Archive for Asia
At the Marcus Evans Innovate 2014 Conference in Shanghai today, I met Rosalie Wu, the head of marketing in China for the rapidly growing startup, Uber. Rosalie was Uber’s first hire in China and exemplifies the energetic, entrepreneurial spirit that is driving Uber to global success. She spoke about the development of Uber’s innovative business model and the many innovations they continue to add in their unique approach to “glocalization,” wherein a company going global adapts its products and business model to the unique constraints and opportunities of each local market. I see Uber at the poster child for sound and innovative glocalization.
Uber began when one of its founders and first CEO, Travis Kalanick, attended Le Web in Paris in 2008 and struggled to get a cab in snowy weather. He realized there had to be a better way to use the free market to solve the basic problem of getting a ride. His passion for solving this problem resulted in forming a San Francisco start-up that began in 2010 with a mobile app for ride sharing in San Francisco. Today they offer a refined and clever business model with services in over 200 cities. Beijing was #200, and Uber is marching rapidly across China and other parts of the world. Rosalie’s enthusiasm for Uber is contagious and really stirred the audience here at the Hongqiao Marriott Hotel.
Uber’s business model innovation includes systems for registering, insuring, and rating drivers. It offers flexible pricing that helps tap the power of the free market much better than conventional taxi pricing and taxi systems can. With Uber you can select quality drivers and have simple, positive experiences getting to where you need to go when you want to be there. The business model is being extended with many other innovations such as delivery of products and even services (in China, they have even offered the service of having a traditional Chinese lion dance sent to be performed in your office). The innovate their offerings to meet local needs and adapt to local regulations and customs, while finding clever ways to continually make people’s lives better. This will inspire the competition to do more and bring ongoing innovation that will benefit us all. Amazing what a bad snowy night can do when an innovator is around.
Less than a year ago, Uber was valued at over US$3.5 billion. A few months ago in 2014, Uber was valued at around $17 billion. This is the power of doing something that brings people together in new ways.
Uber has faced and overcome a host of innovation barriers. Funding challenges, regulatory burdens, and stiff competition. But they have forged ahead with a relentless focus on making life better for its customers with green, energy saving, disruptive innovation . May the path before them remain wide open. Kudos, Uber!
Breaking news from the Province of Shandong in northern China: A Chinese paper company, Quanlin Paper (also called “Tralin Paper”) has successfully used its portfolio of patents and trademarks to secure a huge loan of 7.9 billion RMB (about $1.3 billion). Potentially significant story for those tracking IP and innovation in China. The story was just reported on March 3, 2014 at China Paper (the story is in Mandarin). This is quite a big deal and may be a record for China in terms of how much value IP brought in seeking a corporate loan. To emphasize the significance of this development, the normally dry China Paper publication begins with a somewhat flowery statement based on an interview with the Chairman, who expresses surprise and delight at how much money they were able to obtain with their IP. Here’s my loose translation, followed by the actual Chinese:
“I never thought that intellectual property could have such a big effect in obtaining this loan. IP was a big part of it,” according to Quanlin Paper Company’s Chairman of the Board, President Li Hongfa, speaking today to a reporter about the 7.9 billion yuan from bank lenders that began this week. He said that this money will help them rapidly expand and seize market opportunities. For an enterprise where funds have been tight, this new addition is gladly welcomed just as the mist-covered earth rejoices in the spring rains from the night before.
OK, a bit flowery, but again, this is big news for China and things get flowery when the big news is good. This development shows that IP in China can be valuable (though the portfolio includes some international patents, though it is mostly Chinese IP). It also shows that Chinese companies, even in seemingly dull industries like the paper industry, can be innovative and create valuable IP. I haven’t reviewed their IP to assess its value, but I understand they have over 100 Chinese patents in areas such as technology for using straw and other renewable or recycled materials for making paper, with alleged benefits of enhanced environmental friendliness and cost effectiveness. Shandong Province’s IP Office has also created some publicity about Quanlin’s IP estate (see the Chinese article here), though this was before the news of the massive loan secured with the help of IP. Expect more publicity from them shortly.
Further background comes from Baidu’s wiki-like entry on Quanlin Paper.
When nations develop strong IP systems, companies can use their IP to protect their innovations. This also motivates them to take the risk and spend the money need to drive further innovation, and gives investors courage to fund growth and innovation. In this case, it helped give a lending partner (a Chinese financial organization) the courage to loan a giant sum of money to help Tralin grow. Tralin has been pursuing IP not just for tax breaks it seems but also for strategic purposes, and information coming out about this story shows that they have been developing expertise in their staff to develop their IP estate. Sure looks like that has paid off for them.
This is one of many signs that China is becoming serious about IP and innovation, and not just low quality IP, but IP that can provide significant value. For IP to apparently be a crucial part of such a large loan in this challenging economic times is a remarkably positive sign for China, in my opinion.
A hat tip to Ian Feng (Yan Feng) of Goldeast Paper in Zhenjiang, China for bringing this news to my attention.
Update: On my mostly China-related blog, Shake Well Before Serving, I offer my full translation of the China Paper article, if you are interested. The translation is in the post, “A Sign of China’s Growth in Intellectual Property: Chinese Company Relies on IP to Gain Giant Loan,” where I have cross-posted the breaking news on Tralin Paper (a.k.a. Quanlin Paper).
Among the many burdens entrepreneurs face is the outright theft of their IP by companies that specialize in ripping off others by making counterfeits or knock-offs. It’s a horrific problem in China, in spite of increasing enforcement efforts by authorities. Part of the problem is that the cost of being caught is relatively small, so many of the IP thieves see the risk of spotty enforcement as just the cost of doing business. They are willing to shut down an operation and restart somewhere else, continuing the crime.
Knock-offs not only reduce profits for the innovator, but can damage a brand when the counterfeit products have poor quality or even serious safety issues that can affect the reputation of the original. Apple has faced this problem in many ways. Knock-off iPad and iPhone rechargers have recently failed and injured or even killed some consumers, a potentially disastrous situation for Apple. Apple could face criticism for making its rechargers so expensive that it has created strong incentives to use bogus 3rd-party products. But rather than remaining silent and trying to ignore the risk, Apple has taken an aggressive and bold step that shows the spirit of innovative business model creation is alive and well at Apple. Or it at least shows Apple has some clever and creative marketers still shaping the company.
Apple’s response has been to offer a bold take-back program for the China market. Through October 18, Apple will take back any iPhone, iPod, or iPad charger not made by Apple and in exchange will sell users an authentic Apple USB power adaptor for $10—half the usual price. As reported in coverage at Quartz.com, this approach looks really brilliant. It shows Apple taking proactive steps to solve the safety problems that others have illicitly created, and will result in a lot of people coming into their stores and gaining more loyalty for Apple while properly losing trust in 3rd-party knock-offs. Smart move, one that requires some investment and upfront risk, but one that reduces risk and probably increases profit in the long run.
Even the burden of counterfeits can be an opportunity for innovation in our business models and product strategies. May we face every burden with such an innovative spirit, looking for the opportunities.
One of my favorite conferences dealing with the details of successful open innovation and technology transfer strategy is CoDev, the annual conference sponsored by the Management Roundtable and now chaired by Cheryl Perkins of Innovationedge. I think I’ve been there four times and it was always worthwhile and extremely helpful. I’m pleasantly surprised that CoDev is extending their scope to include a conference in Shanghai, China this year on Dec. 4-5.
CoDev Asia 2012 will offer participants new tools to accelerate R&D and new product development by forming wise alliances with outside organizations such as start-ups, larger companies, universities, and other institutions. From technology scouting to research management to partnership contracts, CoDev Asia will offer insights, resources, practical experience, and connections that can help your company retool and accelerate your innovation engines.
I was recently inspired by the vast international innovation experience of a leader from Procter and Gamble, Bert Grobben, who will be one of the speakers at the conference. I also recently heard Yan Sheng, President of Intellectual Ventures-China, speak and am impressed with what he has to share. In fact, among the other speakers at the event is a wealth of experience and information that might be helpful to you. On the other hand, I’ll also be a speaker (just a panelist, not too dangerous), so look out–but you don’t have to attend my session.
One of the great innovation fatigue factors in many nations is the lack of an effective patent system to protect intellectual property rights. When IP rights are weak or nonexistent, there is little incentive for innovation and economies can lag far behind their potential. China has recognized the need to do more than just low-cost manufacturing and copying from the West, and in the past couple of decades has embarked on a goal of becoming a leader in technology and innovation. It hasn’t been easy and there are still many steps to take, but China has gone from having no IP system at all in the early 80s to having a system that now leads the world in terms of IP filings and IP litigation.
Yes, China is the world leader in IP litigation. Patent owners can and frequently do sue infringers successfully. But there are some challenges in enforcing IP here. One of the problems is the lack of discovery during litigation, making it hard to learn what your opponent has been doing and how much they have made from your invention. There legal system is also a bit more complex, with both administrative and civil routes available for enforcing the patent. One of the most common complaints also is that the awards given to successful plaintiffs are too small. Some of these concerns are being addressed in new proposed changes to the current patent law, changes which make it easier to get higher judgments (and reasonable legal fees) and which also add more teeth to the administrative routes for patent enforcement. In fact, the entire body of proposed changes appear to be geared toward strengthening enforcement. This is consistent with the recent change in 2008 that doubled the statutory infringement penalty (the maximum penalty for infringement in cases when actual damages are unclear) from 500,000 RMB to 1,000,000 RMB. These moves show that China is striving to become more serious about enforcing IP.
For those who have heard that patent awards in IP lawsuits are too small to make a difference, consider the recent case of Chint vs. Schneider in which the plaintiff was awarded 334 million RMB for infringement of a single patent, and it was a utility model patent, the type of patent that Western companies tend to ignore since there’s an assumption that utility model patents aren’t enforceable and are just junk. Other patent battles have results in multimillion dollar (and RMB) awards. If you can prove damages, they can be way beyond the statutory limit.
Yes, China’s IP system has gaps, but those gaps are being filled in with teeth, and the direction for the future is clear: higher quality, better enforcement, and a stronger environment for innovation. Is your nation on the same path? I hope so!
So often I hear Westerners complain about innovation in China or about innovation from Chinese employees. There is a perception that Chinese people are great at following directions and working hard but poor at creativity and innovation. Yes, there is a cultural emphasis on respecting authority, following instructions, and sticking to one’s duties. There is also an understandable but often very strong aversion to losing face, and that can lead to hesitancy to speak out in a group setting when there is a risk of being wrong, and certainly weighs against challenging the views of leaders. None of this needs to be a barrier to innovation. But it’s easy for those barriers to seem insurmountable to Westerners.
If you bring a team of Chinese employees together for a brainstorming session looking for fresh ideas, it’s very easy to get blank stares and a lot of people looking silently at the ground. A Westerner might interpret this as lack of creativity or unwillingness to innovate. But the real problem might be that the boss is in the room and everyone knows what the boss thinks is needed for the future. They aren’t going to challenge that directly. They also don’t want to risk being “wrong” by offering silly ideas. Or perhaps the problem is that they don’t trust you yet and don’t know what you’re really after. In my experience, respect for authority and a desire to follow the rules can be turned to advantage in an innovation session. The trick is helping them understand the process and giving them new rules that promote creative participation. And you must earn their trust and give constant encouragement.
One type of innovation session I do with Chinese teams is aimed at rapidly creating enabled intellectual property to jump start an IP initiative. The goal is not just a list of wild ideas, but a few ideas that can be challenged, critiqued, and improved iteratively until we feel we can actually make it work and have enough detail for an enabled description (“constructive reduction to practice”). With a creative, technically competent team of 6-15 people, during the course of a day we may be able to product 5-10 concepts that seem novel and have enough meat to them to support a reasonably enabled invention disclosure that can then, pending more thorough prior art searching and business considerations, be turned into a patent application or defensive publication, as desired.
In preparing one Chinese team for this exercise, I offered some sample exercises for associative thinking, one of the tools I use in my innovation sessions. I asked for their ideas and got nothing. Blank looks, looking at the ground, obvious discomfort. Few were willing to risk sharing new, untried, possibly crazy thoughts with the group, and this was without the boss being present. I then had to do some coaching. I explained that the rules today required us to express new ideas, that it was OK to be “wrong” and it would not just be OK but even necessary to point out the gaps and problems with our ideas so we could improve them.
It was almost time for a break then, so I also added this: “And we can’t take a break until I get at least 3 ideas from this associative thinking exercise.” Suddenly my quiet, shy team started bubbling with interesting comments. And on each one, I offered praise and acceptance. When they came back from the break, as we did a few more exercises, I soon noticed that these kids were excitedly going the extra mile, trying to get as much as they could from the few minutes of time I gave them. And I found my biggest problem wasn’t getting them to talk, but getting them to stop talking. They wanted to go on and on explaining their creative concepts and how they could be used and all the variations they had thought of and so forth. I felt like I had struck oil.
When I met with them a few days later to get deep into a particular new product concept and tap their thinking, the problem once again was getting too much, not too little. I found them to be enthusiastic inventors anxious to contribute and perhaps even to show off a little. Group exercises added a touch of competition where being quiet would be the way to lose face. By making the rules encourage participation, by reducing risks of losing face, and by giving them positive experiences as they participated, I found that they were every bit as creative if not more than American teams I’ve worked with, and was often impressed with their contributions.
Don’t assume that your Chinese team members are naturally less creative or innovative than Westerners. It’s easy to focus on the moat and wall that China, in Western eyes, seems to have around the “forbidden city” of innovation. In reality, access is easy, but you’ve got to use the right approach and find the (very large) entrance. Recognize that there are cultural differences that need to be bridged, but when you set up your innovation efforts appropriately, you can obtain great results regardless of where your team comes from.
The impact of innovation in China is often not obvious to the West, even when many gadgets like the iPhone draw upon innovations from China and Taiwan that make many Western products possible. Not many Chinese brands have spread outside the borders of China, leading some observers to question the significance of Chinese innovation in full-fledged products and not just components or manufacturing methods. China is just beginning to learn how to develop brands that will succeed in the West. The apparent dearth of brand-based innovation from China should change in the coming decade. Some of the front-runners might be found in the automotive industry.
The Chinese automobile brand, Chery, is already rolling westward. A friend of mine spotted it on-sale in Kiev, Russia, and sent me these photos (photos courtesy of Martin Daffner). Chery, now one of China’s leading exporters, began exports in 2001 to Syria and now sells its cars in the European nations of Russia, Ukraine, Belarus, Serbia, Macedonia, Turkey and Italy (per Wikipedia) and as of 2012 will be marketing also in Australia, Singapore, and South Africa. Chery’s strategy is to expand in developing countries first and then enter more developed countries.
As Chinese brands move to the West, we will increasingly see Chinese companies getting their IP stolen unless they take proactive steps early to protect it. It’s already happening in the realm of trademarks, as Li Yongbo reports in the China Daily article, “More Chinese brands victims of IPR violations.”
- Auto Innovation—China Style (Businessweek)
Maybe China is just too far from the smug innovation circles of the West. Maybe language and cultural barriers make the events unfolding in China too inaccessible to Western media. Maybe decades of concern about IP theft from Chinese companies has closed the eyes of the West to present realities. Whatever the reason, the West today seems generally blind to the innovation powerhouse that China is becoming. Witness, for example, the highly publicized list from Reuters-Thompson of the top 100 global innovators, based on “patent activity.” With China having become one of the world’s true hotbeds of patent activity, not to mention economic impact with innovation in many fields, one might expect Chinese institutions to be well represented on the list. Incredibly, the list has ZERO Chinese entities on. None from Mainland China, none from Taiwan, and none from anywhere else in Asia except for a heavy dose of Japanese companies (27) and 4 from South Korea. Tiny Switzerland makes the list 3 times, and its minute neighbor, Liechtenstein, makes the list with Hilti Corporation. But zero from China and Taiwan? The list is related to “patent activity,” but its compilers wisely recognize that patent volume alone is a poor metric for innovation. Instead, they have created other metrics based on patent data:
The Thomson Reuters 2011 Top 100 Global Innovators are companies that invent on a significant scale; are working on developments which are acknowledged as innovative by patent offices across the world, and by their peers; and, whose inventions are so important that they seek global protection for them.
Sounds fair. So sure, the manufacturing and supply chain innovation that has been a big part of China’s economic rise are not expected to make a showing on this list. That kind of innovation doesn’t show up in terms of granted US and European patents. And the tendency for many Chinese companies to mostly file patents in China doesn’t help them with the methodology Thompson Reuters has, which looks for measures of international impact and international patents. But did they miss all the international activity of some Chinese companies? For example, a couple of days before this list of innovators came out, I posted this on LinkedIn and Twitter (@jefflindsay):
Two Chinese companies, ZTE and Huawei Tech., are among the top 5 international (PCT) patent applicants. Lots of IP here! https://is.gd/t2tUb4
OK, so Thompson Reuters doesn’t follow me, but these companies should have shown up strongly in their patent searches. These are innovative companies with products marketed internationally, having strong economic impact, and loads of patents. Being in the top 5 for international filings wasn’t good enough to even place in the top 100 for Thompson Reuters. Huh? OK, it turns out the ZTE’s surge in patent filings is recent and their numbers prior to 2010 were probably too low to make the cut for this study–that’s fair. But Huawei had 445 US patents from 2005 to 2010, a number in greater than some other companies on the list. For 2011, by the way, Huawei isn’t just in the top 5 so far–they are Number One, the world’s leader in international patent filings (see the Nov. 2011 article in the Vancouver Sun). Think they’ll be on the next list of leaders in patent activity Thompson Reuters publishes? Perhaps, who knows?
How about the Liechtenstein firm that’s in the Top 100, Hilti AG. Heard of them? They have good products for the construction and building maintenance industries such as hammer drills and other tools. They have 20,000 employees, including 2,500 in the US, and market products and file patents internationally. For the 2005-2010 time frame of the Thompson Reuters study, Hilti had 327 patents. Not bad. Well below Huawei’s score, but still respectable.
Now let’s consider a little company that was not on the list: Foxconn. Heard of them? They have over 1 million employees and are the world’s largest producer of electronic components, including circuit boards. They are the ones who actually make Apple’s products such as the iPhone and iPad. This Taiwanese/Chinese firm (China considers Taiwan to be part of China, and much of Foxconn’s work is in China) is arguably the real powerhouse behind the success of Apple and several other companies on the Thompson Reuters list. Foxconn builds Apple’s products, and not just as a mindless executor, but as an innovative partner.
Ah, but what about real technological innovation expressed in patents? Surely Foxconn is just about cheap labor and low cost manufacturing, right? A quick search of Foxconn patents granted in the US from 2005 to 2010 shows they have over 700 patents. Some are design patents, but the vast majority are technological. Foxconn apparently is conducting serious R&D and spending millions on patents to find new ways to make leading edge high-tech products better, safer, faster, and cooler (both in terms of heat management and the “wow” factor). I have the privilege of interacting with some Foxconn people and from what I’ve seen and heard I can say that they have a world-class IP program to support innovation, and I feel that they are way ahead of many Western companies in these areas. Foxconn innovation and Foxconn IP may be the real key to Apple’s success. Foxconn innovation is abundantly expressed in patents, not just trade secrets and know how, with an estate twice as big as Hilti’s over 2005-2010 and an economic impact on the global market far in excess of Hilti. But Foxconn doesn’t make the list. How do none of these Chinese companies break into Thompson Reuters’ Top 100? Did they miss the 2010 story, “China Poised to Become Global Innovation Leader,” based on patent activity? That must be from another source they don’t follow.
Nov. 24, 2011 Update: My search on Foxconn patents needs to be updated. Yes, Foxconn has an impressive 700+ US patents for the 2005-2010 period, more than some companies in the TR list. But my search was deficient, failing to consider that many Foxconn patents might have been filed under the real name of the company that owns Foxconn, Hon Hai Precision Industry Co., Ltd. So I expanded my search term to be “Hon Hai Precision” or Foxconn. Now, instead of 700 patents, we’re looking at a massive estate of 5,872 US patents (perhaps a couple dozen more when typographical errors are considered). This estate now dwarfs MOST of the companies on the list such as Brother Industries (2873, searching for Brother Ind* or Brother Kogyo), BASF (2771, searching for BASF or Bayerische Akt*) Goodyear (1152), ABB (948), Airbus (926), Avaya (<600), Arkema (205), Cheil (116), etc. Oh, and what about innovation giant Apple Compute? A search for simply “Apple” (which might include some smaller companies unrelated to Apple Computer) returns 1809 issued US patents from 2005 to 2010, less than 1/3 of the US patent activity of the invisible innovator that makes Apple what it is.
Let’s return to Huawei for a moment. There should be little doubt about the innovation prowess of Huawei, even though they tend to be far more secretive and do much less P.R. than Apple. But this telecom company is big (with over 100,000 employees, they connect 1/3 of the world’s cell phones) and highly innovative. Read, for example, BBC’s story, “Innovation in China: Huawei – the secretive tech giant.” Maybe the Thompson Reuters methodology docks them for being on the young side. Over half of their 445 US patents from 2005 to 2010 came in 2010–but they still clearly outpace Hilti and others over the 5-year span of the study. So what gives? I suspect that the youthfulness of the estate means there has been less time for others to cite Huawei patents, and that may be part of the problem since patent citations are part of the methodology. But to miss Huawei completely?
Thompson Reuters will surely argue that their methodology was developed and implemented fairly, even blindly (a fair term), but someone should have immediately seen that something was wrong if top international filers and innovators like Huawei, and Foxconn didn’t make the list. But when it comes to innovation, innovation in China tends to be largely invisible to Americans, who are stuck in the old paradigm of US being the innovation leader and China just being a copier. That kind of blindness will catch the West by surprise in the very near future when US companies find themselves facing numerous patent barriers from the Chinese companies that will own much of the most valuable IP. China is creating and will create much of the most important global innovation for the future. Innovation needs to ramp up in the West in order to not be left completely behind.
Dec. 8 Update: Chinese computer giant Lenovo, the world’s 2nd largest producers of personal computers, may also deserve to be on the list.
- IAM Blog: “The US, Japan and France dominate new listing of the world’s most innovative companies“
- Nielsen.com: “Nielsen China Forum: Dispelling the Myths of Innovation in China“
- China Law Blog: “Innovation In China. It’s Happening, But Not How You Think“
- Tech Crunch: “Thomson Reuters Names ‘Top 100 Global Innovators’“
The good folks at the China Law Blog recently discussed a common scam that occurs in China. Actually, this is a scam that is shaking down small and large companies and lone inventors all over the globe. I’ve warned against it in the US for a long time and was intrigued to see it is going full-bore here in China.
When you file or obtain trademark registrations or patents, scammers are likely to send you an invoice asking for some large sum of money in return for being “registered” in their international database of patents or trademarks. In the Chinese version of the scam, you may received a bound volume of Chinese law with an enormous invoice. Failure to pay, they will tell you in annoying repeat calls, could result in all sorts of problems. Don’t pay. Don’t waste your time with them.
In US and European versions of the scam, the invoices sometimes come from Serbia or Croatia. But they can come from anywhere. If it’s from the government where you registered or filed your IP, throw it away. Unfortunately, enough businesses and gullible inventors just routinely pay invoices without asking tough questions that the scam is successful, thus causing it to spread. Don’t be fooled. When your innovation results in being ripped off, you’re on your way to innovation fatigue. Steer clear.
Yinglan Tan’s new book, Chinnovation: How Chinese Innovators Are Changing the World, offers many lessons for the West. Tan explores several dozen case studies of entrepreneurs from small and large companies with roots in China. Some of the lessons counter popular Western perceptions about business in China and others point to broadly applicable lessons in entrepreneurship. The book is well written with key takeaway points highlighted throughout.
A common theme is that Chinese innovators are finding success in spite of highly limited initial resources by taking risks intelligently but aggressively, pushing for cash flow early in the process, and growing rapidly with the help of a healthy network and quick learning. Opportunities are being found in numerous spaces, both low and high tech and with novel or basic business models. Contrary to some stereotypes, integrity matters a great deal in the rising Chinese economy, with respect for others playing an important role in how business is done.
Tan offers much useful advice to Western entrepreneurs to help us find success more rapidly, Chinese-style. For example, he wanrs against the “focusing effect” in which entrepreneurs get too focused on one aspect of an event or business. Falling in love with a project, as often happens to engineers, can lead to losing sight of the larger mission, he warns. Ultimately, he urges entrepreneurs to consider taking a “good enough” approach rather than striving for perfection. “Many products can be built much more quickly and cheaply in China bu settling for good technology plus a bunch of hacks–human editing, partnerships, and outsourciing–instead of trying to create a perfect technology from scratch.” (p. 76)
Chinese companies are also gaining a competitive edge by being able to retain and attract top talent. It’s not just through good salaries, but also through many factors that build trust and loyalty. For example, Wayne Dai, CEO of Verisilicon Holdings, explains that they pay attention to the corporate cafeteria to make sure there is outstanding food. “The first thing I look at in a Shanghai company is the quality of the cafeteria. Without a good lunch, there is no productivity. Two vendors compete in our cafeteria.” They also offer stock options to many in the company. The receptionist, for example, has stock options.. Such steps build loyalty and increase productivity of employees.
The rise of entrepreneurship in China is now being followed with the rise of strong IP rights. There is much progress to be made, but companies are learning that IP matters and that failure to respect the IP of others can result in painful surprises. China is now on the path to surpassing the United States in terms of patent applications. It is a myth that China’s competitiveness just comes from being a source of low cost labor. They are leading the world in R&D in many high tech fields and are becoming the intellectual powerhouse of the planet, not just the source of labor. Between low cost resources, high tech IP, and a Wild West spirit of entrepreneurial adventure, the innovation potential of China cannot be overestimated. The West has many lessons to learn if it is to remain competitive in the global economy.