Moving from “Made in China” to “Innovated in China”
Smart Cities and the Role of the Private Sector
November 21, 2016 Smart city innovation has traditionally been led by the private sector – more specifically large corporations that have the resources and R&D capabilities to develop next-generation technologies. In the US we are accustomed to seeing names like IBM and Cisco lead the charge. While I was in China on an Eisenhower Fellowship, I was able to meet with several companies who are doing their part to advance smart city technology, both in China and around the world.
Here is a quick snapshot of some of the corporations I visited with, where I went and what I learned. I also had the chance to meet with passionate founders at startups as well as leaders of incubators, accelerators and universities. I’ve chosen to concentrate on these larger companies for this article as an attempt to focus. There is so much more to say, it’s difficult to compile it into a few articles.
IT Solutions, Software Product and Platform, Medical Equipment, IT Education, Software and Services
- Formed 1991 // 2015 Revenue: $1.2B // Employees: 20,000
- Six software bases, eight regional centers and a presence in 40+ cities in China
- Neusoft was the first publicly traded software company in China
ZTE Corporation (Beijing)
Telecommunications equipment and systems- carrier networks, terminals and telecommunication
- Formed: 1985 // 2015 Revenue: $14 B USD // Employees: 85,000
- Operating in 160 countries
- M-ICT strategy - mobile information communication technologies (M-ICT)
Intel (Santa Clara, CA - I visited with the maker team in Beijing)
Complete and connected platform computing solutions, consisting of both hardware and software
- Formed: 1968 // 2015 Revenue: $55B USD // Employees: 100,000
- Operating in 120 countries
- Shifting from PC business to person-centric, intuitive, immersive and connected technology
One of the largest Internet companies in the world, providing social network, web portals, e-commerce, and multiplayer online games including (QQ Instant Messenger), Weixin/WeChat, QQ.com, QQ Games, Qzone, and Tenpay
- Formed: 1998 // 2015 Revenue: $15B USD // Employees: 31,000
- Monthly active user accounts: QQ: 899 million; WeChat: 806 million
Creates and manufacturers flexible displays, flexible sensors and wearable consumer electronics.
- Formed: 2012 (will commercialize 2017) // Employees: 600
- Operating in 12 countries
- In 2014, introduced the world’s thinnest full-color flexible displays and in 2015, Royole the first foldable Virtual Mobile Theater. Received CES 2016 Best of award
The largest telecommunications and information and communications technology (ICT) solutions provider in the world.
- Formed 1987 // 2015 Revenue: $61B USD // Employees: 170K (76k are R&D)
- Operating in 170 countries
- Huawei has built over 1,500 networks, helping over one-third of the world's population connect to the Internet.
Each company certainly had their unique approaches, products and services but given all of the differences, there were also several key themes that they all had in common, which fall in line with the vision presented by China’s top party leaders.
You may assume that equates to big brother policies and heavy-handed propaganda. But my experience was just the opposite. Based on what I learned, saw, explored and experienced, there has a careful crafting of a national agenda, designed to mobilize the largest population in the world from poverty to prosperity. Party leaders provide the vision and direction while local government, corporate and NGO leaders execute and implement. The synergy is resulting in one of the most quickly advancing economies the world has ever seen.
A Commitment to Innovation
In 1978, China began instituting economic reforms that introduced market principles into a state-controlled economy. There is a very clear mandate from the Chinese central government that innovation is the key to moving from a developing country to a leading world power. China has launched large-scale government programs and provided billions of dollars to fund infrastructure projects, incubators, accelerators, university initiatives and direct funding to companies. This modeling of investment has inspired companies to follow suit.
A large percentage of employees from these companies work in R&D. Of the 170,000 Huawei employees, 76,000 are R&D. Their facilities, which I had the opportunity to tour, are incredible. A walking meditation pond that spans several acres and comes complete with black swans on the Research Campus provides tranquility for clear thought.
Similarly, ZTE lists innovation as a core value of the company, invests more than 10% of annual revenue in R&D and has established 20 state-of-the-art R&D centers in Asia, North America and Europe. Since 2010, ZTE has been ranked among the world’s Top-3 for patent applications under the Patent Cooperation Treaty (PCT) each year. More than 50% of Tencent employees are R&D staff and in 2007, invested more than $14 million USD in setting up the Tencent Research Institute, China's first Internet research institute, with campuses in Beijing, Shanghai, and Shenzhen.
Each person I met with at the corporate level shared a great enthusiasm for the future, specifically the Internet of Things (IoT), big data and what is possible with connected technology. They are all focused on “what’s next” without grumbling about the past or wasting time prognosticating on the present. China’s incredible economic growth over the past few years doesn’t hurt, but even with the “new normal” rate of 6.7% (down from 7.6% in 1Q 2014), corporates show no sign of slowing.
China – and the companies operating there - are creating solutions for the world. In the short period of 38 years, China has changed quickly, systematically and dramatically. In, the central government released a set of guidelines branded the National New Urbanization Plan with a renewed focus on innovation, industry and economic development. Initially the focus was on technology infrastructure and hardware. Today there is alignment and energy around software, mobile and 5G.
Everyone Knows the Future is 5G
I spend a lot of time and energy talking and educating about 5G and what its impact is for the future of IoT. But in the US that’s certainly not typical. Smart cities is beginning to bubble up in the popular press instead of just niche publications, but all of the attention is on data, sensors and other industry-focused solutions.
In China, however, they understand the wisdom of investing in infrastructure. In 2015, China invested more than the US and EU combined. Granted this was for civic improvement projects like roads and bridges, but their philosophy extends to digital infrastructure as well. One executive in a meeting said, “In order to build the world of the future, you need a solid foundation.” I couldn’t have worded it better myself.
All of companies I visited with understand that seamless customer-centric, connected technology is where the world is headed. There is a major push for consolidation and integration and that can be seen in no better place than WeChat, a product of Tencent with more than 800 million users. The experience is quick, easy and is essentially Facebook, SMS, email, Venmo, LinkedIn, Yelp, Google Maps, Google Wallet and just about every other functionality you can think of combined. The Chinese frequently launch small businesses on WeChat and Tencent happily takes a percentage of the exchange, as opposed to Facebook and Google which chose to switch to an ad-revenue model, creating their own walled garden.
As Americans, I and the other eight Eisenhower Fellows felt sympathy that the Chinese didn’t have access to our usual social media platforms. We all made sure to load our laptops and phones with a VPN (a device that would circumvent the firewalls and provide access to American-based sites.) What we didn’t realize is that most professionals and students in China have a VPN and so have access to the same social media sites that we all enjoy. They choose WeChat because, to be honest, it’s just a better solution. At the beginning of each meeting, we exchanged business cards in the traditional way. At the end of each meeting, we all added each other on WeChat, which is as easy as scanning a QR code. Our fragmented social media solutions seem discombobulated in comparison.
The implications of the technologies from these corporate companies is incredible. There is massive effort being deployed to collaborate with government ministries and local municipalities to share data in a way that is secure and protects the integrity of the company’s users. I had a long conversation about this with Mr. Liu Qing at ZTE who emphasized that the company is dedicated to providing a new level of effiency when it comes to urban management. They are syncing information and communications technologies (ICT) enabled by mobile, high-speed Internet, big data, Internet of things (IoT), and cloud computing. They have implemented smart city projects in more than 140 cities in 40 countries.
And no one can compare with the giant Huawei, which leverages its substantial experience and expertise gained from working with government sectors to develop the e-Government platform, an integral ICT-based network for government network, cloud, collaborative offices, multi-dimensional security, and operational efficiency. Their Smart City Solution features ubiquitous connectivity, information sharing and integration, and cross-sector collaboration. “The urban infrastructure network universally connects a city's user equipment and application terminals; the cloud-based urban data center stores, shares, and integrates the entire sector and subsystem data services; the urban information sharing platform carries various smart applications, such as Smart Government, Safe City, Smart Transport, Smart Enterprise, Smart Education, and Smart Hospital.”
A Focus on Partnership and Collaboration
There is a Chinese proverb that I heard repeatedly throughout my trip, "All rivers flow into the sea." Thought to originate from Lao Tsu (Chapter 32), the aged saying can be applied to my experience meeting with corporate leaders in China. They are private sector companies competing in the modern marketplace, but there is definitely a professed commitment to the collective.
“People first” was a term I heard repeatedly in my meetings. I’m used to hearing this from city and Smart City leaders but usually private-sector companies are inherently focused on the technology. But in China this is different. Having originated from a socialist country that has only embraced market principles in the past 30 years, it makes sense that the concept of “what is best for all” permeates professional conversations. The move to privately-owned enterprises is relatively new for China, which may actually a benefit to them as the world moves to become “smarter” and more connected with a citizen focus. Perhaps the idea of competition at all costs isn’t the only way forward.
In the book, the 2016 G20 and China from Renmin University, there is a passage that sums up the sentiment that I heard in each and every meeting, “We should fully rely on scientific and technological progresses as the engine of world economic growth. In this way, we can bring the world economy out of crisis and realize the ambition of collective prosperity.”
As a result of this trip, I am more convinced than ever that our world will be an increasingly connected one thanks to technology that can capture and securely store information in real time while integrating with large systems (local, regional, national and global) to provide a safer, more efficient, more pleasant world. It definitely requires leadership with vision to create the models and invest in the infrastructure required to move from talk to reality. I saw these projects at work in China and I hope that what I experienced there is a sign of what is to come, not just in the US but around the world.