We have long been aware that the breakup of Western hegemony is in full swing and that the global financial centre is now moving towards Asia. 40 years of huge economic growth has lifted several hundred million Chinese citizens out of poverty and made China the 2nd largest economy in the world.
China is developing at an impressive rate in an age when digitalisation is crucial for economic growth. With 1.4 billion citizens, from 1989 to 2018 China has experienced an incredible annual growth of an average of 9.55%. This means that 9 of the 20 largest Internet companies in the world are now Chinese. In comparison, annual growth in Norway has been 2.3% over the same period. However, there is a great difference between understanding Chinese growth theoretically and actually seeing the results and prioritisations in practice.
To be relevant as a leader in the period of upheaval we are currently experiencing requires curiosity and the courage to learn from the best. While in 2016 I took the corporate management group to Silicon Valley, it was natural that this time we would visit China (and Hong Kong).
Here are my eight first reflections after eight days in China:
- A completely different perspective on pace.
What probably made the greatest impression on me was the astonishing pace of the companies we met. They stated it quite emphatically – we use two months to accomplish what it takes you one year to accomplish in Europe. This, combined with the ability to set really ambitious goals, paid off. The Chinese embrace a unique competitive dynamic that drives cities and companies forward at a tremendous speed.
An example is Alipay (with 800 million users) whose goal is to have two billion users by 2020. A company that has been around for less than 15 years. Another example is Shenzhen, China’s answer to Silicon Valley which, in 1979, was a sleepy fishing village with a few thousand inhabitants. Today, the city that borders Hong Kong has 9 million inhabitants.
The companies we met stated that they spend much less time on planning than Western companies. Once the goal was clear, they got started and were more focused on resolving challenges and adjusting the course along the way.
While China is building infrastructure, cities and companies at a formidable pace, at home we spend several years discussing regional reforms and municipal mergers. I feel a deep sense of unrest on behalf of Norwegian competitiveness. Do we really understand how little time we have?
- Close cooperation between business and the authorities
Even if China adopts a market-orientated approach, the authorities in China and Hong Kong are far from passive.
China has an ambition to become a global leader within artificial intelligence by 2030. And it is investing huge resources in order to achieve this goal. The authorities in Hong Kong are also making an active contribution to ensure that they will achieve the ambition of becoming the centre of innovation and technology in Asia.
Whether we visited Cyberport with 1,000 FinTech companies or InvestHK, it was the authorities who were behind the initiatives. Initiatives to ensure that academia, talent and capital are linked together in order to create new, future-orientated companies. The private sector and the state help each other in a way that would be unthinkable in most other parts of the world.
The Norwegian Minister of Industry is now in the process of conducting a policy review. The purpose of the review is to achieve the greatest possible value creation and profitable workplaces from the funds that are channelled through policy instruments. This is completely necessary and I am confident that this will result in a significantly more practical and targeted arrangement. In addition, resources must be channelled to a greater extent to help companies reach the international market.
- The power of artificial intelligence
During the trip we witnessed many examples of how artificial intelligence will come to streamline our day-to-day lives and be crucial to economic growth going forward. For example, 200 million Chinese currently use an online health platform Ping An Good Doctor. The platform provides half a million consultations every day based on artificial intelligence. Users share their symptoms and receive their diagnosis based on artificial intelligence. They then receive medication in their homes within one hour.
The impressions I gleaned from the trip convinced me that as a country and as a company, we must make a considerably more targeted investment in artificial intelligence in the years to come. At the same time, both the authorities and industry should be aware of the negative sides of technology. We need a much greater overview of the ethical challenges resulting from artificial intelligence. The future use of artificial intelligence and its success will be closely linked to how capable we are as a society of addressing this issue.
Not long ago, Elon Musk stated:
“I’m really quite close to the cutting edge in AI and it scares the hell out of me. It’s capable of vastly more than almost anyone knows. And the rate of improvement is exponential. … We have to figure out some way to ensure that the advent of digital superintelligence is one which is symbiotic with humanity. I think that’s the single biggest existential crisis that we face, and the most pressing one. … Mark my words, AI is far more dangerous than nukes”.
- 5G will speed things up even more
China has great expectations that the 5G network will increase the pace of digitalisation. We are getting closer to a society in which everything and everyone is connected via the Internet. A network based on 5G technology involves super-fast connection, good coverage, extremely high speeds and constant Internet access. The short response time paves the way for a whole new world of possibilities with regards to VR (virtual reality) and other real-time services. It is difficult to say what this will lead to in terms of change and possibilities, but I am confident that it will mean a great deal.
Telenor has already started testing and will be in place in 2020. This will provide an opportunity for digitalisation in areas that we must utilise if we are going to stay ahead of the game.
- Everyone pulling in the same direction
We know that large systems comprising many thousands of employees can quickly become slow and bureaucratic. How, then, can a company like Huawei with 180,000 employees increasingly develop at a record rate in new markets? How is it that they are in the process of eliminating the other 5G suppliers in terms of quality/price? How have they managed to elevate themselves in a few years to be at the very forefront of mobile phone development?
I believe the answer can be found in a huge will to invest in research and development (15% of top line annually) as well as highly targeted work on organisational culture. All of the companies that we met impressed us with a highly systematic approach to the company’s organisational culture. This was to ensure that all employees pulled in the same direction. Nothing was left to chance, whether it was performance measuring, storytelling or onboarding of new employees.
Alibaba, which turned 20 this year, had its own “history museum” on its campus of more than 20,000 employees. The museum recounted the story of the value basis that had made the company into one of the largest in the world. At Huawei, storytelling was also key to defining who they were and what was important. The black swans that swam on the lakes on campus were there as a continual reminder of the need to work hard and focused in order to manage unexpected incidents and future challenges. A dedicated team of researchers had also been assigned the sole task of assessing what could potentially make Huawei topple.
The targeted work on a streamlined performance culture means that huge companies like Alibaba or Huawei come across as impressively fast and very innovative.
- The battle for the best minds
There are few fields in which there is a greater difference in the best and second-best minds as the field of technology. The Chinese are in the process of dominating the best universities in the West. The proportion of international students who are Chinese at MIT, Harvard and Oxford is as much as 24%, 20% and 12%. With the global centre of gravity shifting, there is also increasing interest from newly-educated Western students who would like to work in Asia.
A leader at Startup Salat (FinTech Hub) was asked by someone in the management group what distinguished Europe from Shenzhen. She answered very quickly and slightly embarrassed: “Europe is clearly a great place to take a holiday or get married, but you don’t go there to work if you want to change the world”.
I will remember this answer for a long time. I’m confident that Sparebanken Vest will never be better than its ability to attract the best minds. Countries and regions are no different.
- Heading towards a digital autocracy?
It is impossible not to comment on the lack of data protection in China. This made a great impression.
In many ways, China is moving towards a digital autocracy in which its citizens, through the massive procurement of every type of data, are classified based on a social point system. The systems that are being implemented are redolent of computer games in which citizens are sorted into eight different categories from “AAA” to “D” – untrustworthy. However, as distinct from the gaming world, the consequences for the Chinese are very real.
For us this seems frightening and difficult to digest. Cities like Beijing will now be covered 100% by CCTV cameras, and the authorities can recognise citizens using gait and facial recognition software. If you go through a red light you receive a fine via telephone immediately afterwards and will also get a penalty in your “citizen score”.
While we talk about data protection, they talk about a safer and more just society. There is no doubt that surveillance and extensive data harvesting provide better credit decisions, lower crime rates and increased productivity. However, what was presented made us very uneasy, although the answers suggested that it was not regarded as a major problem for the citizens. It simply appeared that they were quite used to being monitored. The only difference was that the surveillance was now digital.
- Great customer orientation
A common thread at all the companies we visited was a huge dedication to solving customer problems and placing the customer at the centre. We were met with a level of hospitality and an ability to build relationships from which I believe we could learn a great deal. It was also exciting to learn about how they sent newly-educated students out to work with customers early in their careers. At Huawei (which has over 50% of its turnover outside China), newly-educated students were posted abroad in order to gain customer experience. If they were successful in two markets they were promoted to other managerial posts. I believe that the focus and will to give leaders customer-orientated experience and insight is smart.
On the plane home I am full of new inspiration but also feel uneasy inside. An uneasiness that in Norway we are miles away from the hunger we saw in China. A hunger that was about taking a position as the leading nation in the world in what is crucial for future well-being: innovation and digitalisation.
Oil coupled with sensible administration of our common values mean that we have been through an incredible process of development as a nation. But it also has meant that we cannot compete with the hunger and will to change of 1.4 billion Chinese.
One of the two founders of Intel has summed it up:
Success breeds complacency. Complacency breeds failure. Only the paranoid survive.