Magazine Summer 2014 Research Feature

Accelerated Innovation: The New Challenge From China

Rather than focusing on technological breakthroughs, Chinese companies are finding new ways to innovate that reduce lead times and speed up problem solving. Companies elsewhere should take notice.

Peter J. Williamson and Eden Yin Reading Time: 23 min 

Topics

Permissions and PDF

Chinese companies are opening up a new front in global competition. It centers on what we call accelerated innovation — that is, reengineering research and development and innovation processes to make new product development dramatically faster and less costly. The new emphasis is unlikely to generate stunning technological breakthroughs, but it allows Chinese competitors to reduce the time it takes to bring innovative products and services to mainstream markets. It also represents a different way of deploying Chinese cost and volume advantages in global competition.

Silicon Valley and other technology hotbeds may be able to match the speed of Chinese innovation in particular sectors such as electronics and Internet-based services. However, what’s distinctive about the strongest Chinese competitors is their capability to combine accelerated innovation with rapid scale-up to high volume at low cost, and to apply these techniques across a wide variety of traditional industries. We saw accelerated innovation being deployed in Chinese industries ranging from pharmaceuticals, telecommunications and information technology to medical and industrial equipment, consumer electronics and e-business. Although it may not impact companies that are consistently able to deliver breakthrough innovations, it presents real threats and opportunities to many mainstream competitors.

ESSENTIAL INNOVATION INSIGHTS

This article has been selected as one of “12 Essential Innovation Insights” from the MIT Sloan Management Review archives.

Read more »

The Push to Accelerate Innovation

We spent three years researching the way Chinese companies are accelerating R&D and innovation thanks to the low cost and abundant supply of Chinese engineers. (See “About the Research.”) We found that Chinese companies are industrializing innovation to improve speed and cost by applying lessons from production lines, pushing the boundaries of simultaneous engineering to cut the lead times for new product development, rapidly incorporating user feedback into new designs to drive down the learning curve faster and restructuring their organizations to speed up problem solving. These developments have potentially huge implications for how companies should think about global competition and whether they need to rethink and reengineer their established innovation and product development processes.

Topics

About the Authors

Peter J. Williamson is a professor of international management at the University of Cambridge’s Judge Business School in Cambridge, United Kingdom. Eden Yin is a senior lecturer in marketing at the Judge Business School.

References

1. J. Ribbens, “Simultaneous Engineering for New Product Development: Manufacturing Applications” (New York: Wiley, 2000).

2. P.N. Golder and G.J. Tellis, “Pioneer Advantage: Marketing Logic or Marketing Legend?,” Journal of Marketing Research 30, no. 2, (May 1993): 158-170; C.C. Markides and P.A. Geroski, “Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets” (London: John Wiley, 2004); O. Shenkar, “Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge” (Boston: Harvard Business Press, 2010).

3. P. Barwise and S. Meehan, “Innovating Beyond the Familiar,” European Business Review, May 20, 2012, www.europeanbusinessreview.com.

4. P. Engardio and M. Ihlwan, “Samsung’s ‘Sashimi Theory’ of Success,” BusinessWeek, June 10, 2003, www.businessweek.com.

5. J.M. Utterback and W.J. Abernathy, “A Dynamic Model of Product and Process Innovation,” Omega 3, no. 6 (December 1975): 639-656.

6. C. Neumeyer, “China’s Great Leap Forward in Patents,” IP Watchdog, April 4, 2013, www.ipwatchdog.com.

7. J. Teo, “Innovating in China’s Pharma Market: An Interview with AstraZeneca’s Head of R&D in Asia and Emerging Markets,” McKinsey Quarterly, February 2012 , www.mckinsey.com.

8. L. Burkitt, “PepsiCo to Cut Ribbon on China R&D Facility,” Wall Street Journal, November 12, 2012.

9. “Pharmaron Forms Strategic Partnership With Astrazeneca to Accelerate Drug Discovery,” press release, October 14, 2012, www.pharmaron.com.

Tags:

Reprint #:

55405

More Like This

Add a comment

You must to post a comment.

First time here? Sign up for a free account: Comment on articles and get access to many more articles.

Comments (3)
Yogendra Chauhan
Excellent article highlighting importance of China's efforts as well as impact on global innovation and industries and economies.

Great work by author and credit goes to team who helped in compiling resourceful information and references.
Rabindranath Bhattacharya
Dr. Rabindranath Bhattacharya

The objective of any company is to launch a new product as fast as possible i.e faster than your competitor can do. But as I could learn from the article the methodology adopted by the developed and not so developed countries is somewhat different than what Chinese companies adopt to develop, test, manufacture and market their innovative products. I think basically the difference lies in spreading the research and development culture across the organisation. Although this may yield the results  but may lead to easy proliferation of new ideas to your competitors apart from costly field failures resulting from the mistake of the leader, which may put the company reputation at stake. This may be acceptable to a company in China because of their financial strength and loose IP regulations but can the others follow suit? I feel any company can utilise the team approach as propagated by Japanese companies long back to hasten the process but not at the cost of reputation or frequent field complaints. The process has already been adopted by many leading manufacturing companies in India and that is the reason for example why an innovative company like Tata Steel is still the lowest steel producer in the world. Besides, passenger cars produced in India are sold throughout the world. 
I recollect one incident while visiting an electronic company (a leading multinational) in Shanghai some time back where I was impressed by the charts displayed across the company. However, rejection chart showed 100 ppm for internal rejections but 500 ppm for customer rejections! When I was requested by the company official to comment on this I only said that I would be pulled up by my higher authority  if we do not aim for 0 ppm for my customers rejections. 
Hence my recommendation for hastening the process of innovation  is to take the best of everybody and redesign your own innovation supply chain to remain competitive. Chinese method is no panacea for this.
Simon Wierny
And at the same time this is one of the biggest issues China will face in the coming years. As the innovation in China enters efficiency innovation stage where faster and cheaper means less people involved, the problem of sustainable job creation in China will become the main issue. The main question for China now to save its future is how do you create sustainable jobs in a country of billion people? We know from the work of Clayton Christensen that job creation is an issue due to the fact that we develop things better, faster and at lower cost but at the same time we create less jobs. Lost balance is my worry for China. Technology is already moving in to labour intensive industry of smartphones and other similar type of industries which employ millions of people in China. What will China do when if technological innovation outpaces new job creation? How quickly can people on the Chinese shop floor area move into new sectors? The more efficient China becomes the higher chance of significant unemployment issues. That's the paradox.