Organisations must capitalise on China’s innovations

31st August 2020
Alex Lynn

China’s emergence as a global innovation powerhouse has proven to be a double-edged sword for global companies – presenting challenges as China seeks to make its companies more competitive in the international market while also bringing historic opportunities for the technology ecosystem.

The Lux Research report ‘Beyond Made in China 2025: China’s Move up the Global Innovation Value Chain’ analyses the key innovators poised to take a global leading position across 10 key industries in 2025 and beyond.

Lux Research Senior Analyst and co-author Yuan-Sheng Yu said: “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 (see the market map), 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 rising competition.

“These concerns are only realistic in the sense that it is human (and organisational) nature to have such feelings, but misplaced as they pertain to the sense that Chinese technologies will one day blanket the world.”

The swift 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. With the world on the brink of the next technological revolution, there is growing discourse about what the global implications might be if China were to win the technology race.

Rather than focusing on the potential threats, Lux Research recommends that companies work to capitalise on the growing opportunities associated with China’s innovation rise through three key strategies – harmony, synergy, and discovery. 

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. 

“The emergence of new competitors in the technology landscape is inevitable,” added Lux Research Analyst and Co-author Jerrold 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) capitalising 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. 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 are well-established.

Companies must embrace the new innovation world order and the China market, or risk severe financial consequences in the long term. 

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