China's paradox of innovation vs old ideas
Updated: 2013-01-09 06:11
By Ho Chi-ping(HK Edition)
Since manufacturing is the very lifeblood of China's economy, it would seem a good guess that innovation in industry is already entrenched across the country - but that guess would be only partly correct. It is a paradox of China's multi-faceted manufacturing industry that some factories still consciously ignore the benefits of innovation and instead cling to old-fashioned production and marketing methods.
Let us first consider the cutting-edge breakthroughs that innovation has brought the country. The breakthroughs are particularly strong in the solar-power and wind-power elements of the energy sector, which have ballooned into big-time contributors to China's gushing export trade. Other noteworthy achievements are its new high-speed railway system. There have also been breathtaking advances in infotech like the setting up of 22 Silicon Valley-style innovation hubs within its scientific and biotech industries. Further, innovation is revolutionizing a wide range of domestic infotech apps, like electronic products, instant messaging and (here's a surprise) online gambling.
So where's the problem? Despite such obvious proof of the success of innovation, some of China's usually savvy entrepreneurs seem content to stick to time-honored manufacturing processes and not dicker with the trials and experiments that are the very essence of the imaginative processes of innovation.
These manufacturers believe that everyday R&D is already a costly component of production and prefer a quick release of new products and then depend on monitoring customer feedback for smart suggestions and ground-breaking ideas. Based on such real-time "guinea-pig" experience among early buyers, they then modify and fine-tune their products.
To their credit they are remarkably audacious when floating new products, always hoping they will become runaway best-sellers. But instead of pre-production trials and in-depth analysis of customer needs and buying trends they still prefer the trial-and-error process of developing a product to its full potential. Even more surprisingly, a factory owner's intuition still seems to play a considerable role in his planning - specially if he has "lucked" onto some popular products in the past.
All of this hearkens back to the traditional methods these companies employed to debut their products in the 1980s and 1990s. If the companies had an established track record of success in those formative years, then the more likely they are to cling to old practices. Then there's the father/son factor to consider. Many of today's established manufacturing companies have been handed down from a hardened, wily father to an obedient son under strict paternal direction not to break the established business mold.
Hard-scrabble factory owners of yesteryear who made their fortunes through crude and simplistic market research still impose their iron wills on degree-holding sons who are forever held in check from introducing sophisticated R&D and modern market-streaming methodology.
Another factor working in favor of such obdurate old parents is the lucrative free-for-all that China's domestic market has now become. Instead of competing with the multi-nationals for overseas markets, they can mass-produce cheap and trendy products that find a ready sale at home. And, as usual, they tinker with improvements after the initial launch, basing changes on buyer reaction.
But, all that said, the paradox of new versus old is most obvious in that same domestic market, which is well-stocked with a stunning array of breakthrough IT products at the cutting edge of innovation. One outstanding example is a virtual "home cinema" android-enabled TV set, featuring Internet-browsing capabilities and apps that give viewers access to popular Chinese websites and digital movie-streaming services. Other Chinese IT "firsts" now spreading across the country, but yet to launch in overseas markets include Tencent's QQ instant-messaging service and Sina Corp's microblog Weibo. QQ also dominates the online games market with hundreds of millions of gamers happy to be hooked at low subscription rates.
In such a field, it is a bizarre contradiction that many of the factory-produced items on sale are based on market research that is little better than checking around department stores and trendy outlets to see what's hot and what's not.
The author is deputy chairman and secretary-general of China Energy Fund Committee, a think tank on energy and China-related issues.
(HK Edition 01/09/2013 page3)