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Global tech players must rethink China strategy (2) |
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17:03, August 15, 2007 |
One European supplier of industrial components, for example, rigorously tests its highly engineered products to ensure a 5- to 10-year lifespan, but sells to Chinese manufacturers whose products only last three years.
Global tech players need to completely rethink their R&D approach and rediscover the lost art of low-cost R&D. They must ask what kind of products customers are demanding, and then redesign their R&D processes to meet these lower specifications and cost points.
Perhaps the only truly effective way they can do this is to bring their R&D capabilities to China, much as they have already done with manufacturing.
In doing so, global companies need to avoid the temptation to bring in too many expatriate engineers who implement traditional R&D processes that are unsuitable in China.
Chinese engineers already have the required technical know-how, so firms only need to bring in a few foreign experts to hone specific skills, such as the ability to translate consumer needs into technical specifications, instilling standardized R&D processes, maintaining end-to-end oversight, and designing a local production solution that best balances cost, quality and stability.
Rather than building their own localized R&D teams from scratch, firms could also acquire a local competitor and take over the company''s R&D operations and processes. Its products could then be subsumed under the global brand, or retained as a sub-brand to avoid diluting the premium brand''s image.
Some companies have already succeeded at localizing R&D to tap into the low-cost approaches of its Chinese counterparts. One global medical equipment maker, for instance, increased its market share from 18 to 45 percent by localizing its R&D processes to better meet the needs - and budgets - of potential customers in China.
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