OPEN INNOVATION IN CHINA: TRANSITIONING FROM COPYCAT TO AN INNOVATIVE HUB

China’s own technology companies are now challenging market leaders and setting trends in telecommunications, mobile devices and online services. Companies like Seeed Studio, a global leader in open hardware innovation, has transformed into a new model of hardware innovation offering hardware kits to makers and offering personalized services to enable companies to move quickly from an idea to mass production by identifying moments of transition , where a company lacks the knowledge on how to scale up.  WeChat smartphone application, dominates China’s mobile messaging market with 272 million monthly active users from around the world clearly challenging WhatsApp. These are some but a few exemples of Open Innovation in China.

 So what exactly is encouraging this innovation ecosystem?

The rise of China’s tech industry is fueled in part by its growing investment in research and development. [tweetherder]According to a study by U.S.-based Battelle Memorial Institute, R&D spending in China will likely reach $284 billion this year, up 22% from 2012[/tweetherder].

The education has encountered a rise of Chinese graduates, from as few as 1 million graduates in 1999 to almost 7 million in 2013, with 31% of the undergraduates holding engineering degrees.

Other positive factors are the growth of a vibrant venture capital system in the country and an increasingly important market for multinational companies as Chinese consumers are increasingly more demanding of products that are tailored to their unique tastes and habits.

Indeed China still has its challenges such as perception of low-quality products, talent shortage due to graduates leaving to conduct research in richer countries, intellectual property rights issue but it is sure on the right path to becoming an innovative hub.

A recent paper (“How Chinese firms employ open innovation to strengthen their innovative performance” by Jin Chen et al) showed that Chinese firms start widely using open innovation:

1. Technology in-licensing agreements to obtain access to technologies

2. Long-term alliances with foreign partners to access state-of-the-art technologies

3. Collaboration with local universities and R&D institutes to broaden their technological strengths

4.  Collaboration with the local industrial community to deepen their technological skills.

We would like to ask you our reader, what role do you think open innovation has in helping China to accelerate its innovation? Who would benefit? We would like to hear your thoughts?

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Henry Chesbrough Open Innovation

Open Innovation is a paradigm promoted by Henry Chesbrough that expands on the ideas of interbusiness collaboration. Over the last decade or so it has been primarily attributed to Dr. Chesbrough from his position as adjunct professor and faculty director of the Center for Open Innovation at the Haas School of Business at the University of California and as the author of the book “Open Innovation: The New Imperative for Creating and Profiting from Technology” (Harvard Business Press, 2003).

Dr. Chesbrough recommends that companies embrace the idea of ‘Open Innovation’, which very simply means obtaining the required components or building blocks of the development and manufacturing process from any source available, whether it is domestic or not.  He further suggests that even though there is some risk of losing competitiveness because of the loss of a competitive advantage due to the sharing of potentially sensitive information with partners (and consequently competitors) in the manufacturing process, the overall gains far outweigh the risks.

The Chesbrough Open Innovation model incorporates such concepts as the ‘Collaborative Network’, which is a structured system that works as a unit to achieve a particular goal regardless of the locations, circumstances or ideologies of the constituent parts; ‘Innovative Networks’, ‘Data Networks’ and others.

Proponents of the system in the manufacturing sector suggest that development marketing, research and distribution costs may be greatly reduced by making use of facilities, knowledge and structures already in existence. Naysayers point out the risks to individual companies such as loss of such things as proprietary knowledge, competitive edge and even profit may render some business obsolete or defunct.

Dr. Chesbrough firmly believes that the overall gains to innovation, business and even humanity far outweigh these considerations.  Certainly, examples abound where this process has worked marvelously for all concerned; Case in point MS-DOS vs. Apple Macintosh for computer dominance.  Clearly the overwhelming profusion of developers and the size of the existing market share that Microsoft maintains smothered the Macintosh during the early skirmishes between the two giants.  Providing a working platform that enables developers to innovate and expand on existing structures enables better, cheaper and more reliable products for consumers and profits for all the parties concerned.

Another example of where Chesbrough Open Innovation has served well in the marketplace is the profusion of apps for Android and iPhones.  Whichever you prefer, there is no doubt that the ability of developers to create and innovate has been to the benefit of everyone who now uses a mobile phone.

All of which would tend to suggest that the Chesbrough Open Innovation model is a practical success.