The Map is Not the Territory

In a previous column, I have talked about “the myths of innovation”, including the “lone inventor”, the “wiz kid” and the fact that the successes we see today have often evolved and changed since the initial idea. In another, I talked about the “5C’s of innovation”: Copy, Combination, Competition, Constraints and Country, which influence how services and products evolve and diverge from an initial idea due to the influence of their environment.

You might have heard this expression “the map is not the territory” – certainly valid when the Chinese explorer Zheng He possibly sailed up to America in the 15th Century. The meaning is that the name of an object, the word for an idea or the opinion about someone is not the same as the object, the idea or the person itself.

I found that deciding to call something “innovation” or someone “entrepreneur” has a lot to do with:
(1) who is talking (the speaker’s personal knowledge and bias)
(2) who else is saying that (this is also called “social proof”)

Now the questions to tackle are: When can you call something an “innovation”? When can you call someone an “entrepreneur”?

What is innovation?

1. First issue: Finding signal

I am in the business of selling ideas from Asia and I keep hearing that “China is not innovating”. Am I in the wrong business? In fact, we continually identify interesting service concepts, business models, marketing strategies in China, and explain them to our clients. We consider them to be “innovations”, so why is China’s image still so much about “copy”? The short answer is that the “signal” is hard to find when there is a lot of “noise”.

2. Second issue: unknown prior art and dual citizenship

Innovation does not have a nationality, and it is very possible for something to be invented more than once. I was told at school that Gutenberg invented the printing press in the 15th century, but I found out later that it had been around in China since the 11th. Didn’t Gutemberg invent it? I think he did, but he did not know somebody else did it too, earlier. Is the printing press “Chinese”? I am not sure about the nationality but I do hope that possible patents – there was none at the time – have expired!

3. Third issue: incremental innovations

Another issue with innovation is that if you make a tiny change to something, most people would not call it an innovation. But if you make one tiny change every day, then over a few years the result will be radically different from where you started. When did “innovation” happen then? The answer is probably: every day.

I believe this incremental aspect of innovation is what makes it difficult to understand what is innovative in China. If you use Western references to describe local services you will simply miss out on what is different, original and really important.

Call Taobao “China’s eBay” and you will fail to recognize that Taobao implemented many services that eBay doesn’t have (IM, ad exchange, service platform, micro-retail service) and a business model that destroyed eBay in China.

Call Tencent “China’s Facebook” and you will not see that not only Tencent is making about 3 times more revenue than Facebook, but that it is far more profitable and has a very different service offering. Also, Tencent’s customers are its users, while Facebook’s customers are still for 90% its advertisers. If Tencent started as a “ICQ of China” and Taobao as “eBay of China”, they are certainly very different now.

Did they innovate? They would probably not be where they are if they did not.

4. Fourth issue: innovation does not always turn into a business

Of course, not all innovations end up becoming billion dollar companies. Most innovations never turn into profitable businesses. Even great ideas can take years to find a suitable environment to prosper: group buying is becoming hot in the US with a site named Groupon. “Tuangou” group buying in China has been very popular for years, combining online gathering and online/offline purchases, even for large things like cars!

So if you want to find innovation: put aside what you think innovation “should be” and focus on understanding the differences and paying attention to emerging signs. Innovation is right there, every time something is done a bit differently that it used to.

What is an entrepreneur?

Earlier this month I came across another instance of s never-ending debate about entrepreneurs: do you have to be born an entrepreneur to become one? I will try and show that first, this question has a massive logic flaw and second, that just like innovation, entrepreneurs are everywhere. It is all a point of view.

So are you born an entrepreneur? Well the problem with this idea is it is too easy to self-prove: his/her grandfather was an entrepreneur / he has friends who are / he had the drive because he was bored with his previous job, etc. Basically, there is always something I can find to justify this. Convenient, isn’t it?

If even the most socially awkward can be trained…

To show how this idea makes little sense let me make a parallel with a TV show I watched recently. It is a reality TV series named “The Pickup Artist” where a group of men who have extreme difficulties finding a girlfriend – they can be shy, unfashionable, awkward – enroll on a training that will equip them with the skills to approach women confidently.

Some people are “naturals” – born with high social skills, while others are not and might want to do something about it. The instructors in the show are experts who, for some, make a living teaching those skills, and were initially awkward and shy themselves. Along the episodes, participants receiving instruction and techniques and are faced with increasingly difficult challenges (the winner walks away with the title of “Master Pickup Artist” and 50,000 USD).

…then why not entrepreneurs?

The show demonstrates quite effectively that you can take pretty much anyone who is willing to change and help him do that. I would say that the same applies to entrepreneurs. The media only remembers big successes and dramatic failures (see “people love heroes” in my previous column), but most entrepreneurs are not there for the big media splash.

They are in it because they want something to change.

They are not satisfied with the present; they see an opportunity (they often overestimate it) and decide to do something about it. There is something glamorous about being called an entrepreneur – maybe something like being an adventurer of the 21st century. Would “Social Entrepreneurs” be the equivalent of “enlightened philosophers” of the 18th century? Being called an entrepreneur is also a convenient “license to fail” – and at least it was romantic to try. This actually leads us to another important point: what is failure? And what is success?

Failure and Success

Again it is largely a matter of perception. Each culture has its “models” and each person has its own set of values. While success is often described with a dollar value, many creators are more interested in creation and change than in fame and wealth, which come as pleasant side effects, at least while they last.

In a sense, Western companies have both succeeded and failed in China: Facebook has no presence but local evolutions are doing well. MSN and eBay failed but Tencent and Alibaba took their concept and changed it to succeed. I know of numerous small startups with creative approaches, concepts and sometimes technologies, but most of them lack the market-building capabilities, and almost all have little interest in getting known outside of China. Some are doing very well and keeping under the radar intentionally. Some have failed but have had the ride of their life. All have earned experience.

So which ones think of themselves as successes, which ones think of themselves as failures? Their peers and society at large might have an opinion, but eventually, it’s up to them to decide what they make of it. And as the song goes “You come from nothing – you’re going back to nothing. What have you lost? Nothing!”

Note: This is a guest column written for the Chinese business magazine “China Electronic Business”, invested by Jack Ma of Alibaba, and IT news site Interfax. Syndication inquiries are welcome!

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+8* | Plus Eight Star explains to its friends and lucky clients why so many good ideas from Asia are overlooked, and how to leverage them. We’re also on Twitter @plus8star

As mentioned in our quote on today’s Forbes’ column on VinaGame, Vietnam’s largest online gaming company, I believe some are already on their way.

Are there any clues? Here are three reasons to believe so:

• VinaGame already operates IM, portal, SNS and music services
• VinaGame has operational ties with Tencent
• Last, VinaGame purchased our researches on both Tencent and Cyworld from the first edition!

Surely, I am not the first one to suggest that – one commenter on this blog did that in October 2007. There are other companies on this track outside Asia: Mail.ru, the largest Internet portal in Russia, is also studying Tencent closely (and also bought our research). Mail.ru also has MIH as a major investor. If you don’t know MIH, it is a large South-African media group also known as NASPERS. It is the single largest investor in Tencent – they control 35.5% of Tencent, a share worth about 13.5 billion USD.

Another question ask by Rebecca Fannin, author of Silicon Dragon who wrote the column for Forbes, was the evaluation of the Vietnamese online gaming market. I did not have figures at hand but taking hints from an old interview exercise (a Google or Microsoft one I think) that was asking “How many gas stations are there in the US?” with no other information available (I heard another version about dentists), there is always a way to find an rough estimate based on a macroscopic view rather than go with a bottom-up measurement. If you ever wondered how research firms come up with estimates, this is as good a guess as many – and at least there is a methodology to it.

Here is how it goes:

Instead of looking at companies, you can look at market structure:

• Vietnam has similar structure as China in terms of income, GDP/capita, rich/poor (developing market).
• Around 20 million Internet users, so about 25% of the population (similar ratio to China).
• Several years behind China in terms of market maturity (2 or 3? IDG says 10 in the interview but that sounds exaggerated according to some conversations I had with various execs).

So doing just a very rough estimate:

• The China market was ~2 billion 2 years ago
• Vietnam has about 20 times less Internet users

Hence, I would say that Vietnam’s market is probably around $100 million, but has the potential to double or triple within 3 years as Internet spreads (note: this is confirmed by Vinagame’ growth rate of 50%). This number is surprisingly close to VinaGame’s own market estimate (since nobody seem to have a solid figure). The difference is: I know very little about the market and assumed nothing about VinaGame’s revenue. Is that cold reading?

Also, the market is heavily reliant on licenses from China and Korea, which cost quite a bit (also confirmed in the interview that only 5% of VinaGame revenue are from local games), so companies should be able to grow the capability to develop their own titles and potentially generate higher margins (cutting down on licensing + better cultural fit).

You can apply this method to any other developing market, then correct by a few factors like geographical barriers (Internet users don’t grow as fast in countries without densely populated areas), political instability (which harm business), etc.

So… is there a Tencent in your country? What is your market’s potential?

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+8* | Plus Eight Star looks in Asia and picks the best ideas to support your business. Find us also on Twitter!

• Web 2.0 case studies (China, Japan, South Korea)
• Non-gaming virtual worlds (China, Japan, South Korea)
• Casual and serious dating services – best practices in offline/online/mobile services (South Korea)

Mobile

• Mobile marketing (Japan, South Korea)
• Mobile search (Japan)
• Mobile value-added services (China)
• Mobile niche markets: early teens, seniors, female users, etc. (Japan, South Korea)
• World’s first intelligent mobile agent (South Korea)
• Mobile music (Japan, South Korea)
• Mobile gaming (Japan)
• Mobile payment and mobile commerce (Japan)
• Ring back tones services (South Korea)
• Mobile banking (Japan, South Korea)

Convergence

Convergence goes beyond mobile and Internet, as it touches TV, print, radio, music, advertising.

• Fixed-Mobile Convergence (FMC)(Japan, South Korea)
• Mobile TV broadcasting (Japan, South Korea)
• “Well-being” and e-learning services (Japan, South Korea)

Strategy and branding

• Coaching of early stage entrepreneurs for strategy, service design, business models definition and refinement
• Invited expert to support the European Commission’s action towards the opening of China’s mobile and Internet markets
• Corporate positioning for Web 2.0 companies (China)
• Telecom market situation and VNO opportunities (China)
• Branding case studies of telecom companies – brand history, universe, values and perception (Japan, South Korea)
• Identification of acquisition target in Europe for a large Japanese content provider – Market analysis and introduction which led to a successful 18MEUR buy-out (Europe, Japan)

Executive trips

Executive trips are intensive guided field-trips to innovation epicenters.

• Tour of mobile innovations (Japan, South Korea)
• Tour of mobile, Internet and new media (China)
• Tour on mobile payment and innovative retail solutions (Japan)

• Foreign customers: Provide strategic analysis to Western operators & content providers to anticipate their markets
• Local customers: Bring best practices in business models, service design and marketing to Chinese Internet start-ups to accelerate their business
• Other services: M&A advisory, market entry, partners identification, negotiation support