Partnering for successful innovation in China

The last issue of Eye on Innovation focused on "Open Innovation" and investigated some of the latest research on the topic. Open innovation is now widespread, and companies are targeting countries where expansion can take place. A number of multinational companies (MNCs) consider China a hotbed for these new business opportunities, and pioneering companies doing business in China find an open innovation framework one of the most promising concepts to make it happen.  Here's why.

1. Supportive government policies, an increasing number of foreign-educated Chinese returning home and a vibrant venture capital system all contribute to an ecosystem that encourages innovation;
2. Chinese consumers are increasingly more demanding of products tailored to their unique tastes and habits; and
3. For thousands of years the Chinese people used ingenious methods to improve their daily lives. They are now applying those skills in developing new technologies and business models rooted in very practical approaches to their market.

For long-term success in China, MNCs must identify and work openly with innovative partners in the China market before local companies turn into a formidable competing force. The opportunity is now to harvest the power of innovation from one of the world's most populous and fastest-growing countries.

Success takes practice
How can open innovation help multinational companies get a foothold in the Chinese business landscape?  Important for success in China is a systematic approach. Here are some tips from China Materialia's managing partner:

1. Identify objectives and have stakeholders within the company agree on them. Map out key, well-known opinion leaders who are well-established players and also find emerging leaders who may be unknown, but often come from smaller companies experiencing fast growth. Then when the innovation is sourced, a willing audience awaits.
2. Set up a long-term plan that is built slowly over time. This helps build a trustworthy network of innovative partners. Rushing into and out of an open innovation effort in China does more damage to a company's reputation than not starting the effort at all. In China relationships usually play a more important role than contracts.
3. Keep all partners informed. Corporate decision-making style in China is very different than in the West. Western companies tend to make consensus-, data- and analysis-driven decisions in a meticulous fashion, and once decisions are made, they are not often changed. On the other hand, the Chinese usually employ a top-down decision-making process. Therefore, the decision is often made quickly based on limited information. However, these decisions are constantly re-evaluated as more information comes in and decisions can often be changed. To overcome the cultural gap, each partner needs to know the others' management style to be accepting of it.
4. Share background information. Both Western and Chinese companies must supply materials that familiarize each other with home markets, including consumer desires, a product positioning strategy and brand attributes. their particular innovation needs and topics, and information about how the innovation would fit into their product development portfolios in their homelands.
5. Create a "map of talents and resources." Identify expertise and talents in various areas that can potentially work together with the company and transform individual innovative components into a bigger innovation project.
6. Train and guide long-term, innovative partners. MNCs might want to implement techniques such as inviting potential partners to visit company facilities, meeting with employees, attending product launches, or participating in brainstorming sessions. Showing interest in learning from the partners is also important.
7. Experiment with new products and business models. Consumers in China are highly receptive to new experiences and the market is big enough to be able to define and properly test-pilot without negatively impacting the global business in case of failure.

Source: www.chinamaterialia.com

Theory realized in new open innovation center

General Electric Company is a perfect example of an American company initiating open innovation that will help them to establish a foothold in China. The company has just announced completion of a China Innovation Center in Chengdu, the capital of Sichuan Province in southwest China. CIC Chengdu is the first functional innovation center of GE worldwide. According to GE, CIC Chengdu combines research and development sections with marketing ones, focusing on local healthcare, shale gas drilling technology, new industrial automation solution, green energy and more.

GE regards open innovation practices, especially the customer co-creation approach, as essential for multinational technology companies to participate and contribute to China's future growth. Other global industrial multinationals, such as Intel, Foxconn, Dell, Lenovo, Siemens and Philips, agree and are following GE's lead.

With global companies flocking to China, a new axis is certainly in the making. With Europe still suffering from the economic downturn, global companies are investing in Asia, to tap into the skills of an educated, younger generation and the prospects of a large market. China boasts an estimated 980 MNCs (2010) with centers-such as Henkel, Novartis, Unilever, P&G and L'Oreal. Innovation is not limited to technological innovation, but also includes market innovation, product innovation and business model innovation. Multinational companies whose efforts encompass all areas will deliver results more broadly and quickly.

Sources: International Journal of Technology Management, China Business Review, Wireless News, Financial Express from Dialog databases: Global Reporter, Dialog NewsRoom, Gale Group PROMT^®, Gale Group Trade & Industry Database™

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