Disruptive cost innovation

Will Chinese high-tech firms take incumbents multinationals by storm? Not impossible if one is to believe Zeng and Williamson, authors of “Dragons at your door: how Chinese cost innovation is disrupting global competition“.

The authors’ central argument is that China’s real competitive edge is not [only] low cost but rather cost innovation. Chinese companies leverage low-cost R&D resources to deliver high-technology at mass-market prices by focusing on process innovation to breathe new life in technologies that Western companies have written off as obsolete or uneconomical, by developing innovative products at a fraction of the cost of their global competitors by recombining existing technologies in new ways, by riding the wave of open architecture to bypass traditional barriers to innovation, and by successfully rendering established Western competitors’ assets and experience obsolete by betting on low-cost, alternative technologies.

A number of questions come to mind:
- Can Chinese firms apply the [product] cost innovation to services?
- How much does cost innovation allow Chinese firms to be innovative?

Not need to look further than Huawei to have the beginning of an answer…