What innovation does China need?
Xiaonian Xu, professor of Economics and Finance at China Europe International Business School (CEIBS) recently gave a speech on his view of business innovation. When comes to the innovation for established Chinese businesses, he gives more weights on learning / acquiring from world leading firms’ best practices, new business models and new technologies, than trying to creating new concepts or re-inventing the wheels with no long-term plan of research and development.
One example he touched on was a company called SPZP (Shang Pin Zhai Pei, in Chinese尚品宅配). Established in 2004, the tailored furniture company now has grown its market cap to RMB 20 billion (USD 3 billion) with the price-earnings multiple of over 50 times.
How has it grabbed investors’ attention?
SPZP introduces new technologies to enhance rather than to replace its furniture production business. It embraced several matured technologies that only in recent years can be cost-effectively adopted, such as the 3D laser scanning, virtual reality, and Flexible Manufacturing System (FMS) to make its production process more agile. Meanwhile, with a new production process, it activated an additional business model: C2B (Customer-to-Business) + O2O(Online-to-Offline), which is popular among PC manufactures like DELL, to create a new customer experience, further drive customer demand through additional value-add.
Similarly, UBTECH, a now global leader in educational AI and humanoid robotic company founded in 2012 in Shenzhen China has market valuation reached USD 5 billion in just six years.
Not reinventing the wheels is one of the key success factors of UBTECH. It fully embraces established app eco-system including Apple and Google worldwide, actively partnering with western educational organisations and youth science technology programs to improve its exposure to different markets. Both greatly helped its new product design and marketing planning on the world stage. Meanwhile, to make programming easier for beginners, it adopted a visual programming language concept, the concept underpinned the success Lego Mindstorms series robots.
So, what are the opportunities for successful Australian businesses?
In the professional service industry, historically many Australian companies have successfully adopted new systems, methodologies and technologies from US or Europe and often made enhancements to those with years’ experience of applications. Such experience – how to better adopting the worldwide best practices to better solve legacy problems are proven valuable for many businesses to reference upon. In other words, many Australian companies have had experience and developed capabilities to adopting the world’s best, that many Chinese peers are now wanting to acquire. For many Chinese established businesses, the journey starting off cost cutting may eventually lead to the new path of innovation, along the way, Australian businesses can explore many cooperative opportunities.
