Innovation and Incubation in China. Where The System is the Problem

Monday, May 21, 2012 0:20

Will China learn to innovate?

It is a question that has been discussed for a while, and was the topic of focus at the ISTA conference in Nanjing last week.

An organization that works to facilitate tech transfer developed in universities to the private sector, I was one of four panelists discussing different aspect of tech development and incubation in China. With my focus being on the market / business model side for tech development as in solving china’s largest issues of environment, economy, and society. the other three focused primarily on the role of university based incubators and of government funding.

Where the event was really interesting for me was that the conversation was largely focused on academia, and the role of academics, as part of this process.  How schools could more effectively engage students to be entrepreneurs was a big topic, as was, what to do with those students once they are engaged and have entered the incubator. Which is a very different angle than were it 30 industry executives. 

In the eyes of one administrator a few basic hurdles existed:
1) Students were often too ideological, and needed time/ support to develop ideas
2) Students lacked any real world experience
3) When entering the incubator, students lacked a technology (i.e. a product)
4) Students have no competitive advantage in the market place
5) Private sector funding of was difficult

To which the standard “solutions” were suggested:
1) Process needs more funding
2) Government needs to be more active in their investments
3) University incubators/ parks need to be closer to VC
4) subsidies (currently offered to students) should be increased/ extended.

So, students aren’t competitive and they just need more money. Anyone else but me see the problem?

It is a classic case of where the business model for innovation not being clear to anyone, particularly those who are looking to incubate the entrepreneurs who are supposed to be out “innovating”.

And when asked for my thoughts on the difference between East and West, and what lessons I thought China could learn from the outside, I offered two thoughts.
1) In china, the education system (incl first employers) have a job to educate students, and they do it well (as shown through international testing), while in the West we incubate”. Ahhh says the crowd. that the core problem is not one of intelligence, but creativity is punished through its education system as teachers are the sole providers of knowledge necessary to pass exams. Any questions, or variance of opinion, are strictly looked down upon. A poor foundation for developing creative talent in 22 year olds.

2) The Chinese believe that confidence is the critical barrier when it comes to engaging and incubating entrepreneurs, without realizing the reason for the void in confident. Which is to say that while Chinese students are looking for someone to tell them that they can succeed, the educators themselves should be primarily focused on equipping their pupils to succeed. It the different between telling someone they can jump from a bridge, and teaching someone how to B.A.S.E jump of the same bridge.

the first being an issue of common discussion, but the later being one that challenged a few of the tenants core to the existing system, and to the credit of to the participants who I am sure I offended most, they remained engaged. which shows that there is a genuine interest in changing the systems that are failing 85% of the time (a statistic offered by one leading incubator) into ones that will see success at a higher rate.

Success not judged by the number of students who enter the incubator, one of the current core KPIs, but into number of students whose business stabilize, employ, scale, and exit.

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5 Responses to “Innovation and Incubation in China. Where The System is the Problem”

  1. asdf says:

    May 21st, 2012 at 1:32 pm

    I think most of the talk in the west about Chinese invention and innovation misses the 800lb gorilla in the room. 1) China is still developing, and relatively poor. The Chinese are more inclined to pursue less risky paths given most of them still have first or second hand memory of how poor they were just a few decades ago. I think innovation will come by itself as the children of each subsequently wealthier generation feel more confident with their situation and have the support to take riskier endeavors. 2) China is still playing catch up in many areas, and it would be foolish to try to take the expensive/risky path of creating something new when you can simply copy something you know already works somewhere else.

  2. Innovation Development : China Business Leadership Blog says:

    May 21st, 2012 at 9:59 pm

    […] All Roads to China has a post up called Innovation and Incubation in China – The System is the Problem […]

  3. Jay Boyle says:

    May 22nd, 2012 at 7:34 am

    85% failure rate in the first year is not any different then most start-ups. Not sure about incubators.

    Also money is usually the wrong medicine for start-ups. Often money precludes creativity.

  4. Chuck says:

    May 22nd, 2012 at 11:00 am

    I would add another inhibitor to Chinese innovation: a lack of trust. When I worked for a Chinese manufacturer, lower level employees were kept in the dark about the products’ specifications. Salesmen were told as little as possible and factory workers were not rotated along the line, seemingly to prevent them from learning how to make the whole machine. When I inquired about such things as the nomenclature of the steel or gearing ratios to determine how I could differentiate my employer’s products from competitors’, the question was evaded or, if I was persistent, told “It’s a secret.” And from what I could tell, engineers were hired not so much due to talent but because they could be trusted (i.e. guanxi). Management seemed in perpetual fear of someone defecting, then copying the product to become a competitor.

    And in fact that is what could be seen throughout the industry. A majority of the Chinese machines were indistinguishable. You could almost trace the source of the original, a nondescript town with over a dozen companies selling the same machines (down to the paint color). From there it was copied elsewhere in the province, then moved out to neighboring provinces.

    I suspect that for China to become a serious innovator there would have to be more trust and collaboration within organizations, or perhaps better enforcement of intellectual property rights.

  5. Chris Devonshire-Ellis says:

    May 23rd, 2012 at 8:22 pm

    Interesting article. I think one of the main problems is that China has politicized it’s academic and commercial organizations to such a high degree it is difficult to learn how to run a business without taking into account dealing / involving local officials and policy. It has, I believe, the effect of a glass ceiling for erstwhile Chinese executives and nullifies entrepreneurial skills. And once you do that, innovation starts to decrease. I compare in this regard to India, where there appears to me at least, far more openess and free discussion about innovation and freedom to do that, China by contrast everyone seems looking over their shoulder.