To cite two examples, at the Siemens Innovation Summit in Suzhou in September 2017, Siemens announced that Siemens China will lead the global R&D of its Autonomous Robotics. As it is well known, China is the largest robot market in the world, but beyond the absolute market size it also presents the complexity and diversity that other countries lack. Traditionally, industrial robots are mainly applied to the automotive industry.
In China, however, the demand for robots is rapidly expanding into various fields such as home appliances, food and beverage, medical treatment, etc., and robots in these areas are smaller in size and require better sensor technology, more flexible man-machine collaboration and higher reliability. In addition, there are different requirements for the automation of production lines. R&D based on the characteristics of China market will
help Siemens to transfer the innovation from China to the global market to serve its global business growth.
Another case is Volkswagen Group who unveiled its Asia Future Center in January 2018, positioning itself not as a regular R&D center but rather as an innovation think tank, a forward-looking research center and a concept research center. The reason why Volkswagen make such strategic decisions is mainly because of the disruptive evolution of the on-demand mobility market in China over the past few years and the rapid development in such areas as connected, shared, autonomous and electric technologies, which urge Volkswagen to be rooted in China, to explore the future of its transformation as a traditional automotive manufacturer.
From the investment perspective, some MNCs are investing in traditional and emerging markets in China. They can make strategic investment in key areas to promote the sustainable growth of existing business and also fund some start-ups in emerging industries that are not currently associated with the main business through financial investment, so as to be able to exit for economic returns someday or inject in existing business to activate exponential growth.
Shell, for example, announced in October 2017 that Shell Technology Ventures (STV) will establish its first office in China to invest in the explosively growing China market. The fund is mainly targeted at start-ups related to new energy and new materials, which typically cost between USD 2.5 million and USD 5 million in the initial stages.
Daimler, for the first time in 2017, invested in a Beijing-based Chinese start-up, Momenta (a provider of sensors and high-resolution mapping software), that participated in a USD 46 million round of financing. By investing in Chinese autonomous-driving companies, Daimler could overcome the Chinese government’s high threshold to develop the China market.
In May 2016, Apple invested in Didi with USD 1 billion, which is the single largest investment Didi ever obtained. By strategically investing to the largest mobility platform of the China market, Apple can well integrate with all kinds of mobility scenarios and activate entirely new opportunities for growth. As Apple CEO Tim Cook said: “We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market. Of course, we believe it will deliver a strong return for our invested capital over time as well.”
Empowering China's industry as an ecosystem builder and enabler
Looking back on the development of MNCs in China in terms of industrial development, we can see that both B2C and B2B enterprises continuously meet the needs and pain points of consumers and enterprise customers through the provision and improvement of products, technologies, solutions an after-sales services. That is, creating value and benefiting from solving customer problems by themselves. This corresponds to the major contradiction in Chinese society at that time, namely, “the contradiction between the ever-growing material and cultural needs of the people and the backward social production.”
The huge gap between the immense needs of the escalating demand-side and supply-side scarcity has brought many opportunities. However, in the future, the contradiction has started to turn to “the contradiction between the people’s ever-growing needs for a better life and unbalanced and inadequate development”. China began to deepen its efforts to promote the systematic transformation and upgrading of structural reforms in order to solve the issue of “unbalanced and inadequate development”.
We see that some leading MNCs are beginning to upgrade their positioning from problem solvers to builders, leaders and enablers of whole ecosystems. More and more opportunities lie not only in how to help customers solve problems, but also in enabling Chinese enterprises, industries and society as a whole to “empower” China’s overall transformation and upgrading.
In the field of the manufacturing industry, guided by the “Made in China 2025” national strategy, the Chinese government released the “Guiding Opinions on Deepening the Internet + Advanced Manufacturing Industry and Developing the Industrial Internet”.
It is proposed that in the future, China will speed up the development of the industrial Internet, reform industrial ecosystem and speed up the transformation and upgrading. In response, Siemens set its industrial cloud platform MindSphere to China. Together with Chengdu High-Tech Industrial Development Zone, Siemens Industrial Cloud MindSphere R&D Center was established in August 2017.
Another industrial giant, GE, signed an agreement earlier with China Telecom in March 2017 to promote GE Predix in China market and to jointly build China’s Industrial Internet ecosystem. It is conceivable that MNCs such as Siemens and GE will compete in the future to become the “App Store” in China’s industrial field.
This is an upgrade of the entire industrial sector in China and a contribution to China’s national strategy (such as “Made in China 2025”). Siemens and GE, as MNCs that have been cultivating the China market for many years, have positioned themselves as the leaders of this development trend of the industry and play an important role of empowering the whole industrial ecosystem.
As another example, the Chinese government vigorously promotes the “One Belt, One Road” strategy and a number of large state-owned enterprises (SOEs) are taking the vanguard of internationalization. In this context, Schneider Electric China has set up a team of dozens of people who can mobilize the global network, resources and capabilities to help Chinese enterprises to land abroad.
Schneider Electric and China National Building Materials, co-developed overseas markets by leveraging its global networks to give China National Building Materials great support to help reduce its risk. In addition, Schneider Electric can use its global electrical teacher program to help SOEs establish vocational high schools and laboratories, in order to take root in the local. Not only “give people a fish”, but also “teach people how to fish.”
Compared with the past, these MNCs’ change in positioning, strategy and tactics are inseparable with the changes in China Context. Driven by the unique, diverse and complex needs embedded in the vast consumer market in China, companies must be motivated to innovate in many areas such as technology, solutions and business models to meet their ever-evolving needs.
Chinese government’s top-down national strategies (such as “One Belt, One Road”, “Internet +” and “Smart Manufacturing 2025”), systematic transformation and upgrading and deepening reforms (such as state-owned mixed ownership reforms) have given MNCs more dimensions opportunities and deeper engagement.
For the future development of MNCs in China, it is no longer just “In China, For China.” The significance of China market to MNCs lies not only in the contribution to business growth, but also in terms of ideology, market insights, strategic direction and innovation to lead a full range of value creation. MNCs will not only view China as a regional market or the world’s largest single market, but more as a “brain” role for its global development.
Therefore, MNCs’ China strategy will also gradually evolve from “In China, For China” to “In China, With China”. In order to win future global competition, MNCs must be deeply rooted in China and gain deep insights into China Change, think about the future strategy, and then reward the global development. Integrate development through multiple dimensions of innovation, investment and industry development to create a global ecosystem, export innovative ideas, concepts, technologies and products to the world, strengthen today’s pillar businesses and explore tomorrow’s emerging businesses with strategic investments and financial investments, help Chinese customers create greater value and activate the industry as a whole. This is the key to future success.