Why a new approach to innovation could give Chinese companies the edge over their western rivals, says Cambridge Judge professor Peter Williamson.
Think the challenge from China is all about low-cost manufacturing? Think again. A new approach to innovation, which will enable Chinese companies to get new ideas to market in a fifth of the time taken by their Western rivals, is about to create a storm.
“The traditional picture of innovation is of a small team of brilliant minds brainstorming and experimenting, with large-scale and tightly defined processes seen as an obstacle to creativity,” says Peter Williamson, Honorary Professor of International Management at Cambridge Judge Business School. “But the Chinese are using large teams of competent but often unexceptional technicians and dividing the innovation process into a large number of small steps. The model is successfully combining incremental innovation with rapid scale-up and high volume output at low cost – by tearing up the innovation rulebook.”
Williamson’s research into 23 Chinese organisations also showed the most successful were pushing the boundaries of simultaneous engineering to new levels – another rejection of conventional wisdom. “New product development has always been a ‘waterfall’ process,” he says, “with certain steps having to be complete before the next stage can start. But the Chinese method sees team members working on different elements of the process – R&D, design, engineering, quality control, marketing – in parallel.”
Take the case of Pearl River, the world’s largest piano manufacturer, which is based in the Chinese city of Guangzhou. Whereas Western competitors innovate by working sequentially on each instrument’s four main components (the resonance system, keyboard, piano system and case), which takes around two years, Pearl River created a 23-strong team which included six designers and 10 people with specific expertise in areas such as procurement, manufacturing and sales. “This team was supported by 40 craftspeople to enable rapid prototyping of possible new designs,” says Williamson, “and by this process launched a range of 10 new pianos in just five months.”
Williamson, who conducted the three-year research with Cambridge Judge Business School senior marketing lecturer Dr Eden Yin, found the approach was successfully used across a range of industries. Chinese pharmaceutical firm WuXi AppTec, which also has operations in the US, developed a new drug to combat Hepatitis C by dividing the R&D process into eight steps with dozens of people assigned to each one – many of them new graduates – and using cheaper manual, rather than automated, techniques to enable a quick change of scale if necessary. According to Williamson: “This highly industrialised approach enabled the company to complete projects two to five times faster than the conventional approaches that it benchmarked in the US.”
But is it practicable to implement such concurrent processes in the West? Professor Richard Barker, Director of the UK’s Centre for the Advancement of Sustainable Medical Innovation (CASMI), says the regulatory landscape means the more traditional waterfall process is almost always inevitable – and with very good reason. “We do indeed have a more linear approach, not least because the latter stages of research are very expensive,” he says.
“It’s an important process which enables us to knock out unsuccessful products as early as possible. It’s also, quite rightly, very heavily regulated. But there’s an opportunity to follow adaptive approaches to development, allowing patients earlier access to medicines with satisfactory safety profiles and promising efficacy. However you don’t want to go to give medicines to thousands of patients until you’re absolutely certain that it is safe for ordinary patients to use.”
But Williamson insists: “With incremental innovation you know the processes, you can define all the steps, you know all the pieces of the puzzle that you need. Of course you can’t define these processes with breakthrough innovation, because it’s all new, but you can with incremental innovation. Western organisations’ problem is that they use the same R&D approach to both, when the research shows that in the right circumstances a much more industrialised approach to innovation will considerably accelerate the process.”
And flat hierarchies, which so often go hand in hand with breakthrough innovation, are not necessarily faster. “We found Chinese staff with experience of working in foreign multinationals were frustrated that organisations with a flatter structure took considerably longer to make decisions,” says Williamson. “In these Chinese firms the boss’s word was law and he set the project goals, budgets and timelines through a strong vertical hierarchy. But this doesn’t mean Chinese firms are necessarily rigid – there’s a lot of horizontal flexibility. If there is a problem or a hold-up, people bring in colleagues from across departments in a ‘huddle-and-act’ process, with individuals clearly feeling strong duty to each other and the boss to sort out and implement a solution as quickly as possible so as not to let anybody down.”
Williamson adds: “Customer expectations of innovation are higher than ever, and the markets, particularly in technology, are moving at an unprecedented rate. Western organisations need to look at their R&D processes and may come to the conclusion: ‘It’s not that we don’t have the new technology, it’s that we are not fast enough or economical enough in bringing it to market.’ But the Chinese model shows it is possible.”