Look east, young grasshopper, look east!

After my asian trip, and after reading Capitalist China, by Jonathan Woetzel of McKinsey & Co., China, Inc. and Megatrends Asia, I wonder if the maybe the NEW saying should be “Go East, Young Man!”

Beijing’s Spring – Circa 1977, Deng Xiaoping began the revolutionary economic reforms that began to open up China.  They beauty of of being new to this market (INMHO) is that we can once again look to larger market titans for clues as to how to understand and tap this market. 

McKinsey & Co. has been the leading management consulting firm in China for over 2 decades. They helped IBM navigate the divestiture of the IBM PC Company to Lenovo and can save us a lot of time, position us to win, and save ourselves from the humiliation of having to EXIT this vast cultural cornucopia rich with thousands of years of healthcare, and vast growth opportunities resulting from the emergence of their new lower, middle and upper-middle-classes.  As witnessed during the Olympics, they seem to be emerging with disposable income and a desire to import Western ideology, goods and services. 

Many people thought that IBM had finally come to its senses and exited the consumer PC marketplace with the shedding of the money draining assets of the PC company. The reality is, IBM established a beachhead in one of the largest untapped markets of the world that had literally been copying its technology for decades and selling it for considerable profit. 

Chinese Copyright and their interpretation of the public domain means “The Right to Copy”!

Because the Chinese legal perspective on intellectual property is very different than our own, it was practically impossible to police or get compensation for innovations or inventions that IBM had invested billions to research, develop and patent.  Without the benefit of indigenous support for the protection of their intellectual property, IBM realized that the best way to gain the respect and honor of this culture was to participate in it and turn the inherent transparency of the Chinese interpretation of “copyright” as “the right to copy” to their advantage by taking the very assets that IBM had worked so hard to develop, some could argue literally GIVING THEM to the Chinese Technology Manufacturer Lenovo as part of the divestiture deal.

In so doing, IBM bought into a cultural mindset of sharing technology for the advancement of all, and simultaneously established a local partnership with a vested interest in policing how that IP was used, developed and sold.  The free economy and local business interests began to police for IBM what IBM could not protect or enforce on its own.

It was a truly innovative win-win solution to a seemingly intractable lose-lose scenario.

IBM went pervasive.

And a foot note for the personal computer market:  IBM didn’t leave it, it just went invisible. Much like payments companies being content with being the action behind the transaction, IBM is kinda like the “Intel inside” of a lot of things you might not even realize.  Like every entertainment or gaming console out there from Sony’s PlayStation, PSPs and market winning BluRay technology to Nintendo’s GameCubes, Wiis and DSes to even Microsoft’s XBOXes. Yes, IBM is actually the primary component and chip licensor and provider for all three gaming platforms. IBMs cell-based CPU technology is also in most Java-enabled mobile devices and they are too many to list here.  But more on that later…

The Asian Opportunity…

Imagine being able to tap into the largest emergent economy with the lowest penetration of our traditional products, in an environment hungry for change, with a population teeming with excitement and a newfound source of discretionary income exceeding the American economy.

Imagine being asked by the largest credit issuer and largest cellular operator in the world, to partner with them and help them make a vision of electronic payments and mobile acceptance a reality.  This is exactly the position we can be at with China (or for that matter India).  PayPal exited both China and Japan because they could figure out the market dynamics or how these economies worked or how to differentiate their products.

For inspiration and a preview of what the transformational nature and the future of mobile commerce looks like, we need only visit Seoul, Singapore, Tokyo, Hong Kong or Shanghai to see how so-called 4G, or 4th generation, wireless broadband technologies, SmartCards, 2- and 3-D QR codes or barcodes, embedded radio tags and near field communications can be put to effective use right here at home.  An example would be Sony’s FeliCa product, now a “legacy” technology in Asia, as it has been in production since 1996. 1996!

The South Korean’s, Japanese, Chinese and Taiwanese are moving ahead, essentially without us.  What will our response be?  Will the west lose the innovative edge?