Editor's note: This summer, Business Now takes a look at the innovators within AmCham China's membership. To see more, check out our Innovation page and search with #InnovatorsofAmChamChina on social media.
When Dwight Nordstrom thinks about innovation, the Internet giants are not what come to mind.
“I’m in the business of manufacturing, so I’m looking at hard products,” he said. “Our companies ask themselves what the marketplace is looking for and how they can adapt to local needs and cost structures so that China can supply it in a competitive way.”
Nordstrom is Chairman of Pacific Resources International (PRI), a family-owned American holding company for manufacturing investments in China. An avid basketball player and outspoken Christian in both his personal and professional life, Nordstrom first arrived in China in 1979 from the US after the important revelation that China had great manufacturing potential. Over the decades, however, the landscape of manufacturing has dramatically changed, leading to a shift in PRI’s priorities.
Originally, PRI was interested in China because of the low cost of labor. In the present day, the company is incentivized to maintain operations in China because it’s easy to succeed in local markets with their “application patents.”
“Typically, we don’t do inventive, out-of-the-box patents,” Nordstrom said. Instead, the company innovates at a scrappier level. PRI’s operations hire application engineers to modify existing products for Chinese consumers, while still managing to come up with one-of-a-kind, patentable products every few years for clients in industries such as automotive and telecommunication.
Recently, a NYSE-traded telecommunications company came to PRI looking to set up an antenna design and manufacturing-support center in China. PRI took care of this successfully under a turnkey management contract. Initially 4 engineers were hired; now there are 16 people working as engineers and in sales and marketing. While originally expected to function only as a place to modify designs for end-use in the USA, the center now puts out as many new and innovative designs to optimize wireless networks as the company’s Chicago-based HQ design center. Furthermore, designs that were initially meant for use back in America, such as mobile and indoor LTE, broadband and LMR antennas, have been adapted for Asian markets.
PRI has found that the key to successful innovation lies in R&D team dynamics. Nordstrom doesn’t work with big factories, and wants general managers to know everyone’s names, having observed that there’s more room to foster new ideas in closely-knit environments.
But even with such small teams, automation is threatening job security in the push to improve efficiency. PRI has been reducing headcounts in certain industries by bringing in automation, but trains the people who have lost their jobs to machines to do other meaningful things within the same work space. Practices such as this have kept unwanted departures at a minimum. In 2014, PRI’s South Beijing factory ended the year with a 3.8 percent unwanted departure rate, versus an average of over 15 percent in the same district.
Right now, Nordstrom and the rest of his team are excited about a carbon fiber technology acquired from the UK for use in automobiles. “The crash resistance is better than steel or aluminum and basically it meets all the government’s requirements for new breed vehicles. Our first orders were over a million bucks,” he said.
Pacific Resources International
What it does: Provides consulting and assistance for new manufacturing start-ups or the restructuring of existing factories
How they define innovation: “The definition for China is different than for other parts of the world. We take existing products and change them to suit the Chinese market by adapting to local needs and cost structures,” said Dwight Nordstrom.