How do Chinese tech companies grow so big so fast? Beyond the obvious historic factors — a large market, lax regulations (at least until recently), and the late mover advantage — there’s one key, strategic difference among large Chinese companies: a willingness to aggressively experiment with their core products. The most interesting thing about Chinese tech startups isn’t necessarily how innovative they are, but how willing they are to shake up their best, most core assets and disrupt themselves. 

That kind of high-conviction risk-taking is something I wish we saw more of here in Silicon Valley. But this hard-driving business strategy isn’t merely symptomatic of Chinese tech leaders’ ambition: it stems from the belief that innovation isn’t simply about problem-solving for the visible inefficiencies currently in the market, but about taking a much more strategic and proactive role. There’s much to be learned by companies of all sizes from how Chinese companies actively sculpt supply and demand in the pursuit of innovation.

Most recently, this pattern is apparent in two instances: live ecommerce and short video, both of which have seen explosive growth in China over the past five years. Though it’s over 20 years old at this point, Alibaba grew 34 percent last quarter. Rival Pinduoduo now claims the highest number of active buyers, reaching 850 million in just six years. And ByteDance’s crown jewel, TikTok, now boasts 1 billion global users, recently overtaking YouTube’s average watch time in the U.S. and U.K.  

U.S. tech companies have also signaled strong interest in pursuing live ecommerce and short video, but have thus far been comparatively tentative. Tech giants like YouTube, Instagram, and Amazon have advanced technology, plenty of capital, and a dominant position — all of which ought to make it near impossible for upstarts like ByteDance to penetrate the market. But in examining the history of how these new categories emerged, the willingness to make big changes to core assets, I’d argue, is one of the most underrated factors in making Chinese internet companies so formidable. 

Behind China’s live ecommerce dominance 

Over the past five years, live commerce in China has reached $171 billion in total GMV, or 10 percent of total ecommerce. In comparison, that number is less than $1 billion in the U.S. 

Is there something unique about Chinese consumers that makes them love shopping via livestream? Not at all. In fact, the phenomenon had a weak and uncertain start. But Alibaba, the industry leader, predicted that content-based commerce would provide its next stage of growth. And while Alibaba wasn’t the first company to officially launch livestreaming ecommerce on its platform, it was the largest and most aggressive. 

The company made livestreaming a central part of its core apps early on and relentlessly invested in boosting both the supply and demand sides of the equation. On the supply side, Alibaba realized that talent was in short supply and quickly began working with over 200 multi-channel networks (MCNs) to recruit and train large numbers of streamers, a practice that continues today — the company trained over 100,000 agricultural hosts in 2020 alone. Two individuals from those early efforts, Viya and Austin Li, still sit atop leaderboards and are recognizable faces in the industry; in 2020, their combined GMV was over $8 billion USD. Additionally, Alibaba launched 60 shopping-themed live shows within two years, many featuring well-known celebrities, to stoke demand. 

But the most important thing the company did to boost awareness of the feature was to make live commerce a key highlight of Singles’ Day, the world’s largest shopping festival, the first year of its launch. Sixty-thousand livestreams were broadcast at nearly all hours of the day and night. Sellers were incentivized to participate: Livestreaming merchants reaped considerable traffic, well above the norm. Alibaba also invested in a spate of promotional events, including livestreaming the annual gala (which was also co-hosted by a media channel) and a record-breaking eight-hour fashion show at the start of the festivities.

Finally, even when livestreaming ecommerce still accounted for well under 1 percent of Alibaba’s total GMV, it was nonetheless given prime real estate on the app — the middle of the front page. Without these aggressive moves, it is hard to imagine that the industry would have grown even half as quickly as it has in China.

In the American ecosystem, live commerce has been discussed as a potential “next big thing” for years now by internet giants such as Amazon, YouTube, and Instagram. Clearly, all these companies recognize the importance of live content to ecommerce. Yet most options are not yet integrated into core offerings, are buried in subpages, or are still waiting to be launched

That’s not to say progress has not been made. To date, Amazon has made some of the most headway in the live shopping space in the U.S., including introducing a tiered influencer system where streamers of various degrees of fame can make commission off items purchased from their live feeds. In fact, the company piloted a small home shopping project two months before Alibaba launched live commerce. Similarly, Instagram recently hosted a “10 Days of Live Shopping” series featuring stars such as Selena Gomez and Kacey Musgraves. And earlier this year, YouTube announced it would start paying creators for posting “Shorts” content — videos lasting a minute or less — as well as paying for production and other perks. But despite recent strides, these efforts collectively amount to far less than resources and promotional activity that we’ve seen from Chinese tech giants thus far.

China’s tech playbook: Flood the zone

Chinese companies have followed a similar strategy with short video. The current industry leader is TikTok creator ByteDance. ByteDance’s first hit was actually an algorithmic news product called Toutiao. In 2015, Toutiao accounted for nearly all of ByteDance’s revenues and users were doubling every year. In addition, at that time the short video space was already crowded with moderate successes. Nonetheless, ByteDance leadership was convinced that falling data prices and rapid improvements in camera technology would make video the way of the future. 

In May 2015, Toutiao began experimenting with video on its front page. In just over a year, video clicks began exceeding article clicks. Sensing an opportunity, ByteDance had multiple teams work on different video ideas. The winning concept eventually became TikTok. 

Called Douyin in China, the app followed a similar playbook to Alibaba — signing hundreds of MCNs, building out new, easy-to-use tools for brands, and launching a wave of campaign partnerships with celebrities, artists, comedians, influencers, and famous shows, aggressively growing both demand and supply. In China, these efforts are typically the work of the operations team, which delivers a mix of reactive customer service, as well as proactive marketing and engagement. 

When it became clear a year after Douyin’s launch that livestreaming was another video use case that was seeing momentum in the market, ByteDance made it a core function in the app, right on the front page. In this case, the decision might not have been that difficult, but the speed and commitment that accompanied it is noteworthy. While most companies at the time were aware of the potential of short video and livestreaming, the most ambitious brands quickly put those features in the most trafficked places on their best apps. 

The takeaway for U.S. tech: Disrupt thyself

In the simplest terms, the crux of the matter is: Do these companies see their largest, most successful platform as a place where they should be trying out disruptive, new things in a big way, or as a place where they make changes incrementally to avoid upsetting the golden goose?

I’d argue that in China, there is little choice but to pursue the former strategy. The domestic market is incredibly competitive and international markets have thus far been pretty inaccessible. Chinese companies fight over every market opportunity, and there is such FOMO with every new innovation that everyone is all in, all the time. 

Silicon Valley behemoths, on the other hand, are global companies with less competition, especially abroad. Thus, in a sense, the opportunity cost is higher for U.S. companies to take on disruptive innovation. While there is a certain value in a more hands-off, deliberate approach, where the downsides are more bounded, I’d personally love to see more boldness from U.S. giants, especially when it comes to trends such as live commerce and short video. 

Of course, this is not to say that there aren’t some serious shortcomings to the Chinese way. Major apps regularly undergo big makeovers, not all of which are well designed or communicated. The user experience can be confusing, or worse, degraded, as we saw with the backlash against “too many ads on Baidu, for example. Sometimes too much hands-on fiddling with supply and demand hides unsustainable business models, as in recent setbacks around community group buying, leading to greater pain down the road. Regulators, too, have noticed the distortions such practices can have on the market and punished behaviors that unfairly harm other players. 

And there is definitely a FOMO-fueled tendency for everyone to try out every new innovation. Does every product need livestreaming? If you lived in China, you’d notice that every product, be it travel ( or food (Meituan) or dating (Yidui), would have it regardless.

In China, experimentation is frequent and aggressive; new markets are built by playing with demand and supply. As my friend Andy Tian, who grew up in Brooklyn, worked for Google, and later founded a unicorn startup in China likes to say: as Chinese tech companies get bigger, they make more changes, and they get faster.  

One thing is certain: wherever the next big thing comes from, the leading player may not be the first to innovate, but the company that is least afraid to disrupt itself.