Four tips for successful innovation in China

How can multinational corporations better understand the unique challenges--and advantages--of Chinese-style innovation?
Written by Reena Jana, Contributor

A new McKinsey Quarterly article, "A CEO's guide to innovation in China," opens with striking data: since 2005, China's percentage of the world's patents has doubled.

Such statistics make it clear that China is truly on the rise, in terms of their inventive output. But authors Gordon Orr and Erik Roth push the common analysis of China's role as a global leader in innovation--and not only in manufacturing or "copying" existing technologies--further. They do so by offering tips for multinational companies to better understand Chinese-style innovation today. In particular, they note that China is making notable creative strides in the areas such as consumer electronics, instant messaging, and online gaming, as well as in various aspects of business-to-business systems and services--beyond the nation's obvious achievements in wind and solar power.

Orr and Roth observe that the Chinese have a tradition of pushing new products and services to market much faster than U.S. and other "Western" companies do. Even if it seems that such hastily launched items' quality may not be excellent, later iterations tend to improve on that of the originals. Orr and Roth also point out that the Chinese government's latest five-year plan stresses home-grown innovation, and 22 innovation hubs in the life sciences and biotech fields and various centers of excellence for the semiconductor industry have been launched.

The authors offer four priorities for innovators in China. Here's a summary:

  • Deeply understanding Chinese customers -- To do so will require research strategies that are specific to China (rather than utilizing techniques that might work in the U.S., say), as well as experienced researchers who are trained in analyzing customer-research information.
  • Retaining local talent -- McKinsey cites a recent poll from executive recruiting firm Heidrick & Struggles: 91% of senior executives from multinational companies say employee turnover is their "top talent challenge" in China. Suggested solutions from Orr and Roth include offering training courses in-house so staff members don't seek other employers that will allow them to cultivate new skills, and encouraging employees to work on fresh inventions for local markets, to help them see the fruits of their innovation research sooner rather than later.
  • Instilling a culture of risk-taking -- Orr and Roth point out that "failure is a required element of innovation, but isn't the norm in China." Encouraging team-based innovation might be a way to lessen a sense of individual responsibility if a new design goes wrong, thus making it less scary to "fail," they suggest.
  • Promoting collaboration -- Fostering cooperation between internal departments to cross-pollinate ideas is key in innovative design, engineering, and marketing, in China and around the globe. However, in many Chinese companies today, technical and commercial departments rarely cross-reference what they're working on. Orr and Roth don't really offer any solutions, and merely share the observation that Chinese business processes are still based on the goal of manufacturing to scale. But perhaps after reading such analyses as this one from McKinsey, Chinese executives will at least consider such advice in the future.

The tips above are obviously particular to China, but could very well provide a checklist for business leaders in other so-called "emerging markets" such as India (where retention is a huge hurdle), Brazil, and African nations. And they could serve as reminders to American CEOs of large corporations and start-ups alike of the factors necessary to be a strong competitor with Chinese companies, too.

Image: keso/Flickr

This post was originally published on Smartplanet.com

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