Jones: China’s ‘must-do’ list to be­come No 1 BIO

China Daily (Canada) - - ACROSSAMERICA - B y QI­DONG ZHANG in San Fran­cisco Kel­lyzhang@chi­nadai­

Han­del Jones’ in­ter­est in China was de­vel­oped as early as 1982 when he was in­vited to sit be­side Jiang Zemin, then min­is­ter of the Elec­tron­ics In­dus­try, dur­ing a lunch for Jiang’s visit to Austin, Texas.

“He (Jiang) asked me ques­tions af­ter my pre­sen­ta­tion on the fu­ture of elec­tron­ics in­dus­try on be­half of Rock­well (Corp), told me about his goals for China, and I was fas­ci­nated,” Jones re­called.

Af­ter 40 years of study­ing key mar­ket trends of China’s elec­tron­ics, com­puter and con­sumer prod­uct in­dus­tries and pro­vid­ing strate­gic con­sult­ing to both US and Chi­nese cor­po­rate gi­ants as the founder and CEO of IBS, Inc of Los Gatos, Cal­i­for­nia, Jones’s book China’s Global Revo­lu­tion : How China Be­comes Num­ber 1 in Key Mar­ket Seg­ment by China Ma­chine Pub­lisher in Bei­jing comes out in May. It fol­lows his Chi­namer­ica, the Un­easy Part­ner­ship that Will Change the World, pub­lished in 2012.

While Chi­namer­ica was in­tended to “give the US a wake-up call” by trac­ing the rise and fall of US in­dus­tries and em­pha­siz­ing the col­lab­o­ra­tion and wealth shar­ing be­tween China and the US, How China Be­comes Num­ber 1 elab­o­rates on how China has be­come a world leader as well as the chal­lenges that China faces.

“The mo­ti­va­tion for this book is to an­a­lyze the chal­lenges fac­ing China with the next phase of growth and to pro­vide in­put on what needs to be done to have high prob­a­bil­ity of suc­cess,’’ he said. “In­puts are pro­vided based on a global busi­ness per­spec­tive as well as fac­tors that are unique to China. There is also the per­spec­tive that the chal­lenges fac­ing China have not been faced by any other coun­try be­fore. The ap­proaches that will need to be taken by China are unique.”

Jones be­lieves that as an out­sider he has a deep un­der­stand­ing of China, which can pro­vide an ob­jec­tive look at fac­tors that lead to global lead­er­ship.

“The mind­set in China has to be that of chang­ing from be­ing a fol­lower to be­ing the leader. This is a big change, and it is crit­i­cal not to be­come com­pla­cent and sat­is­fied with what has been achieved. The con­cept of China be­com­ing num­ber one has to be­come en­grained in the cul­ture as­so­ci­ated with busi­ness. The fac­tors re­quired to be­come a leader are an­a­lyzed, with the per­spec­tive that it is a jour­ney that needs to be well-planned, with close mon­i­tor­ing of the progress. There can also not be a weak­en­ing of the drive to win be­cause of overem­pha­sis on con­sump­tion,” he said.

Em­pha­siz­ing global strat­egy as key el­e­ment of to­day’s suc­cess, Jones cites South Korea-based Sam­sung, which grew rev­enue to to­day’s $200 bil­lion from $100 bil­lion in 2009 be­cause of its glob­al­iza­tion strat­egy, which in­cludes most of its sales be­ing out­side of its home coun­try.

“Chi­nese com­pa­nies such as Huawei, Len­ovo and Sky­worth have re­al­ized that they have to be­come global as tech­nol­ogy com­pa­nies, and that is a fun­da­men­tal re­quire­ment for sus­tain­able growth in the long run,” he said.

Jones be­lieves China needs to think of an of­fen­sive strat­egy on ex­ports, and de­fen­sive strat­egy on im­ports to pro­tect the lo­cal mar­ket. He uses the 36 mil­i­tary strate­gies of that an­cient Chi­nese used in wars to de­scribe to­day’s Chi­nese econ­omy: “The gen­er­als in the ar­mies are to­day’s cor­po­rate lead­ers and global busi­ness strat­egy is their weapon to win.”

He said that China lacks more global busi­ness lead­ers like Jack Ma of Alibaba. “Many Chi­nese man­agers are low in man­age­ment skills and lack train­ing in busi­ness strat­egy. Their gen­eral skill level in in­ter­na­tional busi­ness is low, lan­guage is a prob­lem; lack of ex­po­sure to global con­cepts is a big­ger prob­lem.”

He cited the au­to­mo­bile in­dus­try as an­other ex­am­ple. “If you look at the US au­to­mo­bile in­dus­try, it was No 1 in the world in the 1970s, but it only fo­cused on the US mar­ket. Then the Ja­panese and Korean cars came in and ba­si­cally de­stroyed the US au­to­mo­bile in­dus­try,” Jones said. “If you want to pro­tect your lo­cal mar­ket to­day, you have to go global. A num­ber of econ­o­mists in China say that the China mar­ket is big enough to sup­port its com­pa­nies in the long run, it’s not prac­ti­cal since they have not un­der­stood the global eco­nomic en­vi­ron­ment.

“About 20 to 22 mil­lion cars are be­ing pro­duced in China ev­ery year. The num­ber is rel­a­tively com­pet­i­tive, but the qual­ity is not quite up to stan­dards be­cause there is too much em­pha­sis on cost in­stead of qual­ity, and it has not gone global like Ja­panese, Korean and US com­pa­nies. If you want a suc­cess­ful in­dus­try, you have to look at global stan­dards, and ap­ply global stan­dards to China.”

Jones said that in the last 20 years China has been very good at build­ing man­u­fac­tur­ing ca­pac­ity with skilled la­bor.

“The next level is in­no­va­tion, not copy­ing prod­ucts or pro­tect­ing the lo­cal mar­ket. China should not build an­other Tesla. In­stead it should build some­thing


Chair­man, CEO, IBS Inc. Born: Car­marthen, Wales, Great Bri­tain King’s Col­lege Lon­don, BS, physics (1961) North­east­ern Univer­sity, MS, physics (1967) Eco­nom­ics, Cal­i­for­nia Western Univer­sity, PhD (1976) Rock­well Corp, vi­cepres­i­dent, strate­gic plan­ning, en­gi­neer­ing, and in­ter­na­tional (19791982) Cal­i­for­nia Mi­cro De­vices, COO (1982-1989) IBS Inc, chair­man, CEO (1989-present) much bet­ter than Tesla, cost half the price of a Tesla. The govern­ment should rank the in­dus­tries; pick win­ner tech­nol­ogy and in­dus­try to in­vest in, such as bat­tery tech­nol­ogy. You have to move ahead of the game in or­der to be­come global lead­ers in this new world,” he said.

To do that, Jones be­lieves ed­u­ca­tion is a start­ing point, with pre­par­ing the work­ing force in high school, train­ing en­gi­neers in col­lege and sup­ply­ing enough of a la­bor force so leading in­dus­tries can ac­cel­er­ate the econ­omy.

“Busi­ness schools in China are im­prov­ing, but noth­ing is up to the stan­dards of Har­vard and Stan­ford. The role of govern­ment also plays a key el­e­ment in terms of pro­vid­ing an en­vi­ron­ment where in­no­va­tion is more en­cour­aged to an ex­tent that people like Steve Jobs would merge, and it takes 20, 30 or 40 years to make it hap­pen,” he said.

Jones gives an­other ex­am­ple of a part of China that needs re­do­ing: the med­i­cal sys­tem. He said the en­tire sys­tem has to be re­struc­tured and re-in­vented by us­ing big data, tele-medicine sys­tem.

“There is a huge ag­ing pop­u­la­tion in China to­day, and I don’t see how the coun­try takes care of its se­niors with the cur­rent med­i­cal sys­tem. That revo­lu­tion or re-struc­ture of the med­i­cal in­dus­try also means huge in­vest­ment in med­i­cal data, anal­y­sis of the traf­fic pat­terns and pro­vid­ing an ef­fi­cient med­i­cal sys­tem. Ali­pay is build­ing up a med­i­cal di­ag­nos­tics and re­mote data min­ing, which pro­vide feed­back on med­i­cal con­di­tion, tests, rec­om­mend­ing what medicine to take. This is a huge progress. Through the big data sys­tem, hard­ware in­fra­struc­ture and so­cial me­dia servers, physi­cians are able to ac­cess high def­i­ni­tion tests where they can treat pa­tients re­motely, that is a revo­lu­tion in medicine.”

How­ever, Jones be­lieves the im­por­tance of the big data ser­vice has not been clearly com­mu­ni­cated in­side China, and the vi­sion of big data is not es­tab­lished in China to­day.

In terms of China’s global lead­er­ship to­day, Jones said the same the­ory of rev­o­lu­tion­iz­ing in­dus­tries ap­plies to high def­i­ni­tion tele­vi­sion, 4G smart phones and tablets. “The rea­son Sil­i­con Val­ley is suc­cess­ful is be­cause it has new in­dus­tries. China needs to in­vent it­self and not re­peat the fail­ing ex­am­ples of the US, Ja­pan and UK to be­come a global leader and that means in­no­va­tion. It can’t re­peat an­other Shen­zhen ei­ther. It needs to ad­dress prob­lems of its ag­ing pop­u­la­tion, the wa­ter is­sue, and es­pe­cially pol­lu­tion. This will in­volve an­other high-tech revo­lu­tion, ei­ther from low-tech to high-tech or high-tech to high-tech. It needs to be cre­ative, too. If you in­vent ro­bots to take over la­bor, you will also need to find more jobs for those re­placed la­bor­ers.”

Jones said that if China fails to pro­vide a wide range of jobs for the young gen­er­a­tion whose mind­set has been fun­da­men­tally changed by the In­ter­net or fails to build a mid­dle class able to en­joy a good life, a lot of in­no­va­tive people will leave.

“So the key to­day is to en­hance the in­no­va­tion ‘soft­ware’ onto in­fra­struc­ture ‘hard­ware’, fo­cus on global mar­kets in­stead of the China mar­ket, en­gage ed­u­ca­tion and in­ter­na­tional strate­gies, and take one step at a time,” he said.

Joes said he is op­ti­mistic about the time­frame for China to gen­er­ate in­ter­na­tional busi­ness lead­ers dur­ing its glob­al­iza­tion process. “In­dus­tries move fast be­cause of the use of In­ter­net. In three to five years we might see stim­u­lated global lead­ers com­ing out of China. Ten­cent, Alibaba, Baidu have started the revo­lu­tion. Len­ovo is on the right track, Xiaomi has done well in China and is mov­ing out­side of China, and Huawei is do­ing well. These are all good signs,” he said.

“Many Western ob­servers pro­mote the con­cept that China will not con­tinue its sus­tain­able growth and even will fall into a cri­sis mode with real es­tate bub­ble and se­ri­ous pol­lu­tion prob­lem. I com­pletely dis­agree with that. I be­lieve even though it has chal­lenges, the lead­er­ship in to­day’s China is do­ing a su­perb job man­ag­ing the com­plex econ­omy with pro­gres­sive and ef­fec­tive mea­sure­ment. The strong top lead­er­ship and its com­mit­ment to suc­ceed is the key as­sur­ance to China’s sus­tain­able global econ­omy to­day and fu­ture.”


Han­del Jones, chair­man and CEO of IBS, Inc.

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