Companies & Industries

The China 2.0 Innovation Dilemma


Harvard blogger Michael Schrage discusses the internet's role in challenging the rigidities of China's educational system

Posted on Harvard Business Review: March 1, 2011 11:10 AM

In the wake of uprisings in Tunisia, Egypt and Libya, China briefly shut down LinkedIn access. Someone had apparently tried to organize an online discussion on a topic that offended the authorities. The social medium doesn't matter. Don't mess with the Great Firewall of China.

But political unrest enabled by social media has virtually all of Asia atwitter. In Australia, pundits openly speculate that digital media will influence Middle Kingdom governance as powerfully as they did Middle East rulership. From reading the English language publications here in Beijing, the powers-that-be are well aware of the Internet's ability to effect fundamental change.

Hence China's innovation dilemma. The very same publications that soft-pedal the Net's role in challenging the social status quo openly discuss its importance in challenging the rigidities of China's educational system. (I'm reliably informed these debates take place—online and on paper—in the Chinese language media, as well.) The Net is championed as a medium for cost-effective learning and training for those who can't quite crack the onerous Gao Kao exam system. Open courseware initiatives fascinate China's educational establishment and its entrepreneurs alike. Rising educational and training standards are essential to this country attaining its demanding economic growth target of 7% per annum. This was the third straight year Chinese Premier Wen Jiabao announced his plans in an online Internet Q&A with citizens before formal annual meetings.

But education only represents the most politically correct theme for China's intensifying internet struggle. Sustaining the country's economic momentum will surely require her companies to become more net-centric and technically sophisticated. Interoperating with supply chain software and CRM technologies used by big customers in Europe and America is already underway. Do the authorities honestly believe that smart, ambitious and entrepreneurial workers won't wonder how freedoms influence opportunities for growth and wealth?

Chinese industries don't just need to become more productive; they want to be more innovative. Their managements increasingly observe—and understand—that they can't be world-class unless their technologies are. Does this require them to embrace Facebook, Twitter, and Gmail? Probably not. But to the extent that Web 2.0 and 3.0 technologies become essential platforms for business innovation, China runs serious risks of underachieving Wen Jiabao's declared objectives. Can China's political leadership afford the dissatisfaction and unrest from industries that know they are economically underperforming because they can't access essential tools for differentiation and innovation?

China's efforts to retain authoritarian control over its internet evolution increasingly—and inherently—conflict with its professed business, economic and educational need to raise living standards and grow. No great leap forward is required to realize that the same economic empowerment business net services like LinkedIn provide can seamlessly become tools for political exchange, as well. The Internet demonstrably dissolves once-meaningful distinctions between political and economic self-expression. Arguments about whether societies can have the benefits of economic freedom without the burdens of political freedom date back before Adam Smith. But what's becoming inarguable is that the more economies use digital platforms to generate greater innovation and choice, the easier introducing political discussions around opportunity and accountability becomes. Intriguingly, SAP, Oracle, and CATIA can be as powerful enablers of social change as tweets, blogs and personal newsfeeds.

After all, economic concerns weren't afterthoughts or irrelevant to toppling a Mubarak or a Qaddafi. For China's leadership to believe—and bet—that the fruits of economic opportunity will consistently trump the toxins of political repression would a remarkable leap of faith. A more convincing truth is that China's most innovative, most creative and most productive would be the likeliest to resent arbitrary distinctions between political and economic freedoms.

The irony for Western business is that a freer China is almost certain to be a more effective economic competitor than one held back by authoritarian fears. For China's leadership, the irony is that the technology most likely to empower and accelerate economic growth effectively requires it to become less authoritarian. Good.

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