Creative China on the Rise

Oct 29, 2013 | Ideas, Ideas for Organisation, News & Updates, Sri Lanka

Hugo Barra, a former top executive in Google, recently told AllThingsD that if he does his job right, his new employer, Xiaomi, the rising Chinese tech star – the company is expected to sell 20 million Android phones this year –  could be in the same league as his former company in a few years time. Hugo’s comments may surprise many people, but this is not just true about Xiaomi but about China as a whole, as it seeks global leadership in creativity and innovation. Not since the Meiji Revolution of Japan and the Cold War has any country embarked on a programme of such scale to secure leadership in technology and design. Just like Japan in the past, existing powers tend to underestimate how fast new powers can achieve breakthroughs, but when you have a determined people, unexpected events can happen and history is changed once again.

Before Xiaomi, there has already been a steady stream of Chinese companies that continue to surprise western observers on their ability to innovate and create well-designed products. Lenovo’s acquisition of IBM’s PC division, for example, has proven to be a success. Just this March, Lenovo, overtook HP as the one with the largest market share in the PC market. And the company did not get there by only selling cheap PCs, it continuously invested in innovation and product designs which won red dot awards. Another Chinese company to take note is Huawei – with its famed employee-ownership programme – which is already the world’s largest provider of telecommunication equipment. Huawei has almost 40% of its staff involved in research and development activities with an annual budget of about 3 billion dollars. The rise of these companies has not been without controversy. Huawei has been accused by Cisco Systems and Motorola of intellectual property infringements. But these incidents are no different from the ones that take place regularly between western tech giants. But the fact that litigation has come into the picture, shows how far these Chinese firms have come along. They have become too big a competitor and are now capable of innovation and creativity, hence they cannot be ignored.

The organisational model makes a difference

The other important characteristic to take note for these Chinese companies that are beginning to show success is, a number of them are not family-run, and so they are already run like multi-national firms. This is very different from companies led by Chinese from HongKong, Malaysia and Taiwan, which tend to be predominantly family-led. This gives them another advantage as their corporate cultures are more open to international talent as they take a merit-based approach, thus giving them the widest possibilities in terms of attracting talent from competitors. Alibaba, most probably the next biggest tech IPO to watch after Twitter, is so concerned about ensuring that the key partners run and manage the firm for longevity, that they decided not to list in HongKong recently because the city would not give them a dual-class share ownership structure. That a Chinese company would think in the same lines as Facebook and Google is another indication of how far the Chinese think in terms of building scale and longevity. Latest word in the market is, Alibaba will probably choose to list in New York instead.

The Chinese Way to Lead in Creativity and Innovation

By now, the Chinese companies seems to be pursuing the following steps to secure leadership in creativity and innovation:

I. Leverage on the size of the Chinese market, go for scale with a good low-cost product.

II. Acquire technology and talent through acquisition.

III. Leverage on newly acquired capabilities, then achieve scale globally.

IV. Once scale and reach are present, continue to create new revenue streams and margins quickly through innovation and design.

From the looks of it, Xiaomi seems to be at stage 2 and is about to embark on a global expansion programme just like how Huawei and Lenovo did. The systematic approach and disciplined way of execution are what makes the Chinese model of innovation formidable. There is  almost a consensus that for China to be successful, then every Chinese citizen has to be focused on the same purpose.

And to be truly successful, the Chinese believe, they have to understand and gain a foothold in the US market. This almost universal admiration for American thinking, creativity, is one of the reasons why China send so many students to study in the US.  Among them are numerous sons and daughters of government officials and entrepreneurs, studying in Ivy League universities. So much so that China has already produced a generation of leaders who are very familiar with America’s way of thinking and approach in solving problems. These included President Xi Jinping, who spent some time in Iowa in 1985, learning about farming and livestock from US farmers.

The pivotal role of the Chinese government

All these progress would not have happened without the foresight of the political leaders in China. This long march to lead in creativity and innovation begun ever since the country opened up for economic reforms. From 1978, the Chinese government actively look at all sorts of models and know-how to secure economic growth. But specifically, the political leadership made a concerted effort to secure knowledge and information to gain a competitive edge for China. The county’s national drive for innovation can be classified into 4 key steps:

I. Identify weakness and then address it with international know-how

II. Aim to create models with Chinese characteristics

III. Cultivate people with skills and talents to lead

IV. Create conditions for scale to happen

From the ambitious space programme which is now close to landing a taikonaut (Chinese version of astronauts) on the moon, to building eco-cities, this methodical approach, through sustained political will is what enables China to build an entire system, from the political class to the private sector to work in concert towards becoming leaders in creativity and innovation. Only the US, Soviet and Japanese governments have ever had similar programmes that run into decades. But with the political situation in the US undermining bipartisan support for long term research and development, China looks set to overtake the US with the most comprehensive creativity and innovation programme. China’s patient and consistent method sustained by a long-term view is what will tip the balance in its favour.

Lessons from China’s Long March towards Creativity and Innovation

There are important and valuable lessons from China’s process of becoming leaders in creativity and innovation. Here are three useful points:

1. Be humble

The Chinese, even though they are a nation with a long history, did not mind learning from anyone. Deng Xiaoping, China’s paramount leader was even willing to learn from a small country like Singapore in the 1980s. From Singapore, China picked up different ideas about industrial parks, monetary management and so on. China even recruited the Deputy Prime Minister of Singapore, Dr Goh Keng Swee, who was widely credited as the economic czar of the city-state to sit as economic advisor on its State Council. The Chinese demonstrated true greatness when they humbly acknowledged their weaknesses and the need to learn from others. Humility is what enabled companies like Lenovo and Huawei to emerge as global leaders in their respective sectors.

2. Be patient

Deng Xiaoping once exhorted his fellow leaders to “hide brightness and cherish obscurity”  The intent behind this doctrine is so that China will be given sufficient time to build a sustainable base to hold onto any form of advantage. To achieve long-term success; Deng believed that it is better for China to maintain a low profile. So far many Chinese institutions and companies seem to be adhering to this very well. Alibaba’s rise and how it outmaneuvered Yahoo to let it go its own way is just one of the many examples of how Chinese companies are sophisticated hands in terms of strategy. They patiently learn from their western counterparts, build up their own teams and once they are sure, they make a move. This is also how Chinese companies have made strategic acquisitions of famous brands like Volvo and the PC division of IBM.

3. Be consistent

The Chinese deeply understand that innovation can only bear fruit if it is consistently embraced and sought after. So they take a long term view while they execute quickly. Even though it might seem like they are just rapidly copying or imitating concepts, they are very good at keeping the big picture in mind, so they are merely learning from these experiences. Therefore they have absolutely no qualms about making mistakes or failing. For a civilization that is supposedly steeped in history, the Chinese society, influenced by decades of communist ideals with Chinese characteristics, has become more pragmatic and less about ideology. This has made it easier for them to embrace change and learn new ideas. On the other hand, US debates about investment in technology are increasingly clouded by ideological differences, limiting its ability to sustain global leadership.

China still has some way to go – it has yet to create disruptive products and systems –  before it can truly dominate the world in creativity and innovation. But if it can continue to keep to these three maxims then it only needs the incumbent to trip up to give it opportunities to lead in different areas. China knows that eventually it will lead, but for now it is best to hide the ‘brightness’ that is emanating from its labs and studios.

Read the full article here.

This article is part of a weekly column called Shaping the World where Lawrence and Shiraz share insights and ideas about building innovative Asian Brands. It is published by one of the leading dailies in Sri Lanka, Ceylon Today.

Lawrence Chong is the CEO of Consulus, an innovation consultancy specializing in helping Asian companies transform their business models to rise up the value chain through business design, organisational development and designing new brand experiences. Consulus’ country representative in Sri Lanka is Shiraz Latiff who is also the CEO/Lead Consultant  of Hummingbird International, a regional knowledge house specializing in coaching, consulting & outsourcing through global partnerships & collaborations.

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