Study: The Puzzle of Innovation in China | Page 11

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EARLY EXPLORERS:
Many international organizations start their
businesses by opening a sales office and importing
goods produced in their home country.
These import-oriented organizations use China
only as a consumer market without localizing
any, or merely a few, functions of the value chain.
About 26% of survey participants are currently
in this development stage.
STAGE III
LOCAL DESIGNERS
⋅ Local product development,
contributing to ~ 20% of revenues
⋅ Alignment of processes, enabling
speed-to-market above industry avg.
⋅ Innovation as Top 3 priority
⋅ Innovation strategy in place
⋅ Engineering of improved and
new designs specifically for
local markets
⋅ Selected steps of value chain
transferred to China
⋅ Management acts autonomously and
strongly supports innovation behavior
⋅ Staff has innovation skills that are
further shaped and developed in
trainings
⋅ Active engagement in I4.0 projects
⋅ Collaboration with various partners,
incl. universities and research
institutes
⋅ Strategic collaborations
⋅ First acquisition of firms
to drive innovation
STAGE IV
GLOBAL
INNOVATION
MOTORS
⋅ Pioneer disposition in introducing
local innovations
⋅ Revenue share generated by localized
innovations >20%
⋅ Innovation as Top 1 priority
⋅ Well-defined innovation strategy
in place
⋅ Engineering of improved and
new designs for local but also
global markets
⋅ Globalization of value chain
⋅ Local management with full
authority for global product and
services development
⋅ Very innovative staff that proactively
drives innovation
⋅ Broad training offerings
⋅ Systematic engagement in I4.0
and development of technological
fully integrated products
⋅ Strategic collaborations
⋅ Further acquisition to drive
innovation
LOCAL ADAPTORS:
When getting more acquainted with the Chinese
market landscape, Chinese affiliates begin to
modify individual features of existing products
within a well-defined scope. While most activities
are still conducted at home, R&D activities are
gradually transferred to China. In addition, initial
cross-border project teams and regular transfers
of key personnel are established, yet Chinese
affiliates are strongly dependent on the headquarters
with only limited discretion rights.
In our experience, which was confirmed by
survey correspondents, a large number of MNCs
can currently be ranked in this category – 39%
of Chinese affiliates interviewed are focusing on
the adaption of already existing product lines.
LOCAL DESIGNERS:
At this development stage, MNCs have successfully
mastered the process of application development,
i.e. the adaption of their development
processes and production technologies to the
Chinese market. In addition, they have started
the first efforts to innovate complete new product
lines and business models in China and for China.
Often, the localization of selected steps of MNCs’
value chains, such as full-scale sourcing or
assembly, goes along with this innovation process.
19% of interviewed companies have managed to
reach the competency level of a “local designer.”
GLOBAL INNOVATION MOTORS:
Having reached the final development stage,
Chinese affiliates provide more input to other
affiliates and the global headquarters than they
receive in turn. Research and development outcomes
achieved in China are applied not only
for the production of Chinese local products,
but also outside China. Eventually, the Chinese
affiliates will gradually evolve to operate in the
center of Asian activities and moreover to be a
net contributor to the global value chain. While
currently only the minority of interviewed
companies (17%) have been empowered by
their headquarters with these far-reaching
capabilities, this development stage is expected
to gain in importance in the years to come.