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Getting the Most from Your R&D in China

Getting the Most from Your R&D in China

Research and Development plays a vital role in the success of all companies, which is why companies are investing more and more in R & D. Similarly, many local Chinese companies are investing significant amount in local research and development to cater to the Chinese customers. In the past few years, companies have invested over $5 billion in R&D in the fast moving consumer product category. The rationale behind investing in R&D is compelling, China is a huge market and products that are in accordance with their taste, and income level and needs are surely to become a hit.

Chinese Companies Invest in R&D

So, what’s driving this rapid surge in Chinese innovation investment? The author sites the following three key reasons:

Need: There is a growing to tailor products and develop original ones that cater to local tastes, preferences, and income levels.
Potential: The research and development is highly motivated by the potential to tap into an enormous pool of low-cost engineering and design talent.
Opportunity: There exists an opportunity to build relationships with Chinese regulators that have a mandate to promote home-grown innovation.

Furthermore, since the products are tailored specifically for the Chinese market and are subject to easy approval from the regulators and hence are highly likely to make a bang.

How can R&D in China excel?

The success rate of R&D centers in China highly depends on factors including decision making authority and coordination. Some of the centers lack these two major characteristics which is why they aren’t successful and are faced with problems including high employee turnover ratio.

On the other hand, there are certain R&D centers that are filling their pockets quickly and filling product pipelines simultaneously. The employees of these centers are highly motivated as the decision authority is vested in them.

Unilever’s popular Hazeline moisturizing cream that instantly became a hit not only in China but in most of the Asian countries was a result of local research done in China. Gillette’s R&D center in China which is one of the two global research center of the company innovates and creates products that are not only sold in China but across the globe.

What are the characteristics of R&D winners?

One of the major success factors of a winner in the field of R&D in China is that they are very clear about the strategic goals as to what they wish to achieve in what time period. Certain R&D companies prefer to opt for a model in which they pick up global products make changes to them according to the Chinese market and sell them across the board. There are certain other companies who conduct end to end research and come up with an entirely new offering or the Chinese and/or the global market. We will discuss Coca Cola and Pepsi two major players in the Soda market and how their approach to R&D is different.

Coca Cola is an example of sheer innovation and product development. Minute Maid Pulpy Super Milky and Sprite Tea drinks were an instant hit in the Chinese as well as global markets. These products were a result of innovation research conducted at Shanghai. On the other hand we have Pepsi who like to localize, meaning they prefer to alter the taste as per the taste of the country they are operating in. Tropicana Guo Bin Fen was designed by Pepsi especially for the Chinese market, it is a blend of tropical citrus and melon which is perfectly in accordance with the Chinese taste and hence was an instant hit.

All the policies and procedures should be inclined and made in a way that they all contribute towards achievement of the strategic goals of the company. Hiring trained PHDs may not necessary help all the time, the focus should be whether the company is innovating or making minor modification to an existing product.

What should companies do to do well in Chinese market?

In order to thrive in the Chinese market, the strategy of winners is to make R&D teams with local innovation. By making locals part of the team, getting insights of the Chinese consumer becomes easier. Hence, the best option for companies is to partner with Chinese counterparts.

Though, at times, it gets difficult for multinational to do so because of factors including organization integration and cultural differences. However there are companies like Nestle who have collaborated with academic institutions to foster research.

Nestle collaborated with Jiao tong University in Xi’an to research on human metabolism. However, there are other companies who have opted for venture style funding arrangements.

Last, but not the least, Innovation is one of the most critical success factor in Chinese R&D. Challenging your people, most of the time managers have complains of lesser authority and monotonous work load and it surely decreases their productivity level. Hence, the better approach is to let them work independently on projects that they enjoy like Google does. And the result surely is innovative and hit products amongst the Chinese customer.

The above listed approaches will not only retain talent but will also help in generating bigger share through R&D centers in China.

Note: The preceding is a summary of an article found though our research, and is provided here with editorial comment for members only. Please see the full article at the following link for full original content http://blogs.hbr.org

The New Asia Innovation Team

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