BIZCHINA> Review & Analysis
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BIZCHINA> Review & Analysis
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Successfully deciding what manufacturing and R&D to bring to China
By Wu Congjian
Updated: 2008-05-04 16:40 Think in competencies, rather than in concrete parts, modules or products When companies start evaluating what makes sense to put in China, they should move away from traditional product thinking and carry out the analysis based on competencies. A competency refers to know-how or capabilities a company possesses in order to make its products. Competencies can be state-of-the-art (e.g., electronic sensor design) as a well as a straightforward commodity (e.g., welding). Unbundling products in competencies has several advantages. First, it encourages platform thinking and enables cross product optimizations. Indeed, although some products at first sight have limited similarities, they might still use similar competencies (e.g., precision machining, embedded software, …). Competencies cut across products, product versions and business units and offer a true possibility for re-using similar knowledge to support several entities within the global organization. Second, this resource-based view as opposed to a product-based view enables an objective evaluation. Indeed, production and research of advanced, lower volume products or components (e.g., high tech machinery, medical devices, etc …) are sometimes quickly ruled out of China by a product based evaluation. The reason is that similar product know-how is not yet available allthough the resource based evaluation may provide a contrary conclusion when the needed underlying competencies might make good sense in China! Don't rule out based on prejudice and dare to rethink a competency Figure I: Example of competency unbundling and scoring
Once a company defines the complete list of competencies it might develop in China, the evaluation can start. Each competency needs to be evaluated with respect to the potential competitive advantage (can they do it cheaper and better in China?) and its availability (can we find it in China?). Competitive advantage should not only be purely based on cost advantages (without quality loss!), but also based on other criteria such as IP risk, transaction costs, supply chain efficiency, etc… (For more biz stories, please visit Industries)
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