Innovation is a big academic topic in Germany. Many German firms can’t compete with China or any such mega country where labour is so much cheaper and thus their aim is to develop niches. These niches are generally in the premium market and not focused towards cost leadership where German firms usually would not stand a chance. There are plenty of “hidden champions” especially in the South part of the country that cater to these smaller, very premium market segments through exclusive technologically advanced and expensive solutions.
During my innovation seminars and multiple visits to their German firms, the topic of innovation would frequently come up. It came additionally with the threat from China– in the manufacturing business. The question was- do most customers really need such high levels of sophistication? And even if they did, China was ‘copying’ solutions and bringing them to the market faster, cheaper. This copying perhaps wasn’t an accusation, perhaps some truth lies in the fact that, many German companies entered the Chinese market with local partners and as a law they had to share all their IP and technical information if they wanted to enter the market. The market (especially for Auto) in China was emerging and so massive, that many took that risk. In any case being an export oriented nation with a rather low/flat domestic demand, the Germans had to sell these premium objects outside. The Chinese middle class was interested in high end brands no matter what the costs were.
Even though there has been a clear benefit in terms of surging German exports to China, usually like any other nation (I heard it in Japan and have often also heard it in India), Germans never stop short of talking about ‘quality’ of Chinese goods and the poor ethics of copying. That the car may be an exact replica of a Porsche but never have that same quality. To an extent I do not disagree. There are industries where it is not easy to compete at the same level when a country has a century of innovation legacy behind it. But then I am not sure China was playing for quality anyway. It has hurt many German companies in markets. There is a rather ethical debate I hear many times about, how can the Chinese copy so blatantly. I am a big fan of strong plagiarism laws personally, and buy into that argument to a large extent.
However, the German theory of ethics fails to a large extent with a homegrown copy cat in Rocket. I found it amusing. So I decided to ask around, why is it ok for Rocket to copy and not get flak and instead pride shares on its IPO plans? Here’s what people said,
Rocket Internet makes everything nice. The quality is not poor like Chinese goods
Rocket Internet may be copying the initial idea, but their implementation and scale is very innovative
Rocket Internet has a great circle and network, if you get in it, you are on a great track
Rocket has entered a market which was competitive (like Germany) and almost killed other eCommerce players because they are so good.
Of course there is inherent pride since it is German. But then, how differently would Chinese people think about their firms? I once had a boss who said he wasn’t shocked with China copying because he thought they don’t see anything wrong with it culturally. I am not taking sides, but I do wonder, the judgement on cultures is not as black and white as we’d like them to be. Unfortunately while this may be just driven by oft hidden harmless national pride, it does raise questions on the theory of implicit western biases.
Disclaimer: I worked in a Rocket Internet venture for 7 months in 2013 first as an intern and later as a work student. In all fairness, it blew me away. There is intense learning, freedom to try, risk, fail and try harder. The office space was full of highly international young energy which was hard to contain- and very non characteristic of traditional German offices. Everything that you would want in an aggressive start-up. Of course it was not perfect and I could have feedback for improvement too. But having worked in big companies without thousands of employees, I see the merit in smaller start-ups and enjoy the challenges.