China’s transformation away from its ‘copycat’ reputation to a leader of global innovation has been a popular theme in the media in recent years.
Chinese businesses are operated at a faster pace in comparison to brands in Western market. Constant change is the epitome of the Chinese experience of living in China, it has become an inherent part of the culture. This has resulted in Chinese brands being more adaptable, risk tolerant and prepared to have a punt on many new tactics and products to see what works than brands in Western markets.
Although Chinese business innovations get the most media attention, the rising tide lifts all boats, many foreign businesses in China are following a similar innovative approach to stay competitive and meet consumer expectations. This is confirmed by two large studies over the past three years by MIT, which analysed the approaches that businesses take to corporate innovation globally. The studies found that whilst most of the world is converging on a common innovation recipe that gets replicated across geographies, China is the exception – “its market is unlike that anywhere else in the world”, and so is the innovation required.
Both domestic or foreign businesses in China largely take a different innovation path due to China’s speed of growth. This growth produces a disproportionately large share of new customers in many industries, coupled with the advanced digital infrastructure to access them. MIT’s data found that foreign companies’ approach to innovation in China is more similar to Chinese companies than in their home countries.
MIT’s analysis also found that one of the key differences for brands innovating in China was the appetite to use customers, competitors or business unit operational employees as a source of innovation. In fact, Chinese companies were about twice as likely to do so as elsewhere in the world.
Electric shavers produced by Dutch-headquartered Phillips are but one example of the different approach taken by a company in China compared to the rest of the world. A universal shaver is available from stores in Seattle, Seville or Sydney, however, the kit sold in Shanghai is specialised for local Chinese consumers’ unique needs. A short ride on the fast train to a third tier city, and you’ll find different shavers again. As Phillips noted, “a second-tier city in China might have a larger addressable market than most European countries.” The company is now aiming to leverage innovations developed for second and third tier cities to grow new markets in Southeast Asia.
L’Oréal is another example that has invested heavily in innovating products specifically for China. Many of the innovations are world leading, and developed with a view of promoting these innovations around the world.
Whilst new product development is being localised for China, the vastly different marketing and sales landscape also sees local and foreign brands develop more diverse, and integrated digital strategies for the market.
Much like Phillips and L’Oréal export the product innovations to other markets, brands that understand China’s marketplace are much better equipped to adapt to Chinese-developed channels such as Tiktok and livestreaming, as global fashion brands have discovered in the US.
(Source : China Skinny)