It is common ground that China developed dramatically over the last years. From 2000 to 2007 the GDP increased by 100%. Taking only the export, it grew in 2009 from US $ 1,202 billion to US $ 1,577 billion in 2010. This means an increase by 31%. And looking at the ranking lists regarding the top 10 exporting nations, China improved by 9 rankings between 1997 and 2009 to the top position. And even if the dynamic is currently calming down, it is still growing.
China catches up and learns very fast
Without doubt China benefits by the know-how of other nations, as China is developing to become a modern high-tech society. The amount of scientists and researchers in relation to the overall population varies globally from Finland 16.1%, to Japan 11%, USA 9.7%, South Korea 9.5%, France 8.4% and Germany 7.3%. In China, the amount of scientists and researchers accounts for 1.8% of one thousand workers (employment statistic: brand eins/statista.com: “Die Welt in Zahlen 2011“, “Die Welt in Zahlen 2012“).
This only shows that China is running fast, for all intents and purposes. The country is not only fast in its economical development combined with the possibility of executing decisions – but it is also fast in adapting regarding know-how training and learning. It is obvious that the technical advantage of the western industrial countries is shrinking more and more. Globalization and digitalization support this general trend.
Does that mean that only companies who build their general marketing on selling emotions (e.g. Coca-Cola, Red Bull, Porsche) might survive? Is the situation for all other companies threatening and unchangeable? Protectionism to defend the home territories against China is the wrong choice. Looking back in economic history, protectionism never worked in the long run and harmed more than it helped. In our modern global economy this would backfire and harm all economies globally. If you take technology, it can be dismantled, transferred to everywhere and copied. This is true even for the smallest, detailed core technology.
And here is the “but …”: There are some aspects which are very difficult and very often not to be found in the detailed drawings, tables and formularies: the customers’ process know-how.
Competitive advantage through customer process know-how
The know-how regarding individual customer processes – and combining this with understanding the customers’ real problem becomes the competitive edge.
This statement becomes more relevant as even main players have to focus more and more on their core competencies. Due to this, the necessary detailed know-how shrinks in nearly all organizations (regarding the question whether customers are able to know what they really want, please see the article “Who knows what the customer really wants”).
This is the challenge and also the risk. The risk is determined by the fact that the customer – less expert than before – decides by price. The pressure will increase especially for non-core customer needs. The chances are related to the core customer needs and the relevant processes. The relevance and the responsibility of the supplier become more important. Those who are willing to manage that accountability and the related risk will be able to develop from supplier to partner.
Regarding China it is very difficult to generate detailed customer process know-how. This means a lot of work, but also plenty of historical know-how accumulation and cannot be copied – yet. This is a clear competitive edge.