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Song Zhiping: How to Make Effective Innovation?



Recently, Premier Li Keqiang emphasized the combination of innovative spirit, entrepreneurial spirit and craftsman spirit. In fact, innovation needs craftsman spirit and realizing the innovative target needs the spirit of persistence, making perfection and down-to-earth work. There emerges a boom of innovation and entrepreneurship in today’s society. According to the relevant media, there are 7 newly established enterprises every minute in China. The public has varied concerns about innovation and entrepreneurship. Some people think innovation is mysterious and not easy while others make innovations blindly and shoulder the unnecessary risks. In the past, the entrepreneurial spirit mainly refers to the innovative spirit and spirit of adventure, while nowadays, the entrepreneurial spirit mainly refers to two qualities, namely, innovative spirit and the ability to seize the opportunity. Entrepreneurs also need to learn to assess and reduce the risks. Next, I will explain how the enterprises make effective innovation in four aspects.

How to reduce the risks in innovation?

Purposeful innovation

When talking about innovation, most of the people will have passion. Actually, before the real innovation, one must have thorough research and conscientiously analyze the opportunities, goal and pathway of innovation. Innovation should be explored with purpose instead of blindly. These years CNBM has made lots of innovations. For example, plane manufacturing will use large amount of composite material and like American Boeing 787 and European Airbus A380, 70% of their structure and parts will use T800 carbon fibre. In the past, America and Japan imposed blockade on techniques so T800 carbon fibre cannot be done in China and we can only do T300 and T400 to make living goods such as fishing pole. Through nearly 10 years of effort, CNBM now can make batch production of carbon fibre T700 and T800 and fill in the blank of high-end technologies of carbon fibre in China.

There is also the electronic display glass. The glass used in mobile phones and TVs in daily life cannot be made by China in the past because the technologies are monopolized by America and Japan etc. In the past, main glass business of CNBM is the building glass, however, in recent years, based on the market need, it breaks down lots of technical barrier and rapidly enters the high-end field of electronic display glass. Nowadays, the electronic display glass in China does not rely on America or Japan any longer and CNBM plays an important role in technology and market. The electronic glass made by CNBM with the thickness of 0.15mm can be bent and rolled like paper to meet the demand of large-sized curved-design LCD TV. The innovation of CNBM in the fields of carbon fibre and electronic display glass is to firstly locate the target and the market and then make purposeful innovation.

Innovation in familiar fields

Enterprise innovation is mainly suitable in familiar fields because in contrast it is relatively easy for the enterprise to make innovation in familiar fields. An important issue for enterprise managers is to select good business for the enterprises and it may take 10 to 20 years even 30 years or longer for the enterprise to make perfection after that. I have been working in the management work of CNBM for nearly 40 years. Over 10 years ago when I took up an official post in CNBM, the operating revenue of the enterprise was only about 2 billion yuan. Through many years of rapid development, now it has 250 billion yuan. During the five years when I have been the chairman of Sinopharm meanwhile, its operating revenue increases from the original 36 billion yuan to over 200 billion yuan. Managing the enterprise is not an easy job and it takes lots of years to research after the business is ensured. And innovation also needs relatively long time and our persistence.

CNBM is the world’s largest building material manufacturer and cement manufacturer. Some people may believe that the cement is just an ordinary product. However, let’s imagine what our cities and life will be like without cement. Despite its long history of 180 years, cement has been making innovation in these years’ development. In the past, cement in China was produced in small vertical furnaces and the daily scale of each production line was about hundreds of tons; then is the wet process cement and the daily scale of each production line was about one thousand tons and now is the new type dry process cement and the daily scale of each production line is ten thousand tons. Through significant innovation, the cement factories become the intelligent and clean new type factories in gardens, forests or prairie. The newly invested and established cement factory of CNBM in Mongolia is the factory on the prairie, displaying the perfect combination of modern industry with the natural environment. 


During the five years when I have been the chairman of CNBM and Sinopharm, I always switch between the two different industries in thinking issues. Some people may be curious about how I deal with the issues with high proficiency between building material and medicine with long span. My major in the university is organic chemistry, the pharmaceutical knowledge is not unfamiliar to me and I can easily understand the medical theory. Even that, when I just took up the official post of chairman in Sinopharm in 2009, I read eight thick books on medical industry without distraction during the seven days of National Day holiday. Later, I insist on learning the knowledge of relevant medical industry. Continuous learning deepens my understanding of the medical industry and plays an important role in decision-making of the Board of Directors.

Organized innovation

Innovation cannot be made alone. Rather, the innovation of all the people and enterprises is made in a systematic organization. Innovation of the most enterprises is made in the self-organizing system of the market. Now, the organization pattern of innovation we talk about is collaborative innovation jointly made by the government, enterprises, NGOs and individuals. Currently, many people are keen on power battery and want to have a try to invest, which is not reasonable actually. Enterprises should cooperate to promote collaborative innovation. In the past, each unit of three large telecom operators in China has its own tower, while now, the newly built tower companies centralize and operate the towers of three units, which can not only save an investment of 50 billion yuan but also collect lots of resources.

There are three forms of organized innovation among enterprises:

Firstly, big enterprises can outsource the innovation to medium-and small-sized enterprises and big enterprises and medium-and small-sized enterprises can make collaborative innovation. Big enterprises do not have to make all the innovation by themselves and can outsource technologies to medium-and small-sized enterprises. The world’s largest pharmaceutical enterprise, American Pfizer, outsources most of its innovation to medium-and small-sized enterprises, some of which are mom and pop stores and some of which place an order online, in order to encourage more people to take part in the innovative platform of big enterprises.

Secondly, big enterprises should set up open type technology platform. With 13,000 scientific research design employees in CNBM, although the innovative organization, CNBM Academy, has done lots of scientific research innovative work, it is not enough and needs to open and build larger network platform to attract more members. Every year, the issues of building material industry can be released on the network platform so that everyone can jointly research and develop. At the beginning of this year, I visited WuXi AppTec in Shanghai. Almost all the big pharmaceutical factories in the world outsource the innovation to it. Founded in 2001, the company is a big innovative platform with 14,000 research employees focusing on technical innovation. With over 10,000 youngsters taking part in innovation, the information and communication technology of Huawei, whose biggest advantage is innovation, has a leading position in the world and the sales of Huawei mobile phones rank 1st in China.

In the past 30 years, relying on cheap labour and low-cost products, China had competitiveness in the arena of world’s economy. However, how do we compete in the next 30 years? We cannot simply rely on cheap labour because the labour cost in China nowadays is not cheap and the cost of low-end labour is even higher than America. Our country has 1.3 billion of people, 0.11 billion of whom have received education above the university level and some of whom return from overseas after the study with global vision. Our country possesses the powerful R&D intellectual resources in the world. The key is to organize different elements, which is a shortcut for China to realize “overtaking around the curve” in the field of technological innovation. In the next competition, enterprises need to rely on the wisdom and innovative abilities of the teams and established open innovative platforms to win victory.

Thirdly, big enterprises should work with medium-and small-sized enterprises to make innovation and the way of cooperation is worth investigating. In the past, I talked in Zhongguancun that all the technological enterprises in Zhongguancun want to begin IPO Process. However, after that, there is still a lot of work to do for enterprises including the turn from technologies to products, the larger scale after that and finally an industrial enterprise. Actually, there are many industrial enterprises in China and China lacks not industrial enterprises but technological enterprises and innovative enterprises. Technological enterprises should position themselves into the innovative enterprises to provide big enterprises with technologies instead of turning technologies into products or factories, which is not the strong point of technological enterprises and can be given to those enterprises good at it. Last year, I visited The University of Manchester in Britain and touched the companies under the Graphene Research Center just beginning IPO Process. Without high market value, the company is only responsible for technical outsourcing and hopes to cooperate with CNBM and to provide the technology of printing copper, indium, gallium and selenium. In terms of innovation, enterprises should divide the work effectively and play the appropriate role in innovation.

Innovation is not an issue of a person or an enterprise but a system. Entrepreneurs should think more about the purpose of enterprise innovation, who is the upstream and downstream of innovation, whether they are familiar with these fields and whether they can obtain the strong support. Only by thinking conscientiously from these perspectives can enterprises reduce risks in the process of innovation.

The most important thing for innovation is to seize the opportunity

According to the analysis of Kondratieff Wave in economics, the economy in America and Europe experienced the prosperous development in 20 years from postwar to 1965. However, from 1965 to 1985, it was in the period of economic restructuring and economy in Europe began to decline. In America, there was also the situation of laid-off blue-collar workers in manufacturing such as steel & iron industry but in this period, American economy is prosperous with 40 million of newly established job positions and 0.11 billion of employed people. Drucker analyzes the prosperous development of America in economic recession is attributed to the substitution of innovative economy for management economy. He also believes that innovation can address the issues of restructuring. Currently economy in China is in the period of new normal and is turning from high-speed growth to medium-high-speed growth and the development is turning from the middle-low-end to the middle-high-end level. We need to unswervingly promote the structural reformation and seize some opportunities of innovation.

Innovative opportunities brought by restructuring

In the economic new normal, enterprises will lose many development opportunities if they only see the pressure of downward economy and ignore the opportunities. In each of the national economic restructuring, some enterprises fall down because they do not adapt to changes while other enterprises rapidly develop by seizing the innovative opportunities and innovating. On the one hand, CNBM is in the traditionally basic building material industry with the business scale of cement and glass ranking world’s top. On the other hand, CNBM has done a lot of work in restructuring. In the future plan, it uses the business development model of “Three Curves”. The first curve is to actively promote the transformation and upgrading of traditional businesses including cement and glass. The second curve is to make innovation in the “Three New” industries, specifically, new type building material, new type housing and new material. While last year, the cement price decreased, the Three New industries of CNBM obtained the profit of 3.5 billion yuan, becoming an important part of source of profit of the Group. The last curve is to make service-oriented manufacturing and industrialized R&D. As a service industry, CTC of CNBM now is developing fast. In addition, smart industry is another new business of CNBM and the company organizes the professional team to manage the factories all over the world.

Innovative opportunities caused by market demand

The market demand can produce lots of innovative opportunities. Not long ago, the affiliated enterprise of CNBM produced a kind of new type foldable electric bicycle with weight of 12kg and it can appropriately reduce the weight based on personalized need. Nowadays, there are subways in most of the cities in China. However, in some places, there is still distance for passengers between places of departure to the subway entrance and subway exit to destinations. The use of this kind of convenient bicycle can resolve the above issues of travelling. One battery of the bicycle can make a person weighing 90kg travel 30km with 2 cents of electric charge for each kilometer. This example shows that market demand is one of the sources of innovation and enterprises need to seize the opportunities.

Climate issue is a severe issue faced by mankind. Climate Change Conference was held in Paris last October. As the representative of Chinese enterprises, I made three speeches at the Conference and talked about my views of how the Chinese enterprises cope with climate change. With the rapid economic development, in the past, humans once faced the pressure of “growth limit”, resources and energy people live on faced challenges and the concept of sustainable development enjoyed popular support. People soon find that they encounter not only the issue of “growth limit” but also more severe about the “survival limit” of humans. In 1962, a book about the ecological issue, Silent Spring written by Rachel Carson, the American biologist, recounted that insects and birds were killed because of the abuse of large amount of pesticide and the spring became silent. After that the environmental issue comes into people’s vision and arouses more attention from the international society.

      Nowadays, the global climate issue becomes increasingly severe and the temperature of the earth is increasing. Scientists predict that for human survival, the temperature rise of the earth from the Industrial Revolution in 1750 to 2100, the end of the 21st century, should not be over 2 Celsius degrees. Until now, the temperature rise of the earth is over 1 Celsius degree. Countries sign relevant agreements in Paris Conference and put forward that in the future, the temperature rise of the earth should not be over 1 Celsius degree, which means that by 2050, people will ban 50% to 70% of fossil energy and by 2100, people will ban all the fossil energy. This is an important event in the development history of mankind and energy restructuring in the future will produce lots of innovative opportunities. Now the main energy people use is coal and it will gradually turn into natural gas, nuclear power and solar energy, hydroenergy and wind power finally, which is the route map of future’s energy use. By referring to this route map, our pathway of industrial development and direction of innovation will be clear. Because CNBM knows the need of large amount of solar energy in the future, it vigorously develops the industry of thin film solar batteries. Therefore, market demand is a motive force of enterprise innovation.


New knowledge brings innovative opportunities

New knowledge and new technologies promote the enterprises to innovate and the development of the internet relies on lots of innovation brought by new knowledge and new technologies. In this aspect, I have two feelings: the first is to combine the internet innovation with the real economy and the second is to make the real economy actively merge into the internet. If the real economy does not embrace the internet, then even the largest enterprise will fall down.

Once in a time, I asked Jack Ma what the biggest challenge for traditional state-owned enterprises will be in the future. He believed that the previous business model of state-owned enterprises was mainly B2C and the enterprises produce products for consumers. However, in the future, the business model of network era is C2B and producers need to consider the personalized need of consumers to produce. In the past without big data, the factories consistently followed the production model of B2C such as making shoes and clothes, producing products with the assembly line and uniform standards and the consumers selected the suitable shoes or clothes. However, with big data, factories can command relevant information of consumers and combine their personalized need with large-scale production by using intelligent equipment.

Take housing as an example. Housing is an issue that people around the world are generally concerned about and need and technologies bring new innovation. Energy Plus 5.0 new type housing made by CNBM is a typical example of innovation. In the past, the housing was energy-consuming. Many peasants in the northern region were unwilling to warm themselves in winter in order to save the expenses. However, they don’t know that if people live in the temperature below 14 Celsius degrees, the body is likely to contract organic diseases. In the past, many diseases of peasants are related with too low indoor temperature. Energy Plus 5.0 housing is new type housing with the functions of geotherm, optothermal, photoelectricity, household wind power and methane, making the family from an energy-consuming unit to a factory of producing energy. Currently, promoted in a large scale in China and completed by the intelligent factories, there are over 3,000 design of new type housing and consumers can select from the computer or have their own idea. By simply inputting and clicking to make sure the order, they can get the housing made by factories. CNBM not only produces new type housing and builds green town in China but also significantly promotes it in countries including Britain, Spain, Chile and Brazil where the local people call it smart housing.

Enterprises make significant innovation under the pressure of market competition

In the market competition, one important issue for enterprises is to reduce the cost. In fact, there are two kinds of ways of competition for them: one is to make innovation and make new products and the second is to reduce the cost, which also needs innovation rather than personnel reduction simply. In the face of the pressure of market competition, enterprises rely more on innovation to solve different kinds of issues and be the early bird in the market.

Factories under China Jushi and BNBM, two listed companies affiliated to CNBM, are also typical examples of innovation. With 1 billion yuan of NOPAT last year, China Jushi, whose main business is glass fibre and its products, is an excellent listed company in Shanghai Stock Exchange. Now the selling price of each ton of glass fibre products is about 5,000 yuan. Through innovation, China Jushi researches and makes new E6 formula, which can make new products save 500 yuan of cost for each ton. Because of the successful experience of realizing the low cost through technical innovation and getting good economic benefits, China Jushi wins a victory in the fierce market competition and makes into the glass fibre enterprise with No. 1 global sales. 

With 1 billion yuan of NOPAT every year, BNBM, whose main business is plasterboard, is also an excellent listed company in Shenzhen Stock Exchange. Generally speaking, in the domestic market, products of multinational corporations or Sino-foreign joint venture have higher price than that of homemade products. However, the plasterboard price of BNBM is much higher than that of multinational corporations. Plasterboard with the Dragon label is our famous brand and obtains the unanimous praise of the industry and consumers. Through innovation, the plasterboard of BNBM with foaming technique not only has more product strength but also saves 0.2 billion yuan of annual cost.

Fashion-orientation brings opportunities of innovation

Fashion-orientation brings some opportunities of innovation. IPhone is favoured by consumers, but what is exactly the secret of its innovation? Among them, the most important factor is to introduce the concept of fashion into the mobile phone to conform to the popular trend in the market and meet the interest of young people. Electric vehicles designed by Musk, CEO of Tesla, are very popular and his plan of Tesla Energy aiming to provide the whole world with electric power attracts worldwide attention. Changing the previous knowledge of storage battery, Musk streamlines storage battery, which has a beautiful and fashionable appearance, can be hung in the room like a painting and is called Powerwall Home Battery. They also have a kind of energy pack of products with delicate craft, which can be put at the corner of the wall like a small freezer and can store 100 KWh of electricity. Now the orders of Tesla batteries last to 2017 and the market demand exceeds supply, which makes us think. Enterprise managers cannot simply regard products as general products. Rather, they should research how to make products integrate with more fashionable elements to attract the attention of numerous consumers and enterprises should be good at seizing these opportunities of innovation.

Two important ways of innovation

Innovation has ways to explore. Currently, many enterprises and youngsters want to make innovation but are confused about the appropriate way. In the past, we always say that there are three ways of independent innovation, that is, original innovation, imitation innovation and integration innovation. Original innovation is an independent innovation and not easy. In America, it is the national large-sized research institutes and universities that research original innovation. Imitation innovation is an innovative pathway from the practice of the reform and opening-up policy in the past 30 years and it is a kind of imitated innovation. Actually, imitation is not disgraceful and some developed countries have imitated the experience of other countries in technical innovation so that they can save a lot of innovation cost. Innovation all over the world is learned and imitated mutually under the premise of strictly following relevant laws and regulations.


There are two kinds of important and effective ways of innovation

Integration innovation. We need to enhance independent innovation and integration innovation and combine different kinds of elements. Economic growth goal in China has already turned from the catch-up pattern in the past into the overtaking pattern so we cannot use the way of imitation innovation in the past but the way of integration innovation. Firstly put forward by foreigners, integration innovation is a kind of innovation combining different kinds of elements. The combination of elements in Schumpeter innovation theory actually is the integration innovation today.

The innovative achievements of CNBM these years are not done in an isolated way but are completed through the combination of different local and international elements. For example, the business of wind turbine blades started in China in 2006 when there were businesses including glass fibre and composite materials in CNBM without the technology of wind turbine blades. After that, CNBM acquired SINOI company in Germany, which was the second largest company in wind turbine blades in Europe at that moment and went bankrupt in the process of operation due to too fast development. CNBM acquired the core enterprise of SINOI company including R&D center, testing center and factory and the company staff soon melted into the culture of CNBM because of high level of professionalism. After the acquisition, CNBM became the largest enterprise in wind turbine blades in China. Wind turbine blades revolve in the air through the principle of aerodynamics. Although they look not very big from afar, actually each of the blade has a very large size, a weight of dozens of tons, a streamlined design and very complex internal structure. Now, CNBM can make the world’s largest wind turbine blades, which are designed by the R&D center in Germany and made in China.

The second case is that CNBM acquired Avancis company in Germany the year before last, which is a thin film solar energy enterprise managed successively by Siemens, Shell and Saint-Gobain, three world’s top 500 companies and whose main business is the business of copper, indium, gallium and selenium with a research institute in Munich. Through this acquisition, CNBM has made a step forward in the business of copper, indium, gallium and selenium thin film solar cells and its newly promoted solar panel has a conversion rate of 17.9%, ranking 1st in the world. 


One does not have to do all the integration innovation by himself and can combine elements of other people with his own specialty or transplant some seemingly irrelevant technologies. For example, one can apply the technology of making bread to making steamed buns, which is also a kind of integration innovation. In the past, foreign employees would ask where the equipment came from when they visited our factories. We would then introduce the source of equipment. And they would ask where the technology came from and we would answer that it came from integration innovation.

Innovation in business model. Lots of innovation thrives from technologies, but some innovation does not have close relationship with technologies. Drucker once said that innovation does not rely on high technology all the time. Instead, medium technology, low technology and zero technology can all make innovation. For example, currently, the front part of chopsticks in some of the restaurants is disposable chopsticks and the rear part is traditional chopsticks. After the disposable chopsticks are used, they can be replaced by new ones, which is just the zero technology innovation. Every year in China, 45 billion pairs of disposable chopsticks are used, which will consume timber of about 1.66 million cubic meters and forest of 2 million square meters. Through this low technology or zero technology innovation, 2/3 of the timber waste will be reduced and resources can be saved.

Another example in life is that in the past, men’s leather shoes sewed with three pieces of leather had shoestrings. Men needed to bend down to wear shoestrings when they wore shoes and sometimes shoestrings were easily stamped. Now, it looks like leather shoes sewed with three pieces of leather, but actually the inner side is the elastic top line without shoestrings, which is also the zero technology innovation to meet the need of consumers. I just mentioned that from 1965 to 1985, among 40 million job positions arranged by America, high technology only took up 6 million and the rest were completed by low technology, medium technology and business model innovation mostly.

The successful operation of Taobao is attributed to the support of technology and network, but more importantly the innovation in business model. As early as in 2000, I began to touch the business of the internet. However, at that time, I lacked mobile terminal and online payment, two key links and at that time, there were not many successful companies of E-business. Now many technical issues are resolved. Jack Ma once said that actually he has limited understanding of the computer even now and he just has made a big platform. His most valuable treasure is data and his core specialty is the ability to process data. The use of Didi to call a taxi is also a form of innovation with the use of internet technology and creates new business model in the transportation industry.

Craftsman spirit and innovative spirit

Innovation needs craftsman spirit. Innovation is not easy or not an inspirational flash. Without craftsman spirit, many innovative ideas cannot be achieved and can only stay at the level of creativity. Popular with consumers, innovator Zhang Guoliang has poured lots of thought into the foldable electric bicycle of CNBM. Over half a year, he has made hundreds of schemes of design modification. Edison is a great inventor and he invents the bulb. Actually, before him, others have completed 90% of work but many of them selected to give up in the process and he has made 6,000 experiments unremittingly to the final success.

When we talk about innovation, what we mean mostly is the continuous innovation. Many entrepreneurs believe that after 10 years, 90% of the enterprise products will change. However, according to the statistics, after 10 years, 90% of the sales income of many enterprises will continue to rely on the existing products and these products are updated continuously simply. Innovation sometimes refers to disruptive innovation, but it is not easy to do it really. Continuous innovation on the current basis, in-depth exploration and industrial transformation and upgrading are fit for general enterprises. Transformation does not mean changing profession and every profession can make innovation. There is no industry without making money but the enterprise without making money and the key is to look for the appropriate innovation point in the industries and enterprises for entrepreneurs.

Successful innovation needs good management. People are likely to ignore the role of management in innovation. Reasons for many unsuccessful NEEQ companies in Zhongguancun include that they deviate from the direction of major innovation and technical services and blindly establish factories on the one hand. On the other hand, many scientists are not good at managing factories. Therefore, there are not many successful listed companies of some schools and research institutes. 


    At that moment, Edison established six or seven companies with enough capital and was good at attracting capital. But Edison did not believe in management or professional managers. Instead, he believed that the enterprise was just technologies and capital. However, because of not good enterprise management, his GE company was forced to go bankrupt and he had to give up the control of the company, which shows that even the most innovative enterprise cannot ignore the role of management and only effective management can make effective innovation.

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