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Didi 10 Uber 0: Why?

By Shlomo Maital

Didi

Uber, the global ride-share company, has sold its China business to Didi, its Chinese counterpart. This, after Apple announced a major investment in Didi.

   Uber’s failure in China (it never had more than a 10% market share, compared with Didi’s 80 %) reminds me of eBay and its massive defeat by Alibaba, despite a huge $150 m. investment of eBay in its China operation.    Alibaba, by the way, along with Tencent, is a major owner of Didi.  

   We can learn a lot from the Uber-Didi battle. The head of Uber China, and of Didi, are cousins. Their uncle was a founder of Lenovo. Didi has been adding 400,000 drivers a day! It has been innovative, offering innovations like bus service and car pooling. Business in China is based on relationships, and the two cousins’ close relationship smoothed the deal.

     I am writing this blog in Pittsburgh, where I’m visiting my sister. Decades ago, I visited her and went to see the steel mills, in Braddock and along the rivers. They’re all gone. And the jobs have migrated (though not the same steelworker people) to health care. U. of Pittsburgh Medical Center, Montefiore Hospital and others now are the major employers, in Pittsburgh, and the city has undergone an amazing revival. This is not, however, true of other rust-belt cities like Gary Indiana and Cleveland, Ohio.

     China has a new program, or policy, Innovation Plus. The idea: Migrate steel jobs toward services, like Didi. America never did have any such plan. The free market is supposed to do the job. But it did it very very poorly or not at all. China’s government is actively encouraging Internet service businesses, like Alibaba’s Taobao villages which do e-commerce.

     I have written a case study of Alibaba, including how it triumphed over eBay, available to anyone who sends me an email: smaital@tx.technion.ac.il

 

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Europe’s REAL Problem: Innovation!

By Shlomo Maital

EU Innovation

Innovation: Only the Dark Green is “Innovation leader”

The EU has a lot of headaches – more than an ocean-full of Tylenol can assuage. Brexit, and copycat exit movements (including Austria, Catalonia, parts of France, eastern Europe); Greek debts that can neither be paid off nor written off (owing to stubborn German banks); a banking system that has an EU central bank but fragmented country-level banks, that can neither be integrated nor freed and opened; and many more.

   Some of these headaches are being (badly) addressed. But one key issue is utterly ignored, as the Washing Post recently noted. *   In an EU report, EU Regional Innovation Scoreboard 2016, it is claimed that:

   The continent’s most creative and productive regions are in Germany, France, Britain and the Nordic countries. Southern England, northern Denmark, southern Germany and Paris are particularly successful — whereas Romania, Poland and Spain have disproportionately more regions that lack innovation. But as a political and economic union, all of Europe should be worried. Europe is becoming less innovative overall.

   Why is this worrisome?   One of the main points of a single market is that by creating a huge market, the world’s 2nd biggest economy, you open huge opportunities for entrepreneurs, whose path-breaking ideas can now reach 510 million people (EU), $20 trillion economy (2nd in the world) and per capita GDP of $37,000.   But the opposite has occurred. Europe is becoming less innovative, as the report shows.  

     In Belgium, Greece, Ireland, the Netherlands and Romania, performance declined in all regions,” the report’s authors note. Germany — often considered the economic powerhouse of the continent — was also unable to improve performance.

         I taught in France for many years.   France has some of the world’s most talented creative engineers. But they don’t start businesses! Why? There are a hundred reasons. Risk, bureaucracy, lack of finance, rigid labor markets…

           You can’t solve a problem until you face it. Europe is preoccupied with other problems, and is not even beginning to face its innovation problem.  Alas.

* Rick Noack “Where Europe is most and least innovative, in 6 maps,” Washington Post. 2016.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
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