China has become an innovator
China is now shifting from an innovation receiver to an innovation leader. Between 2013 and 2015, I have travelled and researched four continents to interview successful technology CEOs and understand what is happening in the technology world and in particular in e-commerce and in the Internet of Things. I have realized that the major technological changes that people are talking about in Silicon Valley are actually happening in China on a much larger scale. It used to take innovation years to travel from Silicon Valley to China, but now it only takes 24 hours. Not only Silicon Valley, but now also China have become a source of inspiration. But this is just the beginning. China’s innovation is not confined to its market; it is now coming out of its borders and spreading into the developing and the developed world. I narrated the story of this journey in a book, which I have called: East-Commerce
It is now widely recognized that China e-commerce has become the biggest in the world. Few numbers will explain the dimension of it. The world has over 3 billion Internet users of which 25% are in China, 667 million against 279 in the U.S. China has now over 361 million web shoppers compared to 200 million in the U.S. and its e-commerce demand for 2015 will be around 566 billion USD while in the U.S. will be 437 billions USD.
When looking at these numbers, it is hard to understand how Chinese e-commerce has grown so big so quickly and most of all where it is heading. To answer these questions I use some of the teachings I have learnt at Singularity University. Based in Mountain View, the Internet’s epicentre, and funded, among others, by NASA, Google, Cisco and Genentech, Singularity University helps people understand how technology will change our lives and which ones have the potential to impact billions of people. I believe that Chinese e-commerce is definitely one of those. Going back to our questions, How did it grow so fast? for the majority of us, change occurs at the same rate that we have experienced it most recently. But technology’s growth does not follow this rule. In other words, it isn’t linear, but exponential. The difference between linear growth and exponential growth is the basis of how technology evolves. Exponential growth is based on the famous dictum called Moore’s Law, named for Intel co-founder Gordon E. Moore who described the trend in a 1965 paper. Moore’s Law observes that the number of transistors on integrated circuits doubles approximately every two years. This means that the power of your computer or mobile phone doubles every two years and explains why China e-commerce is growing faster than anywhere else.
To understand where it is heading we first need to look back at how this world of the Internet evolved. In his award-winning book The World is Flat, Thomas Friedman described the personal computer as the change agent enabling anyone in the connected world to join the Internet and in turn, create a unified world. That was 2005. The wide diffusion of PCs and of the Internet made geography irrelevant and suddenly, everyone became connected. This is when a new world started to unfold. However, while the world was becoming flat thanks to the PCs produced by China, China was still lagging behind. The real technological revolution arrived in China thanks to another device: the smartphone. This was the agent that enabled mass connectivity and became the tool to access the Internet. Thanks to this vast diffusion of smartphones, the Chinese are now moving one step past the rest of the world in creating a super connected world where the physical and virtual dimensions meet inside a mobile phone in the most seamless of ways. This is where China is innovating and where it is creating some of the most interesting business models in sectors such as retail, automotive, finance, healthcare and many others.
Even thought the Internet, e-commerce, and social networks are products of the West, the way Chinese are using them is innovative in itself and is allowing a mass diffusion of these technologies on a huge scale. So far, everyone is still looking to the West, thinking that innovation comes only in one form: inventing something unique which becomes revolutionary. However, something that at first might seem paradoxical is happening in China. The innovation brought about by China, an incremental innovation on a mass scale, is changing the emerging world and will soon influence the developed world as well. This will be a new type revolution, one that is brought about by evolution.
But e-commerce is not the only sector where China is planning to be ahead. It is likely to become leader in the Internet of Things as well. E-commerce has in fact created a super connected world, where the physical and digital dimensions are now coming together like nowhere else on the planet. Through the adoption of Cloud services and data centers, this world has the ability to collect and analyze information on a massive population, which, in turn, allows the development of a very sophisticated grid. When you add the power of the Internet of Things – with its ability to generate an exponential amount of data – to this sophisticated grid, it will give rise to the development of even more innovative models not only for e-commerce, but also for the Internet if Things world itself.
But this is not the end of the story.
In The Singularity Is Near, Ray Kurzweil describes an event called the Singularity, a future period during which technological change will be so rapid that it will irreversibly transform human life. The transformation will affect all the concepts that we rely on from business models to the cycle of human life. China e-commerce and the Internet of Things are the world’s biggest experiments connecting the physical to the digital world. They are connecting human beings and technology on an unprecedented scale. Thanks to this fast digitization process, China has decided to take the road of reforming and evolving its civilization through technology; the road of the Singularity. This is evident today with the mass adoption of smartphones and the increasing number of businesses moving online.
A society that was once based on a traditional industrial model is now quickly becoming technologically advanced; smart homes, self-driving bicycles, and cars will soon be part of the lives of millions. Of course, it will take time for China to fully transform itself into a society based on the future technological model. E-commerce and the Internet of Things show that China has decided to take that road and the first steps to bring its civilization into the future.
The world should take notice.
This article is excerpted from “East-Commerce, A Journey Through China E-commerce and the Internet of Things” by Marco Gervasi, published by Wiley & Sons in April 2016. The ebook is also available on Amazon. To learn more about how technology is changing our lives and the global business models you can follow Marco Gervasi on his blog.
