Cost Innovation and the Importance of the Global Mid-Markets

asiaNBC Video Interview

A discussion of the importance of cost innovation and of addressing the mid-market
opportunities in emerging markets.


I think that over time in the West, we have built up an attitude of saying that if it is to be affordable it’s got to be plain vanilla. I think in China the mindset is how do you get creative and do it at a reasonable price point… I look at the way that the Asian companies, and even the western companies that have learned how to do business effectively in Asia, what they’ve done is they’ve transformed into a mindset of how can I create something unique without necessarily putting it out of the reach of the average consumer… And frankly, I think that was where the West was. If I look to what we were able to do a hundred years ago in America or Europe over the course of many centuries, we were able to attack problems with an attitude of how do I find solutions that are economical, whereas recently we’ve walked our way into a mindset that says innovation can only come if people are willing to pay more for it.

If foreign brands can figure out how to get to that middle market it will do two things: One, it will be a platform that they can take to other emerging markets, and secondarily, and very important, it will make them more competitive in dealing with the wave of emerging Chinese competitors that – if you let get the middle and low segments – inevitably they will get better at doing that and they will eventually start to compete with you in your home market. It certainly happened with the Koreans and the Japanese, it will happen with China, it will happen with India. So multi national companies need to learn to compete head to head – not walk away from – with this emerging class of Chinese competitors who, backed by a strong government level policy support are getting better and better at moving their value chain capabilities away from just being low cost to being more innovative.

The mindset has to shift from one of attacking the market with features and content without necessarily budgeting in the extra cost associated with engineering a unique solution. And you could say that inherently puts you down the path towards imitative products. I think most will look at the Chinese industry and say, okay, the way the Chinese are able to save the development cost was by borrowing designs, copying designs… I’d say in China, it’s the way things are done. It’s don’t reinvent it, leverage what others have done and try to build something unique on top of it.
We don’t reward and recognize engineers for building on other’s ideas; we tend to reward them for doing something that no one has done before. And yeah, that’s a way to be innovative, but who is to say that innovation can’t stand on the shoulders of the giants that preceded you. There is definitely room for best practices as a platform to build up even more innovative products.

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