In a quest to grow revenues, marketers are often charged with discovering and branching into new markets. And while the “green economy” sure looks promising, Western companies are discovering that state and privately owned Chinese enterprises are establishing strong footholds. In a race to develop green technologies and dominate green markets, does China have an insurmountable lead?
Paul Volcker, chairman of U.S President Barack Obama’s Economic Advisory Board recently said, “(The United States) needs to do a better job at the new industries coming along, the so called green economy.” However, an article from the New Yorker titled “Green Giant” suggests that China has invested in green technologies for decades and already has a significant head start.
Why China and green technologies? Call it a matter of survival. As factory to the world, China is now responsible for a larger carbon footprint than even the United States. And while links between carbon emissions and global warming are debatable, Chinese leaders haven’t taken any chances investing in technologies that are more environmentally friendly such as wind and solar. Moreover, its export heavy led economy needs energy to sustain itself, so renewable energy is definitely a national security imperative.
Strategic planning is often about seeing significant trends on the horizon, making big (and wise) bets and laying the foundation for future dominance. To this point, according to the New Yorker article, as far back as 1986 Chinese leaders saw the beginnings of a “new technological revolution” and started building green capabilities and setting targets for heat and wind turbines, solar panels and hydro-electric dams.
Indeed years of heavy investment have paid off in that China now manufactures “more solar cells than any other country” and has doubled its wind capacity for three years running (2006-2008).
It’s tempting to dismiss the prowess?and progress of China with a vision of cheap goods, backwards factories, inefficient processes and thousands of workers in assembly lines producing with ancient technologies. Yet, in many cases Chinese factories are just as productive, clean, and advanced as Western enterprises, and in some instances the only place a product can be made cost effectively is in China!
There is a sliver of good news, however for Western companies. While the New Yorker article cites China’s ability to scale and mass produce green technologies, much of the innovation and science behind the scenes still comes from the West.
One can only wonder, however, how long this lead in innovation will hold, especially as R&D expenditures, “have grown faster in China than other big country?climbing about 20% per year for two decades to $70B last year.”
Perhaps there’s a future in collaboration between Western countries and China. “Chinese manufacturing and American innovation is powerful,” says Kevin Czinger, a former Goldman Sachs executive. Mr. Czinger calls it the “Apple model” where innovation and know-how is born in the West and execution resides in Asia.
On the other hand, with a just small portion of the overall “value” of a product staying in China, it seems unlikely that China will be content as simply the muscular strength powering the world economy.
Questions:
- Marketers; dominance of green markets isn’t just limited to green energy. Green design, building, packaging, chemistry, and nanotechnologies are also in play. Which areas hold the most promise for Western companies?
- With unemployment levels nearing 12-17% in some US states and cities, the green industry is often seen as a potential panacea. Are Western countries in danger of losing green jobs to developing countries? If so, what’s the remedy?
- How does “green technology” fit in the future of your company?
Tags: Apple model, blue ocean strategy, China, competitive advantage, green economy, green energy, green jobs, green technology, growth, new markets, Paul Volcker, strategic planning, Strategy and Tactics
Paul:
The problem with looking to “green technology” for marketers is that this isn’t something one casually steps into. Perhaps “sustainability” is the better word to look at for marketers in terms of packaging, product design and lifecycle management.
As for “green technology” itself, there are centers of excellence in a number of places at this point. China leads the world in solar *manufacturing,* but not necessarily PVC cell design. Fuel cells – very much a here and now decentralized technology for electricity production and grid support – is very much a US centric industry.
The larger problem is that none of these technologies produce electricity even close to the efficiency of fossil fuels, and are often many times the cost per kW hour. This doesn’t make shareholders happy. In addition, many have unhappy side effects that are anything but “green” – no one wants wind in their back yard, or the miles of power lines that have to cut through national parks (and that same back yard, courtesy of eminent domain), etc.
Green tech is a complex issue. Brands invest when they see both the branding (“green is important to our customers and to our brand, therefore we power our facilities with ultra-clean 1MW fuel cells”) and the business case (“we get 24/7 power generation at grid parity, and also re-use the solvent fumes/bio refuse/etc from our manufacturing processes, too”). One or the other rarely makes the cut.
Regards.
Paul,
I’m no expert on green technology, but it seems to me numerous countries’ governments are incentivizing scientist, engineers and designers around the globe to push for solutions. In Europe, for example, the Germans are pioneering many new green technologies.
I like what Stephen has said in his comments. All companies and all marketers can take steps that lead to sustainability. As a package design firm principal, I write about this frequently. Since 70% of our economy in the U.S. is concerned with the manufacture, packaging and marketing consumer products, there are many things that can be done. Cutting waste, increasing efficiency and pioneering new product and package material substrates are great places to start. Operating more environmentally offices and plants also help. Every company and every household can intentionally choose to cut down on waste, cut energy use, recycle more, reuse containers, etc. What a difference purposeful thinking would make!
Necessity is the mother of invention: The Chinese are choking themselves on carbon.
The U.S. has the innovation lead at the moment but it will require a full court press to maintain that. Frankly, that means government incentives or we are at a significant disadvantage.
Industrial policy has become a dirty word but with 10% unemployment and a denuded manufacturing base, I think we might find it back in the lexicon soon.
The U.S. needs to maintain its innovation edge but we also need to make things here again. Let’s hope we can do this in an orderly way through the floating of the Yuan rather than a de facto rebound because the dollar drops so much.
Stephen, thank you for taking time to comment on this column. Fuel cell and battery ‘design’ may be coming from Western countries, but lithium/niCAD battery manufacturing in China is catching up to Japan and now accounts for 40% of world battery production. And as you know, in many regards China is making inroads in design of green technologies.
You made some other compelling points about how “green technology is a complex issue.” Indeed so, and a company does not jump into the green economy lightly. That said, as marketers look towards “blue oceans” of opportunity for their companies; “green” always seems compelling. That is, until they find out that someone’s already been swimming in that new market space and has a significant headstart!
Ted, thank you for commenting. You said, “Since 70% of our economy in the U.S. is concerned with the manufacture, packaging and marketing consumer products, there are many things that can be done. Cutting waste, increasing efficiency and pioneering new product and package material substrates are great places to start.”
Your comments remind me that there is plenty of green opportunity for marketers and our companies whether it’s green technology, design, manufacturing, packaging and more. There is ample opportunity for “business growth”, but some companies and countries have a good headstart. It’s possible to arrive at the party and find the punchbowl dry or missing.
Neil, the New Yorker article cites a study from the National Academies in 2005 that warned, “We fear the abruptness with which a lead in science and technology can be lost?and the difficulty of recovering a lead once lost, if indeed it can be regained at all.
That was in 2005. Again, from the New Yorker article, the Obama Administration, via the 2008 Stimulus bill “put more than thirty-eight billion dollars into the Department of Energy for renewable-energy projects.” $38B isn’t chump change, but I wonder–too little, too late?
Well, the U.S. still has the best University system in the world. Our R&D is the best right now.
We have some assets but it is matter of leveraging them. Nation building begins at home!
yes it is true that Chaina have more solar cells than any other country so, they get the benefit easily.
Marketers take note, more stimulus dollars towards green industries.
1/07/10. Obama announced the awarding of $2.3 billion in tax credits to companies that manufacture wind turbines, solar panels, cutting edge batteries and other green technologies. The money will come from last year’s $787 billion stimulus program.
Is it really to late for that. Whatever you say, i think its worth trying for me since i am a beginner in this business.
A terrific photo essay on some “green” transformations in China…
http://www.technologyreview.com/energy/25112/?a=f