On a recent trip to India for work, I woke up in my hotel room and did my favorite thing which millions of Indians including celebrities and politicians do all over the country every morning: pick up a paper copy of The Times of India stuck snugly on my door knob. As a kid growing up in India, I used to head straight for the cricket page (Sports is Cricket and Cricket is Sports in India). But the gray in my beard now also make me look at the front page headlines before heading to the cricket page.
Besides the usual stuff about politics, crime and business growth, one headline in particular caught my attention: Xiaomi Mi3 sold out in a few seconds; Flipkart site crashes.
Now, for those who don’t know Xiaomi, it is a “young” company started in China in 2010. It is known in the market for listening to the customer’s voice and making rapid changes to software on a regular basis besides being very economical. For eg., all employees including executives have to spend time interacting with consumers and responding to their feedback. By creating an initial adapter model amongst consumer who trade Xiaomi incentives, they have created a cult following in China. It has a big focus on design and many folks compare it to Apple and even being an Apple clone. Its revenues in the first six months of 2014 were almost $7 Billion and as of July 2014, it is the world’s 5th largest smartphone maker as per Forbes. It was also able to overtake Samsung in China as of August 2014. The timing of the launch of Xiaomi in 2010 would imply that it followed Apple’s first generation iPhone launch very closely and was able to build itself in China and is now expanding into countries like India very successfully.
This piece of news made me curious about some of the following things related to consumer-tech and which is what I shall be focusing upon for the purpose of this post:
- How was a Chinese company which as per Business Insider is an Apple clone able to create such a sensation in India in such a short time?
- Was the above phenomenon a flash in the pan (in the Indian market) or does it happen with other foreign companies entering the Indian market as well?
- What kind of competition did Xiaomi face from the local competitors in India? Was there an Apple clone in India as well started by a local Indian entrepreneur?
- What is the state of Indian entrepreneurship and innovation? What are the cultural aspects facing the Indian consumers which potentially influences the mindset of the Indian entrepreneur?
- What kind of innovation is going on in countries such as China? Where is the main innovation coming from?
- How do entrepreneurs outside India view the Indian market?
Digging deeper during my flying time (thanks to in-flight wi-fi), I was able to find some interesting things happening primarily in China, USA and India. Of course, as I am not based out of India anymore, a lot of these findings are “google-based” and not “on-the-ground” knowledge.
Here are the headlines of my findings:
- American entrepreneurs (primarily from Silicon Valley) were still the main innovators coming up with the killer and disruptive ideas. This has been going on for quite some time now and bigger and bigger ideas are being launched into the market on a daily basis. This group of innovators also includes a big chunk of immigrants including Indians.
- Chinese entrepreneurs observe American innovation very closely and think through which innovation might apply to the Chinese market and then localize it and quickly launch the Chinese version very quickly in China.
- India ends up becoming one of the biggest markets for the American companies and 2nd largest for the Chinese companies.
Here are some examples of what led me to the above findings:
- OS Innovation: China develops Windows and Android killer: http://money.cnn.com/2014/08/25/technology/security/china-os/index.html – this demonstrates how folks are thinking of reducing reliance on the market leaders
2. Mobile Messaging: As we all know, WhatsApp was acquired by Facebook for ~19 Billion. WhatsApp is a Silicon Valley company founded in 2009 with the aim of disrupting the SMS space and enabling easy mobile messaging. As of August 2014, it has over 600 Million active users.
Enter WeChat (known as Weixin in China) which is owned by Shenzhen, China based internet company, Tencent (world’s fourth largest internet company as of April 2014). As per Forbes, WeChat is now one of the world’s most powerful apps. For me, it is the closest competitor to Facebook at this time given its very strong eco-system of e-commerce and micro-apps which are being used by companies globally to sell their services, products and engage with a growing number of users globally. As of Q2 2014, WeChat has almost 438 Million users. WeChat is very much catching up with WhatsApp.
India market entry for WeChat: Coming back to the Indian market, as of August 2014, 10% of all active users of WhatsApp are in India which makes India its biggest market. http://timesofindia.indiatimes.com/tech/tech-news/WhatsApps-India-user-base-crosses-70-million/articleshow/45018845.cms
Tencent also sensed the growing demand from India and launched WeChat through an Indian gaming company named Ibibo in which it had invested into. WeChat is now one of the top downloaded apps in India now. WeChat continues to make significant investments and marketing promotions in India. Other top mobile messaging apps included Viber, Line and Facebook Messenger (all non-Indian).
3. Smartphones: Here’s another report for the launch of Xiaomi’s new model: Xiaomi to launch entry-level smartphone Redmi 1S in India on August 26 and how folks are looking forward to it: http://timesofindia.indiatimes.com/tech/tech-news/Xiaomi-to-launch-entry-level-smartphone-Redmi-1S-in-India-on-August-26/articleshow/40783256.cms
4. Facebook and Twitter users to cross 80 Million this year in India:http://www.dnaindia.com/mumbai/report-facebook-twitter-users-to-cross-80-million-this-year-2006431 . This demonstrates how Indian “junta” is so reception to outside innovation and embracing it. http://timesofindia.indiatimes.com/tech/tech-news/Twitter-India-among-our-fastest-growing-markets/articleshow/45240322.cms
5. Another big Silicon Valley company, Uber, has announced that India will be its biggest market: http://thenextweb.com/in/2014/08/19/india-becomes-ubers-largest-market-outside-us-launch-service-four-additional-cities/ .
With this data in hand, I started looking for Chinese comps and found such examples of Chinese innovation (above and beyond WeChat and Xiaomi) and those which have become household names not just in China but outside China as well:
— Baidu is now the default search engine – developed by Chinese, in China and is now expanding globally: http://www.techinasia.com/baidu-mobile-search-engine-hits-500-million-active-users/
— RenRen is considered to be the Facebook of China: http://www.trefis.com/stock/renn/articles/171218/renren-gains-from-facebooks-absence-in-china/2013-05-03
— Weibo is considered to be the local Twitter of China: http://time.com/65792/weibo-ipo/
— AliPay is considered to be the PayPal of China: http://blogs.marketwatch.com/thetell/2014/02/10/sorry-paypal-chinas-alipay-is-worlds-no-1/
— Alibaba is now bigger than Amazon and founded in China: http://www.wired.com/2014/09/alibaba-already-bigger-facebook-amazon-ibm/
I tried to find similar companies founded in India and as successful as their Chinese comps but with the exception of Flipkart and a couple of others, did not find any. Which also implied that I could not find any Indian-origin consumer tech company which had become successful outside India like its Chinese and American counterparts.
Was it a market problem in India with a population of 1.25 Billion with a relatively high degree of education?As per Google, India to have more Internet users than US by 2014-end: http://www.digit.in/internet/indian-internet-users-to-surpass-us-this-year-google-23598.html
So, I started thinking: What’s going on here with India’s entrepreneurs? Why could I not find any other local competition for the above mentioned international entrants into the Indian market?
- Too lazy to innovate and customize for the India market and enter aggressively?
- Give up too fast and take for granted a proven foreign product?
- Have the mentality of accepting everything foreign as a better product than the “Made in India” comparable product
- Maybe the above is true and thus no innovation goes into developing a desi version
- Don’t want to take the risk when the international company is already paying a nice cushy salary plus benefits worth almost $200K/yr out of college: http://articles.economictimes.indiatimes.com/2014-12-02/news/56649164_1_rs-42-lakh-placement-season-tower-research
- Accept everything that falls into lap especially if it’s free or cheap
- Are the current set of policies, incentives and infrastructure not conductive to innovate and build locally (As an eg. a lot of Chinese companies have flourished as their American originals have been blocked in China. Google, Facebook, Twitter etc are still behind the so called “Great Firewall of China”)
- Is it a mindset issue? As an eg. I have seen that many folks in India were very excited with the launch of Uber and the typical thing to say is: “Wow, XYZ is now coming to India”. Replace XYZ with name of international company. Why not think that: “Hmmmm…XYZ was just launched in the US. Maybe I can bring it to India better and faster with my market knowledge and existing network and resources?
- Are folks content being adopter rather than being innovators and owners?
- Is India’s dominance in the service/BPO industry taking it away from a product development and commercialization mindset?
- Is it a lack of awareness towards the effect of loss of data to another country’s companies when the user data is hosted on foreign servers?
- Is it a lack of icons in the country in the consumer tech innovation space? Every country has icons to inspire young entrepreneurs. China has folks like Ma Yun (Jack Ma, Chairman of Alibaba) and Kaifu Lee. US has no lack of them – Hewlett-Packard, Brin-Page, Zuckerberg, Jobs, you name it. Who is the icon that Indian entrepreneurs can live up to?
- Is there a historical precedence for this mindset?
Maybe there is!!! I found an interesting article in Wikipedia about the British East India company and how it entered the Indian market in the early 17th century as its first step of taking over India. The thing that caught my attention was the letter from Emperor Nuruddin Salim Jahangir to King James 1.
Here’s the narrative from Wikipedia:
In 1612, King James I instructed Sir Thomas Roe to visit the Mughal Emperor Nuruddin Salim Jahangir (r. 1605–1627) to arrange for a commercial treaty that would give the company exclusive rights to reside and build factories in Surat and other areas. In return, the company offered to provide the Emperor with goods and rarities from the European market.
This mission was highly successful as Jahangir sent a letter to James through Sir Thomas Roe: “Upon which assurance of your royal love I have given my general command to all the kingdoms and ports of my dominions to receive all the merchants of the English nation as the subjects of my friend; that in what place soever they choose to live, they may have free liberty without any restraint; and at what port soever they shall arrive, that neither Portugal nor any other shall dare to molest their quiet; and in what city soever they shall have residence, I have commanded all my governors and captains to give them freedom answerable to their own desires; to sell, buy, and to transport into their country at their pleasure.
For confirmation of our love and friendship, I desire your Majesty to command your merchants to bring in their ships of all sorts of rarities and rich goods fit for my palace; and that you be pleased to send me your royal letters by every opportunity, that I may rejoice in your health and prosperous affairs; that our friendship may be interchanged and eternal”
—Nuruddin Salim Jahangir, Letter to James I.
Was this letter and action by Jehangir an indicator of how India is so accepting to international companies while not innovating itself? Was it just the awesome gifts from Europe that made the emperor open up India’s doors to the East India company? Was it because he was getting it for free and did not have to work hard to get them or have to make his subjects work towards achieving them? The outcome of the letter was an open invitation to the British and the rest is history! Is the same thing going on with technology companies coming to India due to the same mind set potentially in existence today also?
Here’s the original article: http://en.wikipedia.org/wiki/East_India_Company
Things are changing though and the future looks more promising in terms of home-bred innovation for India. One of the best examples as mentioned above is Flipkart and how it is giving global companies such as Amazon a great fight. It recently raised $1 Billion, Among The Largest In Single Funding Round In Global E-Commerce:
Also, Tiger Global raised $2.5b with an eye towards investing into India: http://techcrunch.com/2014/11/26/tiger-global-raises-2-5-billion-for-new-deals/ .Other examples include companies such as Hike and Portea Medical. Uber’s competitor in India is Ola Cabs and just raised a bunch of money: http://techcrunch.com/2014/10/27/olacabs-softbank-india/ . Entrepreneurs such as Dr. Pratiksha Gandhi have also disrupted traditional markets (healthcare in this instance) and gone into preventive medicine tackling the growing menace of heart disease through her IPC network of hospitals. (India is also known as the heart attack capital of the world: http://www.ndtv.com/article/india/india-is-world-s-coronary-diabetic-capital-says-expert-447189 )
Also, there is a huge wave of “desi” entrepreneurs who find solutions for localized problems. Here’s a great eg: http://www.cnn.com/2013/06/25/tech/innovation/frugal-innovation-india-inventors/index.html
This is a great start. I believe that Indian entrepreneurs have a great advantage which not a lot of folks do in other countries. These include:
— A tech savvy population which is hungry for innovation
— A very forward thinking, new government led by PM Narendra Modi
— Growing usage of internet and smart devices
— Hundreds of Thousands of engineering resources coming out of colleges nationwide who do not want to join the traditional BPO and want to do something different
— Low costs overall for product development
— A big eco-system in residential areas for early adopters which also include big circles of friends and families
— And above all, a deep understanding of culture and needs in the market which helps reduce the time to bring to market a much-needed solution.
Indian entrepreneurs can take advantage of these factors and locally innovate to cater faster, cheaper and better to the massive local population. More importantly, it will keep things such as data and resources within the country and avoid mis-use.