Media reports these days are pretty rosy about the arriving of manufacturing India on global scenario. Tata’s Nano at recent Auto Expo 2008 has raised the hope bar. The special report ‘Made in India’ in Sunday Times of India tracks the rise of the label. “From cars to tractors, refrigerators to laptops, made-and-designed-in-India is becoming a sought after label.” The other day my friend was enthusiastically mentioning the reported preference of Indian goods by the Americans. Chiidanand Rajghatta and many are reporting the wonderful work done by the NRI. How tall can be the claim of ‘NRI brains power world’? I request my readers to go to the entries and read it. Somehow I am of an opinion that India must undergo an overhaul of mindsets about the need of manufacturing to survive and compete. It must not be limited to some few big and small industry leaders and some government institutions. The government, trade associations, engineering colleges must encourage the talents in design and innovations. Schools of management must study how can India become a manufacturing power. The Chinese manufacturers are to be the examples for India. It is interesting to understand how China has moved from low-end manufacturing to high-end too and today is dominating and challenging even Korea and Japan.
Everyone connected and concerned with manufacturing in India must read, understand, and help India learn from the real revolutionary stories of the manufacturing companies of China and the way its cost innovation is disrupting global competition.
I am going through ‘Dragons at your door’ written by Ming Zeng, Professor of Strategy at Cheung Kong Graduate School of Business, Beijing and Peter J. Williamson, Professor of International Management and Asian Business at the INSEAD business school in Fontainebleau and Singapore, that Harvard Business School Press has published. It answers many pertinent questions with the stories of many Chinese companies.
How do the emerging Chinese companies, with limited resources and often little experience, pull off the cost innovation feat?
The Chinese companies are delivering high technology at low cost by leveraging cheap R&D resources; betting on low-cost, alternative technologies; and using the rise of open architecture to blow apart competitors’ high-margin, proprietary systems.
Dawning makes high-performance computers (HPCs), and has become one of the world leaders. It produced its first supercomputer by improving the capability for the processors to work together and then made a technological advance in the hardware and software required to get standard processors to work together at super fast speeds. And today it has transferred some of its supercomputer technologies to bring the benefits of HPCs to the low-end server market.
Zhongxing Medical developed direct digital radiography (DDR) X-ray machine based on line-scanning technology that cost around $20,000 to build, compared with between $ 150,000 to $200,000 for a flat panel DDR. That was more than adequate for the high-volume, every day radiography needs in a hospital, such as chest scans and routine medical examinations. The company then invested heavily in R&D to upgrade the performance of its line-scanning technology. Today its much cheaper machines are almost matching the expensive flat panel products of the competition (for example, the scanning time has been reduced from ten seconds to about two seconds and thus the procedure is much more comfortable for patients).
Teknova is another leading manufacturer of the medical diagnostic equipment and created an all-digital machine for ultrasound scanning using open architecture so that data produced by its digital ultrasound machines could be processed by standard IT equipment that most hospitals already had. Neusoft had used a similar approach in magnetic response imaging (MRI) equipment and digital X-ray machines to become the seventh largest supplier of medical equipment in the world.
The Chinese companies are today able to offer to customers massive variety and choice at mass-market prices through a focus on process innovation and recombination of existing technologies. A good example is BYD, the maker of rechargeable batteries, now second only to Sanyo in global market share. BYD developed its own Ni Cad production line by breaking the automated production processes down and replacing expensive machines with manual procedures that could be completed by ordinary workers. Even with extra workers, BYD could produce a Ni Cad battery for a total cost of $1, compared with cost of $5 to $6 incurred by rivals in Japan. Chint, a maker of electrical equipment such as transformers and power supply units has also achieved a similar cost innovation for achieving variety at low cost.
Haier innovated a high performance washing machine by combining the advantages of the existing machines that were in use in Asia, Europe and US: European machines used less water. American ones were usually faster, and the Asian models generally made better use of electronic sensors. The newly developed Haier machine used only half the water of conventional machines and close to 50% improvement in cleaning power at twice the speed. Additionally, it also reduced the wear and tear on garments by 60%.
The Chinese companies are applying scale intensive technology to specialty products, transforming these businesses by dramatically reducing the costs and prices and hence increasing volumes. Shinco developed its own VCD system from scratch to enable consumer to get quality viewing even from poorly duplicated pirated disks. Shinco then designed and developed its own DVD player and launched in 1999 with superior error correction that cost $129 less than its nearest global competitor. Today Shinco sells more portable DVD players than any other company in the world.
While reading ‘Dragon at your door’, I feel the Chinese way must get the same or more attention in our business schools and industry as once the Japanese way of manufacturing was getting.
Let Indian manufacturers learn from these stories. India has all that is required to be the leader in manufacturing. The number of the missionary leaders in manufacturing segments must grow fast.