What is in this article?:
- China Technology Innovation Comes of Age
- American Companies Rethink China Innovation Strategy
Why American corporations need to reassess their ability to compete, their views of China’s potential, and their strategies for innovation.
Back in 1999, fewer than 1 million Chinese students obtained a university degree of any kind, but by 2014 the number had grown to 7 million. On this measure, China bypassed the United States in 2004.
Software and copyright registrations in China now top 2,200 per day -- up 47% over the government’s prior five-year plan -- and patent applications thus far in 2015 are running 21% ahead of last year. Invention is back in vogue here, and the entrepreneurial energy driving this economy is China’s own.
Despite the global impact of the recent recession, Chinese innovation is quickly beginning to reshape the landscape, and the State Intellectual Property Office doesn’t shy away from showing off new stats on Chinese creative growth.
But what does innovation in the “new China” really mean, especially for American firms?
While there is healthy skepticism about official data releases, there is a constellation of reasons for China’s rising star, beginning with demographic factors that will challenge the United States and other Western nations when it comes to competition in a tech-driven future. Consider the dramatic shift in education and more specifically in science, technology, engineering, and math degrees. Back in 1999, fewer than 1 million Chinese students obtained a university degree of any kind, but by 2014 the number had grown to 7 million. On this measure, China bypassed the United States in 2004, which is concerning but not surprising given China’s scale. A more eye-opening and alarming fact is that China awards 31%of its degrees to engineering students while America awards just 5% of its degrees to such students.
By any measure, that is a tremendous surge of talent being unleashed into the Chinese economy, particularly in R&D, and it’s just one of the reasons why American corporations need to reassess their ability to compete, their views of China’s potential, and their strategies for innovation.
Many companies continue to underestimate the strength and capability of Chinese competitors and dismiss their prospects because of dated assumptions about Chinese culture, Chinese governance, Chinese ethics or some combination thereof. Far too many American business leaders continue to echo the bravado of American exceptionalism that U.S. Vice President Joe Biden voiced last year, when he praised America’s GDP powerhouse, research universities, and advances in energy technologies, and added: “But I challenge you, name me one innovative project, one innovative change, one innovative product that has come out of China.”
Rhetoric aside, there are plenty. For example, Xiaomi, which has commandeered one-sixth of the market for smartphones in China in less than five years to become the market leader, is now going global and gaining traction in a wide range of additional high tech applications.
Western businesses can’t afford to ignore Chinese ingenuity."
Well-known firms like Tencent, Baidu, and Alibaba are recognized as innovators in communications, search, and e-commerce. Others include Haier in appliances and ZTE in network gear. All have distinctive stories of how innovation gave rise to the company or helped the company attack a new market.
Chinese creativity has been, at best, an oxymoron in the eyes of innovative Western firms, because the rigidity and centralized economic structure of five-year plans and the philosophies that support them don’t have a reputation for cultivating a culture of design -- at least not as most American and multinational executives understand. The reality is that firms like Tencent, the creator of WeChat, are delivering the kind of design quality and user experience that rivals American products in rapid fashion. In just five years, WeChat has attracted more than 500 million users -- an achievement on par with Western success stories like Apple, Facebook, and Uber.
Tales of innovation are spreading rapidly, creating a new entrepreneurial class that will soon rival that of Silicon Valley in number if not in longevity. It’s true that more formal Chinese culture doesn’t align with individualism and the maverick nature of many American entrepreneurs, but assumptions about Chinese creativity on the basis of culture are largely rooted in antiquated assumptions.
Western businesses can’t afford to ignore Chinese ingenuity. In the quest to ensure competitiveness, some American firms are now revamping their own R&D efforts in order to better leverage emerging Chinese creativity in their organizations and processes -- a trend that most experts feel will grow as China’s raw talent matures.