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Chinese innovation: lessons to learn

Chinese new year lanterns

by Professor Peter Williamson, Cambridge Judge Business School

Professor Peter Williamson

Professor Peter Williamson

Despite the recent moderation in growth, China remains the second largest consumer market in the world, contributing to over a quarter of global growth. Indeed, forecasters believe the recent dip is part of a longer-term growth strategy to reform and regulate the Chinese markets, ensuring further sustainable growth.

As a business leader you may be looking to China as a potential market, or as a business partner. It could be you are more concerned about how China and its global growth will impact on your business. Or perhaps you’re keen to understand how Chinese businesses have achieved such economic might in a relatively short period. Either way it is important to understand the principals that underpin Chinese innovation.

  1. The role of accelerated innovation
    If there is one theme that has stood out in the rapid ascent of the Chinese economy, it has been the ability to rapidly innovate. The process of ‘accelerated innovation’ – that is, reengineering research and development and innovation processes to make new product development dramatically faster and less costly. Whilst this approach is less likely to yield game-changing innovation it does allow Chinese companies to bring innovative products and services to market at a rapid pace.
  2. Challenge traditional working practices
    Chinese companies are challenging traditional working practices when it comes to production. To support accelerated innovation many Chinese companies have broken down the traditional ‘sequential’ approach to new product design and ushered in ‘simultaneous engineering’. This approach sees teams working on the same product in different ways, at the same time resulting in drastically reduced timelines for new product development. This is often combined with an approach that accommodates both strict vertical hierarchy, where the boss’s word is law, with an impressive degree of flexibility and fluidity across horizontal teams. This means that when problems occur during the innovation process, colleagues from across the company will ‘huddle and act’ to solve issues quickly and meet the expectations of their leaders.
  3. Include the customer in the process
    An essential component of ‘accelerated innovation’ is the Chinese approach to testing new products on their customer base. The ‘launch-test-improve’ process where companies confidently release incomplete products to their customer base to test out and improve before re-releasing means they get early feedback and can self-correct quickly. There is a lot to learn from how the Chinese view both the development of new products and the role of the consumer.

It is true that startups around the world and companies in fast-moving environments such as Silicon Valley are speeding up the pace of new product development. What is noteworthy about the Chinese economy is its ability to achieve accelerated innovation, with rapid scale-up, low cost and “good enough” quality across a wide range of industries.

In a world where consumers have almost instant information about whether a product is truly leading-edge, where imitation by fast followers is relentless and where there is growing pressure on innovation projects to deliver more quickly with high cost efficiency; companies everywhere must rethink traditional innovation and new product development processes. The new frontier of global competition will be to combine the strengths of traditional research and development with the new capabilities for accelerated innovation emerging in China.

The question for managers isn’t whether one approach to innovation is superior or whether China is failing to innovate. The key point is that Chinese companies are beginning to challenge their global competitors on both speed to market and low costs. To meet this challenge, companies of all sizes will need to understand and leverage the potential of China in new ways.