GE CHINA TECHNOLOGY CENTER EVOLVING ROLE IN GLOBAL INNOVATIONHa.docx

GE CHINA TECHNOLOGY CENTER: EVOLVING ROLE IN
GLOBAL INNOVATION
Haiyang Li and Rebecca Chung wrote this case solely to provide
material for class discussion. The authors do not intend to
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In mid-2014, Dr. Xiangli Chen, general manager of the General
Electric (GE) China Technology Center (CTC), and chief
technology officer and vice president of GE China, had just
been promoted to GE officer status and was thinking about the
next stage of the CTC.
Located in Shanghai, the CTC was formed in 2000 to work with
GE’s other research and development (R&D) centers so that it
could bring technology breakthroughs and product innovations
to the market. It was not only one of the biggest foreign-
invested R&D centers in China, but also one of the few
enterprise R&D centers with fundamental research capabilities
and activities in the country. With its “In China for China”
(ICFC) strategy that was initiated in 2008, the CTC specifically
launched new projects for the Chinese market, rather than only
adapting GE’s U.S. products to the Chinese market. It then
disrupted the anti-cannibalization paradigm by bringing
innovations for the mid-range market in China back to the
developed countries like the United States.

Given the growing importance of China as a market, and as an
R&D base, Chen had to consider a few important issues in order
to maintain the growth of the CTC: what would the role of the
CTC be in the long run? How would the CTC continue its role
when China was strategically shifting from being the “world’s
factory” to a global innovation powerhouse? How could the
CTC effectively coordinate with other GE innovation centers in
China and with the rest of the GE Global Research network? GE
had been moving very quickly, as was China; Chen needed to
act accordingly.
GE AND GLOBAL RESEARCH
Headquartered in the U.S. state of Connecticut, GE was formed
in 1892 when the Edison Electric Light Company, which was
established by incandescent lamp inventor Thomas Edison in
1878, merged with the Thomson-Houston Electric Company. It
had been listed on the Dow Jones Industrial Index since 1896.
Jeffrey Immelt, who joined GE in 1982, became GE’s chief
executive officer (CEO) in 2000 and chairman of the board in
2001. The company’s businesses covered financial services via
GE Capital and the following industrial segments: power and
water, energy management, oil and gas, aviation, healthcare,
transportation, appliances and lighting. As one of the largest
employers in the United States and in the world, it had more
than 300,000 employees working in over 100 countries, with
over 10,000 employees who worked in China. In 2013, GE had
total assets of US$654 billion, of which 50 per cent were based
in the United States.1 It generated revenues of $146 billion, net
earnings of $13 billion (see Exhibit 1) and 47 per cent of its
revenues came from the United States (versus 70 per cent in
2002).
GE had a proven track record of innovation in many scientific
disciplines and business areas and had obtained thousands of
patents. Its scientists won two Nobel prizes. In 2012, Forbes
named GE one of the world’s most innovative companies. In
2013, the company spent $5.4 billion on R&D (see Exhibit 1).
GE Global Research,2 headquartered on a 550-acre3 site in

Niskayuna, New York, was one of the world’s largest and most
diversified industrial research organizations. It was positioned
to be the growth engine of the company by striving to drive
technological breakthroughs and working with business units to
introduce new technologies into the product pipeline. In
addition to fundamental scientific disciplines such as aero-
thermal and mechanical systems, chemical engineering,
electrical technologies, materials technologies and software
sciences and analytics, it focused on innovating in leading-edge
areas such as molecular imaging and diagnostics, energy
conversion, nanotechnology, advanced propulsion, organic
electronics, security and sustainable energy. GE Global
Research used about one-tenth of GE’s total R&D expenditure
for fundamental research that was not tied to any specific
requests made by the business units, while business units split
the remaining budget for their own applied research and product
development.
GE IN CHINA AND THE ESTABLISHMENT OF THE CTC
After starting to trade with China in 1906, GE became the first
foreign multinational company (MNC) that conducted
manufacturing activities in China. In 1979, the year after the
advent of China’s open door policy, GE revived its operations
in the country and started to develop its technologies in China.
In 1999, GE Global Research set up its first overseas
technology center in Bangalore, India. The main reason for
using this location was that Jack Welch, the former CEO and
chairman of the board of GE, who had initiated globalization,
was very impressed by the low-cost talent there and was
attracted to the country’s outsourcing potential. In 1999, China
spent 0.76 per cent of its gross domestic product (GDP) on
R&D, while India spent 0.71 per cent.4 At that time, even
though the Chinese government had encouraged foreign MNCs
to set up R&D centers in China, most of these centers did not
actively carry out fundamental research due to concerns about
the lack of an innovation infrastructure, weak intellectual
property protection and the lack of experienced scientists.

Siemens founded a small R&D center in Beijing a year earlier,
while Philips was planning to set one up in Shanghai the
following year.
Chen believed that GE should also set up a technology center in
China. He saw the market potential of China and the benefits of
having a local technology center, such as the opportunity to
cooperate with local government, universities and research
institutes. He gained support from several pro-China colleagues,
including the head of GE China, and then volunteered to
perform the due diligence and to investigate the feasibility and
benefits of such a center. He talked to many colleagues and
went to China to speak with numerous people who ran R&D
centers there. With enthusiasm and determination, his task force
was able to convince the top management to approve a small
investment of $200,000. Chen reflected, “At that time, the focus
was on India. But I asked the business units whether they
thought the availability of technical talent in China would help
them grow. Based on their positive response, I asked the top
management to let me try, even with a small budget.”
In 2000, Chen was relocated back to Shanghai to establish the
CTC in order to conduct technology research, develop new
products and support manufacturing and sourcing. As the most
cosmopolitan city in China, Shanghai had the highest number of
foreign R&D labs in the country and also had a relatively good
talent pool. The CTC rented space in Caohejing Hi-Tech Park.
Building a capable local team was challenging for Chen, and
initially, he was given a team of only 10 people. According to a
McKinsey report:5
China has 1.6 million young ones, more than any other country
we examined. Indeed, 33 per cent of the university students in
China study engineering, compared with 20 percent in Germany
and just 4 per cent in India. But the main drawback of Chinese
applicants for engineering jobs, our interviewees said, is the
educational system’s bias toward theory. Compared with
engineering graduates in Europe and North America, who work
in teams to achieve practical solutions, Chinese students get

little practical experience in projects or teamwork. The result of
these differences is that China’s pool of young engineers
considered suitable for work in multinationals is just 160,000
[people] — no larger than the United Kingdom’s. Hence the
paradox of shortages amidst plenty.
Chen realized that, although China had a large supply of
technical talent, most of these individuals lacked global
communications skills. Thus, Chen had to relocate a few
experienced colleagues from the GE Global Research
headquarters and hire Chinese returnees. He also had to train
new local recruits, who were either engineers from related
industries or fresh graduates, by assigning them to international
project teams.
At the initial stage, the priority for the CTC was to solve the
specific local technology problems and support local businesses
to develop products and suppliers. In 2001, Immelt, who was
the CEO of GE Healthcare and who had successfully developed
business in China, became GE’s chairman of the board. He
aimed to develop multiple businesses in China. In support of the
development of the CTC, Immelt invested in building facilities
for the CTC. In late 2002, Michael Idelchik, who joined GE in
1978, took the role of managing director of the CTC. A few
months later, Chen also moved to GE Healthcare China in
Beijing to focus on developing new products for this business
unit. In May 2003, the CTC’s own facility, a 47,000 square
meter (m2) premises at Zhangjiang Hi-Tech Park in Pudong,
was inaugurated.6 In 2004, Idelchik left, and Bijan Dorri, who
joined GE Global Research in 1983, took over.
At the CTC, each R&D employee needed to report to multiple
leaders: the head of the CTC, the global technology leader, who
coordinated various laboratories for that technology and the
leader of a special project that involved product development
staff working in a business unit. In addition, scientists and
engineers from the headquarters would come to the CTC on
assignments to collaborate with the CTC. Their contribution
was not immediate, however, because they needed to first

understand the differences between the environments in the
United States and China — such as the workflow in hospitals.
Chen stated:
It’s only when you know the value-creation process well, [that]
you can localize by changing the design and qualifying the
supplier, etc. For example, the difference between wind speed
in the [United States], and that in China, has a huge impact on
the product design of our wind turbine.
ICFC STRATEGY The CTC’s New Leadership
In August 2007, Chen rejoined the CTC to head up its
operations, replacing Dorri. At that time, China’s central
government had just announced that R&D was the country’s top
priority, with a focus on areas such as energy, environmental
protection, healthcare and transportation. In 2007, China’s R&D
expenditure increased to CNY¥371 billion — 1.4 per cent of its
GDP (versus ¥68 billion, 0.76 per cent of its GDP, in 1999).
Chen noted:
I realized that China had become a good place for innovation,
particularly in the healthcare industry. Healthcare innovation
depends on user experiences and customer demands that are so
different between developed countries and emerging markets.
Immelt supported GE Healthcare China to develop new products
suitable for the Chinese market.
To benefit from economies of scale and to start localizing, GE
adapted its products that were designed for developed markets
to China. The CTC, together with the business unit’s
development staff, used a “partial re-design” approach to
incrementally modify these upscale products. It typically took
two to three years to complete a local development cycle.
However, local Chinese competitors were growing very fast and
they were quickly moving up from the low-end market to the
mid-range segment. Chen, and other senior executives in GE
China, realized that the CTC had to originate projects that
specifically met China’s unique needs as a means of speeding
up its penetration. Yet, GE headquarters had never given real
consideration to budgeting for China, partly because revenue

generated from China was still relatively small to GE (less than
4 per cent). They did not see the immediate payoff of
innovating “down” or “differently” for the low-end segments,
and they worried about potential cannibalization. Nonetheless,
Chen and several other executives at GE China decided to
collectively approach Immelt to obtain his support. They
proposed the initiation of ICFC R&D projects and received
Immelt’s special funding of $15 million for 25 projects in the
first year.
Project teams, however, faced various challenges. For example,
initial products, developed from projects that were typically led
by engineers and salesmen, did not sell well because these
products were still too expensive in China. To solve this
problem, the business unit adjusted the price and distribution
channel. To ensure that the team understood the business unit’s
marketing roadmap and customer needs, the CTC invited a
product manager from a relevant business unit to join each
project team, as well as to sell the innovative products back to
headquarters. After implementing this solution, the CTC
executed the ICFC strategy smoothly and continued to receive
additional funding for more projects. Skeptical people also
came on board in regard to this strategy. The CTC began to play
a key role in working with business units in China and in
developing goods and services that could meet the unique needs
of this market.
Healthcare as an Example
History of GE Healthcare and Its China Operations
GE’s involvement in healthcare started in 1896, when Elihu
Thomson built electrical equipment to produce X- rays, which
manufactured images for diagnosing bone fractures and locating
foreign objects in the body. X-ray technology was discovered
and introduced only a year earlier.7 The company established
GE Healthcare,8 headquartered in the United Kingdom, to
provide medical technologies and services, including medical
imaging and information technologies, medical diagnostics,
patient monitoring systems, drug discovery, biopharmaceutical

manufacturing technologies and performance improvement
solutions. With more than 50,000 employees (by the end of
2014), GE Healthcare had sold its products to hospitals, medical
facilities, pharmaceutical and biotechnological companies as
well as life sciences research institutes worldwide.
In 1991, GE set up a joint venture, GE Hangwei Medical
Systems, in Beijing to start manufacturing in the country. GE
created two more joint ventures in 1996, and later combined
these two with GE Hangwei to form GE Healthcare China. Its
primary sectors included medical imaging, which covered
ultrasound equipment9 and more technologically advanced
equipment, such as X-ray, magnetic resonance imaging (MRI),
computed tomography (CT) and positron emission tomography
(PET). Its main customers were sophisticated hospitals in major
cities.
In 2000, GE Healthcare China established an applied R&D and
manufacturing base in Wuxi, Jiangsu Province, to develop and
produce affordable ultrasound products. In 2001, by using the
latest technologies developed at GE Global Research, it
launched its first compact ultrasound product,10 the LOGIQ
Book. This product was 30 to 40 per cent less expensive than
the traditional console-type devices. Using the country’s low-
cost advantage, the Wuxi plant started to manufacture the
product and then export a significant portion of its production.
In 2003, 80 per cent of the products made in Wuxi were
exported.
In 2006, China’s total expenditure on healthcare was 4.6 per
cent of its GDP, versus 15.9 per cent in the United States, and
its total expenditure on healthcare per capita was $213, versus
$7,110 (see Exhibit 2). Most of the hospitals and clinics in
China were still poorly funded and equipped. However, there
was market potential due to rising incomes, an aging
population, increasing health consciousness and augmenting
government expenditure. Domestic consumption of GE products
made in Wuxi increased from 20 per cent in 2003 to 35 per cent
in 2006.

GE Healthcare’s main competitors were Siemens Healthcare,
Philips Healthcare and Toshiba Medical Systems. In 2006, these
four players had a combined share of over 60 per cent of the
high-end medical equipment market in China. Other foreign
companies, such as Varian Medical Systems, Hitachi Medical
Systems and Carestream Health, were niche players in several
product categories.
Challenges from local Chinese competitors were also growing.
Among them, Mindray Medical International Ltd. (Mindray)
was the market leader for black-and-white scanners (see Exhibit
3). In 2006, Mindray launched its first color ultrasound scanner
to target the mid-range market and was listed on the New York
Stock Exchange. That same year, it made net revenues and a net
income of $194 million and $46 million, respectively, growing
at a five-year compound annual growth rate (CAGR) of 50 per
cent and 58 per cent, respectively.
Of its net revenue, 49 per cent came from over 140 overseas
countries, including growth markets that GE also targeted.
Mindray had 30 per cent of its net revenue generated from the
medical imaging sector that GE focused on. The company spent
$19 million (10 per cent of its net revenue) on R&D (see
Exhibit 4). Using an extensive network of third-party
distributors in both urban and rural areas, Mindray sold medical
devices to approximately 27,000 community hospitals and
clinics in China.11 It also established service centers in every
province to provide training as well as prompt, low-price repair
and maintenance services. In contrast, GE’s third-party
distributors were located primarily in large cities and provided
limited after-sales services.
Moving Down the Pyramid and Reversing Innovation
In 2008, inaugurating its China headquarters next to the CTC in
Zhangjiang Hi-Tech Park, GE focused on healthcare, energy and
aviation in the country. The CTC started to develop
technologies that helped GE Healthcare China target the mid-
range market (see Exhibit 5). Historically, GE sought choices
and precision when developing products. Using the ultrasound

scanner as an example, GE tended to upgrade product
performance by adding imaging modes, increasing picture
resolution, specializing probes12 and improving ergonomics.
The China project team made a great effort to understand
customer needs by regularly visiting community hospitals and
clinics, talking with administrators and doctors as well as
observing their workflow. From these visits, the team realized
that many of the features were not relevant to these healthcare
institutes, which were often overloaded with patients and had
limited space or were in remote locations. Instead, these
customers preferred products that were affordable, compact,
portable, easy to use and durable.
By the end of 2013, the team developed more than a dozen
healthcare products which were well received not only in China,
but also in emerging markets and even in developed countries.
For example, with the ICFC funding, the China team developed
the Brivo CT 315/325 scanners, which were more compact, less
energy consuming and 30 per cent less expensive than imported
products with similar functionalities. In the first six months
after launch, 100 units were sold in China. Over two-thirds of
its clients had not previously owned a CT scanner. After that, an
increasing number of clients from countries in Southeast Asia,
Latin America, Africa and Europe bought this product. GE was
even getting regulatory approval to sell the product in the
United States. Furthermore, with ICFC funding, GE
collaborated with Shanghai Pulmonary Hospital to develop a
computer-aided detection tool for X-ray imaging that would
screen for pneumoconiosis (occupational lung disease). This
tool increased the screening efficiency by 70 to 80 per cent,
making fast screening possible during times of high patient
inflow.
In addition, colleagues in Norway, Germany, the United States,
and China (mainly in Wuxi) worked together to develop the
Vscan handheld ultrasound scanner, which allowed for
diagnosis at the point of care. Moreover, the tele-ultrasound
remote healthcare system13 allowed doctors at a remote

location to seek medical opinions from experts who were far
away. This usage was in line with China’s Ministry of Health’s
advocacy for having sophisticated hospitals support primary
healthcare institutes. Thus, the Vscan enabled GE Healthcare to
penetrate the mid-range market and even address customer
needs in the bottom-of-the- pyramid market. Indeed, the Vscan
sold well in emerging markets, such as Indonesia, and it was
also adopted in the United States (though in different contexts)
(see Exhibit 6).
In 2013, over 70 per cent of new products launched by GE
Healthcare China were developed for primary healthcare
institutes in China and other emerging markets. GE Healthcare
China expected that the revenue contribution of primary
healthcare institutes would increase to 50 per cent by 2015. Dai
Ying, chief technology officer of GE Healthcare China and
technology leader of Diagnostics and Biomedical Technologies
of GE Global Research Center, added: “GE’s Healthymagination
initiative really pushes us to deliver the customer value
proposition of decreasing costs, improving quality and
increasing access” (see Exhibit 7).
THE CTC: IN CHINA FOR THE WORLD
Achievements
By 2013, the CTC had accomplished more than 100 R&D
projects each year, some of which were cross- business
initiatives. GE Global Research’s headquarters and Europe
Center led approximately half of the international projects,
while the CTC led the rest.14 When other centers were leading
the projects, the CTC performed only certain specific tasks. The
choice of the leading center depended on factors such as
expertise and export constraints. Chen explained, “We aim at
leveraging each other and minimizing duplication.”
By the end of 2013, GE had spent over $250 million on ICFC
projects, leading to over 40 new technologies and products,
such as the non-thermal brine concentrator for water recovery.
Two-thirds of the production coming from these projects was
for local use, while the remainder was for exporting primarily to

emerging markets and secondarily to developed markets.
By using this global-local project approach, the CTC continued
to receive funding for ICFC projects. Technology centers in
India, Brazil and even Germany followed the same approach.
Since its establishment, inventors at the CTC have been named
on over 1,000 patent applications. For three consecutive years
(2012 to 2014), the CTC had an executive, including Chen,
named as one of the “Top 50 Innovators in China” by CBN
Weekly business magazine. In 2013, the CTC also received,
from Scientific American (the Chinese version) magazine, the
prestigious “Top 10 Leading R&D Centers” award for its
research spending, commercialization and talent training and
management.15 Chen noted:
In the past, [the] CTC focused on technology localization,
adaptation, re-design and then local market-driven innovation. I
hope [the] CTC will become a center of excellence in key areas
of business to move the global network’s center of gravity to
China.
New Role
While the CTC was evolving, GE made several breakthroughs in
its R&D strategy, both in China and worldwide. In 2011, GE
planned to invest $500 million, as part of its annual R&D
expenditure to establish five innovation centers across China.
These five innovation centers, together with the Healthcare
R&D sites in Wuxi and Beijing, worked closely with the CTC to
constitute an R&D staff of 3,000 people (mostly Chinese
nationals) and to build a network of over 150 laboratories.
These centers aimed at co-creating new technologies and
products with local customers as well as sourcing and
supporting local suppliers. Rather than using third-party
distributors, GE also deployed staff to each center for marketing
and sales, as well as customer services (e.g., training,
installation, repair and maintenance) to directly build customer
relations and loyalty. The first two centers were opened in
Chengdu and Xi’an in 2012 (see Exhibit 8).
Located in the inner region of China, the Chengdu Center was

dedicated to developing products for primary healthcare,
especially for residents in rural areas. By closely observing
rural customers, project teams were able to develop insights
into their specific needs. For example, team members observed
that it was very time- consuming and inconvenient for the
nurses to disconnect and reconnect a patient’s monitor wires
every time they moved a patient from his or her bed to the
surgery room. Thus, they recommended the development of
wireless monitors. There was also a usability laboratory where
the team could test the prototypes by watching how doctors and
nurses used these devices. Every quarter, the senior
management of GE Healthcare China visited the Chengdu
Center to listen to the project team’s innovation ideas and
review their progress.
Recently, GE Global Research established GE Software to focus
on software development and analytics, which could be applied
to different businesses, such as the management of medical
equipment and cross- institute patient records. Headquartered in
California, GE Software hired approximately 1,000 developers
and analysts in 2012. GE Global Research was also establishing
its first sector-focused center in Oklahoma (with a focus on the
oil and gas industry) and launching two other small centers in
Michigan and Israel (see Exhibit 9). The center in Israel — a
nation renowned for its high-tech start-ups — was aimed at
facilitating the introduction of advanced technologies to GE
through partnerships with local technology companies and
academia. In addition, to speed up innovation, GE Ventures16
was formed to invest in start-ups in healthcare, energy,
advanced manufacturing, software and analytics. Therefore,
with the additional resources, but also pressure from other
centers, the CTC needed to redefine its role.
Opportunities
Potential to Become the World’s Innovator
Over the past 10 years, China’s environment for innovation had
improved significantly. China outperformed other mid-income
countries and moved closer to high-income countries in terms of

innovation capabilities and results. For example, from 1999 —
when Chen investigated the feasibility of setting up the CTC —
to 2012, China’s gross domestic expenditure on R&D increased
almost 15 times, from ¥68 billion (0.76 per cent of its GDP) to
¥1,030 billion (1.98 per cent of its GDP) (see Exhibit 10).17
For the same time period, the country’s number of researchers
increased 2.6 times, from 531,100 to 1,404,017.18 The quality
of education, and levels of experience, for these researchers had
increased as well.
Furthermore, according to the Global Innovation Index (GII)
2014, China as an upper-middle income economy moved up by
six places from 2013 to reach number 29, making it comparable
to the high-income countries that dominated the top 25
rankings. If China continued to improve at such a pace, it would
move to the top 25 within only a few years. In contrast, India
slipped to number 76, and Brazil was number 61, in the GII
rankings.19 Thus, the CTC could benefit from its location
advantage when redefining its new role.
Untapped Industrial Internet
In 2013, GE started to realize its Industrial Internet vision. This
involved gathering data from all machines, including medical
devices and industrial equipment, for control, analysis,
prediction and also allowing machines to communicate with
each other. Not only would this reduce labor costs for operating
the machines, but it would also facilitate predictions about
repair and maintenance for these machines, hence reducing, or
even eliminating, unplanned downtime.
The Industrial Internet connected people, machines and
analytics on a large scale. According to the McKinsey Global
Institute,20 China was going through a digital revolution. Using
healthcare as an example, when China’s Internet was moving
from consumer-oriented to enterprise-driven, by 2025, there
would be a potential annual savings in healthcare expenditures
of ¥610 billion, or $99 billion,21 which was 13 per cent of the
growth in healthcare costs projected from 2013 to 2025. The
savings would come from initiatives such as electronic personal

healthcare record systems, regional healthcare networks that
connected hospitals for coordinating referrals and follow-ups,
tele-ultrasound remote healthcare systems and web-based
patient tracking systems. Hence, the CTC could play a
fundamental role in this revolution.
Challenges
Competitors’ Move
To facilitate innovation and penetrate the mid-range market,
other MNCs and local Chinese companies had strengthened their
R&D investment both in China and worldwide. Siemens
Corporate Technology had over 20 technology centers in
different developed markets and emerging markets, including
Russia, India and China. It employed nearly 7,000 scientists,
software developers and intellectual property experts
worldwide. In 2013, Siemens invested EUR€4.3 billion, or $5.9
billion22 — about 5.7 per cent of its revenue — on R&D for its
wide range of businesses.23 In China, Siemens set up a
technology-to-business innovation center in Shanghai in 2005 to
join its R&D unit in Beijing, established in 1998, to develop
local solutions. The company would soon open another R&D
site in Nanjing, Jiangsu Province.24
Philips Research had eight centers in developed markets and
emerging markets, including India and China. It employed about
2,000 R&D people worldwide to focus on consumer-centric
research in all of its three business sectors: healthcare, lighting
and consumer lifestyle. In 2013, it invested €1.2 million, or
$1.7 million,25 about 5.2 per cent of its revenue, in R&D.26 Its
Shanghai center, had recently set up branch laboratories in other
cities, such as Suzhou in Jiangsu Province, to increase
fundamental research in areas such as medical imaging
solutions. To expand its product portfolio to the lower end,
Philips bought Goldway, a Shenzhen-based company that
manufactured patient and fetal monitors.27
In the healthcare sector, Toshiba Medical Systems set up an
R&D base in the Dalian High-Tech Industrial Zone in 2012.28
With nearly 200 R&D staff, it aimed to develop imaging

products for global sales.29 Mindray quickly broadened and
upgraded its technologies by recruiting overseas experts and
going through numerous mergers and acquisitions in China and
overseas. In 2013, Mindray acquired ZONARE Medical
Systems, Inc., a U.S.-based technology leader in the high-end
ultrasound segment, for its R&D capabilities and distribution
channels.30 Mindray also strengthened its R&D infrastructure
in China, the United States and Europe (see Exhibit 11). The
company replaced Aloka to become the fourth-best player in
China’s ultrasound market, which was estimated to have
generated $1 billion in sales in 2013.31 It also led the in vitro
diagnostic products category in China, in which GE was not
highly involved.32 There were an increasing number of local
start- ups that focused on developing niche technologies, such
as PET scanners, to compete with GE.
Talent
In previous years, the CTC had continued to improve the quality
of fresh graduates by collaborating with academic institutes in
China to add practical elements to their curricula and also to
allow students to sample what a career in R&D would be like.
For example, the CTC hosted the annual GE Tech Awards to
provide master’s and doctorate students with an innovation
platform upon which to practice what they learned in the
classroom. In a master’s program in engineering at Shanghai
Jiaotong University, the CTC allocated over 10 R&D staff
members to act as coaches to guide students that were
conducting research projects. The CTC also offered internships
to university students. Yet, the CTC still faced talent
challenges. First, with the rising numbers of local private
companies and the changing expectations of younger
generations, MNCs were now relatively less attractive to talent
than before. Second, R&D activities were increasing in the
country. According to Scientific American, nearly 470 of the
global 500 MNCs operated R&D centers in China. Thus, talent
retention became a priority.
Talent needs were also evolving. For instance, GE’s Industrial

Internet vision demanded new capabilities, (i.e., analytical and
leadership skills) in addition to technical skills. To partly meet
the cross-discipline requirement, in 2013, GE Global Research
launched a Software Leadership Program, a new multi-year
internal development program for R&D staff. The CTC needed
to develop complementary initiatives to equip its team with the
newly demanded capabilities. More importantly, according to
Chen:
For over a century, all of GE’s major businesses have originated
from the [United States] or Europe. Emerging markets will
likely breed new businesses of the future, and [the] CTC and the
GE Innovation network will drive to achieve this inspiring
vision. Thus we require technical talent with a nose for new
business models, and who are able to interact with customers to
identify emerging businesses that are beyond GE’s core but
have huge growth potential.
WHAT TO INNOVATE? HOW TO INNOVATE WELL?
Over the years, the CTC took on an increasingly significant
role. According to Chen, the past 15 years were a critical period
for GE to explore the Chinese market. Chen reflected:
GE has a culture that allows you to change your own job . . .
and find your way to prove your point. Now, making [the] CTC
a critical member of the GE Global Research network is not a
dream anymore. It has become concrete . . . . Each center should
have its own distinct focus, while cross- center collaboration
should continue. In the next 15 years, while China’s low-cost
advantage has been diminishing, our goal is to develop [a]
distinctive competitive advantage in our global R&D network.
What value could the CTC bring to the Global Research network
in the short run and in the long run? What should be Chen’s top
priorities in the next five years?
Mindray, founded in 1991 and headquartered in Shenzhen
(Nanshan) High-Tech Park,33 started with its business of
importing patient monitoring systems into China. The average

price of a patient monitor was around $2,000. In the mid-1990s,
the company started its own R&D and production. Mindray not
only offered products at a low price, but also fulfilled the
special needs of community hospitals (Levels 1 & 2) and clinics
in small cities, towns and villages. For example, knowing that
the electricity supply was unstable in the rural areas, Mindray
engineered dual (battery and alternating current) equipment so
that it could continue to function with an illuminated control
panel, even when electricity was cut off.
In 2001, it introduced China’s first digital black-and-white
ultrasound scanner, while GE was mainly selling the more
expensive and advanced color scanner to Level 3 hospitals. Due
to the adoption of the latest digital technology, the image
accuracy of Mindray’s black-and-white scanner was better than
that of existing black-and-white scanners produced by other
local companies. More importantly, these scanners were
affordable for most of the hospitals and clinics in China and in
emerging markets.
In 2004, after receiving the approval of the Food and Drug
Administration in the United States, Mindray started exporting
products to the United States, which was the largest (40 per cent
of the total) medical equipment market in the world in terms of
value. By 2006, Mindray had become the market leader, by
units and value, in the patient monitor segment, the diagnostic
laboratory instrument segment, and the black- and-white
ultrasound product category in China. In 2006, Mindray had
approximately 2,000 employees, plus 700 R&D staff.
In May 2009, GE announced the launch of its
Healthymagination Initiative in anticipation of the enactment of
two federal statutes — the Patient Protection and Affordable
Care Act and the Healthcare and Education Reconciliation Act
— in the United States in the following year. By 2015, it spent:
· $3 billion on R&D to focus on innovations that
decrease costs to offer high-tech products at more affordable
price points, allow more people in rural and underserved areas
to have access to healthcare services, support consumer-driven

healthcare and improve healthcare information technology
· $2 billion on financing healthcare information
technology
· $1 billion on related technology and media content
to drive health awareness It aimed at decreasing costs by 15
per cent, reaching 100 million additional patients per year,
increasing access by 15 per cent and improving quality by 15
per cent. GE Global Research would be involved in this
initiative. Immelt, stated: Our focus on the environment and
affordable healthcare will be our pillar strategies for growth
into the next decade. Healthcare is an important industry that is
challenged by rising costs, inequality of access and persistent
quality issues. Healthcare needs new solutions. We must
innovate with smarter processes and technologies that help
doctors and hospitals deliver better healthcare to more people at
a lower cost. Healthymagination is our business strategy that
seeks to help people live healthier lives, support customer
success and help GE grow. In October 2009, GE announced
the formation of the “GE Healthymagination Fund,” a new
equity fund that would make investments in highly promising
healthcare technology companies. The formation of the fund
was part of GE’s $6 billion Healthymagination initiative. The
fund would target three broad areas for investment: broad-based
diagnostics, healthcare information technology and life
sciences. The fund would draw on capabilities from across GE
Healthcare, GE Capital and GE Global Research and would have
a global footprint. Immelt stated: GE is able to offer a unique
proposition to promising healthcare companies. In addition to
providing growth capital and investment expertise, through this
fund, we offer entrepreneurs the opportunity to work directly
with a global leader in healthcare technology in areas of mutual
interest.

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