Note: While reading a book whenever I come across something interesting, I highlight it on my Kindle. Later I turn those highlights into a blogpost. It is not a complete summary of the book. These are my notes which I intend to go back to later. Let’s start!

His successor, Daniel Zhang, the current board chair and CEO of Alibaba, translated Ma’s strategic vision into the following execution plan: “To achieve the number (of serving 2 billion customers), we must go global. Our ultimate goal is global buying, global selling, global paying, global shipping, and global travelling.”

Since then, Alibaba’s cross-border subsidiary AliExpress has helped Chinese sellers reach out to consumers across the world; Alibaba Group has acquired ecommerce platforms including Southeast Asia’s Lazada, South Asia’s Daraz, and Turkey’s Trendyol; Alibaba Cloud has already deployed data centers in Jakarta, Sydney, Dubai, and Frankfurt, among other cities across the globe. Ant Group, Alibaba’s digital financial affiliate, has been even more active globally. Ant Group started from Alipay—a payment and settlement tool used to facilitate transactions on Alibaba’s ecommerce platforms. Over the years, it has grown into a digital finance behemoth in China, and its ambitions have not stopped there. Ant Group is a major shareholder or joint venture partner for Dana in Indonesia, Touch ‘n Go Wallet in Malaysia, GCash in the Philippines, TrueMoney in Thailand, eMonkey in Vietnam, and Wave Money in Myanmar. Ant has also taken control of Lazada’s payment subsidiary helloPay. In addition to Southeast Asia, Ant has become a major shareholder of PayTM, a leading payment/wallet service in India, and similar companies in Korea, Pakistan, and some parts of Europe.

So how did Alibaba and its contemporaries—Tencent, Baidu, Meituan, ByteDance, and so on—grow so quickly to become giants? To understand this, let’s start with a story. When I was with a group of Chinese investors in Jakarta a few years ago, I remember we were looking out from the lounge of the Westin perched on the 52nd floor. The investors were puzzled: “Why does Jakarta still have so many low-rise neighborhoods? It is inefficient.” The context of their question was the following: in the early 2000s, Chinese cities went through a wave of urban renewal. Existing low-rise neighborhoods were dismantled, giving way to high-rise residential blocks and planned communities. As a result, cities became bland and highly similar to each other, unique characteristics of cities and neighborhoods were lost, and many ordinary folks lost homes where they had been living for decades. We are not advocating that it was the right thing to do, but the resulting, almost homogenous, cityscape became the bedrock for efficient penetration of ecommerce, food delivery, new retail, and many other business models. The willingness of the government to dismantle the old for efficiency was, undeniably, paving the way for a national market in which tech entrepreneurship could scale much faster and wider. Another dismantlement, possibly more profound, was on the societal and cultural front. In the first 30 years of the People’s Republic, including through the disastrous upheaval of the Cultural Revolution (1966–1976), China’s government dismantled the traditional social hierarchy and powerful, entrenched, local interest groups. Political power, as well as land ownership, was concentrated in the hands of the government. A long-lasting effect of the upheaval was a clean slate, where infrastructure can be created much faster (e.g., no lengthy land acquisition process). In addition, more than a billion people now speak the same language (standard Mandarin), receive the same education (nine years compulsory primary and secondary), and watch the same entertainment programs. This might sound trivial, but if you know that China was previously so fragmented that during the World War II, army regiments from different provinces simply could not coordinate with each other because soldiers and officers spoke mutually intelligible tongues (dialects), you start to appreciate what has been done. The government is also willing to admit its own mistakes and dismantle its own orthodoxy. Throughout much of the twentieth century, successful Chinese entrepreneurs almost all made their fortunes outside mainland China, mainly in Taiwan and Hong Kong, as well as across Southeast Asia. Mainland China, in contrast, experienced years of political, economic, and sometimes military turmoil. There were almost no successful private companies in this period. A pivotal period in history was the reform and opening up initiated by Supreme Leader Deng Xiaoping in 1978. Over a period of 20 years, pragmatic policies gradually and then entirely took over from orthodox communism. As Deng said, “It doesn’t matter whether a cat is black or white; as long as it catches mice, it is a good cat.” This shift to pragmatic policies and focus on economic development unleashed the growth potential as well as the entrepreneurial zeal of millions of Chinese. “Development is of overriding importance,” Deng repeatedly said. Successful entrepreneurs, both domestic and foreign, became idols of young people. Jack Ma, Pony Ma (no relation—the founder of Tencent), and many others left their stable jobs in the public and private sectors to create their own companies; they were joined by the likes of Robin Li, who quit his job in the United States to return to China. On the hardware front, the government has built high-speed rail, expressways, and aviation networks across the country, making the flow of goods and people fast and efficient. This highly reliable and efficient infrastructure is the system that many Indian entrepreneurs and executives are looking for. Such buildup is almost always planned and executed ahead of time—when Shanghai Pudong International Airport was completed and opened in 1999, many media commentators were still complaining that it was a white elephant—the existing Hongqiao International Airport was not running at full capacity yet. However, barely three years later, in 2002, the new airport was already running at full capacity. In effect, China’s government has created, over a relatively short period of time, a gigantic, homogeneous market with a large population and extensive consumption power. The United States is the only other country in the world that fits these criteria and matches the size. It is interesting to note that the worries that the Chinese people had in the 2000s about traditions being lost turned out to be unfounded. When the economy developed, many of the traditions feared lost began coming back even stronger. For example, people, including the young, nowadays attach more importance to traditional festivals compared to 10 years ago. Han-style clothing (the traditional dress of the Han Chinese people) has become more popular with Generation Z.

Interestingly, many successful or struggling entrepreneurs we personally know have been reading the five-volume Selected Works of Mao Zedong in recent years and drawing inspiration from the leader of the communist revolution. This is quite interesting because they are probably the biggest beneficiaries after Mao’s societal and economic policies were lifted by Den Xiaoping. For them, Mao’s writing is a contemporary of the Art of War, an ancient text written by Chinese military strategist Sun Tzu more than 2,000 years ago. In fact, some entrepreneurs half-seriously said that the Communist Party of China, regardless of whether you agree with their ideology or not, is a great startup success. Mao Zedong’s military and political strategy led to his victory against the Japanese invasion, against the much better equipped Chinese Nationalist forces in the civil war in the late 1940s, and again in achieving a stalemate against American forces in Korea in the 1950s. How did they win? With a playbook that recognizes when to use 游击战 (guerrilla warfare) and when to use 运动战 (mobile warfare). Guerrilla warfare is self-explanatory, whereas mobile warfare keeps moving the military units, and always making sure of military superiority in each specific battle, in order to wipe out entire enemy units, one after another. Depending on the circumstances, military commanders will choose whether to use guerrilla warfare versus mobile warfare. When the enemy is strong, the right strategy should be concealing the forces as small, mobile, and independent guerrilla units. A 16-character mantra was distributed among the commanders of various units: “敌进我退, 敌驻我扰, 敌疲我打, 敌退我追”—“We retreat when the enemy is advancing; we harass when the enemy is camped; we strike when the enemy is tired; and we chase when the enemy is in retreat.”

Once sufficient military strength is built up against the enemy, the strategy becomes mobile warfare. The Chinese government adopted exactly the same methodology in the Korean War—although the Chinese forces were weaker than their US foes by a large margin, at each specific battlefield they were superior in both numbers and vantage points. Another example of Mao’s strategic thinking is the notion of using the countryside as a base to encircle and finally capture cities (农村包围城市). The conventional wisdom and doctrine in the early days of the communist revolution was to follow the Russian experience: organize the workers in cities to protest and eventually seize power. The strategy, however, failed to work in China the way it had in Russia. Mao, an avid reader of Chinese history and a former librarian, challenged the notion. He believed that China was still a largely subsistence farming society, and the real power was in the countryside. To succeed in the revolution, the communists must abandon its worker-focused doctrine to set up bases in the countryside, accumulate power, and eventually surround and take the cities. He did not say that workers in cities were not important. In fact, he always believed that workers should be the core of the revolution together with the peasants. However, his deep sense of reality made him focus on the countryside in the beginning. When the communists eventually accumulated enough power through their countryside and mountain bases, their attacks on the cities were both swift and decisive. Following this methodology, Alibaba built its ecommerce empire through first addressing the customer-to-customer (C2C) market, focusing on low-price products and individual sellers. Once the sales volume became big enough, and the scale brought efficiency, Alibaba moved up the value chain to build the brand-focused Tmall.

Pinduoduo has been using the same strategy to challenge Alibaba in ecommerce, while Meituan built its online travel business precisely starting with the masses. This is in contrast to the conventional wisdom that ecommerce companies should focus on highly transactional sizes and good margins. Uber started with a black car service before moving to the mass taxi market, while Tesla’s first model was a premium vehicle, before using that to prove its name to scale the mass production. There is no right or wrong here, just which strategy fits the current stages of the market more. In this, Mao has said that 没有调查就没有发言权 (“Those who have not conducted investigation shall have no right to speak”). One of Mao’s essays studied vigorously by entrepreneurs is the 1930 Report from Xunwu (“寻乌调查”). In this more than 80,000-word-long text, Mao detailed the history, agriculture, business, artisanry, land ownership, and major social conflicts of Xunwu, a small, remote, and mountainous county in Jiangxi province. The detailed assessment helped Mao form the revolutionary strategy.

Another tactic “virtue,” controversially, is copying. Entrepreneurs ruthlessly copied tech products and business models not only from the United States, but also from each other. As a result, any emerging business model will quickly descend into an aggressive and messy battle of dozens, hundreds, and, in some cases, thousands of companies, often doing exactly the same thing. Unlike in traditional industries where it would take months if not years to build up the supply chain, distribution network, and customer base, with tech and mobile internet infrastructure, firms’ every timeline is compressed. This is something that many foreign companies operating in China then (but maybe less so now) didn’t get.

In 2010, Groupon, armed with its success in the United States and Europe, decided to venture into China with its business model of group buying. Almost overnight, thousands of group buying sites emerged in China—including Manzuo, Lashou, and Meituan. At one time, more than 5,000 group buying businesses were registered in China. In what was dubbed the famous “war of a thousand group-buy companies” (千团大战), the belligerent companies employed almost exactly the same business model as Groupon and competed fiercely with each other. Some players employed ground sales teams whose sole purpose was to sabotage competitors by offering merchants better terms to switch over. Groupon’s European managers were unaware of the competitive environment they were getting themselves into. They followed a successful playbook, but they were just unaware of the aggressiveness of the competition and were not able to react nimbly enough. Groupon’s first merchant was hijacked by Lashou’s ground team before the deal went live. That is still a folktale told by the entrepreneurs in China. Similar stories were repeated many times in the decade that followed: ride hailing, O2O (online to offline), shared bicycles, shared umbrellas, power banks, live-streaming, cross-border ecommerce, community group buying, and so on. Even the more technologically sophisticated areas of smartphone manufacturing, artificial intelligence, face and voice recognition, virtual reality, and electric cars were not spared. By now you should know that the business situation is not about just copying—because Groupon was copying its successful playbook into China as well. It is actually about many players ruthlessly copying from each other, at an intensity not seen in other markets.

In a closed ecosystem, protected by the Chinese firewall for good or for bad, internet firms and business models in China have their own trajectory of development. The gigantic market with fierce competition has the potential to breed unique species. Investors and entrepreneurs have always known that only a small number of players could survive, and then thrive. During the process, the market is educated, experienced talent is groomed, and fortunes are made (for some). Such competition also embodies a system of fast innovation through competition and rapid iteration. Players have to make incremental innovations to be competitive in order to survive, and when hundreds of players do that, the whole sector evolves rapidly. For example, when smartphone manufacturers in China were competing fiercely with little differentiation, some started to innovate: construction workers needed a mobile phone with seven stereo speakers; African traveling salespeople needed a mobile phone that can last a month without charging. Incremental innovations were designed, rolled out, and quickly tested—in a fashion very similar to the concept of design thinking that is being taught in business schools across the world.

Former and current executives of Huawei we spoke to point out that the key success factor is relentless willingness to do the extra to make customers happy. “Initially, Huawei and ZTE actually recognized that their products were inferior, but to survive they decided to compensate for that disadvantage with better services and fast problem solving,” one former Huawei executive told us. “Large Western companies typically face very different competitive environments and product advantages, therefore it is difficult to develop the internal urgency to serve across the organization.” Even to this day, Huawei still embodies the spirit to serve the customers to the extreme. The CTO of a large consumer internet company told us that whenever they have a problem with their network, even though it might not be caused by Huawei products but by those of Huawei competitors, Huawei’s service engineers will quickly jump onsite to try to fix it anyway, with no questions asked about whose responsibility it really should be.

Entrepreneurs who fail often start building other businesses—keeping the whole competition engine running. However, winners of such battles can hardly sit on their laurels and enjoy the spoils. New competitors keep emerging, often from incumbents encroaching from adjacent industries to participants of emerging disrupting models. In contrast, many American entrepreneurs were born in privileged backgrounds with early access to computers. They often have a greater vision and determination to innovate and change the world. American society also prizes original, revolutionary ideas—to the extent that Mark Zuckerberg, founder and CEO of Facebook, is still reprimanded in the ecosystem for copying other people’s ideas.

Alibaba’s Jack Ma built himself up as an icon to inspire people, but that was not enough. His cofounder, Lucy Peng, devised a whole set of values, methodologies, and organizational practices to ensure that people across the various levels of the organization are aligned. An obvious sign of these tech firms’ abilities to get their people to work hard is that Jack Ma of Alibaba and Richard Liu, founder of JD.com, both publicly advocated “996 culture”—working from 9 a.m. to 9 p.m., six days a week—and claimed that 996 culture is a blessing. One of Alibaba Group’s six core values is “If not now, when? If not me, who?”

In addition to product and operations, many of the Chinese tech giants also iterate their organization at a speed never seen before (for large, complex companies). A malleable organization becomes essential when constant strategic adjustments are needed to adapt to the rapidly changing external environment. When the market is full of uncertainty and the future path is ambiguous, organizations need to be ready to change and adapt. However, change is against our human nature. Mentally we may understand the need for change, but psychologically we prefer the status quo because changing is usually accompanied by uncertainty and anxiety.

Jack Ma of Alibaba Group has been a key champion of embracing change. He professed that gospel in multiple speeches to internal and external audiences. In 2011, Alibaba’s executives had a heated debate on the company’s future strategic direction—which model to pursue for Taobao, its main consumer ecommerce platform. Instead of running more strategic exercises, Ma decided to split Taobao into three entities: eTao, Taobao.com, and Taobao Mall (Tmall), and let them compete against each other. It is not easy to restructure a well-established company and reassign its people to competitive positions. But Alibaba achieved this in a very short period of time. Indeed, Alibaba conducts small-scale reorganizations almost continually throughout the year. We know personally someone who has had five different bosses over 1.5 years—a record—and another person we know went through six reorganizations over her three-year stint at Alibaba. Similarly, Huawei forces their executives to switch posts and countries once every two to three years. They intend to create a culture that continuously changes and avoids organizational stagnation—a common problem facing large, successful MNCs. This nimbleness and constant change allow large Chinese tech companies to adapt to the fast-changing environments in their home market. Senior leadership, who senses the shifts in the market, could quickly deploy people and resources to address changes, fix problems, and seize opportunities. This also keeps executives on their toes and prevents slack.

Huawei has repeatedly used the hardships and restrictions it has suffered, including the bans by the Trump administration, as tools to motivate its workforce—its founder, Ren Zhengfei, endured significant hardship during his early years, through the cultural revolution, military career, and a few near-death experiences while turning Huawei from a small electronics manufacturer to a global network and consumer electronics giant. In a similar fashion, Alibaba has included “must have suffered hardship before” as a recruitment criterion in hiring key managers—a reflection of Jack Ma’s early days where he was rejected in, among many occasions, an interview for a part-time job at KFC. One of the cofounders of Alibaba told us that when he was joining Ma in the mid-1990s, his mother had serious reservations because Ma “looked like a swindler.” The notion about hardship is actually about resilience and perseverance because managers know that the undertaking will be hard.

Masayoshi Son, the bold founder of Japan’s SoftBank, is now a household name. His Vision Fund, with more than half its money coming from Saudi Arabia and United Arab Emirates, had made a splash in the late 2010s, backing high-profile companies including WeWork, Uber, DoorDash, and Opendoor. To the Chinese, Son is a familiar figure as an early backer of Alibaba Group, which still counts SoftBank as its largest shareholder. Oddly, most Chinese tech entrepreneurs, executives, and investors are very familiar with Son’s theory of time machine management, which seems little known outside China. The theory was actually not a fable, but was discussed extensively in SoftBank’s annual report. In the extensive document, time machine management is described as “fostering the global incubation of superior internet business models developed in the United States.” The rationale behind this approach is simple: new business models emerged in the United States, where economic development, infrastructure, and tech penetration was superior. Sooner or later, the same business models will emerge in other parts of the world, and SoftBank should be an active participant and investor in this process. A decade later, Germany-based Rocket Internet implemented this strategy (without mentioning the name) thoroughly and launched hundreds of internet businesses across Europe, Latin America, Asia-Pacific, the Middle East, and Africa. Are Chinese tech firms and their business models going to be replicated and succeed in other regions, just like the time machine theory predicts?

In December 2016, one of us was in Dubai. The air was full of excitement that the ecommerce sector was on the verge of taking off. A month earlier, a group of investors led by the chairman of Dubai’s largest property developer, Emaar Group, and Saudi Arabia’s Public Investment Fund announced they would invest US$1 billion to create a new ecommerce platform called noon.com; later, in the same month, Bloomberg reported that Amazon was in talks to acquire Souq, the region’s largest ecommerce site, which had become a unicorn (a privately held startup company valued at over US$1 billion) in a US$275 million round earlier that year. Amid the excitement, a few executives I spoke with had some slight concerns. “There is this company that came from nowhere, is growing really fast in the Saudi market, and looks set to overtake Souq there soon,” said one logistics executive who had noticed JollyChic. JollyChic is based in Hangzhou, a city that was little known in the business world before hosting Alibaba’s headquarters. You could hardly find any information online, aside from its product promotions and app install ads—no media interviews with the founder, no case studies about its practices, and even no LinkedIn profile for its key executives. This is what we call guerrilla forces, which means that it is hard for external people to find information about it in the public domain. The company, founded by veteran ecommerce executive Aaron Li, by then already had a headcount of close to 2,000, mostly in China but also including a large customer service team based in Jordan. Yet almost nobody we spoke to in the Middle East even knew who the founder was, which city the company was based in, or how big it had become. People struggled to understand why this unknown company could catch up so fast, unsettling Souq, which had been operating in the region since 2005. Three months later, in March 2017, Amazon concluded the deal to acquire Souq, at a valuation of US$580 million, or a 42% discount from the previous valuation. Competition from not only Noon but also JollyChic was an important factor in the urgency to sell. That same month, I was in Jakarta, Indonesia. Again, the chatter was about a little-known company almost suddenly appearing everywhere. J&T Express, by then a two-year-old ecommerce logistics company, already had more than 10,000 employees in the country. A few executives from rival ecommerce logistic companies I spoke with were struggling to understand how J&T could grow so fast. “Our experience shows it takes years to build logistics operations in the challenging landscape of Indonesia,” one said. Again, J&T had almost the same level of secrecy as JollyChic: no media interviews, no case studies, no LinkedIn profiles. Similarly, when SheIn (usually seen as Shein in the United States)—a cross-border ecommerce player—overtook Amazon as the most downloaded shopping app on US iOS and Android app stores in May 2021, most people over the age of 30 had not heard of it. One reason is that SheIn only exists in the virtual world, as a pure online digital player, which is different from Zara and H&M, which operate many brick-and-mortar stores. The other reason is that its leadership team had not given any interviews to public media. However, SheIn has achieved remarkable market penetration in the United States with a focus specifically on female Gen Z consumers. Its growth has been further fueled by the global pandemic when consumers relied more on online shopping. These episodes have something in common: a Chinese or Chinese-founded tech company suddenly grew in leaps and bounds in a large foreign market, leaving local executives in rival companies startled about how these new entrants could amass the expertise and resources to grow so fast. Unlike the flamboyant Jack Ma, founders of these companies usually keep a low profile—you can hardly find any press releases, media quotes, or interviews in the public domain. A tech journalist with a major global publication who has been following a number of such companies once told us his frustration: “Over four years of talking to their PR teams, I have never managed to extract a single meaningful quote from any of them.” While the world was surprised, this is actually a classic strategy from Mao’s guerrilla warfare playbook. Executives often believe that if they could survive China’s hypercompetitive domestic tech market, they would not be afraid of any international competition.

Throughout our career, over which we interacted with many Chinese tech leaders of various company sizes and levels of success, we realized that the successful ones, while on the surface can be very different, have the following traits in common:

They are more often than not flamboyant but always inspiring. They are on the ground and have suffered difficult circumstances together with the team. They are deeply reflective and sometimes philosophical. They draw inspiration from historical events and personalities. They discuss and debate a lot with experts. They have a profound understanding of human nature and know how to distribute spoils of success and reward team members. They are passionate and determined—just like Tang Sanzang was in Journey to the West.

Lei often shares his reflections with the team as well as at public events. One of our favorites is: “Never use tactical diligence to cover for strategic laziness.” He used this to point out a common problem facing leaders: getting so busy in minute operational details that they stopped learning, thereby depriving the organization the ability to grow even further.

In order to support WeChat, Pony Ma decided to cannibalize QQ, its long-term instant messaging champion in the desktop era. He later reflected: “In the era of mobile internet, a company might seem invincible but actually has a lot of risks. If you do not grasp the trends in this society, you are in a very dangerous situation—whatever you have accumulated could crumble overnight.”

Pony Ma knew that to constantly grasp new trends is not easy at all. There are internal vested interests (such as QQ’s success), product DNA, and other factors in the organization. He says, “My way is to have another backup, open up an independent unit, that is unrelated to the current products or ways of doing things.” He also convinced the QQ team that it was necessary. “We have the shares of the same company, and therefore are on the same boat. So everyone needs to have a longer vision, instead of narrowly focusing on the interests of your department. I think people can understand that.” Interestingly, despite the fast-growing viral app WeChat, QQ later eventually launched a mobile version as well, and shifted its focus to younger audiences. “Many young people do not want to be in the same social circle as their parents. They will be very active on QQ but use a completely different style to share anything on WeChat (which is used by their parents).”

Fundamentally, Wang, Zhang, and Huang are thoughtful strategists, relentless executioners, and resilient survivors. They are thoughtful with their idealism, setting the vision for the firm, especially when the firms were still in the dark tunnel fighting for the future without a clear direction. They are resilient survivors, being serial entrepreneurs and market creators for multiple times, trying every possibility to survive, continuously facing the threat of death. They are also pragmatic and relentless executioners. They are determined to push forward and advance despite all the hurdles. What’s more, they are young, energetic, and engineering-trained. They are all deeply influenced by the entrepreneurial culture of Silicon Valley, making them produce the potential of international companies.

Huang studied in the United States and worked for Google; Wang had a brief stint in the United States after graduating from Tsinghua University, but dropped out to start companies in China; and although Zhang did not study or work in the United States, he talked a number of times about his reading of Silicon Valley companies and their culture(s). Among these are Netflix’s “context, not control” philosophy and Google’s OKRs (objectives and key results)—the latter of which is probably more rigorously adopted at ByteDance than even at Google. Like their forebears, the trio had a string of entrepreneurial experiences, including small successes and notable failures, before starting their current companies and making them big. Coincidentally or not, all three had exactly seven years of entrepreneurial experiences before founding their respective current companies.

From battle to battle, Wang built deep trust among his top lieutenants. He once said: “Things in nature do not have clear boundaries, therefore we should not set boundaries to ourselves. As long as the core is clear—who do we serve? What services do we provide? We will keep attempting new business areas.”

Some people have described Wang as a cockroach, that is, he never stops fighting. Others say that he crawled out of fields of the dead. People who are close to him describe him as a man of few words but very deep thinking. A few key decisions he made after careful deliberation helped Meituan avoid cost traps: an early example was when many large group buying companies were pivoting to not only services but also goods to keep growing, Wang decided to not do so. It turned out that these companies were quickly obliterated by Alibaba after launching its own group buying services for goods. Later on, even as Meituan took an investment from Alibaba to survive, Wang engineered a bigger investment from Alibaba’s arch rival Tencent to stay independent, unlike its competitor ele.me, which was eventually absorbed by Alibaba with its founder pushed out.

We think there are three critical elements that these Chinese leaders and companies should have in order to succeed overseas.

Mental Space and Judgment: Juggling Demanding Chinese Markets with the Complexity of New Markets In a new market with incomplete information, it is often better to use existing recipes as a starting point and take an iterative approach when the market gives you the feedback to make adjustments—this is tech startup 101. This is how successful Chinese tech leaders expand their businesses into new segments in the China domestic market. Outside of China it has proven to be much harder because the leader is not there all the time, and therefore the right feedback might not be able to resonate in a timely way that it would for local competitors. Western tech companies had this same challenge when they entered China, which led many to fail.

Daniel Zhang (no relation to the ByteDance founder), Jack Ma’s successor as chairman of Alibaba, built his career success in Alibaba when he served as the president of Tmall, and created the Singles’ Day (November 11) shopping holiday. Nowadays the annual shopping event has generated gross sales three times higher than Black Friday and Cyber Monday combined! The Singles’ Day under Tmall has made Zhang’s reputation and paved his way to get the CEO baton from Jack Ma. While Singles’ Day has now become the biggest shopping festival in Southeast Asia, in Zhang’s mind, Tmall’s business model (with a main focus on brands) was also how a successful ecommerce business should run from the start. This inevitably impacted his thinking about the strategy for Lazada, Alibaba’s ecommerce subsidiary in Southeast Asia. One executive we spoke to said that Zhang focused too much attention on making Lazada Tmall-like—perhaps a reflection of his Tmall background in China. In the meantime, Lazada’s regional competitor Shopee, which perhaps understood the overall market structure and, crucially, its stage of development, in Southeast Asia better, decided to focus on a C2C marketplace to start. Interestingly, this is similar to how Alibaba started their own C2C marketplace, Taobao, back to 2003.

Even if the Tmall model would eventually prove to be successful in Southeast Asia, Lazada would have lost the momentum of accumulating customers and expanding its support infrastructure in Southeast Asia. However, if Shopee decides to focus on its B2C outfit ShopeeMall, it would be able to do it much more easily, just like Taobao launched Tmall in China in 2008. When leaders make strategic decisions, it is natural for them to be influenced by their experiences, especially successful ones. Developing new mental frameworks to incorporate the new inputs in a different market is one of the key challenges for any leader. For Chinese leaders who have developed very customized mental frameworks based on the specifics of the Chinese market, it can be even more challenging. Running both Chinese and overseas businesses at the same time could further complicate this, because the demanding market reality in China subconsciously would reinforce the preexisting mindset, even though there is new feedback from global markets. Therefore, it was no surprise that Yiming Zhang of ByteDance wanted to stop running the day-to-day operations in China in early 2020 to focus on how to make TikTok a truly global company. He would need that mental space to make it work.

PATH DEPENDENCE: Organizations could be an imprint of their leaders, whose cognitive framework is based on their own characteristics and background. The way they understand the market to develop the strategy and execution is influenced by their prior experiences. When leaders’ cognition is based on success in the domestic Chinese market, they could become more confident in the existing (i.e., “proven”) recipe, and are less flexible or open to different views in overseas markets.

Commitment: How Many Resources Should You Pour into New Markets? We often see a dilemma for many Chinese tech companies: while founders/CEOs are often keen to develop international markets, China’s domestic market is always the core. Besides, global markets are fragmented, with each single market occupying perhaps an even tinier percentage of the potential. They might nonetheless require a similar level of attention compared to larger markets including the home market of China. The commitment comes in different forms: funding, people, organizational support, and leadership attention. More important, when encountering challenges in the new markets, would the leader double down on the commitment to resolve the challenge, or not?

Didi’s IPO prospectus revealed that after years of development, international business accounted for only 2% of the company’s overall turnover. By contrast, 43% of Uber’s revenue is from regions outside the United States and Canada. Similarly, Alibaba’s international commerce (including retail and wholesale) in FY2020 was only about 7% of the company’s total revenue. That included its cross-border business, AliExpress, which did not have substantial actual operations outside China.

To develop international markets seriously, leaders need to justify all the investment and resource allocation by market potential. In addition, leaders also need to steer the organization toward supporting such initiatives when domestic business units will naturally hold much more weight. Finally, leaders will need to make sure the people working on international initiatives feel motivated and supported—we have seen many expansions fail not because of market reality, but because the best managers will not want to be on such projects versus domestic ones which are perceived to be better for their career. It is a chicken-and-egg problem—if you do not pay an outsized proportion of attention, it is quite difficult to raise the low percentage of the international markets’ contribution to total revenue as well. The competition between Kuaishou and ByteDance internationally in the small video app space clearly shows the challenges.

Leadership’s Managerial Attention: Too Little or Too Much? The importance of commitment is easy to understand; the question of leadership’s managerial attention is a bit trickier. Shall the leaders pay close attention to the overseas expansion? The first reaction is yes, they should. Daniel Zhang visited Singapore once every month to look at Lazada before the pandemic, showing that Lazada and Southeast Asia is his and Alibaba’s top priority. When Uber competed with Didi, its founder, Travis Kalanick, traveled to China much more often. However, we should not equate leaders’ attention to continuous hands-on management. In 2021, Xiaomi ranked first in the Indian smartphone market with a more than 25% share, ahead of Samsung, Vivo, Realme, and Oppo. What drives Xiaomi’s success in India? That it’s cheap and easy to use, or its leaders’ commitment? Yes, both count. In addition, Xiaomi founder Lei Jun’s efforts and attention in the Indian market must be considered. Lei visited India as early as 2001 and kept a diary of his visits. Over the years he had a comprehensive understanding of India’s economy, culture, and software industry dynamics. In 2015, Lei attended Xiaomi’s overseas launch event in India. His awkward English greeting “Are you okay?” went viral and made Xiaomi even more well known. When Lei visited India in 2017, Lei was granted an interview by Indian Prime Minister Narendra Modi.

Throughout Chinese history, there was a deep mistrust of processes and institutions, especially at the higher level. Historical leaders were successful not because they built the best systems, but because they pulled the right strings of people around them: reward them for their achievements, punish them for major mischief, tolerate and even make use of small mistakes or flaws, and, most importantly, balance their desires with those of their peers. One Chinese tech leader once shared, “For the key people around you to work well with you, you need to deeply understand their motivations, and distribute both hardships and rewards accordingly.” He believed that ruling by processes, while seemingly fair, can lead to misalignment of objectives among the top echelons, especially in the fast-changing environment. Modern experts claim that leading through a human-centered approach, rather than processes and institutions, was outdated and a chief contributor to China’s decline in the eighteenth and nineteenth centuries. However, this mindset still prevails in China, from the top political leadership to small and mid-size enterprises (SMEs). Something that is deeply rooted in history will die hard.

When companies expand overseas, they encounter another set of people challenges: Should they send their loyal lieutenants who are more familiar with the organization, or hire local experts who are more familiar with the market? How do they marry these two different skillsets that are equally important for success? Do they fit the local senior hires into the company’s culture, or adjust the culture to something of a hybrid? If the latter, how do they get existing people to adjust their approach to the new hybrid culture? And, if loyal lieutenants are sent to foreign markets, how do companies make sure they become pioneers, not marginalized exiles? After all, in Chinese history there were plenty of promising mandarins sent to and then forgotten at the frontiers.

When we talk about people, first and foremost is identifying the right people at each stage of the company’s development, and bringing these people onboard. We all know that large tech companies, including Chinese internet firms, nowadays have high hiring standards. However, we are less interested in the hiring process and standards and more in what type of talent suit these Chinese tech companies at different stages, and how to find such talent. It is an evolving process—finding the matching talent for each, and subsequent, phase of the company’s growth. Zhang Yiming, who made the pledge to make ByteDance a global company at the beginning of 2020, has been known in China for attaching great importance to having great talent in his organization. In multiple speeches and memos, he described his recruitment philosophy as “do challenging things with great people,” that is, identifying candidates with strategic thinking, shared values, well-rounded knowledge, and problem-solving abilities, to match with “challenging things.”

ByteDance’s Zhang has mentioned that candidates for roles requiring experience need to have qualities including critical thinking, rationality, ambition, and self-control.

Extrinsic motivation, which is often through monetary and other financial rewards, is often what the employees need. In big cities such as Beijing, Shanghai, Shenzhen, and Hangzhou where these internet companies are headquartered, young graduates face increasing pressure to buy a small apartment due to increasing real estate prices in the past decade. Owning a home in China is a social status symbol, a prerequisite for mothers-in-law to accept her daughter’s fiancé and to agree on the marriage. In 2008, a friend of mine who had joined Huawei a year before ended up in a large, less-developed country in central Africa. “Life is really tough here, people get sick and I can’t find good food, at all.” “Why did you go there?” I asked. “I get better compensation, as well as faster promotion,” he said. “These are enough for me to be here.” He subsequently moved through a number of African countries. When I met a Huawei executive in 2019 at a dinner, I told him that my classmate was also in Huawei. After checking through the internal directory, he exclaimed “Holy cow, he is six ranks higher than me, despite having the same years of experience.” So the decade spent in Africa was not in vain. My friend was indeed generously compensated and promoted. He bought a good house in Shenzhen, although he was rarely there, and his kids are receiving the best education in the city.

ByteDance’s Zhang also stressed to the HR department that employees’ compensation packages should be “top of the market.” He thinks that maintaining competitive compensation will increase the need for companies to deploy and perform well. This practice is similar to Netflix’s in hiring the best people with top compensation. Therefore, at ByteDance some outstanding employees have the chance to receive year-end bonuses equal to 100 months of their salaries, and good performers are likely to receive year-end bonuses equal to 20 months of their wages. The bonuses given by these high-tech firms are comparable with those given by the top investment banks on Wall Street. In addition to monetary incentives, companies also offered gifts at traditional Chinese festivals, such as mooncakes for the Mid-Autumn Festival and rice dumplings for the Dragon Boat festival. These are common practices that exist in both public and private sectors in China; however, tech companies often employ unique designs for gift boxes, which could often become a social media sensation as employees of different companies compare examples of the mooncakes they have received.

While companies are going all out to bring in talent at all levels, every leader agrees that the senior ranks, including their lieutenants, are more important than others. “People at the middle level and below, while important, will not differentiate us from our competitors,” the CEO of a $100+ billion company once shared, bluntly. “Our competitors have access to the same talent, and their capabilities will be very similar to ours.” “The top-level people, however, are where we can build a winning edge,” he added. The senior ranks of these companies are typically comprised of three types of people:

Those who started the company with the founders, or joined very early on Experienced professional executives who joined the company at the growth stage Senior managers who were promoted through the ranks

In 2019, at the 20-year anniversary of the group’s founding, Alibaba further refreshed its value system again, and the six new principles are:

Customers first, employees second, shareholders third Trust makes everything simple Change is the only constant Today’s best performance is tomorrow’s baseline If not now, when? If not me, who? Live seriously, work happily

Daniel Zhang, who had succeeded Jack Ma as Alibaba Group CEO by then, said that the key objective of the new principles was to “find people who can be with us on the journey for the next 5, 10, and 20 years.”

Throughout the reign of Jack Ma, Alibaba attached great importance to the values of its employees. For its quarterly assessment of its employees, values account for 50% of its total weight, while results account for the other 50%. Interestingly, in its early days, Alibaba divided its employees into five categories based on the assessment, using very bland language:

Dogs (poor results, poor values) Wild dogs (good results, but poor values) Little white rabbit (poor results, good values) Cow (average results and values) Stars (good results, and good values)

It was relatively easy to deal with all the categories other than “wild dogs.” However, in early years, after the group ruthlessly fired employees in that category, the whole organization realized that management was serious.

Alibaba’s managers are systematically trained on how to deal with people. They are told to “Dream big, start small, and learn fast.” Fundamentally, managers need to understand that the team can only succeed when the team members’ personal goals are aligned with the team goals. In order to achieve that, they need to uncover each team member’s personal goals, and also continuously explain the team’s goals to the employees. It is a recurring four-step process:

Deeply understand the team’s goals. Form the team’s “dream.” Uncover individuals’ personal dreams (can be material, growth, or responsibilities). Align the team and personal goals and dreams, and continuously sell.

“Continuously sell” is a key reminder that managers need to use all the channels—verbal, emails, recruitment, and so on—to emphasize the key messages internally and externally. For the employees, the best timing to sell includes onboarding, their (quarterly or annual) review, encountering difficulties, or achieving key successes. Managers are also reminded that “Employees are an asset lent to you by the company. It is your responsibility to add value to them.” Therefore, managers need to constantly ask themselves, “Has the value of my team members increased or decreased while they are with my team?” “Are they merely completing tasks or continuously growing professionally?” Taking care of team members’ personal emotions is also a key responsibility; otherwise, “when a setback comes, their first thought would be leaving.” Another important aspect of the managers’ training is how to deal with people who are not performing or are not suitable for the role.

Managers are asked to assess the candidates on six criteria before making a decision: Yes:

This person will bring long-term value to the company. This person will enhance the strength of the team. We will suffer if this person goes to a competitor.

No:

This person should be able to do the job well. We have a shortage of people. I’m a little hesitant, but I don’t think this person has got anything wrong. Business pressure is very high, and it is good to have someone covering the job.

On the firing side, managers are asked to reflect first on the question “Have I helped the person adequately?” before making a decision. They also need to remember some simple mantras:

“While the heart has to be benevolent, the knife should be fast.” “Letting the person go is for their own benefit.” “Happy stay, happy go!” “Remove the weeds on time.”

A horrifying situation would be “those who should leave don’t, those who should stay, leave.” Also, oftentimes a person should leave their current role not only because they are a bad performer; in situations where they are outperforming the role they are in, or have exhausted their growth potential in the role, they should be given more responsibilities, rotate to another role, or be entrusted to train the team. All these concepts are distilled into very simple principles and mantras, and used extensively in internal training. Also, as they preached, training, just like managers selling the dream, needs to be continuous and repeated.

Often, not only the leaders, but also other teams or executives in China would need to face the overseas managers, and misunderstandings and frustrations can happen in areas and places where leaders least expect. This can cripple trust and operational effectiveness. What makes things complicated is that Chinese culture has very high context, that is, many messages are not explicitly communicated but are embedded in the common context. The fact that many of the markets Chinese tech companies operate in, such as Indonesia, Thailand, and Saudi Arabia, are also high context but with different context, makes communication even more difficult. In this regard, American companies such as Amazon have big advantages, because the American culture is inherently much lower context (direct), and in many countries you have enough elites who have received Western education and therefore are well versed in communicating with Americans.

Successful Chinese tech firms typically have powerful and stable leadership who keep the decision rights. Information communication is channeled from top to bottom, and decisions about resource allocation are made at the headquarters. In general, organizations use a centralized structure at the top to ensure panorganization integration and that the overall goal is secured. The question is to what extent, in terms of size and complexity, the organization can grow while people at the top can still have the mental capacity to make informed, optimized decisions. To defy gravity and keep their organizations adaptable, leaders of large Chinese tech companies have made various efforts, often taking inspiration from history. We observe that Chinese internet firms have developed a number of tactics, including:

Continuous organizational restructuring Rotation of executives Internal competition Internally developed productivity and collaboration tools Small, agile teams and the attempts of Zhongtai

Executives around the world are probably familiar with organizational restructuring—which happens once every few years to realign the structure and control costs, sometimes but not always accompanied by retrenchments. What makes large Chinese internet firms unique is that they may launch small-scale and continuous organizational restructuring even if there is seemingly no need for major strategy changes. For example, since Daniel Zhang took over as Alibaba Group’s CEO in 2015, a major restructuring happens every year: portfolios of major business units are readjusted, executives reassigned, and new ventures incubated. Under these major restructurings, smaller adjustments happen at departmental levels, and even micro adjustments at team levels. After announcing one of the changes, Zhang said: “Business environment and customer requirements are continuously changing, Alibaba is always growing with constant changes: from separating Tmall from Taobao to all-in mobile, every major organizational adjustment releases huge productivity.” He added: “Only when we are brave to change ourselves, and embrace the uncertain future, can we bring certainty in services and experiences to our consumers and customers. It is the best future proof for any company now.” These are only the major restructurings. Many friends who have worked at Alibaba have encountered various minor, departmental restructurings. The most prolific case we can personally verify is six times over a year. This is hardly healthy for a person’s career development, but was deemed necessary to keep the organization adaptable.

Alibaba is not the only company that does frequent reorgs. Wang Xing, Meituan’s founder, once told his team that “Meituan is always six months away from bankruptcy.” The remark reflects Wang’s sense of urgency on strategy, organization, and the competitive environment. Meituan’s business and organizational structure have been constantly adapting to the rapidly changing competitive environment. In 2015, it structured the company in five business groups, covering hotel, food delivery, dine-in, catering, and other platform businesses. In January 2017, the five business groups were collapsed into three to better reflect market demands and internal efficiency. By October 2018, a further two rounds of restructuring had taken place, regrouping existing businesses and adding new businesses. Even in 2021, when ride-hailing giant Didi faced regulatory challenges and was forced to stop new user signups, Meituan quickly seized the opportunity, breaking its Smart Transportation Group and elevated ride-hailing business into a separate business unit reporting directly to the CEO. At that time, the Smart Transportation Group had been set up for barely a year. Meituan’s organizational restructuring, on the one hand, is to respond to the change in its strategy. On the other hand (perhaps more importantly), it’s a top-down effort to inject urgency and energy to the organization against bureaucracy and complacency.

There is a saying from imperial times: “The mountain is high, and the emperor far far away,” describing that local officials in the vast empire would often govern without the central government in mind—they were too far away anyway. To retain control, the first empire in China more than 2,000 years ago had already abandoned the feudal system. Instead, it created an alternative system where officials, including county magistrates and provincial governors, would have personally come from a different locality, and they would rotate. This system, if implemented well (a big if in imperial times), would prevent corruption as well as local vested interests having too much control. The same system is adopted by the Chinese Communist country, and also by many tech firms. Huawei and Ping’an, two firms revered for their organizational practices, are known for mandatory rotation of their executives. The job rotation system (轮岗制) in Huawei is divided into business-based rotation and post-based rotation. For instance, the practice of business-based rotation is to let R&D staff rotate to other product-related business, including design, production, service, testing, and so on. In contrast, post-based rotation refers to the change in the positions of mid-level and high-level cadres. These rotations are mandatory every three years. Huawei’s job rotation system has several potential advantages. First, it reduces coordination problems among organizations. The job rotation system helps managers get familiar with other departments and facilitates cross-department cooperation. When the executive is eventually promoted to a more senior position, they would have become familiar with the different parts under their purview and found it easier to deal with the challenges at a higher level. Second, it reduces the formation of interest groups in the organization. If managers stay in one post long enough, corruption will likely develop secretly, as in imperial times. Rotation reduces the likelihood of this happening.

Third, the job rotation system also provides some employees who are not progressing well in their current position an opportunity to try something else. In addition, Huawei’s job rotation system requires employees in its global markets to rotate across different countries. Many executives transferred from domestic to overseas units will face a novel, unfamiliar environment—a significant challenge but also at the same time a great learning opportunity. We believe that the premise of the rotation system demonstrates that companies are very confident in their corporate culture and their products. Why? Because the costs of job rotation are extremely high. We cannot expect too much of an employee by asking them to fit in a new environment quickly. If they don’t fit in, the company has to pay for this wrong decision. As an old Chinese saying goes, one careless move forfeits the whole game (一着不慎满盘皆输). For most people, forced rotation is certainly not a comfortable experience. However, in addition to the objectives mentioned previously, an additional benefit of the rotation is that it creates a common “memory”—a form of camaraderie—among the managers who have been through such experiences. We have seen many cases of managers complaining about the discomfort in the rotations, but eventually they become very proud of the organization they are working for. Many internet companies, while not having a mandatory rotation system such as Huawei’s, encourage their managers to rotate through different roles. Quite often, the biggest perk of undergoing rotations is that you get promoted faster. Overall, through rotation systems, these firms build a pool of executives who have experience in decision rights across different levels and different units, access big-picture information, and understand how resources are allocated in the organization.

Many Chinese internet firms deliberately create internal competition when resources allow. A key reason is to avoid making costly strategic mistakes, like the case of Alibaba’s three entities (eTao, Taobao.com, and Tmall) competing to develop an ecommerce platform and Tencent’s three teams working on WeChat at the same time. Another important reason is to let the internal competition stimulate the organization, to keep its people alert, especially when the organization is seemingly successful. Instead of staying in the comfort zone, internal competition helps to push the organization to step out of the areas where they have had market dominance. Tencent’s internal competition was not limited to WeChat. In fact, different studios are competing for the company’s billion-strong user base of gamers. Even globally in the MOBA (multiplayer online battle arena) space, Tencent’s own Arena of Valor competes against Krafton’s PUBG Mobile and Garena’s Free Fire—both publishers count Tencent as a major shareholder. ByteDance does something similar.

Pony Ma once famously proposed the concept of “gray mechanism”; that is, that a product should not be the way it was originally designed, but should stay in the gray area. In this gray area, users will decide the fate of the product. Based on this philosophy, Pony proposed the following: tolerating failure, allowing moderate waste, and encouraging internal competition and internal trial and error. WeChat’s emergence from the competition among three separate teams, as discussed in the Leadership chapter, came through the gray mechanism. When the product(s) was being developed, the company did not provide a clear design idea or development direction. Rather, three teams worked independently and the users were the final judges of which product would prevail.

Another feature that is probably unique to especially large Chinese internet firms is the adoption of internal productivity and collaboration tools. For example, Alibaba developed DingTalk, Tencent has WeChat for Work, while ByteDance has Lark.

These collaboration tools have also evolved to reflect the culture, organizational characteristics, and workflow design of their parent groups. For example, DingTalk allows managers to ping and track their subordinates around the clock, often to the great annoyance of the employees. You would see Alibaba executives at casual lunches suddenly leave their tables because they are “dinged” by their boss. In comparison, ByteDance’s Lark focuses a lot on the needs of an “app factory,” where collaboration and the use of OKRs (a goal-based management framework popularized by Google) are embedded into the system. Lark salespeople sell not only the tool, but ByteDance’s way of effective collaboration. Compared to Slack, Google Suite, or Microsoft Teams, the popular tools in the United States, DingTalk and Lark are much more comprehensive: they include not only messaging, documents, spreadsheets, and a calendar, but also video conferencing, task management, HR processes, automation, and much more. In other words, they try to cover every aspect of a modern worker’s productivity and collaboration needs. For Chinese executives, perhaps the most natural tool is WeChat for Work, for the simple reason that it resembles the consumer version of WeChat, which most of them already use on a daily basis.

Chinese internet firms have their own evolution process. While the big decisions tend to be centralized at their headquarters, some large Chinese firms with multiple product lines have also tried to delegate some decision rights at the product/team levels. This is especially true for some businesses, such as the gaming development of Tencent. Supercell, a gaming company acquired by Tencent, has developed several popular games, including Clash of Clans and Clash Royale. When asked about the secret of the company’s success, the CEO of Greater China replied, “small teams and independence is the key to our game development.” Indeed, Supercell’s teams have always been around 10 people—similar to Amazon’s philosophy where a functional internal team needs to be so small that it can be fed by just two pizzas. Each team has the freedom to decide what kind of game they want to develop and ultimately whether they want to release it to market. It should be noted that this is a perfect example of Tencent’s game business. In fact, most of Tencent’s game research and development teams adopt a small, project-based organization structure. The small team is a closed loop, which includes all the functions needed to develop a game such as planning, artwork, programming, and other functions. These kinds of small teams minimize the need for cross-departmental coordination on a day-to-day basis. In addition, such teams can be reassigned or redistributed if the project they are working on becomes no longer relevant, or another more promising project needs more resources. This arrangement avoids promising employees getting stuck in a part of the organization that is a dead end. However, if not executed well, it could also be problematic because some of the essential but not lucrative projects might find it hard to get enough staff.

To enable and empower such small teams to function well, especially in front-line product development, in recent years a number of large internet companies have tried to build a strong middle platform (Zhongtai). Zhongtai, spearheaded by Alibaba but also tried by other companies, actually borrows the concept from the modern military. For example, during the World War II, the US military adopted divisions and brigades as its main combat mode. But in recent conflicts in the Middle East, the US military changed their tactics and used small teams of 7 to 11 soldiers at the front lines. Why? Because they are supported by a well-functioning, strong central system that provides air, missile, and intelligence cover whenever needed. As a result, commanders of small units are able to make very flexible decisions based on the battleground situation, which leads to optimal outcomes and minimal losses. Similarly, Zhongtai is established to provide data, technology, and other resources to the front-line product teams. Zhongtai empowers and enables small teams on the front lines to make quick responses to the market and act nimbly. Compared with traditional hierarchy, Zhongtai is in theory a better way to coordinate and support all the departments within the company. Therefore, the concept of “big middle platform” and “small front-line team” has been adopted by other Chinese internet firms, although they may use different terms.

For instance, Tencent reconstructed its business units in 2018, aiming to achieve a similar goal. The most prominent change in the organization was the establishment of a technical committee to provide support for other business units. ByteDance’s front-end platform consists of the company’s products (apps) which are directly facing users such as Toutiao, Douyin, TikTok, Xigua, and so on. Each product needs to respond quickly to users’ needs and pursue rapid innovation and iterations. Its back-end platform consists of the infrastructure and data center, where stability always come first. Zhongtai (Middle Platform) is composed of ByteDance’s technical modules or pieces that have been built for previous initiatives. Zhongtai provides services and support for all relevant products while facing technically repetitive tasks. For example, user behavior detected in Toutiao can help refine the recommendation engine, which also applies to Douyin (TikTok). While initiating a new project, Zhongtai can provide general technology, data, algorithms, and other solutions to speed up the development process as well as reduce costs. However, it is worth noting that the success of Zhongtai is not guaranteed, and is still contested. In the military, although ground situations change rapidly, scenarios can be standardized and modeled, with the relevant systems developed. In the tech sector, however, there is much more complexity and much more unknown in scenario planning, which makes building a functional Zhongtai much more difficult. In addition, Zhongtai is often planned and released centrally, that is, by people who can’t “hear the gunfire,” so how to ensure that it can reflect the various product lines and markets is an acute challenge.

Some companies have tried different approaches to tackle the organizational challenge in overseas markets: Tencent has an international business group (IBG) where the headquarters and overseas teams have a channel to communicate. Huawei used a dual-leader system in foreign markets: one is a Chinese expatriate from the headquarters who understands Huawei’s culture, product, and organization, and the other is from the local market and understands local culture, market, and connection. These are often not ideal or adequate, but they are part of the learning process. Organizations will need to be constantly evolving to adapt to the realities of a multinational business. Two critical enablers of improvements here are leadership and people.

Every successful consumer tech company in China is at its very core a master of consumer traffic. This means that companies initially achieve success by being able to acquire and retain customers more cheaply than their competitors. The ultimate formula is that customer acquisition cost (CAC) must be lower than customer lifetime value (LTV). In order to sustain the business, many major tech companies resorted to offering additional services to better retain the consumers, and also monetize more from each customer—and both aims eventually increased the customer LTV. You do not simply lump everything together. Each new offering that is added to the app has to be closely related to existing offerings such that consumers find it natural to use the new service, and the app increases its conversion rate. The second factor is unique to China. In the early days of tech development, Baidu, Alibaba, and Tencent banned each other’s links in order to retain customers: for example, you can’t share a Taobao product on WeChat, and you can’t use WeChat as a payment method on Taobao. The tactic, initially used to avoid leaking too many users to other services, effectively created a few walled gardens of ecosystems. WeChat started systematically channeling their customers to Pinduoduo and JD.com, two ecommerce companies Tencent had invested in, while Alipay made repeated attempts to introduce social elements in its app. Both Tencent and Alibaba have invested in companies across all consumer tech sectors to rival each other. At the same time, smaller but emerging tech companies, fearful of becoming too dependent on the giants, also started to build their (smaller) walled gardens. Therefore, de facto super apps proliferated. At the end of 2021, the government started making efforts to break these walled gardens and force interconnectivity. Whether that will make the ecosystem more open and companies more focused on developing their niche specialties instead of going multi-vertical remains to be seen.

Internationally, tech startups are advised to develop minimally viable product (MVP) first to test the market, before adding features. Major Chinese tech companies follow the same model. Pony Ma of Tencent once said, “The market will never be patiently waiting. In competition, a good product always starts from imperfection.” However, he added that once a product is in the market, it needs to make very frequent improvements toward perfection. “If we fix one or two problems every day, within a year we will have a very good product for our customers.” Jack Ma also advocated for “dream big, start small, learn fast,” while other tech leaders have also emphasized the same logic of starting small and iterating fast. Therefore, new products are often launched with the intention of taking advantage of opportunities to make improvements in the future. Those that withstand the test of the market will be improved and eventually become successful, while others might be phased out very quickly.

Chinese companies, big or small, tend to form clusters when they are outside China. This practice dates back to imperial times, where migrants from the same hometowns tended to move to places where there was already a community of fellow countrymen: Cantonese in California and Peru and Malaysian capital Kuala Lumpur; Fujian people in Singapore, Indonesia, and the Philippines; Chaozhou (Teochew) natives in Vietnam and Thailand; and Hakka in India, Mauritius, and Borneo. Companies operating in foreign markets are not always able to tap into the most trustworthy local sources. A congregation of the existing Chinese community often facilitates the flow of information and fosters infrastructure. For example, the clustering in Brazil of gaming companies was because a set of service providers figured out payment, customer acquisition, and operations for Garena’s Freefire, while service providers camped in the same housing estate (Taman Anggrek) in Jakarta, Indonesia, provide a whole suite of services for fintech companies, from legal and accounting to credit assessment and debt collection. However, the clustering effect also increases the intensity of competition among Chinese companies. JollyChic and the ecommerce industry in the Middle East is a good example. JollyChic was the first Chinese ecommerce company to “discover” the market of Saudi Arabia and invest heavily in that market. In 2016 and 2017, it enjoyed almost unrivaled success in offering large selections of fashion products into the Kingdom. However, once its success became known through the Chinese communities in Dubai, many other Chinese cross-border ecommerce players jumped on the bandwagon. Very quickly, the blue ocean of cross-border ecommerce for the Middle East turned into purple or even red.

There is an optimal window of opportunity when the market (infrastructure and customers) is ready but has yet to take off. This window can open when there are dramatic shifts in demographics in the market. Such shifts include new generations of consumers or new forms of access—an obvious example is when millions suddenly gain access to the internet through smartphones. It can also open when competitors make a strategic shift. For example, Pinduoduo seized the opportunity—created when Alibaba moved upscale (for better profitability)—to attract the leftover market for cheap products and low-end customers. When it built volume in these markets, it also gained a cost structure designed for low-margin markets and an ability to scale up, capabilities that incumbents find hard to match. It then moved up the value chain to attack the more profitable segments guarded by incumbents. Sun Tzu summarized this well in The Art of War: 善用兵者,避其锐气,击其惰归 (The strategist should avoid the enemy when he is strong, and attack when he is tired). To be able to detect such opportunities, companies and leaders need to have a very acute sense of the movement in the market; to seize these opportunities, they need guts and commitment, and Leadership. In addition, they also need to be ready in both product and organizational capabilities, and have a support ecosystem in the market to tap into. Otherwise they can see the opportunity slip away in front of their eyes. The ancient Chinese philosopher Menicius summarized it all: 天时地利人和—which literally means, right time, right place, and right people. To seize the right window of time, the key is not only patience, but also a deep understanding of the market, as well as yourself—there is no shortcut for that.

Localization of products is often the most talked about subject in any forum on Chinese tech companies’ overseas ventures. While we believe the question of “localization” should really be a question of “understanding” and “adaptation” of leadership, people, and organization, eventually the product offered in specific markets needs to fit with what the market needs and is willing to pay for. A simple question here is about the balance between standardization and localization: To what extent should the products be customized to local market needs? The tradeoff is easy to understand. Global standardization, using the same product (brand, design, features, and operations) across multiple markets, helps reduce cost, create synergies in centralized R&D, production, and operations, whereas localization—the process of adapting product design, brand, format, operations, and marketing to specific characteristics of the destination markets—creates better-suited products and thus enables business to grow better locally.

The challenge for tech/internet companies is that they are not able to afford the years that traditional companies took to understand a market and calibrate products. Because the distribution to end consumers is now done via smartphones directly, the timeline is much condensed, market feedback is almost instantaneous, and market share can be gained or lost quickly. Internet companies, as a result, need to adapt their products much more quickly compared to traditional companies. This is in their nature and one of the key reasons they stand out in their home markets. However, in foreign markets, this adaptation has proven to be quite difficult, especially for companies whose home presence is big and successful. We have to say that US tech products are usually less localized, especially to emerging markets where infrastructure, payment methods, and customer trust are all different. That is probably why Amazon still concentrates its operations largely in developed markets (with the notable exception of India) and Facebook focuses on advertising, without getting into ecommerce, which involves the supply chain. Lack of localization is often identified as a key reason why eBay, Amazon, Yahoo!, Groupon, and others failed in China. However, the reality is that, because China is a vast market, it naturally attracts capital and entrepreneurs, and you will naturally have a lot of well-funded local competitors who understand the market better and can move much faster compared to global firms. We all know that if you iterate once every month while your competitor iterates once every week, you will fall far behind within a year’s time.

Chinese tech companies, in their expansion overseas, especially in large markets, face the same reality. Ant Group faced challenges in adapting its advanced financial technologies with its joint ventures in Southeast Asia, losing to much less sophisticated local rivals; Baidu struggled to make its product click with Japan’s and Brazil’s consumers after multiple attempts and acquisitions. In the case of Ant Group, it is not surprising that they are proud of their technology, the mobile payment system, the cloud infrastructure, and their capability to integrate with various pieces of Alibaba’s ecosystems. However, in the perspective of consumers and business partners in Southeast Asia, the number of total sales in the “Double 11” online shopping festival in China is something they will never reach, and thus matter little to them. Ant Group’s technology and offerings, while advanced, are too complicated for their needs. Similar to US companies in China, many Chinese tech firms struggle with reconciling their large and successful products in China with feedback from other markets that sound counterintuitive to what they are used to.

Transsion launched the first dual SIM card phone in 2007, and a four SIM card phone in 2008. Given the fierce competition between telecom operators in Africa (e.g., Telkom, Vodacom, Orange), call charges between different operators were expensive. To take advantage of cheap intra-network rates and promotions, users needed more than two SIM cards; otherwise, they had to change SIM cards frequently. Acknowledging the importance of music and entertainment, Transsion developed louder and clearer speakers for music and phone calls. To overcome the problem of insufficient, unreliable electric power supply in some countries, Transsion developed a long-lasting battery and low-cost quick-charge technology. To take account of language differences, Transsion developed operating interfaces with local languages, such as Amharic Tigrinya and Oromo in the horn of Africa, Swahili in Kenya and Tanzania, and Hausa in Nigeria. To cope with heat and humidity, Transsion developed an anti-corrosion coating technology tailored to hot climates, with strong acid resistance up to pH 3.5, with a sweatproof algorithm to improve the success rate of fingerprint unlocking, as well as a sweatproof USB interface and heat protection for electronics. Its most well-known function was the “beauty camera,” which made it easier to take selfies for dark-skinned sub-Saharan Africans in low light—a feature lacking in mainstream brands. Transsion built a database based on millions of pictures of Africans and optimized the camera and algorithms to light up the faces adequately in photos taken in low light settings.

ByteDance even set up the TikTok headquarters in Singapore to further strengthen its product independence. The company is also trying to replicate this separation in other offerings. For instance, Lark keeps its productivity suite separate from its domestic Chinese version, Feishu (飞书). “China’s market accounts for more than 90% of our business. Had we bundled them together,” one former senior executive told us, “we would not be able to develop international markets properly because Chinese product requests would always take priority—and there are a lot of such requests.” Ant Group further defined the approach, by setting up a G-local (global localization) in its subsidiaries in Southeast Asia to systematically harmonize Chinese product experiences with local realities.

BBB (Build, Borrow, Buy) broadly describes three paths to enter new markets or pursue new growth initiatives. “Build” refers to companies establishing a new presence in the foreign market all by themselves, relying on their own resources and capabilities to self-plant new subsidiaries. On the other end of the spectrum is “buy,” which refers to entering the foreign market by acquiring others’ existing businesses in different countries. It is a relatively quick method to gain others’ resources, capabilities, and local expertise through purchasing their assets and operations.

“Borrow” is somewhere in the middle—you do not fully rely on your own resources, nor do you solely depend on others. Instead, you try to partner with others to enter the new market, borrowing your strategic partners’ resources and capabilities in the foreign market to achieve your purpose in the global market. The other dimension—active and passive engagement—is from the perspective of managerial attention, suggesting the extent to which the executives in the headquarters spend their efforts on the entities they established in the foreign market, ranging from being substantially involved in the local business operations to minimum interference. Thus, three paths and two types of engagement result in six potential expansion strategies: greenfield venture, airborne, joint venture (JV), passive investors, fully integrated acquisition, and separately operated acquisition. Tech companies venturing overseas may use a combination of these strategies, and they may also evolve over time, for instance, starting from JV and moving to fully integrated acquisition.

The most popular online game in China since 2008 is Happy Farm, a multiplayer social game where the users play as the owner of a farm and grow a variety of vegetables and fruits. You can weed, use pesticides, water your plants, and harvest, or help your friends to do so, or even steal their plants. The Happy Farm game was promoted to more than 20 countries, acquiring 500 million overseas users, and is one of the most successful Chinese games venturing overseas. The man behind it is Tang Binshen. In 2014, Tang’s company launched a mobile massively multiplayer online strategy game, Clash of Kings, which quickly gained popularity. The game was downloaded more than 65 million times during its first year. It placed sixth on the best-seller list in North America. Tang also launched web browser, search, navigation, and antivirus tools targeting emerging markets. What is common among all these businesses that Tang built was that he didn’t really need anyone actually physically present in the target markets. After making his money from gaming, Tang went into FMCG (fast-moving consumer goods) and created a blockbuster fizzy drink brand called Genki Forest in China. As of the end of 2021, Genki Forest was valued at US$15 billion.

Build Greenfield venture: A company setting up foreign businesses using its own resources and being actively involved in its management; examples are ByteDance’s TikTok, or AliExpress. Greenfield ventures have the benefits of full control over strategy and operation. You can set your own agenda, the pace of entry, and the region priority. You have the final word and full discretion on how much to invest, how to integrate the existing supply chain, how to hire, and how to manage the relationship between the headquarters and subsidiary. However, the firm now bears the highest risk as a consequence of ownership. This model requires the firm to have the full team and all the capabilities needed to run the subsidiaries. In this case, organizational learning, experimentation and adjustment, and swift response to the market become super critical. For example, TikTok had to spend a lot of effort engaging with different regulators, especially in more conservative countries, on its content moderation. Airborne entry: Building foreign market presence with a minimum involvement on the ground; this is typically adopted by pure internet models. Examples are some mobile gaming companies, or SheIn. In this mode, the company does not set up operations in local markets; rather, they rely on the existing infrastructure to deploy their solutions into the foreign market. In traditional industries, this is similar to the foreign export whose purpose is to sell merchandise to overseas markets.

This model was fashionable before 2018 and is gradually fading. The reason is simple: more successful airborne companies realize that their business in destination markets is growing fast and that they will not be able to cope with things like customer services and partnerships without having a local presence. For example, when SheIn encountered customs problems in Indonesia in mid-2021, without having its own local presence and depending fully on the service provider network it was not able to solve the problem on its own and subsequently decided to exit the market instead. Nevertheless, this mode has its own benefits—low commitment and risk. The downside risk is minimal. It could be a viable approach for entrepreneurs to test business hypotheses and accumulate knowledge and expertise before making larger engagements in the market.

Borrow Joint venture/active alliance partners: Pooling resources with one or more (often local) partners, and actively involved in their management. Examples are Ant Group’s digital wallet joint ventures across Southeast Asia and JD’s ecommerce joint ventures in Thailand and Indonesia. In this case, local partners can contribute to the JV with its local knowledge, expertise, and social network to connect local business elites and regulators. This is also a very established method for large international consumer brands to enter emerging markets. For instance, JD’s ecommerce platforms with self-built warehousing and logistics systems in Thailand and Indonesia are joint ventures with Central Group and Provident Fund, respectively. Joint ventures allow JD to tap into resources, expertise, and relations of their local connection.

JVs help to reduce the risk of overseas exploration as a company works with local partners. However, JVs have their own challenges: they need to adhere to the goals of their partners, which are not always aligned with their own. In the case of JD in Thailand, JD’s objective is probably to develop ecommerce quickly to be competitive against other major platforms such as Shopee and Lazada, whereas Central Group is more concerned with acquiring ecommerce expertise as a defensive method to protect its massive offline retail business. Almost all the joint ventures we have witnessed, from Ant-Emtek-Dana in Indonesia to Ping’an-Grab in Southeast Asia, have some degree of incentive misalignment. In theory, regardless of expansion mode, the firm needs one or more local partners. While on paper many such partnerships point to obvious win-win situations, in reality many things could go wrong when interests or opinions misalign. It is therefore critical to choose the right partner. Thorough due diligence is absolutely required before any decision is made. We have recently seen at least half a dozen cases where the Chinese tech firm is stuck with a local partner that does not align with them in strategy and style, but it reaches a point that too much is at stake to break the partnership. Passive investor: A minority stakeholder with varying degrees of influence in direction. Examples are Tencent in Sea Group, and Alibaba in PayTM. Investing sounds easy, as large Chinese tech companies typically have no shortage of cash and can invest at various stages in home-grown tech companies in destination markets. Investing, however, means that the investing firm needs to position themselves correctly. We have seen a few (albeit rare) cases of large Chinese companies learning the market through investing, and subsequently deciding to enter on their own, crushing the home-grown companies they had invested in. We have also seen companies attempting to invest in all leading players in a particular sector, reducing the risk of concentrated bets but also the trust investees have in them.

While each company will have its own circumstances, perhaps Tencent’s investment in Sea Group will be a case worth studying. As Sea’s largest shareholder, Tencent gave the company substantial support in distributing popular games and in operational expertise, in addition to cash. At the same time, Tencent does not meddle with Sea’s own operation and decision making, at all. Sea’s Freefire game actually competes against Tencent’s Arena of Valor in international markets, and Tencent seems to be perfectly fine with that. The secret of Tencent’s success is that it is more of a passive investor that does not directly interfere in operations. Meanwhile, Tencent is ready to share knowledge, expertise, and even access to its consumer base. The relatively passive role gives Tencent’s investees full discretion and strong incentives to develop the local market, and they indeed achieve a win-win situation.

In comparison, Alibaba and Ant’s investees in Southeast Asia often complain about the group trying to exercise too much control, especially through back-end data systems. Alibaba and Ant executives will often force some changes on home-ground business founders to benefit Alibaba Group, at the cost of their own businesses, and thereafter often create tensions or even failures.

Buy Acquisition and full integration: Purchasing/acquisition of an existing business. An example is Alibaba acquiring Lazada (Southeast Asia), Trendyol (Turkey), and Daraz (South Asia ex-India). This approach has several advantages. The business is already established, with core market experience learned through practice. This saves the buyer a significant amount of time, reducing the early-stage failure risks and, crucially, the risk of missing their window of opportunity. That said, the risk is when the buyer decides on a full integration. As is typical within a large tech conglomerate, the merger and acquisition (M&A) team is separate from the post-acquisition integration team, and coordination might not be fully smooth.

Alibaba’s acquisition of Lazada happened in 2016, Alibaba had neither managers with international ecommerce experience nor experience with coordinating a large business subsidiary outside China. A lot of time and energy were consumed during the process of fitting, which coincided with Shopee’s meteoric rise. Baidu’s acquisition of Peixe Urbano in Brazil and Tencent’s acquisition of Ibibo in India, mentioned earlier, faced similar challenges. Tencent’s acquisition of iflix, a video-streaming player in Southeast Asia, however, followed a different trajectory. The Tencent WeTV team, which already had experience running streaming in Southeast Asia, took over quickly. The acquisition is recent (in 2020) and it is still too early to judge whether it is a success—but early signs show some promise. A more certain example of success is Didi’s acquisition of 99, a Brazilian ride-hailing company. This is partly due to the fact that ride hailing, as a business model, is much more straightforward than ecommerce, or content, in post-acquisition integration. Acquisition and separate operation: Makes an acquisition but chooses not to actively engage in the operation of the acquired target. Examples are ByteDance’s acquisition of Moonton Games, and Tencent’s acquisition of Riot Games. Firms may not be eager to integrate their acquired target into the parent companies for different reasons. One reason could be because of their strategic goal: Tencent’s strategy is to allow the target firm’s managers to have strong incentives and independence in decision making, and to allow internal competition. Such acquisition, often, is strategic, allowing the buyer to own a piece that might be beneficial and critical for the future, and avoid the same piece from falling into the hands of competitors. Indeed, for Chinese firms that are a newbie in the global business, waiting for some time until the market condition is mature is better than a harsh integration without a proper team and mutual understanding. As one executive once said, “When we become more mature and understand each other better, we could do things together.”

Multiple Levers There is no one mode that is always better than the other. Which mode is best depends on a firm’s strategic goal and commitment, willingness to control, and risk tolerance, as well as circumstances and market reality. In addition, firms can use multiple levers to achieve their goal of overseas expansion. For instance, ByteDance first used a mode of greenfield venture by launching TikTok specifically for the overseas market. It later acquired musical.ly and integrated it well into TikTok, which was a landmark in its growth trajectory. Regardless of the expansion mode, when market opportunities emerge, operations actually start, and the clock is ticking, you need to make decisions and implement them. As we can see, products are important, but they are just one element of the whole puzzle in the long journey of new overseas markets. To pace yourself well, make the right decisions, employ the right people, and leverage the right resources, organizing to deliver what you promise to the market, there is a lot to be done.

Business decisions can be easily decomposed into small pieces and then put back together. In addition, what makes the overseas journey tougher for Chinese tech firms is how to pace the speed, sequence, and rhythm in their expansion. In the seventh century BC, the Chinese military strategist Cao Gui famously said: 一鼓作气, 再而衰, 三而竭 (Sound the drum for the first time, the army is vigorous; second time, it becomes weak; third time, it becomes exhausted.) Tech companies entering new markets also need to pace themselves so that they do not become exhausted. New markets have a lot of uncertainties and quite often the speed of business development is far from a company’s ideal case. If not managed well, the team could very easily lose morale and disintegrate. When a company or a venture becomes exhausted, good people will leave, and investors will lose patience. It takes extraordinary leadership to turn things around. Therefore, the correct approach is to pace well, and grow with the market. SheIn, a Chinese cross-border ecommerce company, was for a long time seen as an underdog compared to more famous rivals JollyChic and Club Factory. Both latter companies were aggressive with their investment, while SheIn’s management focused on building tech and data capabilities and a sophisticated supply chain. In 2020, when the two companies crumbled, SheIn more than doubled its annual sales to close to $10 billion. To summarize, all these interrelated decisions pose great challenges to business leaders. However, compared to people and organization, which are a higher bar to overcome, we believe that Chinese tech firm leaders are more capable in dealing with product-related decisions, as many of them started their career as product managers, and understand the need to listen to the customers.

Shopee’s strategy is more similar to Taobao’s, where massive, low-value customers and orders are prioritized compared to more premium ones. This strategy was puzzling to many investors, analysts, and competitors, but fairly familiar to anyone who has closely watched or participated in consumer tech growth in China. “To understand all these years of Chinese consumer tech growth, you need to first understand this word: 流量 (consumer traffic),” one billionaire exited founder once told us. Underpinning this strategy is that a large platform needs to start and dominate high-frequency, low-value transactions to capture and retain users, and then build high-value, low-frequency transactions on top to monetize. “The reverse has never worked in China,” the same founder told us. Alibaba started its consumer ecommerce with the low-value, high-frequency Taobao for massive volume, and then spun off Tmall as a separate brand for more premium, branded purchases to make a profit. Similarly, Meituan used its low-value and low-margin but high-frequency food-delivery business to achieve volume and profit from its high-value, lower-frequency travel and other businesses. Other successful large consumer tech platforms in China all used similar strategies. The hierarchy of transaction cases in descending order in the conversion funnel (from the highest frequency to the lowest) is also applied in other domains of business, such as social and content (e.g., WeChat, TikTok) and payment (e.g., Alipay), in addition to ecommerce (e.g., Taobao), ride hailing, and food delivery. Compared to many of its rivals in various markets, Shopee has applied this strategy very consistently, much to the bewilderment of its competitors. Lazada executives lamented in 2017 that Shopee customers were bargain hunters not worth pursuing; Latin America’s MercadoLibre had the same stance in 2021; so do ShopeeFood’s main competitors in Southeast Asia in 2022.

One question that often puzzled investors and analysts who have followed China tech closely was “This all seems like common sense to us, why do Shopee’s competitors not act or react accordingly to arrest Shopee’s growth?” First, this strategy is not necessarily common sense to everyone. There is still debate over whether success in China is country-specific (ultimately China is unique in many aspects) or widely applicable in other emerging markets too. Executives from Shopee competitors we spoke to are often dismissive of the strategy. There are some reasons why the same strategy does not work everywhere every time. While consumers across Southeast Asia and in Brazil and Poland responded to these growth tactics well, consumers in France showed an obvious behavior of … indifference. Shopee could not get them to act on campaigns or discounts that work in other markets, resulting in very high effective customer acquisition costs—a key reason for its withdrawal from France in March 2022, less than four months after entry. However, by 2021 it was clear to everyone that Shopee’s strategy was winning in most markets in Southeast Asia. We somehow feel that the competitors, while now taking Shopee seriously enough, are still not entirely convinced about Shopee’s strategy, or decisive enough to respond to it. One example is Carousell which has not exactly been clear about whether they want to focus on just classifieds with advertising or close the loop by capturing transactions with a commission charged. Tokopedia, Shopee’s largest competitor in Indonesia, initially struggled with Shopee’s assortment of cross-border selection, and debated internally for a long time whether they should launch across the border as well. As a champion for enabling Indonesian SMEs, it was quite difficult for them to open up to Chinese sellers; however, the lack of a clear decision in this and many other areas allowed Shopee to eventually overtake Carousell to become the largest marketplace in Indonesia.

However, how about Alibaba affiliates Lazada and AliExpress, which operate in the same markets as Shopee? Taobao grew exactly with this strategy, so are Alibaba’s other affiliates in China? Surely they understand and appreciate that? Well, they do. However, for them the problem is much more nuanced. Organizational issues and decision-making mechanisms in Lazada (and AliExpress too) are often more complicated, which prevents consistent execution even if they are fully aware of what Shopee is up to, and have better technology, operational experience, and expertise to counter that. Another challenge facing Alibaba companies is that they are too familiar with the ecommerce evolution and what advanced stages look like. That led to Lazada to focus a lot on brands earlier on, limiting itself to a premium position while Shopee was building volume. As mentioned earlier, it is much easier to launch into low-frequency, high-value transaction cases from high-frequency, low-value ones than the other way around. Lazada’s attempts to compete against Shopee through free shipping falls exactly into this predicament.

Another key advantage of Shopee is against the common perception of the first-mover advantage that is often discussed in highly competitive markets. However, Shopee, in Southeast Asia at least, has largely and almost deliberately chosen to be a late mover, and turning that into an advantage. In 2016 when Shopee stepped on the pedal in Southeast Asia, Lazada had been around for four years; when ShopeePay started aggressive acquisition in Indonesia at the end of 2019, at least three other mobile wallets—Ant Group–backed Dana, Grab and Tokopedia–backed OVO, and Gojek’s GoPay—had been fighting an intensive subsidy war for many months; Gojek and Grab’s food delivery business had formed a duopoly when ShopeeFood entered Indonesia in 2021; not to mention the challenge to Allegro in Poland and MercadoLibre in Latin America. How did Shopee do all that? First, while time to market is critically important, the very notion of first-mover advantage needs to be decomposed. In the markets Shopee has chosen to enter to challenge the earlier movers, we often see a situation where the earlier movers have spent money, time, and effort educating the market, be it sellers, buyers, ecosystem partners, or their own employees; however, the market is yet to be fully penetrated. In other words, there is significant market potential that has yet to be fully captured, and the earlier movers have not yet reached the stage where they are able to consolidate the market leadership and build a moat. Enter Shopee, with its decisive tactics: they can onboard sellers and customers who are already educated; poach the executives of competitors who are already well trained; and plug into the infrastructure that has already been built. In all these areas you just need to be better than the competition, and by observing closely the mistakes and weaknesses of competition, it is not that hard to figure out how to avoid them. Then supercharge. This strategy has worked very well for Shopee in many business areas in many countries in Southeast Asia. And it allowed them a continuous momentum of growth while competitors had often exhausted themselves through all the market education.

Underpinning the late-mover advantage is the leadership’s, notably Feng’s, clear sense of timing and prioritization. As a big organization with multiple business lines, there are many things that Shopee could do, and should do. However, the resources and people’s mental space are always limited. What you could do does not mean you should do it; what you should do does not mean you should do it now. Many companies in Southeast Asia, China, and beyond fumbled when they focused on the right things at the wrong time. We heard from Shopee insiders that when his subordinates present a plan to resolve a problem or build a new feature, Feng’s response is often “Is this the right time to do it?” “He can always parse complex issues and determine whether they should be prioritized or left to later stages,” an ex-Shopee executive we interviewed told us. If you follow the product logic of Shopee, you will know: instead of building everything at once, Shopee has built capacities in many areas: payment, digital lending, food delivery, fresh groceries, Shopee Express logistics, and so on, but only stepped on the pedal for each of them when the timing was right. That was also the reason it could demonstrate almost sustained growth in each of the quarterly financial reports it released. Another issue is the perception of people. At various stages of Shopee’s, or Sea Group’s in general, development, many employees will tell you that the company was problematic and that much of their advice was ignored. Upon closely watching Shopee’s growth for the past five years, we feel that much improvement advice was ignored because, while valid, it should not have been the focus of the group at that particular point of time. The investment of leadership’s time and mental space, as well as the group’s money and resources, into certain areas will generate a much better return over both the short and long term. This, although clear to the leadership, might not be that apparent to employees at specific posts. Those who understand the logic tend to stick with the company, while those who do not often end up frustrated and leaving.

Pretty similar to Alibaba and other major tech successes in China we mentioned earlier, the early employees of Garena were not necessarily the best in the market. Facing an uncertain future at Garena, candidates who had a choice would join banks, consulting companies, and even semiconductor companies. Many of these earlier employees of Garena were Chinese graduates in Southeast Asia who were either passionate about (or addicted to) gaming, or did not speak English well enough to pass bank or consulting interviews. Similar to Alibaba but probably less dramatically, the early employees also had their stories of when the company was small (when the whole team could be fit into a junk in Singapore River for team building), fun, and sometimes very stressful (when the cofounder knocks at your home’s door to drag you out to fix a server problem). Many left the company for better opportunities earlier on, a decision some have come to regret deeply years down the road. As Garena became increasingly profitable, the talent it was able to attract also improved. When the company first opened its new headquarters in Singapore’s One North district, designated by the government as a zone for tech companies, it included unlimited snacks, napping pods, and a resident masseuse. This had been a tactic commonly used by Chinese tech companies to attract and motivate engineering talent who might work 14–16 hours a day. At that time in Singapore, only American tech companies such as Apple and Google offered gourmet food, and their talent in the region was hardly any tech.

Shopee brought in a culture of its own, deeply influenced by Chris Feng. Communications were straightforward, decisions were fast, and key executives stressed over facts rather than presentation. That has allowed the company to be efficient, but also less attractive to experienced corporate executives, who were used to a totally different set of expectations and communication protocols. While the chain of command seems to be very clear, the company seems to be conscious that the expectations of senior executives are very different from those of junior operatives. Shopee operates in different Southeast Asian markets with very different cultures and dynamics, and at the ground level it has to rely on local operatives to succeed. This means that it can only tap into the same talent pool as its competitors. To win and to succeed, it needs to differentiate at the senior level, with competent and driven executives, to stay agile and adaptable to local market realities, while tapping effectively into the strategies and expertise from the regional team. For a long time, Shopee did not assign the role of country managers; rather, Chris and his top lieutenant, Terence Pang, would spend a lot of time personally in the key markets, leading the team and growing the operations. Senior executives who are leading the cross-border team in China are asked to spend time in destination markets, so that they will gain a firsthand sense of consumers for their decision making as well. At the same time, a group of young executives rose up through the ranks to increasingly assume more responsibilities. For example, Christin Djuarto, an Indonesian Chinese who had graduated from Singapore’s Nanyang Technological University and spent three years with Garena before moving to Shopee, became executive director and took on leadership responsibilities in Shopee’s largest market.

Long-term lieutenants are also given the opportunity to develop new markets. For example, Jianghong Liu, who previously worked as head of cross border based in Shenzhen, China, was assigned to lead the operations in Mexico; Pine Kyaw, who previously led Shopee Vietnam, was made executive director to lead its Brazil business, among a group of other executives sent from Asia. When Shopee launched digital financial services, including ShopeePay as well as consumer credit, it struggled for a while to get the right senior executives. China’s crackdown of fintech and especially lending since 2019 has provided a golden opportunity—a group of experienced executives who found China’s market no longer welcome ended up at Shopee, which they consider not too alien at all. Some of them had led very-large-scale operations before, and would not have descended into Southeast Asia if not for the crackdown in China. Feng himself has proved pivotal in holding all these people together. His ability to balance big-picture strategy as well as specific customer experience has earned him a reputation. Detractors accuse him of being too much of a micromanager, while people who have stayed find it intellectually stimulating and rewarding to constantly be challenged by him. This has helped Shopee distill a good core team as it has today.

Of course, there are downsides. When things are going well, people praise you for your efficiency and effectiveness. But when things turn sour, the tone may switch quickly. Unfortunately, anyone who has followed large companies in recent years knows that we are in a much more nuanced world with a lot of undercurrents, from political, social, and geopolitical forces. As a company operating in multiple continents and cultures, Shopee has managed to keep its internal culture and communications consistent and efficient; however, it can’t be immune to some of these undercurrents. Society expects it to carry the social responsibility that is commensurate with its size and influence. While the group has been helping Shopee with some of these functions, as mentioned earlier in this chapter, it is probably not enough for it to be completely isolated from them. While these are challenges that you would imagine Feng is not personally comfortable resolving, it is also important to note that he has an almost innate ability to identify the right priorities at the right time. It is highly possible that he tackles these issues only when the timing becomes right and these issues become actual issues—which might be now. Ultimately, as the group leveraged the opportunity of cheap capital during the pandemic to catapult itself into a global operation, it is now at the stage of dealing with the challenges that come with it, and especially at the time of publishing this book, the bearish investor sentiment. If these challenges are dealt with well, the company will end up having much more motivated senior ranks, and greater prospects as a global challenger in ecommerce and digital financial services.

Many consumers around us often complain by asking: Why would anyone use Shopee, as the product is still not the best in the market? Truth be told, in a lot of finer details Shopee is still behind Lazada. At the time of this writing, Lazada’s product search gives very accurate matching, while Shopee’s often comes out with irrelevant items—for example, a search for bolts and nuts is supposed to only give you results in hardware, but in Shopee pistachios and almonds will appear. Similarly, ShopeePay’s experience, at the time of writing, is still not yet comparable to GrabPay’s, run by Grab, Shopee’s largest competitor in digital financial services in the region. However, these probably did not matter so much in the past, as we mentioned earlier on Feng’s strategy of only addressing the right problems at the right time. Shopee’s primary focus has been young, urban, and mass consumers, while more sophisticated, highly demanding, and older customers are next in line to be tackled. Would the hitherto target audience care so much about making search results 100% accurate versus getting the best deals for the goods they actually want to buy? Another important aspect of Shopee’s product is its large team of product managers. Compared to its main competitor Lazada, where many product managers boast years of experience working for Alibaba, Shopee’s product team is still relatively raw. One way to compensate for that is a combination of the sheer number of product managers and the close attention to product details of senior executives, including Chris Feng. One person familiar with the product management process of both companies told us that typically a Lazada product manager is probably five times as productive as Shopee colleagues, but with the numbers and streamlined command structure, Shopee makes up for this shortfall. Gradually, as trusted lieutenants rise in the ranks to lead country markets, they are also empowered with more decision-making rights on product, marketing, and operations.

Shopee is in the best position to adapt some of the leading experiences on both ecommerce and digital financial services in various emerging markets. They learned from Chinese players from strategy and business models to operation. Meanwhile they kept its system open and flexible, to understand the local markets’ development stage and real need. Over the years they have developed a unique compatibility, such as cross-culture management in different countries from Southeast Asia to South America, which enables them to be in a better position when competing with indigenous Chinese ecommerce players. The question is whether Shopee, or Sea Group in general, will eventually turn profitable while continuing to grow their market size and share. At the time of writing there is a sense of skepticism from investors, some of whom argue that the market has already been adequately penetrated, with only limited future growth opportunities, while some others believe that like many emerging markets tech growth stories, profit will remain elusive for a long, long time. We tend to agree with a third narrative—that with its current leadership, people, organization, and product, Shopee is in a great position to capture Southeast Asia’s ecommerce prize. The company’s execution, if Feng is still at the helm, should give investors confidence. If they fail, the problem is probably more fundamentally about the market than about competition or execution. Global expansion offers a way to unlock a much larger addressable market, while hedging the risks that are inherently associated with emerging markets (political/policy uncertainty, currency exchange, and others). Whether Shopee can tackle global expansion effectively will provide an immensely useful case study for any company, tech or nontech, looking to create global domination.

Shopee is not alone in adapting Chinese ecommerce-related experiences across the globe. J&T Express, founded in Indonesia also in 2015, has become one of the largest courier companies in China, occupying a close to 20% market share in the highly competitive Chinese logistics market. At the time of this writing, J&T is making aggressive inroads globally, into markets including Brazil and Mexico, North America, Europe, and the Middle East. J&T Express was started by Chinese businessman Jet Lee who, prior to founding the logistics company, spent years distributing smartphones for Oppo in Indonesia. He and his team had acquired invaluable experience and knowledge about the Indonesian market through working with distributors, resellers, and retailers in even the remotest islands of the vast archipelago. The founding of an ecommerce logistics company was a natural extension—ecommerce was booming and no incumbent seemed to be doing a very good job. From its early days, J&T learned from the business models and operational systems of Chinese courier companies such as SF Express, even hiring some of the ex-SF cadres to help build its own systems, processes, and people management. That, coupled with J&T’s deep understanding of the market, its leadership’s commitment in Indonesia, and the ability to manage a large local workforce, did wonders. Crucially, J&T also leveraged Shopee’s rise, delivering parcels for the ecommerce platform at the scale and service level others simply could not match. Many have asked us whether J&T and Shopee have a deeper relationship than just partnering on logistics. Our sense is that it is a pure commercial relationship, but it is a matter of convenience. Both have the Chinese gene, and yearn for rapid growth—working with each other to realize that growth is just natural. Shopee’s recently fast foray into its own logistics service ShopeeExpress also suggests that the J&T partnership is now an in-depth marriage. Very quickly, J&T became one of the largest courier companies in Indonesia. Through the Oppo network, it also quickly expanded to the rest of Southeast Asia. Its most audacious move, however, was launching an assault in the courier market in China, which by that time was dominated by SF Express and four companies invested by Alibaba. Competition was fierce and margins slim. The timing was right. Because SF Express focused on the more premium segment, and while the other four companies all had investment from Alibaba, Pinduoduo—the fast rising challenger to Alibaba—needed a reliable partner to work with. So the Shopee partnership in Southeast Asia was quickly replicated in China, with J&T Express growing volumes very fast in the vast market. The other experience that was replicated was the reliance on Oppo’s network of partners and distributors, allowing J&T to quickly expand its acceptance points. Within a year after its launch, J&T was already delivering more than 20 million parcels every day in China. Now, with Shopee investing heavily into Latin America, J&T also expanded into Brazil and Mexico. The other markets J&T has launched into include the Middle East and Europe—and the company is quickly building an ecosystem based on its logistics core.

Since 2016, Ant Group has invested in a number of e-wallets and mobile payment joint ventures across different countries in Southeast Asia. The strategy at that time was clear: Ant would provide the technological, product, and operational expertise needed for these companies to win at mobile payment services in their respective markets. Ant had realized that it would be difficult for them to secure licenses and operational partnerships in those countries alone—any regulator would be very hesitant for a large foreign group known for aggressive tactics to have great control over the payment infrastructure and data of their country. And here we are talking about Southeast Asian regulators, who still vividly remembered the 1997 Asian Financial Crisis. Therefore, Ant decided to work with strong local partners: CP Group in Thailand; CIMB Bank in Malaysia; Emtek Group in Indonesia; and Globe Telecom, an affiliate of Ayala Group in the Philippines. They are either among the largest conglomerates in their respective countries or are in control of significant infrastructure that a mobile payment system can launch upon. Another possible calculation of Ant is the following: If all these leading players adopt Ant’s technology, Ant could build a powerful cross-border payment settlement network that puts itself akin to the role of Visa or Mastercard. However, Ant and its partners are not the only giants, Chinese or local, that had similar plans for Southeast Asia. Ant’s parent company—Alibaba’s ecommerce competitor JD.com—quickly secured a partnership with Central Group, a main conglomerate rival of CP Group in Thailand. The biggest competitor of Ant’s Alipay in China is Tencent’s WeChat Pay. They are both super apps that provide more than just financial services after years of development. Tencent initially tried to launch its WeChat wallet in Malaysia (for which it had acquired a license) but also quickly realized that a joint venture or investment approach made more sense—for example, it backed Voyager, the digital finance venture of Smart, the main competitor of Globe in the Philippines. Many other local conglomerates, tech companies, telcos, and media groups in Southeast Asia launched their own mobile payment wallets as well. At one point we counted more than 800 active wallets being promoted in Southeast Asia. The dream of replicating Alipay or WeChat’s success is a rather common one.

The result? More than five years later, none of the wallets has achieved a level of success comparable to China’s. Whereas in China almost every urban consumer uses either Alipay or WeChat, or both, on a regular basis, with cash nowhere to be seen, the most successful wallets in Southeast Asia hardly count more than 10% of their country’s population as monthly active users. With such limited penetration, and the limited data that comes with it, these mobile wallets have yet to replicate the success of other digital financial services offered by Ant or WeChat Pay, including consumer credit, digital lending, insurance brokerage, and wealth management. There are a number of reasons for this situation. First and foremost is the fragmentation of the market in Southeast Asia. In China, when Alipay rose to prominence, nobody else, including banks and telcos, had the technical and operational expertise to create such a payment system and take it to success. Many of them chose to work with Ant. In Southeast Asia, the landscape was different. The rival conglomerates each had their own dominance over different parts of the retail, banking, telco, and other consumer-facing infrastructure. This created a number of walled gardens which, while allowing companies to quickly roll out mobile payment to their own captive audience, make it very difficult for any wallet to cover all the everyday use cases or transactions as Alipay and WeChat have done in China. That requires the e-wallets to adapt, instead of purely replicating the experience and tactics from China. That also requires the main drivers of these e-wallets, who are not of Chinese background themselves (unlike Shopee and J&T Express) to first understand the essence and inherent logic of the experiences in China and then determine how to adapt to be useful in their own setting.

Since 2016, Southeast Asia has gone through a phase of replicating the successes of Chinese tech business models—fueled by investor belief that such models would succeed in a region that has significant geographical, cultural, and historical connections with China. E-wallet and mobile payments are just a couple of the many examples. Similar attempts have been made across ecommerce, logistics, local services, marketplaces, and other sectors. Not only in Southeast Asia, but also globally, investors and entrepreneurs have been trying to take inspiration from Chinese business models. India, which now has a frosty relationship with Chinese apps (it has banned hundreds of Chinese apps, including TikTok and WeChat, since 2020), saw even more entrepreneurial zest in learning and adapting Chinese models (and seeking Chinese investment). Terms that originate from China’s hypercompetitive tech sector, such as O2O (offline to online), C2M (consumer to manufacturer), and social commerce, have become familiar to investors and entrepreneurs in different corners of the world. Quite often, such terms are misunderstood or misused by observers and sometimes even the companies making use of them. Let’s take the case of social commerce—where an array of companies, from Meesho in India to Facily in Brazil, have raced to replicate successes of Chinese companies such as Pinduoduo, Xiaohongshu (“little red book”), and even TikTok.

Perhaps the most intensive battlefield was Indonesia, where investors have poured money into a large array of companies all calling themselves social commerce. But what exactly is social commerce? How did it succeed in China? What is needed to succeed in Indonesia? Or would it succeed in Indonesia at all? To understand this, we need to first understand what social commerce is. Ecommerce, like many other sectors in China, has evolved into a sophisticated environment where two ecosystems dominate. On the one hand is Alibaba, whose Taobao and Tmall platforms dominate the majority of formalized ecommerce; on the other hand is an ecosystem of major companies Tencent has invested in, including JD.com, Pinduoduo, and Meituan. TikTok, with its focus on video content, has also ventured into ecommerce, converting part of the billions of hours its users spend on the platform into buying time. These are just the platforms—ecommerce in China also boasts a whole ecosystem of enablers, service providers, and most importantly, manufacturers and sellers. This book has thus far focused on the competition among major tech companies, but the competition among manufacturers, sellers, and brands is probably even more intense—for consumers’ attention, and wallet share. With platforms such as Alibaba’s Taobao and Tmall, sellers compete by paying for advertising (through Alibaba’s ad exchange, Alimama), offering discounts or low prices, and participating in shopping festivals and/or live streaming (which means more discounts and low prices). As a result, the customer acquisition cost and distribution costs for these sellers can be very high and margins thin—they are constantly seeking ways to break through and lower these costs.

Enter social commerce—an array of different methods to acquire and retain customers, and distribute goods online with cheaper costs, using social influence and social networks. We have categorized social commerce into essentially four categories; to make these more relatable to the audience, we use some of the following global platforms:

Content: Influencers (or sellers themselves) build content on popular platforms such as Instagram, Facebook, and TikTok, with consumers being able to place orders either directly or through a link to the ecommerce store; Xiaohongshu (“little red book”) in China is a good example, where beauty influencers in particular write reviews and recommendations. Reseller: Members of a social or community network enlist to resell products to their network, often through social media and chat groups. Fashion and home products are often sold in this way—Yunji in China and Meesho in India are typical examples of this model. Social group buying: Buyers share with existing social network (through social media and chat groups as well) to form group deals at a discount; the rapidly ascending story of Pinduoduo is a prime example. Community group buying: Buyers join a local community coordinated by a leader to make group buying purchases. In this model, the categories on sale are usually the most common denominators such as fresh produce and fast moving consumer goods (FMCG).

While these models are different from each other, they all use social and community networks to reduce customer acquisition and distribution costs. Now we project the business models in Indonesia, where an (increasing) number of players have adopted different strategies and models of social commerce. With a good understanding of the experience in China, the fundamental question of whether these businesses will succeed will come down to a few factors:

We are sure that Indonesian consumers are deeply social—but do they have the willingness, tools, and consumption power to sustain large social commerce platforms? For example, WeChat in China makes social sharing, logistics, and payment possible through a single app. WhatsApp and Instagram, the social tools most commonly used by Indonesia, do not have payment or logistics capabilities to be able to close the transaction loop. What are the supply and distribution networks for the various categories of goods to be sold on social commerce? Take the example of FMCG; the traditional distribution networks are already very established. The very thin margin across the value chain makes it harder for social commerce players to derive any cost advantage, even if they can move large volumes. Similarly, for fresh produce, the gross margin is higher (up to 70%), but the supply is often unstable and wastage is a big problem. Traditional distribution channels rely on farmers, distributors, truckers, and final resellers absorbing costs and part of the losses to enhance the overall resilience of the network; when social commerce platforms try to have the distribution more organized, they have to bear with all these losses and inefficiencies. Even in China, with billions of dollars invested in community group buying, players are yet to make a profitable case. Players in more frictional markets such as Southeast Asia need to be extra operationally efficient. What would be the stance of major consumer tech platforms, such as Shopee, Grab, and Gojek? In China, areas where major tech platforms have entered generally have become very difficult for startups and new ventures to launch in, because major tech platforms often have economies of scale and lower cost capital, which are very difficult for startups to match. A quarter of widening losses for major tech companies can be compensated by growth in other areas or a public market raise, while for startups it is life and death.

We also need to be aware of players, including TikTok and Shopee, that are either Chinese or deeply inspired by the Chinese experience. They have not only more resources and firepower, but also the ability to internalize and adapt successful tactics and experience from China deeper and faster. TikTok is making repeated attempts to tackle ecommerce in Indonesia, despite earlier challenges due to lack of an ecosystem including suppliers, trained influencer networks, and professional content creators. Shopee has been beefing up its own video capabilities to counter potential competition from TikTok, while at the same time offering its sellers a better way to showcase their products (in addition to text descriptions and photos). The dynamics that are happening in Indonesia could have global ramifications and define how ecommerce will evolve globally (that is, outside the unique context of the Chinese market). Stakeholders should watch the evolution very closely.

Facing disruption, especially by players employing business models that have not yet existed in your market, how should you, as corporate leaders, respond effectively? Or more fundamentally, what are the options your company should pursue? Should you explore joint venture opportunities, expand your own businesses, or compete head on? By now, you should realize that the considerations for corporate leaders here are essentially very similar to what Chinese business leaders face when they try to decide on their global expansion—the decision is just the opposite side of the same coin. Unlike corporates in more established markets and sectors, tech companies in China typically shun traditional consulting firms, because they often do not believe consultants are sufficiently well informed about the fast-changing dynamics they are facing to be able to offer relevant or up-to-date best practices. “We do not even do strategic planning, that’s what corporates in mature industries or consultants do,” a key division leader of a large tech company once told us. “What is the use of putting all these forecast numbers in a market where dynamics change on a daily basis?” His alternate approach is top down. “We estimate the potential market size by a very rough set of assumptions, and then set a target for ourselves to hit. Once we launch, we just focus on solving problems along the way.” How do you work with, or compete against, people with such a mindset and aggression? In fact, we were once asked by a large incumbent ecommerce player in a market where Shopee had just ventured in: How should we respond to Shopee? “If we play by their tactics, we will lose a lot of money in a short period of time, with uncertainty about whether we can beat them at their game, or sustain ourselves to the day when they exhaust their resources and cease their attack,” the questioner went on. “If we do not respond, as we are now, we see them chipping away our market share, day by day, without knowing when they will stop, or if they will ever stop.” As Chinese and Chinese-inspired tech companies are disrupting more and more sectors across the world, learning and adapting along the way, we are facing more and more such questions. To find answers to these questions, it is essential to first gain a deep understanding about these Chinese companies, including their strategy, inherent business and operational logic, and their leadership. That understanding does not come from putting your own leaders in a strategy course or a high-pressure workshop, but by exposing them to real, in-depth examples, case studies from those tech companies. Most corporate leaders are exceptionally good at connecting the dots—they just need to get the right dots to connect. One area that established corporates could definitely learn from these Chinese or Chinese-inspired tech companies is how to find the right people, inspire them, and keep the organization flexible enough to adapt to change—in Alibaba’s lingo, “Change is the only constant” or “embrace change,”. This is the corporate culture and organizational mindset that leaders need to consciously build, such that whenever they need to respond to something, they are not bogged down by organizational inertia. A good example of how to respond to change involves the two leading banks in Thailand, Siam Commercial Bank (SCB) and Kasikorn Bank (K Bank). Like traditional lenders in many markets, they were comfortably profitable through a good offline presence, good brand names, and a large asset base. Ant Group’s investment in CP Group’s AscendMoney served as a big wake-up call for the two banks. While their counterparts in many markets battled with internal organizational inertia and slow decision making in shifting strategies to respond to disruption, the two showed exceptional leadership in first understanding what disruption was coming their way, and then responding actively. They strengthened the leadership team, restructured the organization, actively absorbed the top talent, and experimented with a slew of different digital financial services products from mobile payment to digital lending. Not only in the core domain of their finance businesses, through investment, joint venture, and their own corporate venture building, they have actively expanded their sphere into food delivery, data analytics, and even crypto platforms. As of the end of March 2022, SCB’s venture arm SCB10x boasted an investment portfolio of 51 companies and 5 subsidiaries across 13 countries. Through seeding many leading venture capital firms focused not only on Southeast Asia but also on China, SCB has been able to learn about the upcoming business models and devise corresponding strategies quickly.