Over the past few years, a number of multinationals have made investments in the tens of millions of dollars in R&D centers in China. Procter & Gamble is one such company. The $10 million facility it opened in Beijing in 1998 is part of a global strategy to adapt products to local conditions and to take advantage of local ideas in improving products around the world, according to one of the company's executives.
Al Pretty, P&G's R&D director for China, declines to say exactly what proportion of the center's roughly 200 scientists are local Chinese but acknowledges that the number is "in the range" of 80-90 percent. The center occupies three floors of a building adjacent to Tsinghua University, considered China's best in science and technology. Size-wise, says Pretty, his center is about the median among P&G's 17 technical centers worldwide, which together employ about 8,500 scientists.
Pretty is originally from England and has worked for P&G since he received a physical chemistry Ph.D. in 1973. He was sent to Beijing in early 1997 to oversee a major investment in R&D. The Cincinnati-based consumer products company has had offices in China since 1988, but at that time the company had only five or six scientists, says Pretty, whose official title is director and general manager of Beijing Technology Company.
P&G's formal R&D mission in China is twofold. The first: "to make absolutely sure that our global products are meeting the needs of Chinese consumers." But in practice, the inhouse scientists in China, as in other P&G centers worldwide, are doing work relevant to products in all locations, not just China. The second: "to form mutually beneficial relationships with top institutions in China to gain access to Chinese problem-solving and research opportunities." In other words, to find potentially useful, untapped innovations among local research.
P&G's in-house research in Beijing deals with two product lines: the "laundry program" (Tide and Ariel-branded detergents) and the "oral care program" (Crest-branded toothpaste and toothbrushes). The decision to source those two operations to Beijing came from the vice presidents responsible for the respective global R&D programs, who saw China as a major market for their products. About two-thirds of the P&G scientists in Beijing are working on detergents and the other one-third on the oral care products. Pretty says the company wants to first make sure the two programs are running smoothly at the Beijing center before adding research on other product lines. "You don't expect to hire 200 people and be doing global-level R&D in one or two years," he explains. To fulfill the first of P&G's formal missions, researchers study Chinese people's toothbrushing and laundry-washing habits and preferences. Pretty emphasizes the importance of having an R&D operation based in China with Chinese employees: "We firmly believe that you have to live with consumers in order to understand their needs." P&G scientists watch people doing their laundry at home, for example, or brushing their teeth aboard a bus specially equipped with 12 bathrooms.
The idea is to "fine-tune global products to Chinese preferences." Compared to American consumers, explains Pretty, Chinese like different toothpaste flavors. They want a lot of foam in their mouths, but they want it to dissipate quickly. Most Chinese consumers wash their laundry by hand and prefer suds to be generated and removed at rates different from the rates produced by detergents sold in America.
But the Beijing center's oral care and laundry work is also aimed at improving products globally, suggesting that it may not be absolutely necessary to live with consumers in order to understand them. It was originally labs outside Asia that, using market research done in Asia, developed the varieties of Pringles potato chips sold in Asia. …