Innovation Models in China
* The 5C™ of Innovation +
Benjamin Joffe, CEO | Plus Eight Star | Beijing, 2009.06

Benjamin Joffe
ベンジャミン
벤자민
本杰明

4 years
1 year
4 years

www.plus8star.com

Innovation Arbitrage
China | Japan | Korea

+8* and Me
– Worked in mobile SNS in Japan in 2003
• With avatars, virtual goods and GPS!
– Advise leading companies worldwide
• MIH (China/S.Africa | Largest shareholder of Tencent)
• DeNA (Japan | Mobile Game Town)
• IMVU (US | 3D chat / virtual world)
– First commercial report on Tencent “Inside QQ”
– Work with China-based 3D social gaming startup
– Co-Founded Mobile Monday in Beijing

Here is the plan
1. Exogenous innovation
2. What is innovation?
3. The 5C™ of Innovation
4. Some things we think are cool
5. What if all this was irrelevant?

1.
Exogenous Innovation

When was it invented?

Europe
Gutemberg | ~1450
Korea
Metal | ~1230
China
Wooden | ~1040

Who came first?

Where do you get inspiration from?

Innovations are bound to happen

2.
What is innovation?

Technology?

e.g. LAMP stack
(Linux / Apache / MySQL / PHP)
+ HTML / Flash / AJAX…

Largely commoditized…

Makes money?

Tons of users?

Most start with zero
(is innovation a popular vote?)

Speak English?

Some things
going on here
And there There too

Some things
going on here
And there There too
And of course in a lot
more places

“News is anything that happens to
or near publishers and their friends”

Alternative
Live in Silicon Valley

Internet Mobile
1.3 billion 3.3 billion
(Asia = US + Europe)
Source: Morgan Stanley, 2007

English-speaking LAN

3.
“5Cs of Innovation”™

a. Copy

“Benchmarking”
“Inspiration”
“Best practice”
“If I have seen farther it is only by standing on
the shoulders of Giants.”
(Isaac Newton)

Pragmatic Entrepreneurs & Investors
Innovation ROI?
“Blue oceans”

Entry barriers
Technology?
Capital?
Talent?
Intellectual Property?
Censorship?

The Underpants Gnomes

Business Plan

Copy can backfire!

Japan: Mayonnaise

China: Whipped Cream

Copycats often die
• Market not sustainable
• Business model does not work

b. China

Already in 2007 ...$1 billion do not
(We even published a report…) appear overnight

Attention Threshold
=
1 billion dollars?

Scale / Geography / Demography
make some services viable

Maybe the West is simply
not looking?
Happy life in a fish bowl

c. Combination

Will it blend?

Tencent (1998)

Registered users
200 mln 856 mln

Revenues 2008 (E)
1 BILLION DOLLAR
COMPANY YOU NEVER
HEARD OF?
350 mln 1 bln!

Profit margin
- X? 40%
~400 MILLION DOLLAR
NET PROFIT

Market Capitalization
(June 2009)
3-15 bln? 21 bln
REAL MARKET CAP

Our estimates for 2009 (roughly)
Revenue | $1.5 bln
Net Profit | $600 mln
(Let’s buy MySpace this year?)

d. Competition

“Survival of the fittest”
(Herbert Spencer)

What happens when you have
4 Facebook
20 YouTube
10 MySpace
5 Match.com
3 Yahoo
4 Twitter
?

Hard spots
“Concepts”
Sociology
Psychology
“Execution”
Marketing
Business models
Payment

e. Constraints

“Necessity is the mother of invention”
(Plato)

Low GDP/capita
Small transactions / making millions from cents

Limited advertising
Alternative business models / B2B to B2C

No credit cards
Alternative payment systems,
mobile, virtual currencies

No legacy industry
(is it a constraint?)

4.
Some things we think are cool

Lihua | Order food over IM

Alimama | Ad exchange + Micro-retail

Babytree | Vertical for young parents

Huica | Mobile coupons

PPLive | P2P Internet TV

iNezha | RSS-to-IM

Digu | Twitter + Pics + Celebs

5.
What if all this was irrelevant?

Many ways to work with China
Develop in China
Operate from China
Build for China

Innovation does not have a nationality

From China to the World?
1. “Global” idea
2. Multi-cultural team
3. Leverage resources globally

One example: Cmune
• What is it?
– Next-generation social gaming platform
– 3D MMO: Browser / SNS / Widgets / Download
– Virtual goods
• Team
– Based in Beijing
– 7 nationalities
– Most speak 2+ languages & lived in several countries

Early Results
• 1 million installations
• Microsoft BizSpark
• Facebook Fund
• Facebook gaming campaign

Being Global?
Partners
Founders
Team

Learn from the proven models
of yesterday

Tomorrow’s models
are born today

Contact Us
www.plus8star.com
benjamin@plus8star.com
+81 | Japan
benjamin0123 +82 | Korea
http://twitter.com/plus8star +86 | China
Telecom & Internet
www.linkedin.com/in/benjaminjoffe
+ Added Value
www.slideshare.net/plus8star * High quality

About +8*

There are more ideas
outside your country
than inside
Tom Kelley
CEO, IDEO
The 10 faces of Innovation

“Innovation Arbitrage”
• About us
– +8* | Plus Eight Star is the leading cross-market and cross-cultural consultancy in Asia.
– We provide local expertise & global perspective on mobile and Internet innovation from
China, Japan and South Korea to add value to and accelerate the development of our
clients’ businesses.
• Our services
– Analysis of proven best practices and business models from Asia
– Other services: executive study trips, market entry strategy, M&A advisory, partners
identification, negotiation support.
• Founder & CEO: Benjamin Joffe
– 9 years experience with mobile & Internet in Asia
– Selected among “China’s Top 100 mobile industry influencers” in 2007 and 2008
– Regularly quoted in international press and keynote speaker at numerous telecom and
Internet events
– Fluent in English, Japanese, French with working knowledge of Mandarin, Korean and
Spanish

Selected References
• Adidas | E-commerce strategy for China, Japan & Korea
• Bouygues Telecom | Cases studies of leading Asian Web 2.0 services
and virtual worlds
• Deutsche Telekom / T-Online | Benchmark of Korean mobile & Internet
convergence strategies
• Hemisphere | Analysis of mobile marketing best practices in Japan and
South Korea (Hemisphere is a leading digital advertising agency),
analysis of leading social platforms (SNS, virtual worlds, online games).
• Microsoft | Analysis of Japan’s key players and market catalysts for
mobile commerce market positioning in China
• DeNA | Case studies of the best practices of leading social networks in
China and South Korea (DeNA operates Mobile Game Town, Japan’s
leading mobile SNS service)
• China Mobile | Benchmark of Korean leading online communities
• Sands Capital Management | Evaluation of China’s investment
opportunities in social networks in China

Social Contribution
• Mobile Monday
– Founder of the Mobile Monday forum in Beijing since 2006 (3,000+
members, 28 events, over 100 presentations).
• Media
– Monthly column on Asian innovation for Asian Business Leaders
(one of the leading Chinese business magazines), numerous interviews in
international media such as The Economist, CNN.com, etc.
• Events
– Regular keynote speaker and moderator at Internet, Telecom, Media and
Investment events
e.g. eComm, ITU Asia, Asia Venture Capital Forum, China Mobility International
Summit, O’Reilly’s Graphing Social Patterns, Red Herring Asia, Media 08
Conference, Wireless Developer Forum, Open Web Asia, XMediaLab, Mobile
Monday Global Summit, etc.)