Wednesday, February 8, 2012

GM's Kevin Wale on Innovation in China

The consulting firm McKinsey published on its website an interview with Kevin Wale, president and managing director of General Motors China.  The whole interview is worth a read if you are interested in the state of innovation in China, but here are a few of the more revealing excerpts with a little of my own commentary.
Kevin Wale: When the Chinese get an idea, they test it in the marketplace. They’re happy to do three to four rounds of commercialization to get an idea right, whereas in the West companies spend the same amount of time on research, testing, and validation before trying to take products to market.
This is both scary and admirable.  Scary, because the Chinese are, at least according to Mr Wale, willing to put products into the market before they are fully tested as a means of development.  When you think about it, this is pretty much what Apple does with its products.  The first iPhone wasn't fully ready, but it was ready enough.  Feedback from customers helped them to improve on subsequent iterations.

What's scary about this is that driving a car that has been put into the market on an experimental basis doesn't sound like something I would want to do.  If my iPhone blows up, I would probably survive.  I'm not sure I could survive my car blowing up.  While I would hope that GM is able to prevent its partner, Shanghai Auto, from putting dangerous vehicles on the market, I wonder whether other Chinese auto companies are quite as careful.

The Buick LaCrosse, partially designed in Shanghai

The Chinese system supports the idea that it’s OK to fail if you fail in a government-sponsored direction. It’s OK to make mistakes as long as you’re moving forward. They’re quite OK to get out there, do something, find out it’s not perfect, but quickly adapt it and move forward. There’s no recrimination internally for doing that if that’s the direction the country wants to move in.
It's a great thing that people feel comfortable to experiment within the boundaries set by the state, but the opposite of Mr. Wale's statement is that they do not feel comfortable experimenting outside the boundaries set by the state.  But what if a worker has an idea that's not in “the direction the country wants to move in.”?  Too bad.

This, in my view, is precisely why China will always be a step behind.  Governments have historically been quite bad at charting an unknown course in terms of picking winners and losers.  In China, true technical innovation will always have to come from outside until people feel free to make mistakes in all areas of business, not just those approved by the geniuses in Beijing.
McKinsey Quarterly: Do you source innovation from outside GM China?  Kevin Wale: The answer depends on whether you’re talking about joint ventures or GM. In our joint ventures, we’re happy to take innovation from suppliers any day of the week.

This is more interesting for what Mr Wale doesn't say.  When asked whether GM gets innovation from outside, Mr. Wale assumes the question is about whether GM sources innovation from its joint ventures in China.  From his answer, it seems pretty clear that they don't.

Let's be honest here, the technology is still only flowing in one direction, and that's from GM to its Chinese partners.  At what point will GM's partner have enough technology that it doesn't need GM anymore?


  1. Dr. Anderson: Our recent response to the MQ interview with Mr. Wales...


    Shanghai, Peoples Republic of China., February 6, 2012 - (PressReleasePoint); - eMOTION! REPORTS com, an automotive/aerospace industries research and analysis site founded in 2001 with a mission to target professionals within the academic, media and government sectors, has just gone live, initially on its blogs, with an analysis in response to a recent interview conducted by the McKinsey Quarterly with GM China President and Managing Director Kevin Wales. "In this age of instantaneous communication accorded through cyberspace and cellular-based data conveyance, it is considered wise to weigh ones words carefully before pressing 'send'", said Publisher Myron D. Stokes, an award winning, former Newsweek, Newsweek Japan and Newsweek International special correspondent and industry analyst.

    "In acknowledgement of that wisdom, ER's global team of journalist/analysts -some of them among the best within academia, NGOs and government- did indeed weigh the following words, and the GM activities that induced them, then wondered why we didn't hit the "send" button within minutes of reviewing the interview conducted with GM China's Kevin Wales. "What Wales euphemistically calls China's process of "Innovation through commercialization" to accelerate technology prove-out and utilization, is simply considered, by every other industrialized society, as theft, industrial espionage, illegal acquisition of intellectual property, patent right infringement, unfair trade practice by government subsidization... In other words, economic war on a massive scale, coupled with an endgame strategy epitomizing zero sum.

    "Grammatically", Stokes continued, 'Innovation through commercialization' should be ranked right along with "ethnic cleansing" in sheer euphemistic audacity."

    1. Hmmmm... I didn't interpret "innovation by commercialization" quite the way you did.

      I think the term just describes getting something to market before it's fully tested and vetted by potential customers. It's a strategy very commonly applied in Silicon Valley. I'm really not sure how or why it must necessarily be connected with IP theft.

      Maybe you are right that GM is allowing its IP to be stolen by its Chinese partner, but I don't see the connection of that with the term you object to so strongly.

      What am I missing here?

  2. Not sure if you're truly missing anything.

    What is at work here is, perhaps, a better than average knowledge and understanding of what has taken place to effect GM's transition to China - regardless of the terminologies used.

    The clarity of your comments amidst too few examples of such is nevertheless most welcome.

    Be well and thank you for your kind response.

    Best and cheers,


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