Rise of New Tech Giants from China

Google， Amazon， Facebook and Apple（‘GAFA） may still be the worlds largest technology companies， but a new generation of technology contenders is coming from the East. Alibaba and its peers Baidu， Tencent and Xiaomi （popularly termed ‘BATX in China）， not only lead but also create and disrupt markets. With a combined market capitalization of about $900 billion， incubating over 1，000 new ventures within a decade and an average annual growth of over 50 percent， they are showing their unprecedented growth and relentless ambition to the world. Did you know that Tencents WeChat has over 1 billion users worldwide？ Xiaomi bested Apple in the Chinese market， just 4 years after establishment. Baidu is one of the big boys in artificial intelligence （AI）， not less than Google and Microsoft. GAFA needs to be aware of the rise of BATX.

BATX have no respect for boundaries： sectors， countries， and technologies. While BATX roots are in search technology， ecommerce， social communication and software， the times have changed in the last 5 years or so. These new technology giants are active in over 20 different sectors， both online and offline and increasingly in hardware electronics. Alibaba and Tencent have penetrated almost every aspect of the life of a Chinese consumer. Xiaomi is one of the largest players in smart homes， Internet of Things and smart wearables. While Google and Facebooks revenue models are predominantly based on advertisement， BATX have diverse sources of income， related to their wide variety of activities.

Global presence is no longer just an ambition but already becoming a reality. BATX gained hundreds of millions of users in international markets， footholds in American， European and Asian markets， over 150 direct overseas investments and acquisitions and rapidly spreading pioneering payment， cloud and communication technology services. In fact， BATX re-ported in 2015 that about 10 percent of their total revenues –considering their huge revenues， this totals billions of dollars– already came from abroad. As oversized startups， still in the early phases of developing mature management systems， these companies have internationalized early and rapidly. Although these are the first experiments and they may go wrong， BATX will not rest until succeeding abroad.

Did you know that BAT are consistently on MIT Technology Reviews list of smartest companies in the world？ While Chinese companies were long hailed as copycats， this has now become a bad joke. In fact， BATX not only improved their core technologies such as search algorithms and communication tools， but also developed innovations outside their core technology， such as AI， social media， online security and mobile payment. Alibaba and Tencents advances in mobile technology， from payment to communication， are world leading. Baidus driverless car ambition beats Tesla with first commercial cars on the road in 2019. Xiaomis massive Internet of Things network with over 300 million connected devices deployed makes many traditional appliance and electronics manufacturer jealous. But perhaps it is the embrace of multiple， pioneering technologies that sets BATX apart.

But does this mean that these boundaryless organizations have nothing to keep them together？ Our decade-long research as summarized in our book Business ecosystems in China： Alibaba and peers Baidu， Tencent， Xiaomi and LeEco（Routledge， 2017）， suggests otherwise. In fact， no longer can Chinese companies rely on cost advantages but are required to innovate their whole business. And this is indeed what BATX have done by creating business ecosystems， rather than corporations.

Business ecosystems are boundaryless organizations of interdependent businesses with customer centric offerings across industries. Our research shows that Chinese business ecosystems are digital driven， featured with strong interdependence between the businesses and orchestration by a focal player， innovate across the boundaries of industries and countries and co evolve with the dynamic business environment. Chinese business ecosystems developed and transformed from organic growth to rapid expansion by investment， incubation， innovation and internationalization. For example， each of them invested in over 40 companies on average for the last 5 years and hundreds of new CEOs have been groomed inside the business ecosystems. For instance， the founder of the worlds second-largest unicorn Didi Chuxing – right after Uber – is former Alibaba salesman Cheng Wei， NASDAQ listed Xunlei （XNET） is founded by a former Baidu engineer Cheng Hao.

GAFA needs to be aware of BATXs boundaryless business approach， leveraging a new way of organizing and exploiting the benefits of both strategic planning and entrepreneurial decision making. BATXs business ecosystems are leading， creating and disrupting markets， not only in China， but in the rest of the world as well.

Blurring Boundaries of Sectors

Digital ecosystems， or business ecosystems， are a model in which traditional industry boundaries are radically reordered， where sectors that once seemed disconnected fit together seamlessly and where users， their data， and businesses are part of a large co-dependent machine， according to a McKinsey analysis titled “Competing in a world of sectors without bor-ders.” The report shows how Chinas tech giants are developing this model and setting an example for global players.

The term business ecosystem was coined by James F. Moore who studied the co-evolution of social and economic systems. It is now widely adopted in tech companies but it is quietly seeping into other areas.

The model is a good reference for Chinas digital landscape. Consider Alibaba—it can be defined as a retailer and a financial company. It has cloud technology， logistics， entertain- ment， healthcare， and even maps. Its O2O， B2B， B2C， C2C and probably every other acronym you could think of.

Alibaba， of course， is not the only example， other companies in China such as Tencent and Baidu， and even insurance company PingAn are building their own ecosystems. PingAn has moved on from insurance to financial services to AI development， and it has also created the PingAn Good Doctor app that connects patients with doctors.

Chinas tech giants owe their turbo-charged rise to unique regulatory， demographic， and developmental conditions. They were founded at a time when the efficiency of the traditional industries was low： e-commerce gained massive user number because classical retail was underdeveloped； delivery companies expanded because of the unreliability of China Post； healthcare apps gained momentum because of the inefficiencies of the healthcare system； mobile payments took the population by storm because plastic never had time to gain traction.

By not being defined or constrained by a single industry， Chinese tech companies have accelerated the blurring of the borders between areas such as these. Much like WeChat which has become “the everything app” by joining social media， content， shopping， and more， these companies are trying to become “the everything company，” simultaneously competing in multiple sectors.