German and Chinese Start-ups Compared

Chinese start-ups are focused on the customer. For them, technology is strictly a tool in that relationship.

How Chinese start-ups look at their business

A Chinese start-up will look at the customer and say, okay, what do they want or need and what are their pain points? What kind of product or service can I sell to them?

They will jump into that opportunity, but at the same time they also operate in a particularly opportunistic fashion. Once they realize that the market does not like their product, they will change and pivot very quickly.

In that sense, Chinese start-ups are very agile and fast. With numerous ambitious start-ups seeking opportunities but lacking significant technological superiority over their peers, speed has emerged as a crucial competitive advantage.

However, they may lack the kind of long-term orientation and focus that is required for success in the long run.

Germany and lacking customer focus

In contrast, German start-ups are very focused on technologies. But while whatever technology they are developing is on the way to the market, the risk is that they lose sight of what the customers actually want.

This is one of the major differences between Chinese and German start-ups. The second one is rooted in the culture of Chinese start-ups. They are very open to risks, while German start-ups are very much risk averse.

Germany’s innovative past as a disadvantage

In that sense, the fact that Germany has a long reputation and record as the land of innovators, inventors and engineers is actually a disadvantage in the context of start-up driven innovation.

That culture, developed in the age of when mechanical engineering started its long sweep in the world economy, demands that whatever gearbox you may be creating, you need to make the gearbox perfect before you can build into the car.

This mentality of striving for ultra-precision, if not perfection, has been the distinguishing German hallmark since the days of building the first car.

It is an engineering tradition and rigorous standard that has been passed on from one generation to the next.

However, that mindset that was a powerful asset for so long turns into a disadvantage in the era of digitalization.

Sticking to this 19th and 20th century mindset means that you cannot move forward as fast as someone who did not have this heritage.

Slow vs. fast development times

Culturally, German start-ups need a shift to a much faster product development cycle. Their Chinese counterparts often achieve speed through very long working hours.

For example, Chinese start-ups have no qualms saying: Okay, we just need to get it 30%, 40%, 50% or 60% right, and then we will start to try to sell and to monetize. And don’t worry, there will be some bugs, but we can fix those the next day.

In China, “996” refers to a work culture where employees work from 9 AM to 9 PM, six days a week, totaling 72 hours. The 996 concept is often associated with the tech industry and criticized for overwork and poor work-life balance.

Decision-making vs. too much consensus orientation

A further fundamental difference between the two start-up cultures concerns the way of decision making. I believe this is also a cultural issue. German society is very consensus oriented.

That’s why even in a German start-up, whether you have two founders or three founders, or a team of 5 or 6, they all feel that they need to come up with a decision that should represent the consensus of the team.

In China, most start-up CEOs or co-founders are the king of their kingdom. They make decisions on their own. They own the right to make the call. They just make the decision and do not lose too much sleep over it.

The art of the pivot

Of course, the disadvantage is the risk they have to take in case their decision is wrong. But why worry? They will compensate for that by means of a quick pivot and change.

In the German ecosystem of innovation, a lot of governmental approval processes are involved, which inevitably slows down the speed of innovation, if not innovation itself.

The Chinese operate differently. They will just go ahead and, if need to be, will ask for forgiveness later.

Germans’ fear of punishment

That approach obviously does not work in Germany because people who proceed in that manner will be punished.

In Germany, the cost of failure and mistakes is significantly higher, and such behavior often leads to consequences or penalties.

This also helps explain why the company Rocket Internet, founded by the Samwer brothers, was so successful at the time. The start-ups they launched initially were based on business models already proven elsewhere, and the cost of failure in a risk-averse society was much lower.

One final remark

It is obvious to any reader just how much the Chinese and American start-up cultures are alike.