October 18th, 2016 Shanghai

China's Disruptors
How Chinese Entrepreneurs–like Baidu,
Alibaba, & Tencent–are Changing China
(and Rest of the world)

Presented by Dr. Edward Tse, Founder & CEO

 October 27th, 2016 Shanghai

China's Disruptors
How Chinese Entrepreneurs–like Baidu, Alibaba,
& Tencent–are Changing China
(and Rest of the world)

Learn How Innovative 'Disruptor' Companies

are Restructuring China's Economy

Dr. Edward Tse

• Founder & CEO Gao Feng Advisory Company

• former Senior Partner & Chairman Greater China, Booz & Co.

• former Managing Partner, China, The Boston Consulting Group

• author China's Disruptors

Non-state enterprises revenue and profit
trump those of state-owned enterprises

Revenue by Company Type Profit by Company Type

1998 - 2013, Trillion Yuan 1998 - 2013, Billion Yuan

80 5,000
70 4,500
4,000
60
3,500
50 3,000
40 2,500
30 2,000
1,500
20
1,000
10 500
0 0
1998 ‘00 ‘02 ‘04 ‘06 ‘08 ‘10 ‘12 1998 ‘00 ‘02 ‘04 ‘06 ‘08 ‘10 ‘12
‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 2013 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 2013

State-owned enterprises Non-state-owned enterprises

Source: National Bureau of Statistics, “Monthly Industrial Survey”

Gao Feng Advisory Company

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Waves of entrepreneurs in China

First generation Responses to Deng
Chinese entrepreneurs Xiaoping’s
§ Little experience encouragement
§ Little training and education § Many ex-Govt officials
§ Little legal framework § “Jumping” into the sea
§ High risks of failure
Emergence of the BATs
§ “Grassroot” entrepreneurs
§ Some overseas returnees
§ Began to embrace the
internet
Inflection point Post 80’s, Post 90’s
§ Entrepreneur-ship began to § More “Why not me?”
take off § “Why not?”
§ “Why not me?” § “What failure?”
§ Acceleration

Liu Chuanzhi Liu Yonghao Chen Guo Jack Ma Pony Ma Lei Jun Richard Liu Mao Wenchao Wang Tao
Lenovo New Hope Dongsheng Guangchang Alibaba Tencent Xiaomi JD.com Xiaohongshu DJI
Taikang Life Fosun

Ren Zhengfei Xu Lianjie Tian Yuan Wang Shi Robin Li Charles Zhang Zhou Hongyi Wang Jingbo Cheng Wei Li Xiang
Huawei Heng An CFA Vanke Baidu Sohu Qihoo 360 Noah Wealth Didi Autohome
Management

Pre-1990’s Early 1990’s – Late 1990’s Late 1990’s – Early 2000’s Early 2000’s – Late 2000’s Late 2000’s –Present

Gao Feng Advisory Company

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Exponential Organizations

Wechat’s Number Didi Chuxing Valuation, Oppo’s Smartphone

of Registered Users Pre- and Post-mergers Sales Volume

Million USD Billion Million

800 35
50
700
30
600 Merger with 40
25 Uber China
500 in Aug 2016
20 30
400
15
300 20
10 Merger
200 announcement
in Feb 2015* 10
100 5
0 0 0
Q2 Q2 Q2 Q2 Q2 Q1 May-15 Jan-16 Sep-16 2011 2012 2013 2014 2015
2011 2012 2013 2014 2015 2016
* Pre-merger values are combined of both companies
Source: Gao Feng Analysis

Gao Feng Advisory Company

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China’s digital landscape by numbers

Total Internet users Total mobile Internet Monthly active users

in China users in China of WeChat*

710M 656M 806M

(51.7% penetration rate) (10.4% YoY growth) (34% YoY growth)

Number of Chinese Daily rides booked on Alibaba’s sales on

companies in top 10 tech Didi Chuxing (May 2016) Singles' Day 2015
companies worldwide

4 11M USD 14.3Bn

(based on market capitalization) (covering 400 cities in China) (310M orders shipped)

Note: *Combined MAU of Weixin and WeChat; Numbers are latest published figures
Source: Gao Feng Analysis Source: CNNIC; Literature Research; Gao Feng analysis

Gao Feng Advisory Company

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Their characteristics

§ Why not me?

§ Fearless experimentation
§ Speed, agility, adaptability
§ “Triple jumping”
§ In and out of industry boundaries
§ Platforms; ecosystems; resource leverage

Source: Gao Feng Analysis

Gao Feng Advisory Company

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The third way

2 Core Competencies 3 Multiple Jumping 1 Conglomeration

New
Opportunity

Jump
Competencies or not?

Capability
Self-defined, Gaps
confined
boundaries
Current
Competencies
Random business clusters

Source: Gao Feng Analysis

Gao Feng Advisory Company

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Disrupting industry after industry

Dec 2015

Dec 2015
Jan 2016

Gao Feng Advisory Company

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Cross-industry ecosystems

Alibaba’s E-commerce Ecosystem Xiaomi’s IoT Ecosystem

Source: Gao Feng Analysis

Gao Feng Advisory Company

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Re-configuration of value chains and
disruption of traditional players
Traditional Automotive Value Chain CASE EXAMPLE: Connected mobility

Product Sales &

R&D Sourcing Manufacturing Marketing Service
Development Distribution

Future Mobility Value Chain

ILLUSTRATIVE

Intersection between the Automotive and

Internet Service Value Chains forms the
New Mobility Value Chain

Source: Gao Feng Analysis

Gao Feng Advisory Company

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They are all over

Internet Technology Health Energy

Jack Ma Pony Ma Robin Li Lei Jun Richard Liu Diane Wang Wang Tao Wang Jian Chen Haibin - Wu Gang
- Alibaba - Tencent - Baidu - Xiaomi - JD.com - DHGate - DJI - BGI DIAN - Goldwind
Diagnostics

Consumer & Retail Auto/Connected Mobility FS

Zong Qinghou Liu Chuanzhi Zhang Ruimin Wei Jianjun Li Shufu Jean Liu Zhou Hang Wang Jingbo Ma Mingzhe Peng Lei
- Wahaha - Lenovo - Haier - Great Wall - Geely - Didi - Yidao - Noah Wealth - Pingan - Ant Financial
Management

Gao Feng Advisory Company

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What drives China’s innovation?

▪ Decade-long, gradual transition from planned economy to market

economy
− Generating discontinuities
▪ Society’s “pain points” were exposed
− Providing opportunities for entrepreneurs
▪ Intense and transformative competition
▪ Massive market scale
− Allowing rapid scale up
▪ Prevalence of technology, especially the wireless internet
▪ Availability of VC and angel funds
− Overseas and local
Source: American Chamber of Commerce China, European Chamber of Commerce China

Gao Feng Advisory Company

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Example: Chinese leading innovators (1/2)
WhatsApp Vs. WeChat Feature Development Growth
WhatsApp
Functionalities WeChat

Instant Messaging; International

Voice Messaging, Money Calling;
Picture Sharing; Transfer; Foreign
Nearby User Search Taxi Booking; Currency Average Revenue Per User
E-Commerce Clearing; 2016, USD*
Instant Voice Global WeChat
Messaging; Messaging WeChat Pay 7
Picture Wallet;
Sharing Game WeChat City
Center Services;
Video PC Client
Chat;
Social
Network
Voice PC Client
Calling 1

2009 2010 2011 2012 2013 2014 2015 2016 WhatsApp WeChat

Note: Recent Estimates of WeChat’s ARPU are at least USD 7

Source: Literature Research; Gao Feng analysis

Gao Feng Advisory Company

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Example: Chinese leading innovators (2/2)

Ant Financial ecosystem (affiliate of Alibaba)

Wealth Microloans Mutual funds Banking Insurance
management & credit

Alipay (since 2011) Ant Cloud

E-commerce O2O apps / sites

Source: Literature research; Latest published figures

Gao Feng Advisory Company

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China is not just complex but is also
becoming sophisticated
Advanced Manufacturing Product Market Segmentation

Short-term Short-term transition

x
x
x
15 years ago Today

Digital Disruption Business Thought Leadership

Multiple Jumping Ecosystem

Competency
Gaps
Current
Competencies
Source: Gao Feng Analysis

Gao Feng Advisory Company

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China for the world

Gao Feng Advisory Company

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In China’s Disruptors, we chronicle power of the Chinese
entrepreneurs
Key Themes (book released in July 2015)

§ The real force in Chinese economy is

increasingly private companies, not SOEs
§ Leading private Chinese companies are
innovative and ambitious
§ They are changing not only China but
increasingly also the rest of the world

“
“ Five of the best new books on innovation
– China’s Disruptors’ public recognition
by Fortune.com, April 2015

Gao Feng Advisory Company

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Who is Gao Feng?
§ A pre-eminent strategy and management consulting firm with roots
in China and global vision, capabilities and resources network
§ We help our clients address and solve their toughest business and

THANK
management issues
§ Our behavior is led by our values
− We put our clients’ interest first and foremost
− We are objective and we view our client engagements as long-term

YOU
relationships rather than one-off projects
− We view our people as strategic assets and not merely “units of
capacity”
− We believe that every member of our team can contribute to problem
solving for our clients, from the most senior to the most junior
§ Our seniors are former senior consultants at leading management
consulting firms and/or senior executives at large corporations

Gao Feng Advisory Company

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Gao Feng’s heritage and our deep roots
in China

§ Our name Gao Feng 高風 is taken

from the Song Dynasty Chinese
proverb Gao Feng Liang Jie 高風亮節
§ Gao Feng denotes noble character
while Liang Jie refers to a sharp
sense of integrity
§ We believe this principle lies at the
core of management consulting – a
truly trustworthy partner who will help
clients tackle their toughest issues

Gao Feng Advisory Company

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Contact us
Please find below contact details for our offices
in Beijing, Hong Kong and Shanghai or contact us at
info@gaofengadv.com

Beijing Hong Kong Shanghai

Gao Feng Advisory Company
Suite 0707, Guang Ming Building
42 Liang Ma Qiao Road,
Chaoyang District
Beijing 10011, P.R. China
Tel +86 10 8441 8422
Fax +86 10 8441 8423
Gao Feng Advisory Company
Suite 33B, Level 3 Three Pacific
Place
1 Queen’s Road East
Admiralty, Hong Kong
Tel +852 2588 3554
Fax +852 2588 3499
Gao Feng Advisory Company
Suite 502
119 Madang Road
Huangpu District
Shanghai, 200021, P.R. China
Tel +86 21 6333 9611
Fax +86 21 6326 7808

Gao Feng WeChat Official Accounts：

Gaofengadv

Gao Feng Advisory Company

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