3rd Semester begins - 6 months to go!!

The thirty of us remaining in the WFU MBA 2009 program returned last night from our international trips and a couple weeks off. It was good to see everyone again and catch up on their trips. The mood seemed to be slightly less intense than semesters past, partially because the weather is so nice and partially because it's been six weeks since we were here in Winston-Salem and everyone is trying to get back into a groove.

This semester is about all things International. We have three classroom courses and the International Practicum, which included the two week trips to either China, Japan or South America. The classroom courses this semester are all only six weeks (instead of eight), which means they consolidate quite a bit more reading into each session.

International Financial Management is being taught by Dr. Bruce Resnick. The course will focus on FX Markets, differences between Domestic and International Finance, International Strategy and overall International Portfolio Management.

International Business Management is being taught by Dr. Mike Lord. Mike was the lead for our China trip. The course focuses on a broad range of topics (Cultural, Economic, Political, Geographic) that effect how companies engage in international expansion and operations.

Global Strategic Management is being taught by Dr. Ram Baliga. The course focuses on many aspects of strategy as it relates to products, operations, M&A, market entry and competition.

The international trips seem to have changed the overall perspective of the world for many of my classmates. They seem to have a better understanding of how much bigger the world in terms of opportunities and competition. They seem to have a better grasp on how Finance, Culture, Government Policy and Global Economics fit together. And they seem to have a new sense of what to explore and question as they try and make sense of how they are going to fit into the global economy.

We still don't know what we don't know, and but this semester should help to fill in the blanks on a few questions. The courses are all in English, but there is definitely a different set of languages being spoken in class are still a little bit foreign. Hopefully the learning curve moves faster than my attempts at Mandarin.

Value creation through the dip

Following up on my post yesterday regarding the phases that hype, technology and value-creation go through, I thought it might be useful to dust off the questions I typically use to determine if a new innovation is a fad or if it has a chance to survive long-term. This seems to align to Fred Wilson's take on adoption of new innovations.

1. Can I explain the benefit of the technology (or vision) in 1-2 sentences, or do I need to ramble through some story?

2. If I can explain it in 1-2 sentences, do semi-technical or non-technical people understand it, or at least ask good questions to clarify?

3. If this technology was open-sourced, as opposed to being controlled by a single company (or a small number of companies), are there enough interesting aspects to get communities of developers to engage with it?

4. If it’s not happening already, what is going to be the “ah ha” moment when people will actually start valuing it enough to pay for it, or at least associating valid business models with it? If this is consumer-oriented, why would they include it in their life?

5. If it went away tomorrow, would anyone really miss it within 3-6 months?

We live in a world of Twitter-time value creation

If you haven't been paying attention, this little thing called Twitter has been generating quite a bit of buzz over the past 6 months. Regardless of if you're a Twitter fanboy, hater or just trying to understand it, it's been incredibly interesting to watch not only the growth of the service, but also the huge range of opinions about whether or not it creates any real value. One day it's a life-changing technology, the next day it's dead!

Twitter has obviously changed the game in terms of how we can now consume information. It's no longer measured in days or hours, but instead it was become instantaneous. But does this create new value? For the average user, it may create more distraction than the value the instant information could bring. But it is starting to bring value to new technologies that are leveraging Twitter APIs to take the feed of information and turn it into something new.

So I have to ask a few simple questions:

• Do we have any sense of what value is anymore?
• Does long-term value exist anymore?
• Is all value going forward going to be measured in Twitter time?
• Is technology moving so fast that we won't recognize that we need additional value, or new value, until the technology is upon us?

On our trip to China, our new friend Joost at Volvo mentioned that if we wanted to come do business there, that we'd better have a business model that expected products & services to be copied in 90 days. Maybe that's the new duration of value creation. It's been about 90 days since Oprah first joined Twitter, the user count soared, and now it's coming back down to earth.

Or maybe there will now be phases of value created, like rounds of venture funding. Maybe Twitter has now been through it's adolescence value-creation phase, and over the next 90 days (or maybe 6 months, or maybe 12 months), it will have to decide if it's able to move into it's 20'something value-creation phase, or it's adult-maturity value-creation phase.

We live in interesting times. Fast moving times. Sometimes it's very difficult to not only keep up with the pace, but determine if the thing in front of you is valuable or not. I don't know the answers to my questions, but I do expect that they will flip the business world on its head over the next couple of years. Are you creating long-term value, or Twitter-time value?

China (Overall) Notes

These were point-in-time notes as we went through various areas of China. Some of them I still believe, while my opinion on other areas was changed as the trip went on. I'm including all of them to help me remember how my mindset changed throughout the trip and after I returned.

Asia - 3B people, 20% of global GDP

Surface tradition; govt or society defined rules; no enforcement penalties; no rules for business in the "get it done" levels

Not about thc great people or ideas, the average / above average people and the masses at the bottom, hungry to get out.

US rules don't apply to business models or practices. One man's profit is another man's business model.

Growth model is not sustainable (questionable) and doesn't create real value, sustainable value (need to dig into these stats). Need to rethink this thought. The pace is face and destructive, but it may be moving value from other parts of the world.

Go back and study the evolutional of American economy (from 1900s) to have a viewpoint on how China & India may evolve.

Remember GaFe's viewpoint, it's about a long-term partnership, not adversarial. Let govt fight about keeping score.

Stop trying to defend why the US is better. Start thinking about better partnerships or ways to succeed within the new rules.

China ambitions are something better every 2 years (promotions), and salary/costs are rising 100% y-over-y. Think about how you'd structure your business within those models.

With China growing this fast, they don't have the legacy technologies...leapfrog to latest stuff.

Little Emperor syndrome, similar to US helicopter parents and Milenials

Go with the flow on new stuff.

SMB is difficult to create because their sense of size & scale is so different. Technology is a possibility, otherwise consider JV.

Just as other countries have strived to speak English to study the US, it's time to begin learning Mandarin to communicate and understand.

Xi'an Notes

I found these on my iPhone, which I was using as a notepad during the various bus rides and business tours on the trip. I've been reading back through these to get perspective on how my mindset changed throughout the trip and after I returned

Original capital of China
Northwest part of China
8.3M people
No subway system - original line in 2011
Natural gas cabs

Beginning of Silk Road - China to Europe
Terra Cotta Warriors

Well balanced workforce, industry, infrastructure. Gateway to the west. Parallel to US Western expansion?

JV opportunities because of workforce education? Concerns about govt intervenion (IPR issues) because of aerospace industry.

Energy center; Chemical center

Volvo JV: (Joost)
- IPR - copy yourself or done within 90 days
- Supplies from state owned partner
- Top down management (only)
- Prices fall every year - China doesnt follow world market prices (govt subsidies)
- "hourly capital" - lean manufacturing
- 1/3 temporary workers, compete for jobs with others
- Attempts to reduce required floor space by 10% each year.
- Every 1500km west, labor costs drop 50%

Environmental - big difference between regulation & enforcement

Beijing Notes

I found these on my iPhone, which I was using as a notepad during the various bus rides and business tours on the trip. I've been reading back through these to get perspective on how my mindset changed throughout the trip and after I returned

15M people; 85% non native to Beijing

City wall - stones for houses - eventually the stones from the City Wall were used to build 1000s of local houses
10,000,000 bicycles - lose one, steal one
4 walls surrounding the city (old)
3.5 M cars (no carpools)
Huge change in Chinese culture in last 20-30 year
Small house destroyed for large buildings
40,000 yuan per 10 sq ft (business center)
1976 earthquake - buildings with white columns - reinforcement
Before 1980 - no buildings above 10 stories
90 universities

80% of trees removed from 1950s to build farms
Renewal of trees with last 10-15year
Great wall of trees - Green Wall

No receipt, don't pay taxes - sometimes you can ask locals for the "no receipt" price to get better deals

Coal mine owners are the riches segment of the country, behind the government
"Managing the Dragon" , "Mr. China" - books that explain this concept

For the good of China...don't harm the environment...use resources from other countries - a comment from CITIC on the State policy of using local natural resources vs. buying them from other countries

No appt. for medical services. Go to hospital (stand in line). Pay service fee. Dr. gets commission from prescriptions, so they typically over-medicate. TCM - Chinese Traditional Medicine. Wholistic medicine. No testing of drugs. Contrast vs United Family Healthcare. Life expectancy is similar to US...walking, biking, green tea. Tamaflu based on TCM.

Disregard for IPR (Intellectual Property Rights) is incredible. No morales for ideas. Copycat culture. Nothing sustainable. 20 international films per year. - later in the trip I learned more about their IPR laws vs. IPR enforcement, as we all the attitudes towards not caring about "YOUR" IPR if a copy can employ 100s or 1000s of Chinese workers.

Greg's analogy of the winding road system to the overall system of controlling the population - these was never a direct path to get between places in Beijing. It felt similar to waiting in line at an amusement park, where they have the long, wrapping lines to better handle crowd control and queuing. Driving anywhere in Beijing felt like this.

FAILURE (or "I Failed")

In talking to many different people in China, from various backgrounds, one word that I heard quite often was "FAILURE". The context was typically something like this, "Before doing , I worked as a , but I was a failure." The Chinese seem to have a binary view of activities. You're either extremely successful (most popular, most famous) or you failed.

I wasn't exactly sure how to interpret this.

• How long do they typically give themselves in a certain activity before it is considered a failure?
• Are they better than Americans at getting out of a bad situation? I know plenty of people in the US that dislike their job but stick with it because it pays the mortgage.
• Is their concept of failure considered a black mark on their career (or resume), or like a badge of honor, similar to how failed entrepreneurs (or NFL football coaches) are revered in Silicon Valley?
• Does their lack of creative thinking (vs. analytic thinking) lead them to consider activities failures earlier than they might if they stepped back and looked at alternative strategies or options more often?

I need to speak to some of my Chinese-American friends about this aspect of the culture in more detail. I need to better understand if this is a widespread mindset, or just a coincidence that we experienced during our two weeks in China.

The Golden Rules of China

Professor Mike Lord shared various tidbits from his previous travels with us throughout the trip. In an email today, he shared with us a list that he and several other exPats (and MNCs) have been developing since their visits in the mid-1990s.

Golden Rules of China

1. Everything is possible.

2. Nothing is easy.

3. Western business logic does not apply.

4. It is a fun project if there is no deadline.

5. You must persist – things will come your way – eventually.

6. Patience is the essence of success.

7. “You don’t know China” means they disagree.

8. New regulation means they found a new way to avoid doing something.

9. “Internal regulation” means they are mad at you.

10. “Basically, no problem” means BIG problem.

11. When you are optimistic, think about Rule 2.

12. When you are discouraged, think about Rule 1.

Feedback on Netbooks & Mobile Computing

Before our trip to China, I wrote about the 9" Asus Eee PC netbook that I would be taking to assist with blogging. Having discussed the product in ITMgmt class in the Spring'09 semester, I got a good chance to experience the difference between a netbook and a full-blown laptop.

Here's my thoughts...

Size & Weight - Considering that I carried this around in my backpack for 14 days, the weight and form-factor were perfect. The keyboard took me a few days to master, and it helped that I'm a two fingered typist. My roommate Gregg had a difficult time on the keyboard using traditional typing techniques. The screen size is obviously smaller, but this tradeoff was more than acceptable for the weight.

Usability & Mobility - I opted for the Linux version, instead of the Windows version, to get the true netbook experience. I wanted to focus on using applications that reside in the cloud, as opposed to local apps (MS-Office, etc.). Most of the applications I needed (Firefox, Skype, etc.) come pre-loaded on the machine, and they worked perfectly. Internet from the hotel rooms was decent, not exceptional, which sort of surprised me. What I didn't find much of was free WiFi access in coffee-shops, and netbook did not have any built-in 3G access, so the mobility aspects weren't something I could experience. WiFi worked fine at home in the states, so I'll give that a pass.

Cons - For the most part, it's a very useable machine and a great mobile computing device. But the one thing I truly disliked was the interaction with the mouse and trackpad. It was very inconsistent (mouse and finger-swipe movements) and the click-button was too stiff and very loud. The noise isn't that big a problem, except in quiet rooms. I think I woke up my roommate several times when I'd get up to write in the morning.

While the netbook seemed to be a decent platform for the trip, I eventually had to compare to using my iPhone. It was somewhat of a difficult comparison in China because the international data rate from AT&T were obscene (20Mb for $20). The netbook had the storage I needed to download picture and videos, and supported Flash for applications that required it. But if I could had gotten US rates for 3G data access, I think I could have been just as happy using my iPhone for all my mobile computing except for data storage.

Overall, mobile computing has come a long way in just a few years, with netbooks beginning to fill a niche in size, weight and functionality. The iPhone fills another niche, and I think there may still be room for an in-between form factor (or a storage add-on to the iPhone). I still had to carry my FlipVideo and others used their digital cameras, so the all-in-one mobile device still doesn't exist. And of course, ubiquitous & cost-effective mobile bandwidth still has a little way to go.

The Chinese seem to do everything from their mobile phone, so I wouldn't be against that form factor. A world without wires is critical, and the instant reponse times possible with a phone-like device make business in China move at the pace it does. Innovation in this area still has a alot of potential to drive huge amount of revenues and business opportunities.

Why China isn't the next Silicon Valley!

This is an interesting article by Sarah Lacy. I'm not sure how many times she has been to China, nor do I claim to be an expert with my visit count at a whopping "1". I find her viewpoint interesting, but not surprising. How could anyone but America, and especially our innovation mecca of Silicon Valley not be the home of the next great invention? I'm ashamed to admit that before our trip a few weeks ago, I would have thought the same thing. China is great at copying stuff. They are great at completing tasks that the brilliant and creative Americans assign to their low-cost workers. They all skipped the creative classes in school to take an extra math class.

Boy was I wrong about that. Its hard to explain without visiting, but there is definitely a culture of innovation in China. You can't build the cities that dominate their landscape without some creativity and strategy. You can't create business models that allow your companies to grow, when faced with a copied product within 90 days, if you don't have creativity and innovation. At this stage the innovation may not all be about new technology, but it is definitely about operational excellence, business model creativity, and a good bit of raw determination. Call it survival innovation. It's what motivates you to move from $1/day to $40/month to a high-rise in Xi'an, to a 100M RMB villa outside Beijing.

I'm looking forward to seeing if China becomes another Silicon Valley. But from the little bit I learned about Chinese culture, I doubt they want to become another anything. They will want to create a uniquely Chinese mecca of technology and innovation, or maybe a half-dozen. I'm hoping to find some ways to be part of that growth. I that for the next 5-10 years (or more), it will be a partnership play for those willing to create win-win situations in both countries. I don't believe it will be a zero-sum game with only one winner. As we've seen from the current econalypse, neither current can succeed if there is only one winner.

btw - kudos to Ms. Lacy for working on her Mandarin. I've been trying for a few months and not having as much success as I'd like. If she needs a study partner, please let me know. Or if she learns any tricks to learning it faster, I'd welcome those as well.