Three in­gre­di­ents fuel China’s in­no­va­tion, says pro­fes­sor

China Daily (Canada) - - PEOPLE - By WANG MINGJIE wang­mingjie@ mail.chi­nadai­lyuk.com

Ge­orge Yip be­lieves China is moving ag­gres­sively from a strat­egy of imi­ta­tion to one of in­no­va­tion, driven by its sci­en­tific ca­pa­bil­ity, man­u­fac­tur­ing re­sources and huge do­mes­tic mar­ket.

The pro­fes­sor of mar­ket­ing and strat­egy at Imperial Col­lege Busi­ness School said the triple com­bi­na­tion has been seen only twice be­fore: the Bri­tish Em­pire and the United States’ com­mer­cial em­pire.

China’s sci­en­tific ca­pa­bil­ity has come about be­cause “the ed­u­ca­tion sys­tem pro­duces a lot of sci­en­tists and en­gi­neers, al­most to Western stan­dards but at a much lower cost”, he said.

Many Chi­nese who go to the West to study and to get doc­tor­ates are now en­cour­aged to re­turn to China through gov­ern­ment ini­tia­tives such as the Thou­sand Tal­ents Pro­gram, he said.

In ad­di­tion, Chi­nese com­pa­nies have grown large and are rich enough to in­vest in research and de­vel­op­ment, par­tic­u­larly pri­vate en­ter­prises.

The rea­son it is pos­si­ble to do R&D is that “you need a big mar­ket to amor­tize the cost of what you spend, and the Chi­nese mar­ket is so big, the sec­ond-largest mar­ket in the world”, he said.

Yip cited the ex­am­ple of China start­ing to chal­lenge the air­craft mak­ers Air­bus and Boe­ing in the com­mer­cial jet sec­tor.

In­no­va­tion in China is a mix­ture of learn­ing from Western mod­els and in­dige­nous in­no­va­tion, he said.

“Chi­nese com­pa­nies have made it cheaper, but also added many more fea­tures. A Chi­nese prod­uct com­pared with a Western prod­uct has twice the fea­tures for half the price.”

Take Haier for ex­am­ple, the multi­na­tional Chi­nese home ap­pli­ances maker, with its well­known in­no­va­tion story be­ing how the com­pany worked out how to al­low farm­ers to wash pota­toes as well as clothes.

When the com­pany en­tered the US mar­ket, it started with “low in­no­va­tion” by adding a fold­ing table­top so that re­frig­er­a­tors in univer­sity dor­mi­to­ries could dou­ble as a desk, he said.

“Now it has moved beyond that. It has pi­o­neered a three tem­per­a­ture com­part­ment re­frig­er­a­tor, where the third tem­per­a­ture is in be­tween the ice box and the reg­u­lar one. You can take the ice cream out of the third com­part­ment, and it is not hard, so you do not have to wait (to eat it), be­cause Amer­i­cans do not like to wait, and it took a Chi­nese com­pany to un­der­stand the psy­chol­ogy of Amer­i­cans. It is typ­i­cal of the Chi­nese that it is prag­matic and prof­itable in­no­va­tion.”

The chal­lenges for in­no­va­tion in China lie in the fact the coun­try started from a low base with ba­sic prod­ucts, Yip said.

“Yet it has over­come that chal­lenge, partly by par­tic­i­pat­ing in the global sup­ply chains of for­eign com­pa­nies. That has raised Chi­nese stan­dards.”

An­other chal­lenge, he ar­gued, is that there has been fierce com­pe­ti­tion in China, which on the one hand brings pres­sure for low costs, but on the other cre­ates pres­sure to be dif­fer­ent, to in­no­vate.

Yip was born in Viet­nam to a Eurasian mother and a Chi­nese-In­done­sian father, and grew up in Hong Kong, Myan­mar and Bri­tain. He was ed­u­cated at Mag­da­lene Col­lege, Cam­bridge, and went to the US in 1975. He went on to ob­tain an MBA and PhD from Har­vard Busi­ness School.

His busi­ness ex­pe­ri­ence ranges from mar­ket­ing and prod­uct man­age­ment to consulting and in­no­va­tion.

He started his ca­reer at Unilever, work­ing in mar­ket­ing and prod­uct man­age­ment, and was also a se­nior man­ager at Price Water­house’s strate­gic man­age­ment consulting ser­vices in Bos­ton.

His cur­rent research on in­no­va­tion in China be­gan in 2011, when he was ap­pointed co-di­rec­tor of the China Europe International Busi­ness School’s Cen­tre on China In­no­va­tion. To­gether with fel­low pro­fes­sor Bruce McKern, Yip pub­lished research in April in a book, China’s Next Strate­gic Ad­van­tage: From Imi­ta­tion to In­no­va­tion.

He ar­gued that although China may trail the West in rad­i­cal and dis­rup­tive in­no­va­tion, its com­pa­nies are mak­ing a lot of money by be­ing in­no­va­tive in other ways, as most of the prod­ucts that people buy are based on in­cre­men­tal in­no­va­tion.

Ac­cord­ing to the In­no­va­tion Pol­icy Plat­form, a rad­i­cal or dis­rup­tive in­no­va­tion is one that has a sig­nif­i­cant im­pact on a mar­ket and the eco­nomic ac­tiv­ity of com­pa­nies in that mar­ket, while in­cre­men­tal in­no­va­tion con­cerns a sig­nif­i­cant en­hance­ment or up­grade to an ex­ist­ing prod­uct, ser­vice, process, or­ga­ni­za­tion or method.

The US has made money out of those through in­cre­men­tal in­no­va­tion and man­u­fac­tur­ing for the mass mar­ket, while Ger­many started out do­ing im­i­ta­tions of Bri­tish prod­ucts and do­ing ap­pli­ca­tions in­no­va­tion. Rad­i­cal in­no­va­tion is not the only way for­ward, he said.

What is dif­fer­ent about the Chi­nese com­pa­nies’ ap­proach to in­no­va­tion is that “it is fast in­cre­men­tal, and makes mis­takes quickly, not try­ing for a rad­i­cal in­no­va­tion, but prag­matic, prof­itable, and very cus­tomer-fo­cused”.

While the West has fo­cused on in­no­va­tion for its own sake, China has been very prac­ti­cal, want­ing in­no­va­tion that makes money, Yip said.

“The West is very good at go­ing from zero to one; China is very good at go­ing from one to 100, and one to 100 is all about scal­ing up from in­cre­men­tal in­no­va­tions.”

Dur­ing his research, Yip vis­ited China six times a year for five years.

He said he was par­tic­u­larly daz­zled with the in­no­va­tion he saw at Broad Group, a pri­vate man­u­fac­turer of cen­tral air con­di­tion­ing in Chang­sha, Hu­nan prov­ince.

Broad started out in­no­vat­ing with air con­di­tion­ers us­ing gas in­stead of elec­tric, and its lat­est in­no­va­tion is in build­ing con­struc­tion.

“They in­no­vate by build­ing faster and cheaper than Western pro­cesses. I have been in­side one of their build­ings — pre­fab­ri­cated steel struc­tures, pre­fab­ri­cated pan­els and sealed air con­di­tion­ing — so they can make th­ese much quicker and cheaper. This is typ­i­cal Chi­nese ap­pli­ca­tion, cost and pro­cessed-based in­no­va­tion.”

Most Western com­pa­nies, es­pe­cially older ones, have be­come too cau­tious, partly be­cause of do­mes­tic reg­u­la­tion at home, le­gal is­sues and bu­reau­cratic stric­tures, Yip said.

“Again and again, Western com­pa­nies in China say, ‘ We are be­ing slowed down by th­ese cau­tious pro­ce­dures that the head­quar­ters at home are im­pos­ing on us, and in China we are learn­ing to be quicker and to take more risks,’” he said, adding that the West needs to re­learn how to be bold and ex­per­i­men­tal.

He said he was also sur­prised to find that, in terms of man­age­ment, Western com­pa­nies are re­al­iz­ing that China is a good place to send man­agers to learn how to man­age di­ver­sity and for­eign­ers.

“You could not do that in Ja­pan, be­cause Ja­pan does not ac­cept for­eign man­agers, but China does ac­cept for­eign man­agers, and they can man­age dif­fer­ent types of em­ploy­ees, in­clud­ing Chi­nese.”

WANG MINGJIE CHINA DAILY

Ge­orge Yip be­lieves China is moving ag­gres­sively from a strat­egy of imi­ta­tion to one of in­no­va­tion. /

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