The innovation ecosystem in China
Kristina Dryza
As a writer and a consultant working in mainland China, author Alexandra Harney talks about innovation a lot. “My book, ‘The China Price: The True Cost of Chinese Competitive Advantage’ described the first phase of China’s export boom, where following orders - producing goods on time to the agreed specifications - mattered most. Creativity - say, for example, putting Nike’s swoosh on the toe of a shoe rather than the side because you think it looks better that way - was penalised. Now, as China moves away from producing garments and toys for foreign brands and towards designing its own products across a wide range of industries, creativity and innovation matter more.”
Harney explains how she doesn’t have enough fingers to count the number of Chinese cities that want to become the next Silicon Valley. “But as a Japanese friend pointed out to me recently, Silicon Valley is not just a place with a higher than average level of innovation; it’s an ecosystem. There are serial entrepreneurs, older advisors with operational experience, venture capital firms, a legal framework - it’s all there. Most Chinese cities lack that ecosystem. Innovation needs to be cultivated in the right atmosphere.”
Amena Schlaikjer, a consultant currently researching innovations in the health and wellness industry, feels China has the perfect environment to develop this ecosystem because the Chinese government is being rather experimental in finding the right balance between offering new consumer rights to its citizens and opening up its philosophies to more democratic systems.
But operational expertise is needed. “China is famous for being experimental and, well, ‘messy’ when it comes to trying things. Execution, on the other hand, is what needs help.” Schlaikjer, who has spent a total of 18 years in the Greater China region, feels foreign companies and individuals have the enormous responsibility to role model innovative behaviours in a system that never really celebrated this type of thinking, but is extremely open to it.
Spanish born Alex Kauffmann who until recently was an Inventor at the Shanghai office of the world's largest independent innovation company ‘?What If! Innovation’ believes there are no new ideas, only new combinations of old ideas. “Innovation for me is like cooking. It's an original synthesis of limited and age-old ingredients.”
He says, “Wholesale piracy is still China's prevailing mode of ideation,” adding that to get Chinese clients to take innovation seriously took a lot of additional handholding. “China is the first place I really thought about innovation in a systematic way. If what we proposed was truly new then it was also untested and thus much scarier than simply ‘borrowing’ an idea that had already worked somewhere else. In the US everyone wants to be first. But in China there's a saying that the man at the front of the line is the one who gets shot.”
The interviewees felt no foreign brands have really ‘figured out’ China yet but some have adapted remarkably well. For example, the Chinese don't generally eat cookies so Oreo introduced wafers that have been so successful that Nabisco rolled them out in other markets. “Most foreign brands are trying too hard to sell the Chinese an exoticised and idealised version of what they think the Chinese should be,” Kauffmann explains.
The amount of foreign brand activity in China is phenomenal in scale and scope. Mattel’s ‘House of Barbie’ in Shanghai is the first physical space to express the broader vision for Barbie. The 35,000 square foot store features Barbie-themed clothing, jewelry, cosmetics, food and spa treatments, “It’s changing the perceptions of young Chinese girls overnight,” Schlaikjer says.
And then there are the luxury brands like Hermes and Dunhill. Richard Hsu, a brand consultant educated both in China and Europe, says these two luxury brands in particular are looking at the long run and planting seeds. “They are not necessarily looking at the immediate bottom line. They realise they need to invest time, efforts and money in getting closer and deeper with China. Dunhill for example has brought lifestyle to China in ways the Chinese have never experienced.”
But what are domestic companies doing? Kauffmann’s favourite example is dairy company Guang Ming's chocolate cheese slices. “It's a bizarre idea, but it demonstrates the Chinese ability to digest and internalise the foreign and make it local. Because they are unhindered by conventions i.e. processed cheese must be savoury, they are able to achieve new and original syntheses of old foreign ideas. Chocolate cheese tastes as disgusting as it looks, but it's not meant for someone like me who loves cheese and finds the very notion of chocolate cheese deeply offensive. It's meant for a Chinese audience that appreciates the convenient, individually wrapped format of a dairy product that melts easily and couldn’t care less about what the French think.”
But what of future innovation? Schlaikjer sees growth in people innovation. “We're going to get an influx of new talent (Chinese-born returnees from the States and Europe) whom will have a lot of opinions on how to transform their motherland into a world-market competitor with its own local brands.”
Hsu predicts that architecture, fashion, food, beverage and sportswear will be the most innovative industries because these industries are the easiest to learn from. “You can touch, study, copy, experience and emulate them. Service industries are dire because it’s basically not in the Chinese genes to serve.”
As he continues, “To me innovation means advancement of ideas, of imagination, of culture, of life itself. For the next generations we must help open minds. We must allow permission to be different, to be courageous.” And hopefully this open minded thinking will soon be flourishing within Silicon Valley-like ecosystems.