Game-changing China (1) - China Dialogue

Game-changing China (1)

A novel approach to innovation – where social redefinition of existing technologies is taken as seriously as new inventions – could boost our ability to fight climate change, say David Tyfield, Jin Jun and Tyler Rooker.

Big hydro, big solar photovoltaic (PV) and big wind – these are the usual focus of accounts of low-carbon technologies in China. But a very different type of innovation, ranging from a farm cooperative in Yunnan, to woodchip and corn pellets in rural Beijing and air-conditioning using just salt and water in Hangzhou and Shenzhen, could be even more significant as examples of how to achieve a low-carbon economy and society for China and the world.

Low-carbon innovation in China is an issue of key global significance. This is not just because of the large and growing carbon footprint of the Chinese economy as a whole, but also because China’s spectacular social and economic growth represents a unique opportunity to develop and roll out low-carbon innovations. China’s capacities in science and innovation are also improving rapidly. And, following the financial crash of 2008, it is clear that China’s growing geopolitical influence has entered a new phase, which will be a crucial determinant of global efforts to respond to climate change.

However, it must not be forgotten that China is still a developing country. Indeed, just as the United States economy (let alone its military) continues overwhelmingly to dominate all other countries and is still over twice the size of China’s with a population one-fifth as big, caution is needed not to exaggerate the current strength of China’s science and innovation.

In particular, hi-tech innovation capacities, while undoubtedly improving, are still comparatively modest in most sectors. Despite (or rather, precisely because of) these modest capacities, China’s current policy regarding low-carbon innovation focuses squarely on hi-tech innovation. To be sure, this focus is achieving some significant successes, such as China’s global solar PV companies or its leading coal combustion technologies. But these alone, even where they are widely adopted (and over 90% of Chinese PV is currently exported), will be unable to produce the wholesale transition to low-carbon systems that is needed.

One form of low-carbon innovation that offers considerable opportunities, but that is usually overlooked is “disruptive innovation”. Disruptive innovation challenges many of our common assumptions about innovation. As originally developed by US business professor Clayton Christensen and applied to low-carbon innovation by a previous report by the National Endowment for Science, Technology and the Arts (NESTA), disruptive innovation involves “cheaper, easier-to-use alternatives to existing products or services often produced by non-traditional players that target previously ignored customers” and/or use in novel contexts and combinations. It is primarily characterised by a social redefinition of a technology, as opposed to improvement of the technology along established trajectories. Disruptive innovation will likely offer lower than cutting-edge functionality, according to established definitions, but for different uses and to neglected customers.

As set out in a report by the United Kingdom’s Royal Academy of Engineering in March, the exceptionally tight time constraints for the necessary low-carbon transition mean that “only the low-carbon technologies that are already known can make a significant contribution to meeting the 2050 targets. They are already in the marketplace, close to it or close to being demonstrated at scale.” In short, we must do the best with what we have.

But from the perspective of disruptive innovation, which makes use of just such established technologies, this maximisation of climate impact need not be limited to current uses and familiar sectoral definitions of these technologies. Rather, disruptive innovation offers a potential route to substantial improvements in the societal impact of low-carbon technologies that is not dependent on their radical technological upgrade.

This argument becomes even more important in the case of China. This is not just because China’s capacities for hi-tech, low-carbon innovation are not yet fully developed, as demonstrated by the continuing dominance of intellectual-property ownership of major low-carbon technologies by OECD-based – developed-world based – companies. But also because Chinese companies are already transforming global competition through their low-cost disruptive innovations, as business scholars Ming Zeng and Peter Williamson have shown.

For instance, Haier has developed a range of fridges with relatively low-tech adaptations that serve a variety of niche, but highly profitable, markets, including student rooms (doubling up as desks) and wine collectors. Similarly, China International Marine Containers Group (CIMC) has achieved unrivalled global dominance in their industry through a low-cost strategy. Other examples of successful low-cost disruptive innovators include car company Chery, piano maker Pearl River, consumer electronics maker TCL, computer company Dawning and port-equipment manufacturer ZPMC. The list goes on and on.

While these and other examples listed by Zeng and Williamson are not low-carbon innovators (at least not in all cases and not yet), high profile examples of the latter are increasingly apparent. BYD is using its global leadership in battery manufacturing and technology to develop low-cost electric cars and has won the attention (and investment) of legendary investor, Warren Buffett. Himin Group is now a global leader in solar-thermal technology, a sector dominated as a whole by Chinese companies.

By focusing on low-cost products and services for the Chinese market, this also has the advantage of developing technologies that are appropriate not only for Chinese society but for other developing countries worldwide. And with over 70% of total costs of abatement and hence low-carbon investment to 2050 likely to come from developing countries, servicing this market would also be to focus on the major business opportunity, not merely to make a virtue of necessity by targeting secondary sources of demand.

A policy that effectively supports the existing Chinese competitive strength of disruptive low-carbon innovation would also expedite a Chinese low-carbon systems transition, responding to the unprecedented timescale. Conversely, banking primarily on the improvement of hi-tech innovation capacities will incur substantial (and climatically consequential) delays, given the need to develop institutional, social and cultural conditions that are hard to short-circuit.

Similarly, incorporating disruptive low-carbon innovation into policy could support a broader public redefinition of low-carbon, away from its current identification with expensive equipment. This tends to embed a perceived opposition between low-carbon innovation and socio-economic development and hence to slow down the former, while it is clear that a low-carbon shift must attend to both. China cannot and must not be forced to choose between “environment” and “economy”, and disruptive low-carbon innovation is an important way to sidestep this false choice.

Finally, disruptive innovation offers the most plausible route to establishing world-beating companies, while simply pursuing existing leaders directly through hi-tech improvements along established pathways sets up a perpetual game of “catch-up”. Globally competitive hi-tech companies may be more effectively fostered by sponsoring disruptive low-cost innovations than by focusing on high-technology itself. This has significant implications for national economic growth as much as it does for business strategy, and this, in turn, is crucial for China’s low-carbon shift.

NEXT: Learning by example

This is a summary of the report “Game changing China: Lessons from China about Disruptive Low-Carbon Innovation”. It was commissioned by the UK’s National Endowment for Science, Technology and the Arts (NESTA) and written by David Tyfield (Lancaster University), Jin Jun (Zhejiang University) and Tyler Rooker (Oxford University). It is summarised and used here with permission.

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