Monday, April 30, 2007

An Interesting Thing Happened to Me on the Way Back From China ....

Just returned from a trip to China, obstensibly to visit friends and family, but the workaholic side of me couldn't help but arrange for a variety of conversations with businesses large and small doing business in China ... as well as the investors who fund them. I have to admit that came back both awed, as well as a bit disillusioned by what I can only describe in the word, "massive."

First, everyone is filled with the potential of China as THE booming market. You can't help but notice much of it in the lack of rules and constraints, whether in ...
(1) the hyper aggressiveness of startups quickly replicating and expanding on existing ideas ... an example is my conversation with Bill, the founder of KU6, a hot Draper funded "youtube+" that has brought together not only user generated content with shared ad revenue, but also user generated advertising.
(2) the continued drive of innovations in mobile in areas such as pervasive branded experiences ... for example MyClick
(3) whole new business models ... a key observation is that without incumbants defining business boundaries, companies actually have the ability to cross traditional market lines starting from a strong web-presence into things like ... amusement parks, retail, or media. Some would use this to justify some of the large pre-IPO valuations. Very exciting. Then again, a little too much like the height of Silicon Valley craziness, including the extreme sense of developer entitlements that was a hallmark of the bubble.

At the same time, to many around the world as well as a key driver of the economy, China is still about execution: IT Outsourcing, BPO, and cheap labor ... especially for Korea and Japan, for whom India cannot provide the Asian language skills. I had interesting conversations with BearingPoint regarding their evolving strategy ... and how it necessarily includes expanded use of the Global Development Centers. Interestingly, China, as validated by BearingPoint, struggles to support the rapid growth for Services due to (1) education system inadequacies and (2) a booming local economy ... something that India has less issue. A recent McKinsey study does a nice job outlining the looming shortage of manpower for service industries in both China and India. As mentioned above, the local market is expanding incredibly rapidly, whether in Internet, as well as consumer services, retail, entertainment, etc., competing for human capital.

All that in mind, there is something disturbingly hopeful about the rapid rise of the Internet to both entertain and ultimately, connect people in China. In a society where Internet entreprenuers openly speak of the fact that China has become a very lonely place - in many cases driven by government policy of single children households, breakup of the extended family unit, and forced movement to the cities and mass production, mass living, mass education ... resulting in a mass of lonely people looking to connect.