Inventing ways
Updated: 2007-10-08 15:24
Back to inventions
After all, inventing has historically been China's forte. It's the country that gave the world gunpowder, paper and the compass. But in recent centuries, its inventions seem to have dried up.
Though more than two decades of rapid economic growth has considerably enhanced China's global in the world, it has only won the race to be the factory of the world. Since living up to such a reputation comes at the cost of substantial damage to the country's resources and environment, moving up the value chain has become a priority.
When the country embarked on the road of economic reforms, private companies competed with State-owned enterprises by leveraging their low costs and flexibility. But as the domestic market matures, such advantages may gradually disappear.
"They can no longer rely on low-price strategies because every enterprise in China is facing the challenge of rising costs of everything from labor to raw materials and land to electricity," says Bao Yujun, president of the All-China Society of Private Economy Research.
Another challenge is increasingly intensifying competition brought about by globalization, says Gao Xudong, with the Research Center for Technological Innovation of Tsinghua University.
"Today private enterprises not only have to compete with State-owned companies, but also with foreign companies," Gao says. "They are forced to find new ways. Being innovative is the best solution."
Goodbaby Group, China's largest baby stroller maker, 17 years ago was a loss-making school-run tool factory in Kunshan, a city less than an hour's drive from Shanghai. Today it controls nearly 80 percent of China's baby carriages market. Its baby carriages are so popular overseas that one out of every three strollers sold in the United States is a Goodbaby product.
The company now owns more than 2,300 patents in China and over 40 abroad. About 80 percent of its sales come from overseas market, of which the United States contributes half.
"When I was asked to take over the factory, the only thing we had was our own intelligence. research and development (R&D) innovation saved Goodbaby," says Song Zhenghuan, president of Goodbaby Group.
He used to be a mathematics teacher and deputy headmaster of the school that ran the factory. He began by making the old strollers at the factory, but realized that limited orders meant the factory would never be profitable. He then started to develop his own baby stroller during spare time. Finally he designed a stroller that could function as a cradle as well as a baby walker. That patent was sold for 40,000 yuan.
When Song developed the second patent, which some companies bid for at 140,000 yuan, Song decided not to sell his patents anymore and started to sell his own baby strollers. His company became a domestic market leader in less than three years.
Song is one of the many Chinese entrepreneurs who have achieved success by turning their inventions into money-spinners.
"Many Chinese private enterprises are born out of innovation," says Zhang Benzheng, managing vice-president of Beijing Non-governmental Science-Technology Entrepreneurs Association.
"Their only choice is to make something that State-owned companies do not produce and the market does not have, otherwise they can't survive," Zhang says.
Goodbaby's R&D center today hires about 180 designers and engineers, some of whom used to design aircraft landing gears. In the past 10 years, Song's company has made several "world's first" products.
For example, in 1999, Goodbaby developed a stroller that can be folded using just one hand without bending down. It was a huge success in the US and the idea was soon adopted by other US brands.
Song says he is personally "addicted" to the process of R&D. But more importantly, he believes "innovation is the lifeline of Goodbaby". While Song has delegated sales and marketing to his vice-president, he still directly controls the R&D center. "Goodbaby only manufactures products designed by itself," Song says.
An original equipment manufacturer's profit rate can, at most, reach 2 percent, according to Song. But for Goodbaby's high-end products sold abroad, the profit rate can reach as much as 50 percent. Last summer a Goodbaby stroller was sold at over 700 euros in Europe.
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