Innovation Factories: Why China’s Shenzhen Isn’t Just a Manufacturing Hub

About four years ago, I visited Shenzhen for the first time. It’s just over the border from Hong Kong, where I live, and I expected the trip would be quick and not too impactful. I was wrong.

I was so inspired by what I saw that, since then, I’ve visited Shenzhen about once every six weeks.

Even in that short period of time, the city has continued to grow and evolve. I have watched it change and witnessed the impact those changes are having, both in China and around the world.

Shenzhen is typically perceived as a manufacturing hub. In fact, what’s happening there is far more profound than simply the making of products, and far more exciting.

Shenzhen is producing world-class innovation, modeling approaches that your business can learn from.

A Brief History of Computing

Early pioneers of computing, such as Bill Gates and Paul Allen, often saw manufacturing as a hobby, assembling components and building machines in their garages. Eventually, this experimentation led to the first personal computers.

When the time came to bring computers to a mass market, these pioneers were in a position to order many interchangeable parts and put them together them in a consistent way, boosting the number they could build and reducing the price.

For decades, making quality products at scale was a solid business model. Dell, HP, Lenovo, Samsung, Apple, and others all followed this blueprint successfully.

Over the past several years, however, cloud computing has shifted the landscape. By bringing many computers together, it’s possible to generate almost unlimited processing power.

As a result, the innovation focus has shifted to software, a shift that has both democratized the process of change and radically shortened feedback cycles. Now, anyone with a computer and coding skills can build and test an app, with very little capital investment.

Shenzhen has taken that cycle to its logical next step, allowing people to build and test hardware at a speed comparable with software.

How Shenzhen Went From Fishing Village to Technological Metropolis in 30 Years

In 1979, Shenzhen was chosen to be China’s very first special economic zone. At the time, it was a fishing village with a population of fewer than 300,000 people. By 2020, it’s anticipated that the city will be home to in excess of 15 million people.

In the space of a few decades, Shenzhen has transformed to a degree that would be unimaginable in most cities. The airport, built in the shape of a manta ray, is a perfect symbol of Shenzhen’s ambitions.

Shenzhen has long had a reputation as the world’s workshop, and there’s a reason for that. A staggering quantity of goods is manufactured in the city. More recently, however, Shenzhen has evolved into a perfect storm of markets, workshops, and factories. This makes it possible to design, build, and test new hardware at an astonishing pace.

Like no other place in the world, Shenzhen contains the ingredients for building, testing, and refining prototypes of electronic products. Retailers, component suppliers, and factories coexist practically side-by-side.

When Kickstarter projects are funded, their founders often turn to Shenzhen to build the products. When politicians ask why manufacturing cannot be relocated to the United States, Shenzhen is the answer.

There is currently no place in America where every facet of the manufacturing process collides in such a small area as Shenzhen.

A Licence to Tinker

While the ease of manufacturing in Shenzhen is exciting in itself, the real revolution stems from the ease with which it’s possible to build and test new products.

Imagine that you have an idea for a new mobile phone. In Shenzhen, you could engage a factory to produce a few prototypes, then stand outside on the street, sell them to passersby, and request feedback. When your buyers tell you what they like, and don’t like, about the phones, you could adjust the design accordingly and manufacture another batch.

In the West, the predominant perception of Shenzhen is as a workshop, where designs from Silicon Valley are brought to life. That perception is becoming increasingly outdated. Companies both large and small are now collaborating to create a lightning-quick manufacturing cycle that invites entrepreneurs to receive real-time feedback from their marketplaces.

What Does Shenzhen Mean for You?

If you make physical products, Shenzhen offers an extraordinary opportunity. The city is home to more than 200 incubators, where people experiment with new ways of making products.

For those with an idea for a new product or company, Shenzhen can provide you with unparalleled speed of manufacture and feedback. It’s a place where you can refine your product before you take it in into production.

By the same token, if you ignore what’s happening in Shenzhen, you may find that your business model becomes increasingly antiquated. Hardware innovation is no longer simply about making a product and selling it. It’s about listening to the market, receiving feedback, and making adjustments based upon that feedback.

Shenzhen leads the way in making this model a reality, and it’s an example makers of products around the world can understand and use to their advantage.

In Hardware Innovation, All Roads Lead To Shenzhen

If you’re reading this post in the West, you may have been unaware of the enormous influence Shenzhen is exerting on the evolution of manufacturing.

You may not have realized, for example, that Shenzhen is the place where drone manufacture first began at scale, and the home of the world’s largest drone company, DJI.

DJI takes advantage of precisely the model described above to accelerate the feedback cycle. The company experiments with different models and parts, using limited production runs to solicit customer responses and incorporating that information into future designs.

Perhaps you’ve noticed the massive recent growth in the popularity of e-cigarettes. These, too, started life in Shenzhen and have now spread across the globe.

Most powerfully of all, however, is the influence of Shenzhen in the mobile phone space. Apple, of course, has been a huge player in this field since the launch of the first iPhone. Now, however, Apple is seeing significant competition from Chinese competitors.

There are currently at least four major brands making statements in China, two of which have achieved significant global penetration. Those four are Huawei, Xiaomi, Vivo, and Oppo. All four have achieved a very strong ratio of quality to price, and taken innovative steps to create desirable brands.

The Huawei P9, for example, is a flagship phone developed in partnership with Leica cameras. As a company, Huawei is very keen to create a link between its phones and high picture quality, so partnering with a respected manufacturer of cameras is a smart move.

Even more intriguingly, Xiaomi’s newest phone is rumored to offer higher technological specifications than the next iPhone, coupled with some aggressive hardware innovations. The company has partnered with world-class designer Philippe Starck, and the result is a beautiful phone with an edge-to-edge glass display and a ceramic casing.

The key takeaway here? Companies based in Shenzhen are taking advantage of the city’s unique business environment to out-innovate the global leader in the smartphone market.

They benefit from the rapid feedback loops Shenzhen makes possible, and they’re now combining that with smart brand choices that make their brands as desirable as their hardware.

Every Innovator Needs To Visit Shenzhen

Shenzhen is an incredibly instructive example of a city, built from practically nothing, that has become a global leader in technological innovation.

The old model of designing and shipping hardware products is slowly dying. The future lies in partnerships that allow rapid innovation and testing of prototypes. At the moment, no place in the world does that more effectively than Shenzhen.

If you produce hardware, or you’re thinking of doing so, you may benefit considerably from visiting Shenzhen and testing your ideas. Even if you’re working at a scale that makes it uneconomical to actually travel to Shenzhen, you can still learn from the principles that enable companies in the city to innovate so rapidly.

The hardware innovation cycle is shrinking, and Shenzhen is at the vanguard of this movement. The process of listening to customer feedback, understanding what sells, and revising your designs based upon that information, is critical to success in the digital era.

Originally published at Tech in Asia.