM find their own business model. These products are free to users so they are not afraid of being copied.
Conclusion
1. Breakthrough innovation can allow US to lead the world
2. Innovation in the future will be iterative
3. China's tech companies are adapted to iterative innovation environment
4. It's too early to say that China will surpass United States. But China's role is more and more important.
About Author
Kai-Fu Lee is founder and CEO of Innovation works and he worked in Apple, SGI, Microsoft and Google before. He was CEO of Google China.
The essay of Dr. Lee's is very good, and the statements are authenticã€objective.