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Innovation: China’s Next Big Push

Posted By Paul Burgo, January 04, 2011 at 8:32 AM, in Category: The Innovation Enterprise

It should come as no surprise that the Chinese government is getting serious about growing that country’s industrial innovation capabilities. Although China in recent years has succeeded in breathtaking fashion at becoming the global leader in low-cost, high-volume manufacturing, many of the innovations and designs that China’s plants produce still come from the West. As living standards—and wages—inexorably rise in China, the authorities there are realizing there’s not much of a future in remaining the world’s low-cost, outsourced manufacturing center. There will always be someone who can do it cheaper.

Chinese companies in recent years have invested in acquiring existing brands such as Volvo. But the long-term goal is for Chinese companies and individuals to benefit from brands and intellectual property of their own creation. The critical question, particularly for Western manufacturers, is how quickly and how effectively Chinese competitors can get there.

One thing’s for sure: They want to get there quickly. A translated document from China’s state Intellectual Property Office (http://graphics8.nytimes.com/packages/pdf/business/SIPONatPatentDevStrategy.pdf) recently posted by The New York Times, provides a clear indication of China’s innovation ambitions. The document indicates that China’s leaders want to see the country’s individuals and companies file 2 million patent claims per year by 2015. That’s up from about 600,000 in 2009. (Patent filings in the U.S. totaled about 480,000 for the 12 months ending in September 2010, but China and the U.S. have significantly different patent-filing systems, so they’re not easily comparable.) China also aims to double the number of patents its citizens and companies file in other countries.

China wants to double its number of patent examiners by 2015 and to stage a publicity campaign “by taking advantage of emerging media such as Internet and mobile phones,” to encourage patent filings. And the report recommends dangling incentives such as cash bonuses, better housing, and tax breaks to get individuals and companies to file more patents.

But can the Chinese government’s patent-focused, by-the-numbers approach really stimulate an innovation upsurge? Perhaps more to the point, is innovation something government—any government—can mandate?

I think not.

Certainly, manufacturers around the world are under unprecedented competitive pressure to innovate faster and more productively than ever before. But the one theme we hear repeatedly from innovation leaders such as GE, 3M, IBM, and Cisco is that innovation within enterprises is largely a matter of culture. Innovation leaders have figured out how to create an atmosphere that rewards risk-taking and even tolerates occasional failures in the pursuit of innovation. And innovation leaders have the humility to understand that they cannot be the source of all the best ideas. So, they’re figuring out how to tap into ideas coming from customers, suppliers, and other communities—virtual and others.

In some ways, China would seem to be operating at a disadvantage when it comes to creating such a culture of innovation. For one thing, because China hasn’t yet developed the kind of consumer society that exists in the West, its manufacturers may have a harder time developing the kinds of collaborative idea-sharing relationships with end customers that Western manufacturers increasingly enjoy. For another, the Chinese government’s willingness to control the free flow of ideas taking place on the Internet and elsewhere will not serve it well as it attempts to stimulate innovation.

The bottom line is that China’s government will soon learn that the number of patents its companies and citizens hold should not be seen as the ultimate goal. The ultimate goal is true, sustainable innovation itself, and culture is the enabler.

What do you think? Can China become a leading source of new product innovation anytime soon?

Written by Paul Burgo

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