1、1Analysis on Chinas Product Innovation Management JIANG Jiquan1. General introduction of the product innovation A. The proposal of the product innovation management The purpose of the product innovation and development is to cut down cost and to increase the speed. But the problem is that how to cor
2、rectly foresee the market demand and improve the product R while those who are planning to surpass others in the same industry nationally is 9.0%, as for other who want to exceed those in the same industry globally accounts for 2.7%. b. Single innovation pattern: Nowadays, Chinese enterprises origin
3、ate creative ideas from other companies and research institutions. But compared with the foreign companies, our domestic companies are not willing to cooperate with those abroad. Most of them are still adapt the seal management innovation pattern. They concentrate on their internal resource but do n
4、ot use the external knowledge and resources to cooperate with others. c. Expenditure structure imbalance: what china facing now is the innovation expenditure structure is not reasonable. They invest more on the fixed assets and spend half of the money on machinery equipment. As for intellectual prop
5、erty rights, brand building and corporate culture and other intangible assets are really small. d. Innovation grade is very basic: Between the year 2004 to 2006, from the research of product innovation in large industry enterprises and from the creative point, the brand new products only accounts fo
6、r 17.4% in world market and 60% in domestic market. But in the new product sales volume, it accounts for 46.5%. The percentage it occupies in domestic market is 40.1%, while in the international market, there is only 13.4% for it. e. The innovation result is not satisfactory: from some extent, paten
7、t can be regarded as product innovation out-put. In licensed patent, the structure of the three categories is not very reasonable. The high-end innovation paten is only a small proposition. f. Inefficient innovation benefit: Chinas product innovation success rate only 60% verses other multinational
8、companies. The 20% success rate shows that we are not doing well in the product innovation, especially the state-owned enterprises. The percentage of the new product that successfully launched is only 5%, 20% of them are not quite good and has not reached the companys expectation. While most of them
9、 are just like a flash in the pan. 2. Product innovation management environment and its influence factor 2.1 Macro-environment for product innovation management 4With the fast development of technology, the cycle of new knowledge, new technology, new invention become shorter and shorter. As the comp
10、etition is gradually fierce, the upgrading of products is developing in a unprecedented speed and scale. According to statistics, in America, the machinery products upgrade every twenty years; electronic products at ten years interval; aerospace products upgrade one cycle and a half every ten years.
11、 That is where the Moores law, Davidows Law and sashimi theory are come from. a. Chinese products are low value added. In world market, the products that labeled Made in China are mostly with poor quality even they have got certain license. So Chinese enterprises only share a really small profit. b.
12、 The main reason for this are poor quality,low-technology and low value added. Made in China just locates in the low end in the global market, c. Multi national companies pose threat: The multi national companies take advantage of their advanced technology. They adapt many methods: make much profit
13、by developing new products; sell core technology at a high price; postpone the selling of core technology or drive the price down when the local companies try to research core technology. Then the local companies have to sell their technology at a too much low price which cannot even afford their re
14、search investment. 2.2 Micro-environment for product innovation management In recent years, with the great change of product innovation external environment and practical demand, Micro-environment for product innovation management also changes correspondingly. Transformation from a single object inn
15、ovation to a innovation integrated. Product innovation management objects expansion is displayed in three aspects: first, product concept has transformed from traditional tangible product to intangible product, from simple product to complicated product and there are also some integrated products. S
16、econd, turn the innovation focus from product quality to cost and product function with the influence of pursuing high end products in this era of personality. Third, function innovation focus transformed from superficial layout innovation to core function innovation and service integrated with func
17、tion innovation. Innovation methods transformation, from scattering to systematization: in recent years, innovation methods have improved from scattered ones to more systemic new methods. Scattered methods 5include: associative thinking, combining thinking, designing and logic thinking, and super th
18、inking. They make the product innovation really mysterious and hard to get. Innovation tools, transformed from traditional ones to digital tools: digital technology plays a supportive role in the innovation process. Since the middle of 1990s, network technique, information technology, computer aided
19、 technology CAT, database technology, and other digital technique have developed so fast which makes it possible to adapt digital technique to product innovation. Thus we can mitigate risks of traditional methods by using digital technique in each step. 3. Factors that influence the product innovati
20、on management We generally believe that product innovation frequently occurs by a strong actor who knows the market and technology. For this reason, the market leader has a stronger position to make an innovative product because of its marketing and technological competence to know market needs and
21、technology seeds. But what kind of product inhibits product innovation. In this mature stage, all the companies recognize the research target for the existing innovative product since market needs and technology seeds are commonly shared among all firms. By analyzing the characteristics of the behav
22、ior of the companies for product change, it is demonstrated how strongly an existing product inhibits product change when a new product has a differentiated point and will create a new market. In conclusion, product innovation to create a new market by differentiation is inhibited by strongly existi
23、ng products and the market knowledge that is acquired to gain or accumulate the expertise through marketing the existing product. We have shown the existence of a paradox between product strength in a market and product innovation by new technology.Superficially, there are some certain macro factors
24、 that block the product innovation in China. The most common ones are lack of appropriate talent, intellectual property protection is not qualified, and lack of new ideas and the transformation mechanism from research institutions to enterprise use is not efficient. However, the main reason is no st
25、andardized management and systematic thinking of product innovation. The following facts can justify this: A. Scientific programming: scientific programming is the key factor that influences the product innovation. In reality, product innovation is just a tool that the company fights with other 6com
26、petitors. If the company has not take a overall look at the risk, cost, cycle, resource of the innovation, the product innovation will either fail or stop half way. What even worse is no positive respond to when the product come into the market. This will lead to much valuable resources waste and pu
27、t the product innovation in a more terrible situation. B. Effective management methods: during the product innovation process, standardized management is helpful for the smooth going of this process. Domestic companies have aware the importance of improving management methods and enhancing innovatio
28、n benefit. But still lacks system management among research structure, technology, and project management. This makes many excellent projects cannot put in practice. There are also many defects in the process, take ambiguous responsibilities for example. Many enterprises lack of standardized procedu
29、re for product development. Even though some of them have set the procedure, there are no departments support them. For example, lacks of appropriate product innovation management procedure and the selection, experiment, investment have no clear goal. C. Human resource: domestic companies suffer fro
30、m a shortage of talents who are experienced, creative and can contribute to the product innovation; the corporate culture is not supportive for innovation and the innovation potential of employee is restricted; cross-department communication is mostly just a kind of formality. The R success rate has
31、 improved from 35% in 2000 to 70%; but the in-put percentage in sales revenue has dropped from 4.5% to 3.4%. Then compare with its main competitors, Unilever and Colgate, what the results like? Please see the chart below: Proportion of Innovation in sales revenueThe conduct of external product innov
32、ation strategy not only saved the decreasing P&G, but also brought a new strength to it, which made P&G more competitive. Compare with its main competitors, Unilever and Colgate, P&Gs profit growth is far ahead of them, as we can see from the figure below: Proportion YearPurple: P&GRed: UnileverYell
33、ow: Colgate9Profit comparison The success of external product innovation strategy has brought P&G much strength. When to balance the internal and external product innovation, the relevant product innovation management mechanism is really important. In summary, the great success of P&G lies in intern
34、al and external product innovation strategy, under the effective supervision of innovation management mechanism. As we mentioned above, on one hand, Chinese companies have to dig deep into our potential. We can achieve this by creating the innovation atmosphere in the company, start an invation deve
35、lopment group, so as to motivate some quick minded and creative staff to participate. On the other, amply reward the R&D staff and even those who contribute great ideas, and thus the corporate culture is built. The company has to establish relationship with some universities and research institution
36、s, cooperate with them actively. External innovation and combine learning with production and research is also of great importance. Reference:1. Merle Crawford, New Product Management, China Renmin University Press, 2005 2. Schumpeter, The Theory of Economic Development, Beijing The Commercial Press, 1990：73Revenue (unit: $10 million)Year13. Xu QingRui, R &D Management, Beijing, Higher Education Press, 1986
