Is the Age of 'Indovation' and 'Chinovation' Becoming Real?

What are the threats to established global companies?

by Idris Mootee

Is the Age of Indovation and Chinovation Becoming Real?‘The age of ‘Indovation’ dawns’ – this headline from Financial Times caught my attention while I was sitting on a plane flying out of New Jersey. It is an interesting article about Armin Bruck, managing director of Siemens in India, trying to convince the board of the Siemens of the potential of Indian innovation. He gave them the keys to a Tata Nano to convey the “smell and feel” of a revolutionary mass market product and to persuade his company that it should improve its pipeline of local inventions aimed at Indian consumers.

So, in February, Peter Löscher, the company’s chief executive, and his colleagues Heinrich Heisinger and Joe Kaeser piled into the world’s cheapest car – priced at $2,000 – and drove round New Delhi. I think the same can be said about ‘Chinovation’. Innovation from emerging economies will change the dynamics of global competition and forces every company to rethink or reconfigure their strategy for developing its high-quality technology for low-cost emerging markets. Good quality and low cost products with advance technology will becoming an important battlefield between global companies and local companies in India and China.

FT reported that after three months of that February visit, Siemens had declared publicly its intention to develop more than 80 “base level” products – targeted at financially constrained mass markets – with an investment of €3bn in India, China, Russia and Brazil over the next 3 years. Siemens expects to raise its order book 10-fold in India from these redesigned products during the next decade to €1bn a year. It also foresees double-digit profitability from the low-cost, high-quality strategy – what in India is called “frugal engineering”.

China understands the accelerating competition and the need to develop high value add industries, China is actively transforming itself from a low-cost manufacturer to global innovation test bed. The manufacturing base big domestic market give them a competitive advantage, but China’s companies still face tough challenges in their quest to move up the global value chain, and they still have come a long way, fast.

In short, Chinese companies don’t understand ‘innovation’, let alone innovating beyond manufacturing. The idea of a ‘customer’ is still pretty foreign to Chinese companies and to understand how to embed empathy and user needs to help innovation is a long way away, because of cultural differences as well as business management mind set. China today does not have the talent base for design and at the corporate level, developing leadership skills is vital to close that gaps, and at the same time attuned to the end user will open vast new opportunities for consumer-centric innovation. It is at least 10 years away.

The concept of creative industries (happening in Shanghai and Beijing but not much outside these two big cities) in the context of China raises important issues, they have been trying to develop the creative industries with Chinese characteristics, but there are plenty to be done on intellectual property and copyright protection, design education, regional and enterprise development, consumer activism, and the fundamental tensions within the creative industries between individual design creativity and industrial scale. Only if the barriers are crossed otherwise the creative industries will no more than just fringes.
But the trend is unstoppable and it is a serious threat for those companies in the west such as the Siemens or GEs of the world. Siemens understands the threat and is acting fast.

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Idris MooteeIdris Mootee is the CEO of idea couture, a strategic innovation and experience design firm. He is the author of four books, tens of published articles, and a frequent speaker at business conferences and executive retreats.

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Idris Mootee




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No Comments

  1. Sam on June 27, 2010 at 1:13 am

    While the world is looking at TATA Nano as “Indovation” , I think TATA is struggling to sell the vehicle at the promised Rs 1 Lakh price tag, probably they are losing money on Nano at this price.

    Everything finally boil down to price to cusotmer , the lower the better. The lower price results in thin margins and requires huge volumes to sustain. The Nano concept is perfect except for the fact that the huge volumes need to come from upgrading the existing 2 Wheelers , which is 10 million + market. The average price of a 2Wheeler will be in the range of 50000 and nano is double that at the lowest variant. Tata selling only about 30000 nos in a year is also a concern, citing manufacturing/political problems.

    Chinovation is nothing but low cost manufacturing and there is no innovation

    However, the new terms like Indovation, frugal engineering, safe shortcuts etc need to be studied in detail as regards their impact on quality and safety before jumping in to the bandswagon !

  2. Vijai Krishnamurthy on June 30, 2010 at 12:12 am

    @Sam – Want to create a viewpoint on Indovation, here is just 3 examples. It is more than just products !

    Indovation is not about whether TATA managed to get the promised price-point for TATA Nano. It is about daring to challenge the auto industry to “innvoate” to cater to mid-income population. This is about creating an opporutunity to fulfill the aspiration of a huge population. It changed the way people think. If I can buy a car for 1Lakh, I can as well push myself to buy a 2Lakh or a 3Lakh car.

    Indovation is about Deccan Airlines making air-travel affordable to the masses (tickets were priced as low as $22/Rs1000). Yes due to shooting fule prices and the global recession this could not be sustained, but what Capt. Gopinath (ex-CEO of Deccan) managed to create was a populace which could realise the aspriation of travelling by air which otherwise was not possible even 5 yrs ago. This has pushed that whole populace up by a notch giving them the confidence of carrying their businees with more efficiency. Now the same populace doesn’t mind paying more money for air-travel.

    Indovation is about Chetan Maini creating India’s (probably world’s only commercially successful) first electric car “Reva”. The car itself might look like nothing more than a covered golf cart, but what it has done is made the mid-income population in India to be proud of environment sustainability. They can now dream of upgrading to the next class of living, without having the guilt of harming the environment !

    It is about “continuous innovation” in challenging norms, uplifting an entire populace to aspire for the next “class” of living. This has created an unstoppable chain reaction in India not just in product innovation but innovation in every aspect of life ! The west can either fence-sit or be part of it, but the chain reaction continues !

  3. Lisa on July 29, 2010 at 3:21 am

    I’m skeptical of your ability to recognize the talent an innovation that is developing like wild fire in many areas of China (not just Beijing and Shanghai)

    When visiting the industrial/high-tech zone in any of China’s major cities (chengdu, shenzhen etc) one would be immediately astounded at the innovative and dynamic spirit that is driving China to the front of the line. Production aside (since now over 1/3 of all electronics are produced in China) the Chinese are brilliantly pushing innovation to new levels.

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