International Management Challenges- China
China’s Next Strategic Advantage from Imitation to Innovation
Chapter 1: China’s Drive for Innovation (Pages 1-40)
Whilst reading this chapter I found many things interesting. As I’ve learned in world
history in high school, China has invented many things in history such as gunpowder, fireworks,
and paper to iron ploughs, hydraulic engineering, wheelbarrows, horse collars, fertilizers,
veterinary medicine, pharmaceuticals, and multiple nautical innovations (such as ships with
rudders, maneuverable sails, and buoyancy chambers as well as the compass) . However, the
book hinges on Su Song’s clock that was built in the capital, Kaifeng China, during the Norther
Song Dynasty as the prominent example of China’s highlight of early inventiveness and
innovation. All of this historical context was interesting as it was a nice reminder of what
ancient China has contributed to the world in terms of innovation and is a nice introductory
topic to talk about China’s innovative state as of around 2016, when the book was written.
As the chapter progresses, the book discusses Chinas ultimate goal, to catch up with the
innovative west as well as re-establish as the forefront country of technological innovations.
China has two forces that drive innovation and those are: 1) to solve China’s domestic
problems of quickly growing economic expansion, 2) strategic direction for Chinese
corporations to enter high value, and high margin sectors. The book then establishes the
structure of the book in chapters to come and how it will describe China’s innovative capacity in
terms of the 4 C’s (Customer, Culture, Cash and Capabilities).
It was described that innovation is necessary to solve the impending and growing needs of
energy, water, health, food safety, retirement insurance, and air quality, which are all needed
for China’s next phase of economic development. I found it surprising that as a result for this
need of innovation, Chinese companies are very open to changing the way things are structured
and operated in order to meet this country wide demand for innovation. So, many companies,
such as Haier, are experimenting with different business models to create a more innovative
environment. However, the book questions if organizational structure innovation equivalates to
product and service innovation.
Later on, the example of the innovative creation of the US’s iPhone is brought to the
reader’s attention and leads that discussion to how China failed to create the iPhone. So, clearly
the US has a grasp on innovation that China desperately seeks to gain. It was said that radical
innovations tend to arise in countries with high disposable incomes, and that China’s low level
of income is an innovative constraint to their country. This statement was interesting and also
makes intuitive sense to me, as almost alike to Maslow’s hierarchy of needs, innovativeness
comes about after the basic needs of humans are met, which is also why China is probably
concerned with their issues of water, food and air quality.
The three phases of Chinese innovation that were presented are: 1) “From copying to fit for
purpose”, 2) ” from followers to world standard”, 3) ” from new resources to new knowledge”.
In order to follow these three phases of Chinese innovation, China’s four Supply Enablers are: 1)
Chinese scientists returning to China after attending western universities (most valuable), 2)
Government Support, 3) Chinese entrepreneurial spirit, and 4) the rapid and creative evolution
of the internet related industries. The four demand enablers are: 1) China’s rapid growth and
forgiving environment for innovation (Chinese consumers relatively forgiving), 2) China’s many
empty market spaces and small heritage in terms of customer habits, 3) China’s needs for
simpler and cheaper products, and 4) fast moving, large scale government projects
Some things I found the most interesting from this chapter were found in the context of
the last few pages. The central idea that was presented was comparing the cultural
environment of China and the US, such as how China’s science and technology lacks an
innovative ecosystem to where the US is alluded to already having one due to innovation
arises like the iPhone. The following statements presented in the book, “China has become
more nationalistic, “anti–corruption” and has ensured only politically correct statements are
made in places such as university classrooms and these measures may have an effect on
innovation. “, “US business R&D Spending was more than twice China’s R&D Spending in
2012.”, “China’s system of education doesn’t encourage creativity” are all areas that change
could take place to make strives to become more innovative. It seems as though the
upbringing of Americans within the US to free think is an innovative strength while the lack
there of in China is an large innovative barrier to overcome. It makes me think if China can
both keep their citizens obedient and respectful of the government whilst incentivizing
select groups of people within their businesses to free think (which is not as natural,
growing up told not to do so) to create innovations. Can China find a way to successfully
develop obedient, free thinkers to reap the benefits of an obedient governing body of
people and free-thinking innovators?
Chapter 2: How Chinese Companies Innovate (Pages 41–74)
Chapter 2 started off with a story of how CEO Zhang Ruimin of Haier pulled 76
refrigerators off of the manufacturing line for minor defects, to demonstrate that any defects
although minor, are defects. Of the 76 refrigerators that were pulled, they were all destroyed
with sledgehammers by Zhang Ruimin and Haier’s managers. Two of the sledgehammers that
were used now are displayed at Haier’s headquarters and within the National Museum of China
in Beijing, so from that fact this story seems to be an important one to the people of China and
that is an interesting fact to know.
Eight modes of Chinese manufacturing: 1) Cost Innovation (China’s First Advantage), 2)
Process Innovation, 3) Application Innovation, 4) Supply-Chain Innovation(an opportunity in
China), 5) Product Innovation, 6) Technological Innovation, 7) Business Model Innovation, 8)
Non-Customer Innovation (a huge opportunity).
One quote from the books stated that, “In China, much process innovation seeks to
reduce the cost of production.”. This further discussed that China innovates more in cost, labor
and savings innovation in comparison to product and technology innovation. “China has
produced relatively few product innovations that are truly new to the world, But it’s rapid
development has spurred incremental innovation in many fields” bridges, highways, urban
transit systems, high speed trains, skyscrapers” This following quote affirms what I previously
stated to be true, but also taught me that the other things China has produced has been
successful construction and infrastructure projects.
An interesting side fact I read was In 2011, a company named Rapoo became the first 3C
(computing, communication, and consumer) company within the domestic industry in China to
have full robotic automation on assembly lines by installing 70+ robots that replaced the
manufacturing jobs of around 300 humans.
Some Chinese companies such as Huawei are moving towards radical innovations. Over
the years, Huawei won several awards at the World Summit for research and development
towards LTE and 5G development. BROAD Group made an air quality detection machines that
are similar in size to that of a cell phone and an air conditioner that directly uses energy from
fuel to air cooling.
For China’s next phase, technological innovation, SVG Optronics is using nanotechnology
to create thing holographic patterned films that can be printed onto identification cards which
makes Chinese IDs more secure than other countries. DJI Innovation developed small
unmanned aerial systems(particularly the autopilot and gimbal stabilization), specifically for
filming aerial footage on camera, and later developed a cloud platforms, image-transfer devices
and cameras. US’s GoPro even sought out to work with DJI Innovation.
Four Chinese innovation leaders are talked about in chapter 2 and they are: 1) The Haier
Group, 2) Huawei, 3) Alibaba, 4) Yuwell Medical equipment; and they all use one or multiple of
different innovation modes.
From reading the passage about the Haier Group, what stuck out to me the most was
that after-sales service in china is a new concept there, and their ZZJYT management approach
which sounds similar to continuous improvement without doing any outside the book research.
The business model innovation that the Haier Group uses also sounds interesting, as they
created a distribution platform that sells Haier’s competitor’s products as well as their own in
order to work with different companies such as US’s Black & Decker.
Within the passage about Huawei, “Huawei’s great advantage in international markets
has been that as a newcomer it has shown willingness to listen to customers and to develop
solutions without preconceptions.” was interesting to read. And by doing just that Huawei
developed a new industry standard for 3G base technology. A neat fact was that Huawei has a
lab named 2012 dedicated to working on “stupid ideas” that seem less stupid as time goes on. I
found it interesting and surprising that, “Huawei wants to change its company culture to
tolerate failure – for Huawei a big change”. This is an area of growth that I’ve personally seen
American companies try to embrace as well, however I think it is probably easier for Americans
to embrace failure as a success than for the East to.
According to Jack Ma (Ma Yun), Alibaba Group’s founder, “If we fight in the ocean, we
lose – but if we fight I the river, we win” , which I found was an interesting quote as it makes
sense because Alibaba’s priority is to win China’s demographic as customers. Another
interesting fact I learned was that Alibaba capitalized on becoming recognized as a trusted
brand amongst the dishonest behavior in China. “Ma insisted that customers use their real
names, and from the very start any buyer or seller who cheated in any way was expelled from
the company’s platforms.” Again alluding to the winning at home strategy the following quote
sums up more of Alibaba’s strategy more concisely; “Alibaba is the champion of “Sin–aptation”–
that is the adaptation of foreign products and services, such as Amazon and eBay, to China”.
Jack Ma also stated that “China will take 30 years to become one of the rich countries in
the world, but it will take 50 years or China and the people to understand been rich; this culture
is very difficult to build a reality. Trustworthiness is one element in this culture, but due to
some historic reasons, it was not emphasized in the past”, and I found this quote of his the
most interesting as it is a unique obstacle that China has had to overcome, and one that the US
has not had to widely face.
I learned that Yuwell studied pulse patterns in patients to understand variations and
generated about 17 million in sales from the R&D and product development that went into that
product. Yuwell leaders also said that “Innovation does not necessarily mean a technology
invention; sometimes it is about reinventing culture. We often invite fashion models to the
exhibilition to express our mission statement, ‘To bring beauty to people’s lives’”. The following
quote resonated with the discussion this section talked about as the culture in was changing as
it is becoming a gesture of empathy to buy medical products for personal use such wheelchairs
