Innovation and Standardization in China

The study examines defining characteristics of the evolving Chinese innovation and standards system and explores possible impacts for China as well as the global economy. China considers standardization to be an essential tool for improving its innovative capacity, yet very little is known about this critical building block of China’s innovation system.

Source: Indigenous Innovation and Globalization: The Challenge for China’s Standardization Strategy | East-West Center | www.eastwestcenter.org

China’s Big Data Play

Big Data: Transforming the Design Philosophy of the Future Internet,”
Hao Yin, Yong Jiang, Chuong Lin, Yan Luo, and Yunjie Liu, 
IEEE Network,
July/August 2014 pp 14-19

For proof of how the tendrils of Chinese policy reach into science, five Chinese engineers offer their view of the current design of China’s Internet in this paper from IEEE Network. Most of the discussion is highly technical in nature, but one issue that cropped up is the paper’s complaint how “vendor lock-in” has made the current cost structure of the Internet far too high to be sustainable – a complaint that is surprising given the pervasiveness of the Internet in China, and how hardware and networking costs have been plunging for two decades.

There is more than a bit of politics in this. The study was co-funded by the Chinese government via the Ministry of Science and Technology’s National Basic Research Foundation of China, also known as Project 973 (because of its creation in March 1997), the National Natural Science Foundation of China (directly administered by the State Council), and Intel Corporation. The complaint about “vendor lock-in” is clearly aimed as a broadside against Intel, though in consideration of its role in the study, the authors clearly felt it impolitic to name names.

There is likely much more in the way of technical nationalism to be found in this paper, but this example is sufficient to underscore how China is content to infuse (i.e., taint) scientific research with politics and posturing. That the paper was accepted for publication by the IEEE should not exonerate the authors for their posturing, however well-couched.

If China doesn’t like paying Intel prices only to see the cash flow overseas, Intel’s substantial local investments notwithstanding, that is the right of the nation’s leaders. Injecting what appears to be a political snipe into a scientific paper, however, gives comfort to those who would discount legitimate Chinese research for fear of political considerations that would turn the science into junk.

China’s Cloud

We have made the point often and publicly that China wants to create its own, separate cloud for both commercial and security reasons. The United States – China Economic and Security Review Commission gets that, and commissioned Defense Group, Inc. to study why China is creating its own cloud and how it is doing it. The result is Red Cloud Rising: Cloud Computing in China. Much to my personal pleasure, the study vindicates my point of view, but it goes further, assessing the impacts to US security and the economy, and making recommendations as to what th US needs to do about it. As with many such efforts, it is not a casual read, but a scan of the text offers interesting nuggets aplenty.

Finding Innovation in Dark Corners

“Global Technology Sourcing in China’s Integrated Circuit Design Industry: A Conceptual Framework and Preliminary Findings”
Dieter Ernst and Barry Naughton
East-West Center
August 2012

For nearly a decade, Chinese policy-makers have been on a seemingly Quixotic quest to turn the nation’s low-cost manufacturers into innovation-driven firms. The question that has plagued that effort from the start is whether Beijing’s “indigenous innovation” drive isn’t just a form of techno-protectionism, and if not, whether and how policy might actually aid in the emergence of world-class innovative firms.

That question remains largely unanswered, but Dieter Ernst and Berry Naughton have gone looking for answers in China’s integrated circuit design business. What the paper reveals is an example of how innovation is taking place outside the purview of government industrial policy, calling into question the value of centrally-driven strategic emerging industries.

A growing body of evidence suggests that the ship of state capitalism will founder on the rocks of innovation. The emergence of the new and the novel from overlooked quarters offers a reminder of the agrarian entrepreneurialim that emerged in 1980s China when Deng Xiaoping simply lifted the heavy hand of central planning. Ernst and Naughton’s study seems to points the nation toward a more productive approach to industrial innovation, yet one that would sorely test the natural interventionist urge of Party aparatchiks.

Indigenous Innovation and Globalization

Is China’s Indigenous Innovation Strategy Compatible with Globalization? by Liu Xielin and Cheng Peng; Honolulu:  East-West Center, 2011.

Much ink has been spilled over the correct path to turn China from the world’s contract manufacturer into an innovator on a par with the United States. Indeed, there are those who suggest that such an evolution is probably impossible given the straightjacket of Chinese culture.

As tempting as it is to go with the skeptics, there is mounting evidence that Chinese can and do innovate, and that innovation can happen with the backing of the government. (If you disagree, it would be worthwhile to review the funding source for many of America’s storied postwar innovations: if you follow the money, you wind up on Capitol Hill or the Pentagon as often as Wall Street or Sand Hill Road.)

The authors of this short book, Liu Xielin and Peng Cheng, argue that China is indeed beginning to innovate in part because the government is underwriting China’s effort to close the technical gap between its enterprises and engineers and those of the west. If they stopped there, it would be easy to dismiss both as government stooges.

They are not: once they have acknowledged the merit of government involvement, they then assess its limitations. Specifically, they note that in addition to putting China into policy conflict with nations that should be customers for Chinese innovations, government involvement (read “micromanagement”) of the innovation process closes it off from the overseas markets that are the real target of the indigenous innovation policy in the first place.

Turning China into an innovation powerhouse is neither a matter of letting markets do their thing, nor of government control: it is a matter of striking a careful balance between the two. Ascribing the best possible motives to China’s policymakers, the Party and government are looking for the best way to strike that balance. But old habits die hard: the received myth in Beijing is that the government that has brought a half-dozen major industries to near-parity with their global counterparts through vigorous funding and protective policies. Why, then, should things be done differently going forward?

Liu and Cheng do an admirable job at answering that challenge, but the problem is in the received myth. China’s homegrown industries succeed in the marketplace (both at abroad and at home) in inverse proportion to government involvement, not as its result. It is only when the government alters the rules of the market that local companies in innovative industries achieve success. Such heresy may be too dangerous for the authors: Liu is at the Chinese Academy of Sciences; Cheng at the Beijing University of Forestry. Nonetheless, their analysis hints in the right direction, and hopefully their thinking will enter the political discussion in Beijing.

The Tao of Bill, the Te of Dave

Bill & Dave: How Hewlett and Packard Built The World’s Greatest Company
by Michael S. Malone
Portfolio, 438pp

Cognizant that saying this may well sound ungracious, if not heretical, the recent well-deserved paeans to Steve Jobs tactfully omit the fact that in all he accomplished, he stood on the shoulders of giants. This is not to belittle what he accomplished. He created one industry, disrupted several others, created products that inspired the fierce loyalty of millions of consumers (myself included), and set in motion careers, companies, and trends that will define the foreseeable future. But Steve Jobs did not spontaneously self-generate. Everything he became, everything he accomplished, he was able to do because other men and women had passed that way before. The Apple II, the Macintosh, NEXT, Pixar, OS X, the iPod, the iPhone, the iPad, and iTunes were his products.

But Jobs himself was the product of Silicon Valley: the place, the ecosystem, and the attitudes that combined to give this powerful, unique, and ultimately fragile wizard the place to create electronic magic.

As supporting evidence for my heresy I offer Michael Malone’s engaging biography of the founders of Hewlett-Packard, Bill & Dave: How Hewlett and Packard Built the World’s Greatest Company. It is hard for most of us to recall the days when HP was the glowing heart of Silicon Valley, especially as the latest in a long string of outsiders attempts to save the company from the consequences of misguided leadership. But in telling the story of the two proto-geeks-cum-billionaires, Malone reminds us why Hewlett and Packard deserve to stand above the Silicon Valley milieu as both icons and role models.

To be sure, the environs south of San Francisco have been engineering hotbeds since just after Governor and Mrs. Leland Stanford turned their Palo Alto farm into a college. Stanford Professor Fred Terman and entrepreneurs like Charlie Litton and Ed Varian were the early shoots of the Valley’s transmogrification into the global capital of electronic engineering. But Malone’s narrative suggests that the Valley’s destiny was no given: the region was such a backwater when Bill and Dave graduated from Stanford in the mid ’30s that there was no company in the region capable of hiring either of the talented young engineers: Packard went to work for GE in its test lab Schenectady, New York, and Hewlett, a year behind, stayed in Stanford to work with his mentor Terman. The only way for the two men to get a job that suited them was to start a company. But when they did, right on the eve of World War II, established an enterprise that brought to the region and to the industry an ethos that mixed engineering talent, opportunistic flexibility, and Depression-tempered business sense. That ethos, suggests Malone, was the fertilizer that allowed Silicon Valley as we know it to take root.

After a time as a freelance electrical engineering firm, the two men produced their 1st unique product: an audio oscillator, a product that seems prosaic now but at the time was a revelation: the men had figured out a way to use an overlooked principle of electronics to create a device that cost a tenth of the competition’s product, and was easier to use to boot. The result, the Hewlett-Packard 200A Audio Oscillator, not only set the company on its path, it also set the mold for the way the company would do business for the next five decades: tinker, innovate, disrupt, reap, repeat. In the process, Hewlett and Packard established a legacy that the young Turks of the PC revolution could only envy.

For those younger entrepreneurs…many had already failed at least once. And all of that combined to make their respect for Hewlett and Packard ever greater. Those two guys, they realized, had not only already negotiated every step of the career path they intended to follow, often doing so first, but they had done so with breathtaking grace…Even in the virulently competitive world of high technology, even as people measured their own careers against those of Hewlett and Packard, many privately admitted that matching Bill and Dave was beyond their reach. No amount of revenue or percentage of market share would ever match a company that had invented a dozen entirely new industries; no amount of laudatory BusinessWeek cover stories would ever match a company whose employees set historic records for loyalty and commitment’ and no number of trips to Washington would ever equal having a medal for quality named after you.

What is more, Hewlett and Packard had created a series of business innovations that altered forever the world of work. Flex-time, coffee breaks, casual Fridays, beer and pizza busts, open plan offices, profit-sharing, flattened organizational charts, managing-by-walking-around, and the open-door policy are but a few of the practices that HP’s founders created, championed, or popularized. Then they crafted all of these into a form of enlightened management that reinvented work for much of the developed world, and turned conventional labor-management relations on its ear.

Malone began his career as a public relations guy for Hewlett-Packard, which is perhaps why he treads lightly on the shortcomings of HP’s founders. He skims past allegations of Packard’s marital infidelities, soft-pedals HP’s defense work, and lamely excuses HP’s failure to start the personal computer revolution by suggesting that the company was “just too busy” when Steve Wozniak presented his Apple I computer to HP management. These and other tells leave Malone open to accusations of hagiography.

One could argue in Malone’s defense that his treatment of Hewlett and Packard is far less breathless than the fawning prose that too often passes for business journalism. In an age when men of commerce with far less impressive legacies than HP’s founders are lionized and deified by the business-as-a-spectator-sport crowd, Malone’s tribute to his idols is perhaps a measured effort to restore some perspective.

Which brings us back to Mr. Jobs.

A friend and I were lunching in these willow-shaded precincts last week, shivering slightly as the Beijing fall worked its way into our bones. The topic turned to Walter Isaacson’s biography of the late Apple CEO, and my friend asked if I would be reading it. “No,” I replied, “but not because I’m not interested.”

For an aspiring historian, Isaacson’s study has come out a decade or more too soon. I was a teenager when Apple was born, and I grew up watching Steve Jobs, so I don’t need a rehash of his remarkable life or career. What I want to know is whether history will treat him like a Morgan, Edison, Westinghouse, Pullman, Ford, or Watson; or whether, perhaps, he was a transitional figure setting the stage for someone or something even greater.

As for me I believe the former. But as Bill & Dave illustrates, our importance to history, to the bigger picture, is not always what we think it is at the time.