According to a new report from Lux Research, China’s emergence as a global innovation powerhouse has proven to be a “double-edged sword for global companies,” which presents challenges as the country seeks to make its companies more competitive in the international market.
The Lux Research report “Beyond Made in China 2025: China’s Move up the Global Innovation Value Chain” analyzes innovative brands poised to take a global leading position across 10 key industries in 2025 and beyond.
“China’s rise up the innovation leaderboards is causing concerns for many of the world’s companies and is a classic case of fear, uncertainty, and doubt – fear that China may eventually dominate key technologies and sectors with its vibrant ecosystem of innovators, uncertainty if China’s recent efforts in critical emerging technologies today will lead to a similar rise on the global landscape, and doubt about the prospects of being able to maintain a strong market presence against the rising competition,” said Lux Research Senior Analyst and co-author Yuan-Sheng Yu.
“These concerns are only realistic in the sense that it is human (and organizational) nature to have such feelings, but misplaced as they pertain to the sense that Chinese technologies will one day blanket the world,” adds Yu.
China’s Validation on global stage and the opportunities
Recent decisions to ban products and services from some of China’s major tech companies, such as Huawei, ByteDance, and Tencent, only validate China’s technology competitiveness on the global stage, Lux Research said in a release.
As the world moves towards the next technological revolution, rather than focusing on the potential threats, Lux Research recommends that companies “work to capitalize on the growing opportunities associated with China’s innovation rise through three key strategies – harmony, synergy, and discovery.”
The rise of new competitors is a given says Lux Research Analyst and co-author Jerrold Wang. Companies should focus on dealing with these challenges by rising to the occasion.
“The emergence of new competitors in the technology landscape is inevitable,” said Wang.
“Instead of focusing on the potential challenges brought about by China’s rise, attention should be directed toward 1) identifying opportunities to leverage these three key strategies, 2) capitalizing on China’s momentum catering to the country’s technology appetite, and 3) subsequently acquiring a share in China, with the second-largest economy and the highest industrial output in the world.”
China’s quest to become the world’s leading provider of advanced technologies and higher-value-added products and services has clearly grabbed the world’s attention – for better and worse, says Lux Research, adding that while geopolitical factors will play a critical role in determining China’s position on the global stage, its newfound position in the global innovation value chain, economic growth, and consumer demand is now well-established.
It goes on to say that companies “must embrace the new innovation world order and the China market, or risk severe financial consequences in the long term.”
Copycat nation reputation
The report summary notes China’s continuing battle to “fight its reputation as a copycat nation” saying:
“Despite some progress, the reputation remains, and hesitancy to bring research and development initiatives into the country is further amplified by a lack of proper IP protection laws, limited market access, and a sometimes unfair business environment. These claims are valid, but in order to fully tap into the opportunities in the China market, organizations must adapt to the rules of engagement – both official and unofficial – despite the additional difficulties that may present themselves.”
Lux Research additionally notes that “the new era of innovations spawning out of China is now ushering in a new phase of “Copy from China” in recent years, especially in the arena of consumer-facing digital technologies and services.”
Three Key Strategies: Harmony, Synergy & Discovery
According to the Lux Research report:
- Harmony embraces China’s strengths and position in established and maturing global value chains rather than trying to compete directly.
- Synergy collaborates with local innovators to reap the benefits of the strong innovation ecosystem fostered by government-led directives ranging from fundamental research to startup incubation to real-world applications.
- Discovery gains a firsthand look at the world’s most dynamic and demanding consumer market to adapt products, services, and business models to fast-paced local trends.
For more information, you can download the report’s executive summary here.
Featured image by Peng Liu via Pexels.
