Signs

Somewhere on the Third Ring Road
Beijing
0725 hrs

Looking to be another long day. Possibly some interesting news later. I’m a half-hour early for my first appointment of the day, and the skies are clear if hazy above Beijing. There is promise in the air.

Great iPod shuffle billboard along 3rd Ring near the Zhaolong hotel. ¥990 is a bit more expensive than the $99 the thing goes for in the states, but it’s brilliant. In a country where there price is a mostly subjective thing, simply smacking a price on a billboard is a bold statement. Go Apple.

Huge double-decker bus ads for 7-Eleven, stores which are just starting to pop up in China. Why does China need more convenience retail? It doesn’t. It needs more cost-effective convenience retail, and 7-Eleven’s inventory and supply-chain management technology are what is going to revolutionize small retail here. It will become increasingly difficult in China to run a retail operation with an abacus and a cash box.

BCG-Wharton Report: A Worthy Read

Perched 9 Floors Above the Hutong
1320 hrs

I have hardly in the past to nail the folks at Wharton when I felt they were wrong about issues in China, so in all fairness I need to compliment them when they get something right.

The recent report by the Boston Consulting Group and Knowledge@Wharton on Overcoming Challenges in China Operations has come up with some very poignant conclusions that are worth reviewing in detail. While it pussyfoots around some critical issues in the name of political correctness (they stopped just short of saying that most Chinese managers aren’t ready to take the top local job in MNCs, as an example) and there are some notable omissions, they come up with a set of of “uniquely China” observations about MNCs who have succeeded in China.

It’s hard to argue with things like:

1. Giving China high visibility at headquarters;
2. Personal CEO involvement and regular visits by the CEO to China;
3. Clear, bold targets;
4. Give China a high priority regardless of what it would be assigned under normal internal systems;
5. Create China-specific products;
6. Bring the entire value chain to China, including R&D;
7. Nurture managers for the long term;
8. Emphasize government relations and public relations;
9. The China operation is given a genuine “value-added” role in the organization; and
10. Make China a global or regional center for key responsibilities.

Clearly, these alone won’t make an MNC successful in China, but they’re a good start.

Why isn’t China Teaching Integrity

9 Floors Above the Hutong
China World Tower 2

1233 hrs

I wish to hell more companies in China would publicly eject dishonest employees. More stories like this one running here might have an impact.

“I lied to my previous employer and falsified company documents while making lots of money for them and myself. Then I wrote a book about it. What’s wrong with that?”

“Uh, you’re a self-confessed dishonest guy who has no integrity and has committed acts that under the laws of the land could be considered criminal. Hit the road.”

Damn, I wish there was more of that here…

Attention all employers in China! If they cannot define “integrity” when you interview them, DON’T HIRE THEM.

If they behave with a lack of integrity, FIRE them.

Build it into company policies. Use YOUR definition of proper behavior and clear it with local counsel. Then enforce it.

In China, Be Human

Somewhere on the Airport Expressway
Beijing
2149 hrs

Heading home after an exceptionally long day (global CEO in town) passing a 1/4 ton truck half filled with leaves and five guys with dirty orange coveralls crapped out on top of the pile humming along at 120 kilometers an hour, I am reminded once again that for all of the advancement in this country, human life remains an exceptionally cheap commodity.

To an economist that’s not surprising: in a country with 1.3 billion people, human life is plentiful, and thus inexpensive. The marginal value of each individual is to the state and its economy is, depending on which expert you ask, not only tiny, but indeed perhaps negative. China has too many people, we are told. Take this logic an extra step, and the question then becomes “so, how do we shave a few hundred million off of the total.”

A repugnant thought to anyone raised in a tradition that teaches that the value of an individual life is equal to the value of the entire world.

Okay. So say it’s “culture.” Say that China is different from the West. Accept it. Deal with it.

You start making compromises with your humanity like that, and sure as hell, you will find yourself justifying injustice all day long in China.

The challenge is to sustain and constructively channel that just outrage without allowing it to consume you, to neither apologize for this place nor to hurl yourself bodily against the system in protest, but to find a way to create change a little bit a day.

I smile a lot. I salute the guards back when they salute me. I tip. I say thank you. It’s not much, but dammit, if more people would do it, I guarantee you this would be a lot nicer place to live and work.

Spooky Moment

Hangover Recovery Unit
Silicon Hutong Clinic
Beijing

Watching The Devil’s Own on HBO Asia. There’s this one spooky moment when the Irish terrorist arrives in New York, and his U.S. sympathizer is driving him over the Brooklyn Bridge. He looks at the World Trade Center towers and says “and there it is.”

Hair rises on back of neck.

Irish Ball

Hangover Recovery Unit
Silicon Hutong Clinic
Beijing

Irish Ball in Beijing last night, Sunny and I there courtesy of Cyril and the gang at I.T. United. Still getting over it, but a good time had by all. Cyril is one of those guys who is plugged into a whole lot of fascinating people, and we shared the table with some deeply fascinating people. And anyway, any table with senior executives from Airbus, BMW, Panalpina, and the Beijing city government can’t help but be really interesting.

One of the wonderful things about living in Beijing – ball season. Ran into a bunch of people I haven’t seen in a while, including Greg from Sun. Sun is up for taking a chunk of the open source war over here, and Greg is leading the charge with regional governments in Northeast Asia. That’s a tough battle, given that the Asianux folks have a long lead and have something of a home court advantage.

Video Game Wars: How Long Before the Chinese Catch Up

Headquarters
Silicon Hutong
Beijing

So the United States Air Force wants to take a big step toward retiring the $2 million pilots flying $100 million jets, replacing them with smart kids sitting in air conditioned trailers outside of Las Vegas flying $4 million recon drones.

The pilot of the future is the video gamer of today. Technology changing air combat.

Now, how long before the PLA figures out they can stop buying Su-27s and Su-30s from the Russians at $34 million a pop, then deal with spares, then deal with the headaches they’re having integrating them into the force, and start buying projectable power on the cheap?

Bluetooth: Not Dead Yet, but Not Looking Good

Command Center
Silicon Hutong Plaza
Beijing

Among the avalanche of information pouring out of CTIA 2005 comes this piece in Engadget that suggests Bluetooth is blossoming.

Respects to Ross Rubin, who I think is a very switched-on and entertaining writer, this comes across as a badly disguised piece of sponsored PR dreck from the heart of the Bluetooth SIG. The entry is long on declaration (“CTIA made a convincing case that this is Bluetooth’s moment to shine”) and very short on supporting evidence. Wow – half a dozen high-end phones have Bluetooth, there are some Bluetooth enabled GPS devices, a couple of peripherals, and an MIT-designed Bluetooth stuffed animal.

WIth respect, this is the sort of uptake and support that befits a new technology, not one that’s been around for several years. Ross makes the point in the article that Bluetooth is hardly ubiquitous, and he’s right. It may not be a novelty, but if it isn’t ubiquitous now, it never will be. There are a lot of little reasons for this, but to me, there are really only three that matter:

1. Muddled Positioning: The industry is still operating under the misconception that Bluetooth would act as what Ross calls an “Internet Gateway” for personal area networks. I’m sorry – isn’t that what WiFi does? My understanding of Bluetooth was that it would replace the serial cable, IRdA, and other hookups between devices, accessories, and peripherals, NOT create an Internet hookup. If the industry hasn’t figured out the positioning of the Bluetooth relative to the other technologies out there, how are users to understand how to use it?

2. Unclear Value: Following on from the positioning problem, neither the Bluetooth SIG nor the industry has made sufficiently clear the advantages of using Bluetooth to your average. What IS a personal area network, and how does making it wireless make my life better. By failing to communicate the basic, simple advantages of eliminating half of the cords in ones laptop bag or on ones desktop, the SIG and manufacturers have insured that mainstream users cannot but fail to get it, and visionaries – who understand the value of the technology – think that because it’s not being pushed, maybe the technology doesn’t live up to its promise.

3. Impending Obsolescence: The standards groups around what has been called Ultra Wideband (UWB) and is now being called Wireless USB are just coalescing, and we are certainly some ways away from real product. But the positioning – starting with the new name – has begun in earnest, and the advantages are clear – eliminate your USB wires. Period. Awesome. Fast. Cool. I’m there. And thanks very much, Bluetooth, but I’m waiting.

Nowhere are these failures more a pity than in Asia, where consumers have proven willing to experiment with these kinds of technologies and implement them into their lifestyles, and where the mobile phone plays a role far greater than anywhere else in the world.

Ericsson did a great thing creating Bluetooth, and it has given a lot of us a chance to tinker and play with he idea of unplugging cables. Unfortunately, it’s really clear that Bluetooth has fallen into Gordon Moore’s chasm and will eventually land in the Graveyard of Technologies with Unrealized Potential.

Nokia: Dis-N-Gage

In the Hutong after a Long Day

The capacity for institutional self-deception powered by hubris grows in direct proportion to your greatest accomplishments.

It is for that reason, perhaps, that just under a year and a half after the introduction of the Finnish Taco Game Phone, better known as the N-Gage, Nokia is still telling itself the thing can be saved. Despite lousy sales, a lack of titles, and just plain stupid features, NokNok still thinks its a good idea. The Espooians are about to spend a chunk of their shareholders’ money redesigning the ugly beast (2 years too late).

Which means they’ll probably get a whole bunch of guys who spend their lives commuting from one end of Espoo to another to sit inside a glass room and brainstorm what it should look like, what it should do, etc.

I hope Nokia has learned a few lessons. Lessons like, well, getting feedback from the rest of the world – end users, hardcore gamers, game designers, retailers, and a whole lot of people who would love to provide Nokia with feedback.

Finally, I hope Nokia has started to learn that it cannot possibly hope to do everything, from design, to components, to manufacturing, to marketing, to software, to services and hope to succeed. Not even Apple does all of that anymore.

But I have a funny feeling that as long as the company’s current leadership stays in place, Nokia will still try to do it all.

Boeing Boss Allegedly Gets Caught with Pants Down. Party in Toulouse!

In the Hutong
Beneath the Departure Path for PEK Rwy 18R

Harry Stonecipher’s abrupt departure from Boeing – and its salacious cause – will certainly garner much mirth around the world, but nowhere more so than Airbus headquarters in Toulouse.

The French and Germans must be laughing their heads off. The Germans are laughing because they have learned the hard way the cost of relieving a competent commander in the middle of a fight, regardless of his peccadilloes.

And of course, the French are laughing because if one of them had done what Stonecipher is accused of doing, they’d expect a promotion or a raise.

Stonecipher won’t be missed by the Boeing rank and file, but you know what? It’s nice if the troops like you, but I would worry about a leader eager to curry favor with the troops.

I just hope they replace him, and soon. Airbus has had a ridiculously good romp, and it’s been by default – Boeing achieved almost nothing of note in the 14-year long dry spell twixt the 777 and the 787 , while Airbus has done what Boeing used to be quite good at – mixing experience, leading technology, and deep customer relations to create great products.

It’s high time Boeing had a leader who can brilliantly synthesize all of that great raw material into the aerospace powerhouse the company should be. Clearly, ol’ Harry (whose previous claim to fame as CEO was to sell McDonnell-Douglas to Boeing) was not the guy.

Over the next 20 years, China is collectively sitting atop orders for 2,300 or so aircraft, equivalent to about six years production of either Boeing or Airbus. By fundamentally rejecting Russian designs, the government and the airlines are essentially saying they want more technologically robust aircraft. While both Airbus and Boeing will both get orders, somebody will own the larger chunk of the purchases. The only way Boeing will do that is by being perceived as the stronger player. And right now, from Beijing, Boeing not only looks weak, it looks lame.

China, India, and Technology

In the Hutong

The India vs. China thing has become something of a fetish among global executives, business analysts, government officials, and think tankers, and now The Economist.

As a strategic issue, the India/China issue is totally irrelevant. Any senior executive anywhere in the world who is still saying “hmm, should we go with China or India” is out of touch and a danger to his company and its shareholders.

India is given far too much credit for its IT industry, which is a good thing for the country, no doubt, but is not the answer to the country’s ills. It makes up a mere 4% of GDP, and is going to find its long term upside as a mass employer sorely limited as the country runs out of trained graduates. Worse, as we are discovering worldwide, the IT revolution has two distinct phases. In the first, a company creates an industry, first in assembling machines, then designing them, then providing services, then writing software, then designing the whole deal.

In the second, traditional industries in agriculture, manufacturing, and services begin to absorb increasingly sophisticated doses of IT, radically transforming the industry and raising its productivity and profitability. This is where the big payoff comes – when the entire industry is fundamentally changed.

With its English-speaking masses, its technical universities, and a global community of Indian engineers, the company will certainly do well with the first.

But India’s challenge is education beyond this elite, because that is where the nation struggles, and its lack of inward foreign direct investment. Without the inward FDI, traditional industries find making the major investments to transform and modernize their businesses a major, often insurmountable challenge. And without a large pool of labor with an elementary and secondary education, where is the workforce trainable to operate in those modern transformed enterprises? Literacy runs at 57% (vs. China’s 91%), and an appalling 45% of adult women are functionally illiterate in India.

So India is set to hit a wall in this second phase unless it begins redressing some fundamental problems. Building hardware, writing software, and even creating services will only absorb part of the population and make a few sectors globally competitive. China, on the other hand, is already starting to transform its industries.

That can all change in a heartbeat. All India needs to do is begin taking a chainsaw to the license raj, and it will suddenly look like a great bet – even if companies have to provide their own workers with basic instruction. I expect it will happen, but not soon.

BTW – check out Silicon Hutong’s India soulmate – The Sepia Mutiny.