![\"Paradigm\"](\"http:\/\/www.sdaconseil.com\/blog\/wp-content\/uploads\/2014\/04\/Paradigm.png\")
<\/a><\/p>\nIt did not take long for China to capture the manufacturing of low value goods.\u00a0 The Western consumer was happy to see its standards of living rise on the back of a vast army of low wage workers toiling in the special economic zones of China, and beyond.\u00a0 Foreign direct investments poured in for 30 years, fueling an insatiable boom.\u00a0\u00a0\u00a0 But the consumer\u2019s gain later turned out to be the blue collar\u2019s loss in the shop floor.\u00a0\u00a0 The scale of manufacturing relocation to China was bound to depress jobs and wages in the West.\u00a0 It also carried a hidden price tag: growth options were slipping away from industrialized nations to emerging countries, and specifically to China.\u00a0 Bureaucrats and policy makers in the West forgot that up to 8 service jobs are affected when 1 manufacturing job disappears.\u00a0 \u00a0Technology is the key for China to avoid the middle income trap.<\/p>\n
Ever since the WTO let in China in 2001, many countries are having second thoughts about the bargain.\u00a0\u00a0 Yes the Chinese export conveyor belt has worked wildly beyond expectations, but the cost has been steep for Western nations in jobs and wages. \u00a0What is now making the bargain expensive has been the real prize for China : \u00a0Technology.\u00a0 Western technology has been steadily leaking and finding its way to China: sold, hacked, stolen, or traded for the \u2018lure\u2019 of market access to a billion customers. \u00a0But just like Japan and South Korea, China has made its markets more difficult to penetrate for the foreign invader.\u00a0 There have been winners, but a great deal more of failures.<\/p>\n
All Asian nations embrace technology as a basic economic policy.\u00a0 The Japanese initially acquired technology in joint-ventures overseas<\/i>, transferring the technology back home for production.\u00a0 Layer by layer, they built strong competences in technology manufacturing and moved up the value added chain.\u00a0\u00a0 Low pricing, product technology and then high quality helped them move from widgets to high value goods.\u00a0 Eventually the Lexus was launched in 1989 to the disbelief of American car makers, who acknowledged at the time\u00a0 they could not build this car.<\/p>\n
The Chinese played their hand differently.\u00a0 They promoted joint ventures at home<\/i> to capture western technologies, by all possible means.\u00a0 Thus the tech transfer was faster and vaster than in the case of Japan.\u00a0 We might now argue that Chinese wages are moving up and are denting\u00a0 their low cost advantage in manufacturing.\u00a0\u00a0 This is going to give a reprieve to other emerging countries such as Mexico and Brazil.\u00a0\u00a0 But this is not going to help embattled Western nations very much.\u00a0\u00a0\u00a0 Low cost wages have shifted from manufacturing to a new generation of engineers and managers, forming the backbone of the new emerging champions.<\/p>\n
China produces nearly 900,000 engineers per year.\u00a0 They cost less and work harder than their Western counterparts.\u00a0 On a per-hour basis, they cost 15% to 25% of the typical European engineer.\u00a0\u00a0 China had about 200 R&D centers in the early 2000s.\u00a0 The number has moved up to about 1600 in 2013, of which 1300 are from multinationals.\u00a0 China ranks now 2nd on the world in R&D budgets and patents filed.\u00a0 As an example, the Beijing Institute of Genomics has 15,000 researchers under its payroll.<\/p>\n
The Japanese were thought to be good makers and not good inventors.\u00a0\u00a0 Today many of us think of the Chinese as decent makers and rather poor innovators.\u00a0 But think again.\u00a0 Emerging champions such as Huawei, Haier and several others, all have at least 25% of their employees working in R&D.\u00a0\u00a0 This enormously speeds up product development and shortens product cycles.\u00a0 Few western companies can match this up.<\/p>\n
Many western executives poorly assess the innovation capacities of emerging Asian champions.\u00a0 They like to examine the technology capability of their rivals.\u00a0 But innovation is not just a single pony trick on technology.\u00a0 Market research and customer insights are equally<\/i> critical in the innovation equation.\u00a0 This core competence is developing fast with the emerging champions of Asia.\u00a0 If you are still a doubter, just look at how Alibaba, Tencent, Weibo, Xiaomi have cornered the Internet market in China.\u00a0 Samsung was about the only competitor to keep pace and rival Apple when it launched the i-phone.\u00a0 Many large companies such as Shiseido have adapted \u00a0marketing strategies differentiated on city populations across China and the rest of Asia.<\/p>\n
Now consider the final bundling of attributes found in these emerging champions:<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 They are adept at bringing the cost structure down and they start with a formidable competitive advantage<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 They are not afraid to tap into the best management practices worldwide<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 They buy the best technology available and improve on it (frugal innovation)<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 They build the most modern plants at a fraction of the cost in the West<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 They are quick to set up R&D capabilities to accelerate product innovation\u00a0taking advantage of their\u00a0low cost engineers<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 They develop a culture with a strong unanimity of purpose and immense drive<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 They craft a strong sense of customer relationship and client-centricity in their organizations<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 They often deploy their international strategies in other emerging markets, to gain scale and experience (that is why you don’t yet see them around)<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 They have started to\u00a0 experiment with organization structures to combine the best Western and Eastern management practices<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Some are now integrating design and brand into their strategies<\/p>\n
If you were surprised by the speed of China’s industrial revolutions, you ain’t seen nothing yet.<\/p>\n
New epic battles stand around the corner.<\/p>\n
Andr\u00e9 Du Sault<\/p>\n
MBA(LBS), MPA (Harvard)<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
Montreal, 18 April 2014. International champions from Asia are moving up the value chain a lot faster than anticipated.\u00a0 If Japanese companies shook the economic foundations of the Western industrialized nations in the 1970s and 80s, a new roster of champions, notably from China, will challenge anew the Western economies. My colleague William Polushin and […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4,6,7,8],"tags":[],"_links":{"self":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts\/389"}],"collection":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=389"}],"version-history":[{"count":5,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts\/389\/revisions"}],"predecessor-version":[{"id":395,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts\/389\/revisions\/395"}],"wp:attachment":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=389"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=389"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=389"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}