Before the internet, there was social networking

February 16, 2015 18:01
Xiaomi's Lei Jun says the key to business success lies in four words -- focus, perfection, reputation and speed. Photo: Bloomberg

The internet mindset has existed long before the emergence of the internet. The internet just made it more visible.

Lei Jun, founder of Chinese smartphone maker Xiaomi, said the key to a successful internet business can be summed up in four words: focus, perfection, reputation and speed.

Many traditional companies have been focused on a single product.

Lego Group, founded in Denmark in 1932, has been making lego bricks to this day. Although the company has undergone transformations over the years, it has not deviated from building those colorful blocks we have come to know and many have come to enjoy.

On the other hand, some traditional businesses pursue perfection, particularly through delicate craftsmanship.

Take the world renowned Chinese carved ivory puzzle ball.

Inside the ball are several hollow spheres with different sizes on top of one another.

Each ball is engraved with exquisite and complicated design, all delicate and refined.

In the Song dynasty, these puzzles had 26 layers. The first such ball first went on display during the 1915 World Expo in San Francisco in 1915.

The number of layers increased to 30 in the 1950s and 60 in 2008.

In terms of reputation, opinions are generally held on something or someone as defined in the Grand Dictionary of Chinese Language.

In addition, Chinese idioms have various expressions about reputation.

Fast-food restaurants, automated laundry, 24-hour suits and fast retailing initiated by Uniqlo are reputational, so are Zara's fast fashion and high-speed railways.

Certain business models such as franchising are related to speed. Convenience and speed have been part of reputations before the internet age.

In fact, the internet mindset has been part of traditional business wisdom. Combined with other characteristics of the internet, that mindset can unleash unprecedented power, helping transform most traditional businesses.

Yang Yuanqing, chairman of Lenovo Group Ltd. (00992.HK), said the internet has brought progress but it can’t replace product innovation, R&D, manufacturing and supply chain management.

The internet can't change the core values of traditional business the way the steam engine and electricity improved productivity and efficiency in two industrial revolutions.

Nevertheless, the internet mindset does change the behavior of operators and service users, enabling data sharing and creating a business ecosystem that does away with middlemen, among other things.

These changes will impact how business is done and therefore is capable of turning business models upside down.

For example, education can be received outside of school and educational materials can be had for free.

That has completely changed the way education-related enterprises are run but the core value of education remains the same.

Electricity has helped people extend their activities but it does not mean they did not practice social networking before electricity brought television, movies, home appliances and other conveniences into our homes.

We should embrace the new era just as we embraced the changes electricity has brought into our lives.

This article appeared in the Hong Kong Economic Journal on Feb. 14.

Translation by Julie Zhu

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adjunct professor in the Department of Finance at HKUST Business School