Ortus Round Table: The Future of China’s Innovation Hubs

by OrtusClub on 13th December 2017

Senior executives of the technology ecosystem and investment community in Shanghai gathered at the Nova Dinner, hosted by Savills, to discuss the future of Shanghai and other cities in China as innovation hubs.

Shanghai is clearly a global business hub and China’s financial capital. It’s growing base of digital media and entertainment companies, availability of educational programs and access to and capital tech infrastructure make Shanghai the front-runner in KPMG’s ranking of global innovation hubs. But when it comes to most metrics on entrepreneurship, Beijing is doing far better. Zhongguancun’s ecosystem of new ventures, tech giants, research universities and professional services firms has developed tacit knowledge and an entrepreneurial culture that is hard to replicate. What does this mean for Shanghai’s plans of becoming a global innovation hub?

Does Global Talent Matter?

With over 200,000 expats, Shanghai is positioned as a bridge between China and the rest of the world. The city’s strategic importance will grow as China strengthens its position as an economic powerhouse. But how much does an international workforce matter for innovation and entrepreneurship right now? Some guests at the Nova Dinner disagreed about the importance of global talent for entrepreneurship, pointing out that most startups’ focus is the domestic market.

While it is true that most startups in China right now focus on internal customers, the next natural step once the market is saturated will be international expansion. China is transitioning from a country that replicated technology to an exporter of ideas and patents, making Shanghai’s cosmopolitanism a valuable asset over the long-run. Exposure to foreign languages and cultures also makes locals in Shanghai able to scale up domestic ventures. A diverse environment and awareness about global trends certainly encourage creativity as well.

Forget Traditional VC Assumptions

In the American model of entrepreneurship, location is a big deal for funding. Startups from all over the country will put their staff in a plane bound to Silicon Valley or San Francisco. VCs prefer physical proximity with their portfolio companies as it facilitates supervision, while founders value the availability of advisors and collaborators. This is best exemplified by startup accelerators, which often require relocation. Under those assumptions, Beijing’s entrepreneurship ecosystem might come off as a direct threat to innovation in Shanghai, but there are reasons to believe things might be different for China in the next few decades.

To begin with, geographical proximity is generally less important now in all aspects of life. Silicon Valley developed as a tech hub in the late 20th century–before iPhones and WeChat existed. Better internal infrastructure in China makes business traveling easy and cheap. In addition, we are already seeing successful efforts to create entrepreneurship hubs all over China, suggesting it might not be a zero-sum competition between cities after all. A guest pointed out how medium-sized cities like Qingdao are successfully setting up incentives to attract startups. Chinese cities see a remarkable level of scientific collaboration, with Beijing and Shanghai having formed 382 bilateral institutional partnerships in 2016 according to Nature. Some guests claimed that VCs actually look for geographical diversification of their portfolio within China.

 

Attended by:

CEO at C&A Advisors China

Co-Founder at italki

Country Manager, China at Pivotal Software

Executive Director at CITIC Capital

Executive Director at J.P. Morgan Chase

Founder & CEO at 23Seed

Founder & CEO at Automobility

Founder & CEO at Withinlink

Founder & Managing Director at DRP Capital

General Partner at SOSV

Head of Corporate Banking at SPD-Silicon Valley Bank

Managing Director at JR Capital

Managing Director at Parkopedia

Managing Partner at China Materialia

Managing Partner at PurpleSky Capital

Partner at Chinaccelerator

Partner at TD Growth Capital

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OrtusClubOrtus Round Table: The Future of China’s Innovation Hubs

Wake up, CMO: Loyalty Programmes are Dead

by OrtusClub on 12th December 2017

customer loyalty

Committing to a single airline’s rewards programme to buy a flight every few months just isn’t worth it. Tools like Kayak and Expedia allow us to get the cheapest flight out of hundreds of airlines. Do people walk several blocks to a coffee shop every morning because of its rewards program? Probably not.

Many companies continue to expand their loyalty programmes as if it were an all-in-one solution for customer acquisition. Maybe it used to work but ask anyone if they are as loyal to brands right now as they were in the 90s and I’d be surprised if anyone said yes. There are two reasons behind this trend in customer loyalty.

Online Price Visibility    

Comparison sites have popped up in all industries in the past decade. Flights, toys, shoes, insurance, remittances—you name it. These websites are killing customer loyalty. As they were made to do so, they minimise the price of cost comparison, once a considerably burdensome task. By doing so they bring out our inner homo economicus. Our attachment to brands clashes with our desire to be profit maximising. We might wonder, am I that picky to pay an extra $200 to fly in my favorite airline? Not all sectors are affected by this. Hermès, for example, rewards loyal or prominent customers with the possibility of buying their pricey Birkin bags. But for most non-luxury goods, the online disclosure of prices make consumers prioritize cost-efficiency over personal brand preferences. 

data analytics

The Idle Customer Gold Mine

Conventional wisdom tells us to reward existing customers. Why waste time and energy on acquiring new customers when you can easily get old ones to buy more? Some tech startups, aware of the importance of access to data, are starting to challenge this paradigm. Acquiring data, even from one-time consumers creates growth opportunities. Take ride-hailing companies. There’s a fixed amount of drivers out there at any time and excess demand is not rare. Do old, loyal customers get priority? Usually not. By minimising waiting time for new customers, startups are able to retain consumers and, with them, data they can monetize, such as traffic data. This strategy will allow tech companies to exploit big data to understand consumer behavior more in the long-run. 

 

 

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OrtusClubWake up, CMO: Loyalty Programmes are Dead