Can China Compete Against Nano-thinking?
January 31st, 2008 | by This is China! |
A group of Western engineers and I were sitting around Blue Marlin recently marveling at the low price of the new Indian car by Tata, a mere US$2,500. It’s called the Nano. “The Americans, the Japanese, they all said it couldn’t be done, getting a car to the twenty-five hundred point,” Fred said. Fred has been a team manager at a Suzhou manufacturer for nearly seven years, having recently taken the role of division director. “You know how they did it?” he asked us, techno-geeks all. We shook our heads, took another swallow of our beers.
“They don’t actually make cars; they manufacture the parts of the cars, then send the parts out to the distributors. When a customer wants to buy a car, the distributors themselves bolt the car together.”
I said, jokingly, “I would imagine the car would shake itself apart on the Indian roads.” I’ve not been to India, but understand road conditions - if not actually dirt - are just a step up from rutted, hardened mud.
“They use a modular-fastening technology proofed by NASA, Zeus fasteners, they call it. Turns out it was the fastest, easiest, most secure way to connect modules together on the space shuttle and space station.”
“Sort of like the IKEA fasteners to put your furniture together,” I said.
Fred said, “Yeah, sort of.” He continued, “Point is, this bit of innovation is going to change the way we think of the manufacturing process, turn it on its head.”
Just a couple days later I read an article in the January 10, 2008 edition of The Economist Magazine about the car and their R&D effort:
“Cheap cars can be expensive to invent. Tata experimented with a smaller engine, but was dissatisfied with its performance. It hoped to use continuous-variable transmission, but had to make do, for now, with manual.”
But what really interested me was the way Tata developers went about actually making a car that was usable by families that would otherwise be crammed on a motorcycle:
“Competitors will, for example, notice how Tata shrank the car into what its chairman calls a ‘concise package’, with the engine at the back and the wheels at the “extremities”. The result is 21% more space inside than the Maruti 800, says Ravi Kant, the managing director of Tata Motors, but it is 8% shorter.”
“Why don’t the Chinese come up with anything like that?” Mike asked. Mike is the new product development manager for an American company in Suzhou. He had been living and working in the area over ten years, one of the Originals.
I said, “The education system. The Indians had 350 years of British education system; the same sort of system that has helped them develop their IT- and Business Process Outsourcing businesses to be international brands. The Western system emphasizes experimentation and extrapolation, deductive reasoning versus inductive. The Chinese are still trapped by an education system thousands of years old, based in rote learning and regurgitating facts.
“And then you’ve got the Emperor syndrome: everyone’s an emperor in China - the father to the children, the boss to the department, the local government official in the town.”
Fred chimed in, “And you should see how the engineers in our [Suzhou] company treat others when the engineer has information from headquarters that no one else has. They act as though they have all the answers and no one can have anything to contribute.”
But lest we believe the Chinese will be long in developing an R&D mindset, consider the Chongqing manufacturing network for motorcycles. Chongqing, in south central China, is the motorcycle manufacturing center of the world. The Economist magazine in its October 11, 2007 survey on innovation wrote:
“Unlike state-run firms, the city’s private-sector upstarts, such as Longxin and Zongshen, do not have big foreign partners like Honda or Suzuki with deep pockets and proven designs. So they came up with a different business model, one that was simpler and more flexible. Instead of dictating every detail of the parts they want from their suppliers, the motorcycle-makers specify only the important features, like size and weight, and let outside designers improvise. This so-called ‘localised modularisation’ approach has been very successful and delivered big cost reductions and quality improvements, says John Seely Brown, an innovation expert who used to head the legendary Xerox PARC research centre.”
Still, China is a long way off from creating the kind of IBM-type think-tank model that Tata has clearly adopted in developing the Nano. For China, revolutions in fundamental institutions will have to first occur: a reformation in the education system; liberalization of capital markets to fund innovation of new ventures, not rennovation of State Owned Enterprises (SOEs); and the national government completely divesting itself of the flagship corporations it wants to have ply international trade waters.
Maybe a spin round the block in the Nano will be just what the Chinese leadership needs to motivate it to a new way of steering the country.
Bill Dodson
SUZHOU, China
2 Responses to “Can China Compete Against Nano-thinking?”
By Inst on Feb 24, 2008 | Reply
With regard to the innovation problem, one factor is time. China exists, relative to the rest of the world, in a weird time warp, where different processes proceed at different rates. Research and development, unfortunately, proceeds at about the same pace in China as it does in other countries. Business processes, on the other hand, move at an accelerated rate. So what’s happenning is that the time cost of an R and D project, relative to the business side, is higher than it is elsewhere. A research project that would normally take 4 years to yield results elsewhere, in China, would subjectively take 16 years.
By This is China! on Feb 25, 2008 | Reply
Inst;
I think you have hit on a fundamental insight into developing and doing business in China. Sull writes in his book Made in China on the same point: basically, in developing countries, companies do not have the luxury of the same R&D cycle times as they do in the West, with what he calls their “fortress” approach to planning. In China - as in South America or Southeast Asia - there is a greater need for just getting a product out into the marketplace. If it works in a few short months, great; if not, pull it and try again.
This points to a kind of Innovation that may grow up in China we’ve not seen before or eschewed awhile back in the West, perhaps based on the idea that “Small is Beautiful”. I do believe China’s challenge is more than it being a developing economy; it has for millenia had a mixed-up, highly changeable way of doing everyday things.