This week’s Monday Morning Must Read catalyzed a lot of stuff I had been reading and thinking related to innovation and China. I’m going to make a little prediction (the good thing about dramatic prognostication is that if you’re right you get you say I told you so, but if you’re wrong no one will remember). China will never innovate.
China has positioned itself as a fast-follower rather than a trail-blazer—partnering with GM and hiring retired Japanese business leaders, assimilating their industry knowledge and then going it alone. As a fast-follower China will continue leaving the risk of innovation to others, and then execute those innovations cheaper and faster than the innovators can. As a strategy this makes enormous sense, and seems to be working rather well.
Porter tells us that you cannot adopt two positions simultaneously. So, since China has already committed to the fast-follower position, they will by choice not innovate.
Companies make this choice all the time. Indeed, many are quite successful at either buying their innovation through M&As, for example. So why can’t a whole, politically monolithic, country do the same?
Of course, the assumption is that there *is* a strategy and not just chance or circumstance. I’ll follow up with a post on this.
Could be a little of both–I don’t known nearly enough to say. Henry Mintzberg would say that most strategies are more opporuntistic rather than entirely planned. Perhaps that’s what we have here with China, en emmergent strategy, the right circumstances, at the right time, and a powerful authoritarian organization capable of ensuring alignment.
Just thinkin’ out loud.
Article from the Washington Post:
Take the L.R. Nelson lawn sprinklers, which used to be made in Peoria, Ill., before Wal-Mart pressured Nelson to make them in China instead. Before the move, one laid-off Peoria worker told the reporter, Chinese managers were “walking around the plant and videotaping us working. That was horrible, horrendous. Right in our faces. They are taking our jobs.”
Sure its just an anecdote, but its a relevant anecdote.
Interesting analysis, but working for a chinese company, i disagree with you somewhat. What, other than the GM incident, other evidence has lead you to this conclusion?
Personally, my opinion is that it not about not wanting to take the risk, but the issue is returns or ROI. i.e. i invest this amount in R&D what will i get back? If a design or R&D can justify the ROI then, IMO many chinese will jump at the opportunity to differentiate. Its also about investing in talent and designers in the board room, helping make the decisions. Look at Lenovo or Haier? Haier developed a washing machine that not only washes clothes, but also produce grown from the farm.
I think like all developing manufacturing countries, the thinking is first: 1) product improvements, then 2) product innovation. I think it only a matter of time before china WILL innovate. The signs of innovation are really only starting to show.
Admittedly, I was being a bit hyperbolic with this post. Still, you ask a valid question. What evidence? Well I don’t have much (so I’m very open to counter evidence) and logically speaking its impossible to prove a negative (so can’t *prove* China won’t innovate).
1. I could turn your question around and ask what innovation is coming from China? I am unaware of any significant product innovations from China. Perhaps there are many operational efficiency innovations coming out of China, but from where I sit I can’t see these–and the ones I am familiar with actually came from talent outside China. Furthermore your Lenovo example actually makes my case stronger. I don’t know anything about Haier, unfortunately.
2. Strategy and position precede ROI. There’s huge ROI in oil. But Microsoft isn’t about to become an oil player. It’s just too far outside M$’s position and strategy.
3. Speaking of strategy fast follower is perfectly legitimate, and its one that’s working for China. Why mess with a good thing? Why give up money in the bank? All the values and capabilities that optimize an organization for fast following are counter productive for innovating. You just can’t have you cake and eat it too. And why would you want to try given how handsomely and consistently the fast follower strategy is paying off? There is no reason to rock the boat.
4. Okay, now I’m going to get into some rather touchy territory. In corporate environments highly centralized and authoritarian cultures that discourage dissent and diversity of thought do not typically lead innovation. China’s entire history has be one of powerful centralization and authoritarianism. Deference to authority is encouraged and dissent discouraged. Theoretically (and theory is always vulnerable to reality, so I could be very wrong here) innovation is a harder path to follow for China than fast follower. So again, why take the risk?
Oh yeah, and welcome–I noticed you started posting again after a long hiatus.
I think the post is terribly unfair. You’re privileging a wealthy, Western definition of innovation. And you’re privileging now over time. They will be the most innovative people in the world because they will have to be. An expansive middle class emerging in a context of limited resources must innovate or die. And entire groups of people have a tendency not to die.
Dude, saying “They will be the most innovative people in the world” is just as ridiculous and hyperbolic as my saying “they will never innovate.” I was of course being a little tongue-in-cheek. I do not however think you were.
So since you seem serious, I’ll respond seriously.
1. I’m not privileging anyone, wealthy or not. Furthermore the only indirect mention I made related to wealth was that a fast-follower strategy can in fact make one very wealthy, and China seems to be doing quite well at it. Which was my entire point. Let me repeat. Fast-following is a legitimate strategy. There is room in the world for many successful strategies. Many are mutually exclusive and thus cannot be adopted simultaneously (Porter has some interesting stories about what happens when companies do try–spoiler: they fail). China seems to be doing extremely well with its fast-following strategy. Innovation is highly risky. There is no reason to mess with a winning strategy in the absence of an external pressure to do so and especially when the alternative is incredibly risky.
2. What is a “wealthy, western definition of innovation?” Is there an eastern one? Would there be differences between a poor Eastern and a rich Eastern definition? Relativism is often taken too far–funny how that happened when people compare nations, but not when people compare companies. No one says innovation for IBM is different from innovation for Nokia. For what its worth, I have posted my working definition of innovation (http://www.scoobr.com/niblettes_old/2005/10/23/theory-of-product-design-part-i-definition/).
3. “They will be the most innovative people in the world because they will have to be.” This could be said of anyone. So does that mean we will *all* be the most innovative people in the world? Do i need to remind you that you just dismissed my entire point with a wave of semantic relativism, implying that western innovation and eastern innovation are different creatures rendering my comparison unfair. So then according to you own argument the Chinese will be the most innovative people on the planet as according to a Chinese definition of innovation. And so will we according to our relative definition, and so will the Czechs according to their…
4. “[I]nnovate or die” sounds like Tom Peters. What do you mean by it? Could you prove that this is the case? That innovation is the *only* strategy for success? That fast-following or any other strategy is doomed to failure?
Let me turn the question back to you. Can you demonstrate either a) that there is something inherently and consistently inferior about a fast-follower strategy in relation to an innovator strategy, or b) that China has in fact not adopted a fast-follower strategy, and is realizing success from original products or product juxtapositions?
I was being kind of tongue-in-cheek, too.
I was more responding to “since China has already committed to the fast-follower position, they will by choice not innovate.” This statement has an expiration date. China may not innovate now, but the Chinese will innovate in the future. This inevitability is what made your prediction stick out so much.
And I think we also have differing takes on the meaning of innovation. When I read your post I take innovation to mean disruptive innovation. (Though I’m digging into your innovation theory now.) Whereas, I consider “faster and cheaper” innovations as well.
I characterize innovation as making any product or service more relevant to the audience. This is similar to your definition around ‘Opportunities’ but without your linchpin idea of capitalization (which seems to imply success).
“That innovation is the *only* strategy for success?” This was interesting. Hadn’t really thought about it, but yes. Innovation (by my definition) is the only strategy for success. Fast-following would be a tactic for organizational innovation on the cheap, not a strategy. Fast-following would be desirable because it is less risky and cheaper than trying to lead.
And I guess that would be the difference between market innovation and process innovation. Maybe the gist of our difference is that you’re talking about the former and I’m talking about the latter?
Sure, all statements have an expiration date. And you’ve made a few statements of your own. So how do you know China will innovate in the future? And how far in the future? And what will it be? Saying some vague thing will happen at some vague point in the future isn’t terribly meaningful. Besides, why does my claim get an expiration date and your claim get an infinite shelf life? Of course this is just logical quibbling.
Yes I think we have very very different conceptions of innovation. Faster and cheaper is optimization, not innovation. These can be predictably achieved through inherently anti-innovative approaches like six-sigma (which seeks to drive out variance, when in fact innovation needs increased variance). So with your definition, I can achieve innovation be eliminating what fuels innovations. That’s quite a contradiction.
Also according to you definition a seasonal promotion (Labor Day Sale!) is innovation. It makes things cheaper and more relevant to their audiences. But I think you will have to explain how a Labor Day sale qualifies as innovation?
Or how about changing a product’s color to pink. Women respond to pink more favorably than men do. So pink makes the product more relevant to female consumers, thus by your definition, making a product pink is innovation.
And finally getting more slave labor for manufacturing necessarily makes your product cheaper and faster to produce. So is slavery (an ancient and evil institution) innovative?
Sure these are all fairly silly examples, but they are all *easily* defensible with your definition of innovation.
Now for a counter example….
When Ford invented the end-to-end moving assembly line factory it did help make cars faster and cheaper. Indeed that was the goal. But that wasn’t what was so innovative. The innovation was taking some theories on the division of labor, some existing assembly line practices and iteratively creating out of that the modern mass market. He wasn’t making something more relevant to his audience (he famously said that if he had asked his customers what they wanted they would have wanted a faster horse, not a car)–he was creating whole new audiences.
Innovation is definitely not the only strategy for success. For instance many companies simply buy innovation. EA doesn’t do a lot of innovative game development in house, they just buy smaller more innovative game studios. Microsoft has also had a history of buying it innovation.
Modern advertising (structurally, I’m no talking content) hasn’t changed much since it was invented by Pulitzer and Hearst nearly a hundred years ago–yet it has raked in obscene wealth (ok, Google is trying to shake this up a bit, but modern advertising has had an incredibly long and successful and un-innovative lifespan).
And finally fast following is not a tactic, it is a strategy. It is a position a company takes in the market, and is the strategic decision to do certain thing and not do certain other things. In other words, it the text-book definition of strategy.
(As a preface, I’m grinning like an idiot right now. I’m loving this discussion, especially at how you are forcing me to evaluate how I define innovation.)
“Besides, why does my claim get an expiration date and your claim get an infinite shelf life?”
The initial claim was that China would not innovate. In retrospect, you probably meant they don’t innovate now, and probably wouldn’t focus on innovation for the next few years. However, in the next few years, it’s very clear to me that innovation will become a prime Chinese activity both at the strategic level, as well as at lower, less glamorous levels.
At the strategic level, as China develops their own business culture and imports successful cultures from around the world, they will quickly “optimize” and move on to other sources of competitive advantage. Design, innovation: those are at the top of the pyramid, and that’s where they’re headed.
At the lower, less glamorous level, emerging middle class increases levels of wealth and entrepreneurship. Combined with several yers of piloting businesses from where they are now, I see a large increase in small and medium sized organizations in China. To compete with each other, or with existing large enterprises, innovation will again provide key differentiating factors.
In both cases, I think China’s business maturity will evolve very quickly. Just my take on the emerging situation.
“So with your definition, I can achieve innovation by eliminating what fuels innovations.”
That’s quite a leap, but…
No. Innovation (by my definition) can improve relevance by any number of criteria. It doesn’t matter if it improves relevance through some special, unique insight or if it requires capitalization. Using my design/maturity diagram as a reference (http://thinkingandmaking.com/entries/158), innovation can happen at different levels, based on the person’s design/business maturity.
How one optimizes can be innovative. Ford’s assembly line was innovative. (The innovation increased the relevance of cars to the general public by lowering the entry price.)
A Labor Day sale? Yes. Pink? Yes. Slave labor? Yes. Are those examples of innovation? Yes.
I think the biggest difference in our persepctives is that when you talk about innovation, you’re speaking of abstract strategies pursued by abstract corporate bodies as they maneuver through an abstract economic world. That’s fair. Much of the recent talk on innovation has been at this level. But, in the end I think it falls victim to the way current hype has blurred the meaning of innovation.
Secondly, I think it falls prey to a common syllogism that posits corporations as entities unto themselves, instead of as a group of people. I don’t have any specific history to back up this claim, but the idea of company being a separate entity has emerged in the relative past. Prior to that, I think the conception of a company had a very different collection of meanings. (I would really love to research how the concept of a company has evolved over the years.)
An important part of how I view innovation is that it happens every day, everywhere, with every one. It’s a fundamental part of being human and a part of the human network. Corporations, as groups of people, do not choose to innovate or not innovate. Rather, they have cultures that support innovation to greater or lesser degrees.
The innovations that enable change in the culture of a 10-person secretarial pool are just as innovative and valuable as the innovations that enable change in a national culture.
Fast-following does not forego innovation. It constrains local innovation to using one company’s processes and culture to mimic what another company’s processes and culture have created. When you compare fast-following to innovation, what exactly are you saying? Product innovation? Market innovation? Process innovation? Supply chain innovation? Policy innovation? Resource innovation? Finance innovation? Brand innovation?
Perhaps that’s the better question to answer: What kind of innovation is China *not* pursuing? And why?