China Tech Blog invited and interviewed Mark West, Head of EMEA at 4Paradigm, one of China's leaders in artificial intelligence. Founded in 2014, 4Paradigm is an emerging global leader in enterprise-grade applied AI, with the top market share in China. 4Paradigm’s latest valuation is approximately USD 2 billion.
China’s AI industry and Global AI market
China’s AI industry has made impressive leaps in technology development in the recent years, with many Chinese AI companies synonymous with top-quality AI technologies and high specifications. According to CB Insights, as of November 2020, China accounts for 11 of the world’s 46 AI unicorns (startups valued at over USD 1 billion).
Source: CB Insights
Furthermore, China’s AI unicorns account for five of the ten AI unicorns with the highest valuation. Bytedance, with a valuation of USD 140 billion, tops the list, far outstripping other companies. With a valuation of USD 2 billion, 4Paradigm is 17th on the list, alongside Preferred Networks and Babylon Health.
Source: CB Insights
Although China’s AI market size has been growing enormously over the past few years; Chinese AI companies should not neglect global AI markets. Inkwood Research estimates the Compound Annual Growth Rate (CAGR) of the AI market will be higher in North America and Europe than for China. As Chinese companies begin thinking of and actually expanding abroad, Mark West provides insights on best practices in international expansion, emphasizing the importance of communication especially in the midst of the global Covid-19 pandemic.
Source: Inkwood research
Mark West’s Career Path
Mark is responsible for the launch, business development, staffing, and management of 4Paradigm’s EMEA subsidiary. His role is unique, because very few Chinese AI unicorns have decided to go international. Before moving to the Netherlands with 4Paradigm, Mark had already worked and studied in eight different countries across North America, Asia-Pacific, and Europe, with extensive intersectional experience in government, finance, and tech.
Although Mark’s various career transitions across multiple continents, sectors, and languages have not been the result of a step-by-step plan, he notes that a major motivation has been the opportunity to meet and work with people from highly diverse cultural and linguistic backgrounds, and work with them on challenging international projects. This attraction to complexity has taken him from the bilingual environment of the Canadian government to investment banking and stock markets in Asia to his current task of bringing 4Paradigm, a top Chinese AI company, to Western markets. Mark notes that China and technology have played increasingly important roles in his professional life, and his work at 4Paradigm is the culmination of these trends.
The Differences between the Chinese AI Market and the European AI Market
Mark began by stating that for a fair number of applications, there is not a large difference between AI markets in Europe and in China. For example, banks in Europe face many of the same issues with technology platforms as banks in China. However, there are a few distinct qualities of the European market and Mark provided two major examples. One is that the European market involves a diverse set of languages. Although Chinese is perhaps the most difficult language regarding optical character recognition (OCR), OCR systems in China essentially have to deal with just one language. In most European markets, OCR systems have to operate in multiple languages. Switzerland, for example, has four official languages: French, German, Italian, and Romansh. The other unique quality of European market that differentiates it from other global AI markets is the heavy emphasis on careful handling of data and personal privacy, particularly compliance with the EU’s General Data Protection Regulation (GDPR) and other local data privacy regulations. Although China also has an increasing emphasis on data privacy, as reflected in new laws and regulations, the European market sets the bar very high for demonstrable compliance with both the letter and spirit of data-related laws and regulations. Furthermore, there are multiple levels to the European market in terms of regulations and policy environments: the European level, the country level, and often also the individual company level.
Competitive Advantages of Chinese AI companies in Europe
In terms of competitive advantages for Chinese AI companies, Mark began with the fact that there is a good high-level match between, on the one hand, China’s high-spec AI capabilities and innovative applications, and, on the other hand, Europe’s high-quality data and increasingly sophisticated aspirations to leverage AI to drive new- and better business models. Europe still has a relatively small number of indigenous AI capabilities to unlock the value of its excellent data pools. In this respect, the European environment is perfect for those Chinese AI companies that can demonstrate significant technological advantages. In addition, Mark pointed out that China has the largest volume of data globally, forcing successful Chinese AI companies to cope with the most extreme data processing demands. The population of China is more than twice that of Europe, and, additionally, China’s mobile user population continues to grow very rapidly. Currently, China accounts for almost 20% of all active global internet users, with over 900 million Chinese netizens reported as of March 2020. This creates a significant structural competitive advantage for a leading Chinese AI company like 4Paradigm.
Mark commented that Europeans increasingly recognize China as the most experimentally-driven AI market in the world, with a faster pace of AI adoption than in the relatively cautious European market. In many cases, therefore, Chinese AI companies have the advantage of experiencing and learning from cutting-edge applied AI use cases before their European counterparts.
Challenges of Chinese AI companies expanding into Europe and the Importance of Cross-Cultural Connectivity
Mark mentioned how Covid-19 has made almost everything much more challenging for almost everyone, including for a Chinese AI company recently arrived in the European market. He emphasized the importance of cross-cultural communications in tackling many of the challenges created or exacerbated by the pandemic:
“Artificial Intelligence is a very complex, powerful, inevitable technology, and some fear it will be a net negative. How do you convince people that AI will be a net positive as we develop AI applications to solve problems for the common good? To overcome this challenge requires respectful listening to concerns, and a lot of time spent in open dialogue.”
Although there are many differences between regions, countries, cultures, and languages, there are certain underlying commonalities that exist in every context, and it’s important to find the right people who can bridge East and West by creating an environment conducive to open dialogue. Mark explained how those people with international backgrounds and cross-cultural communication skills lay the foundation for companies expanding from Asia to Europe, becoming key nodes in a network of people from different backgrounds and creating a work environment that makes employees comfortable raising their ideas and concerns so the company can then address them, to everyone’s benefit.
Cross-cultural connectivity from international expansion is not only important when reaching out to new stakeholders or partners, but is also important for the parent company. When companies expand overseas, some of the pre-expansion employees may feel disconnected with the international expansion project and new markets. This is dangerous, because everyone – for example, new customers in Europe and the original team in China – needs to feel connected with the product and have the ability to speak up when they do not understand or feel comfortable with something. Mark elaborated on this issue as it affects the parent company:
“It’s important to position an international expansion in everyone’s mind as an opportunity to develop new competencies and new problem-solving techniques, rather than as a threat or extra burden.’
4Paradigm’s Specific Expansion Strategies and Processes
Mark joined 4Paradigm in 2019, and arrived in the Netherlands to establish the EMEA headquarters in early 2020. Whereas in China 4Paradigm is widely known as a leading AI company with top market share, in EMEA 4Paradigm is a completely new entrant and does not have the same brand awareness and reputational advantage. Mark emphasized the need to be humble and unassuming when entering a new market, because what makes a company successful in its home market will not automatically make it successful in international markets. Furthermore, because of Covid-19, business plan assumptions and timelines have completely changed throughout EMEA, and 4Paradigm must adjust accordingly.
Partnering with Local Businesses and Finding Collaborators
Mark emphasized the opportunity for 4Paradigm to find reputable local channel partners open to collaboration with a high-quality Chinese AI company, especially those who have the trust of, and access to, clients even under pandemic conditions. As a new entrant in the EMEA market, it is important for 4Paradigm to look for well-established partners. Mark discussed two strategies when screening and selecting local channel partners: one is to find partners that are engaged in a broad range of industries or geographies, while the other is to find partners that have a relatively limited but clearly defined industry or geography that includes a concentration of solid relationships with high-potential clients. Mark believes these two strategies are not mutually exclusive, and in fact a mix of the two would be optimal.
In terms of the characteristics of a good partner, Mark reinforced the need for a strong ability to communicate with new stakeholders, including clients, channel partners, and regulators. In fact, Mark stated that when communicating at the outset of new international relationships, “Sometimes it’s not what’s said that is important, but rather what’s not said.” This type of cross-cultural communication skill set is often regrettably undervalued. For 4Paradigm in EMEA, Mark’s strategic objective was to first establish open lines of communication with the relevant governments, including different layers of the Dutch government and the City of Amsterdam, reflecting the important of the Netherlands as 4Paradigm’s chosen EMEA HQ. By connecting with the governments at the earliest stage, 4Paradigm has been able to access expert advice on how to deal with the practicalities of establishing its EMEA HQ in the Netherlands, while publicly and openly informing relevant stakeholders of the goals and timelines associated with its entry into Europe. In fact, Mark highlighted 4Paradigm’s ‘open door’ policy towards any stakeholder interested in 4Paradigm, and towards AI in general, and expressed how this open approach of entering a new market also allows 4Paradigm to better connect with and understand the new environment of partners, regulators, local talent pools, and competitors.
Cultural and communication expertise remain key to all international expansion and localization efforts. The Covid pandemic has thrown a wrench into many normal business practices, including traditional face-to-face networking and communication efforts at conferences and events, so companies must become creative in finding ways to communicate and establish trust with new partners, often in a 100% digital environment.
All opinions expressed in this essay represent our personal views only.