The China Challenge. Agenda. Knowledge Leak or Leverage? What we all should know by now. China: Knowledge Leak or Leverage? Know-how Transfer Programs

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1 The China Challenge Knowledge Leak or Leverage? Agenda What we all should know by now China: Knowledge Leak or Leverage? Know-how Transfer Programs

2 What we all should know by now China is the economic powerhouse of the 21 st Century; Most business is done along the coastline; Development is faster than we are used to; Consequences are more significant (for business and environment) Red hot activity Source: Envisat

3 What we all should know by now There is not 1 China; Cultural sensitivity is key; MNCs are at least as much to blame for misunderstandings; Intellectual property protection is a challenge The copycar launched before the original QQ (Chery) versus Spark (GM)

4 But there is hope Publicatiedatum: !" # " $ " Copyright (c) 2005 Het Financieele Dagblad The China Challenge: Know-how Leak or Leverage? Do we want to manufacture in China considering the know-how risks? High-end products % Production elsewhere % Production in China Standard products Desired shift due to cost imperative Natural urge for know-how protection What do we want to manufacture in China considering the know-how risks?

5 Or else They d like to know if we d be able to assemble their high-tech products Source: Cartoon by Arend van Dam However, Knowledge Transfer (KT) policies are lacking in the China strategy of most MNC s Key insights based on desk and field* research: Despite heavy investments in China, very few MNC s have a comprehensive knowledge transfer policy in place; Knowledge protection is often limited to the explicit factors such as intellectual property - and copyrights and patents; Awareness of the value of the production factor knowledge and the consequences of knowledge leakage for competitive advantage is low; There is an important difference in dealing with knowledge protection, based on the business structure in China (JV, Wholly-owned etc.); MNCs are subsequently often helping to develop their own competitors; War stories of copying activities and knowledge leakage are rampant. * amongst 20 MNCs

6 KT Program to sustain your know-how advantage in China STRATEGY - Know-how Transfer Approach PEOPLE Know-how ACCOUNT -ABILITY ALERTNESS Know-how SYSTEMS Copyright Squarewise International AWARENESS OPERATIONS - Know-how Transfer Policy This leads to LESS LEAKAGE A clear Know-how Transfer Strategy and a higher know-how awareness amongst employees leads to less know-how leakage. LOWER COSTS As more know-how is transferred securely it facilitates more low-cost production. FASTER DECISIONS Structured processes for know-how transfer lead to increased speed of decisions. INCREASED RETENTION The Triple A model incorporates retention stimulating measures. MORE LEARNING The structured, objective approach for know-how transfer provides feedback and learning loops.

7 Latest Publication Doing R&D in China (2005) Based on interviews with: Airbus, ASML, Akzo Nobel, Corus, BASF, Bayer, Degussa, DSM, Heineken, Nokia, Philips, SAP, Shell, Siemens, Stork, Unilever, Volkswagen and others. The Key Questions: How well is your know-how protected in China? Do you have a strategy for Know-how Transfer in place? How aware are your local managers and employees of the risks? Are you helping develop your own competitors in China? Are you making the most of the Chinese R&D opportunity? For more information, you can contact me at: Arno Boersma boersma@squarewise.com

8 About Squarewise Mission To help organizations innovate and grow in the knowledge based economy by tapping into the it s most valuable resource: knowledge. Knowledge? Action instead of abstraction! Associate Partner: Prof.dr.ir Mathieu Weggeman Strategy A human approach for knowledge management (KM), a results-driven attitude for organizational innovation, and the experience in creating, sharing, and applying KM to the overall mission of the organization and its human capital. About Squarewise Positioning: Strategy consultancy for knowledge and innovation strategies in an international context; main hub in Amsterdam. Some our clients: Our approach: Pragmatic: no abstraction, but action; Integrated business driven approach: Strategy, process/ project management, and implementation. Services include: Consultancy; Program & project mgt; Workshops.