Lesson 4 // Innovation
Rapid change in China makes innovation vital
It must be holistic, and include more than products and services
Brand innovation is necessary in all country markets because it strengthens competitiveness and drives value. Innovation is vital in China where rapid change is the norm, and the newest products and conveniences quickly become old news. In China, even the definition of innovation needs innovation.
Innovation and creativity are closely linked. The words expressed in Chinese characters are similar. In the context of brands, creativity is the capacity to transfigure thought and emotion into original ideas; innovation is the application of that capacity—typically products or services that are new and distinctive.
Innovation needs to become more holistic, encompassing more than introducing new products and services or venturing into new categories. While these innovations must continue, brand success in China also will require innovation throughout all departments of an organization, both strategic and operational, from human resources and finance to logistics and sales and marketing.
Innovation requires the ability to uncover and address consumer wants and needs—even when unstated and unrecognized—and the willingness to make bold changes, if necessary. Some innovations are incremental and help build the perception of being different (a key to premiumization). Other innovations are so substantial they can cause market disruption.
Haier, for example, is introducing incremental improvements to existing products, at the same time the home appliances maker is transforming into an Internet of Things ecosystem of products and services. In a holistic approach, Haier changed its name to Haier Smart Home Co., Ltd, introduced retail locations that showcase the new vision, and shifted its marketing emphasis from traditional media to interactive exchanges with groups of engaged consumers.
Similarly, the beverage brand Yili has made both incremental and substantial innovative changes. While introducing new products that address the growing consumer concern with health and wellness, Yili is also reframing and enlarging its focus. The brand will continue to emphasize dairy, but also market other health and wellness items.
Innovation can be expensive. But sometimes less is more. Maximizing innovation ROI requires insight about what innovations consumers perceive as adding value. An expensive investment in technology to create a new and different app may not be as appreciated by the consumer as integrating existing apps with innovations that add excitement, entertainment, or convenience.
Key Takeaways // Innovation
Brand Building for Future Growth
- Change the mindset
For a long time, Chinese brands operated from the assumption that innovation was what happened outside of China, and China became expert in the imitation of innovation. Reverse the assumption. Begin with the idea that something original can begin in China. And be open to sharing that originality with Western brands that want to learn and collaborate.
- Go back to the future
Think Silk Road, the invention of paper, the invention of porcelain, the excavation of the Great Canal. The China of these accomplishments does not belong only in history books and museums. This is the China that set standards for innovation. And it is the memory of this China that should inspire innovation going forward.
- Begin with a need
The first question often is, what innovation will make money? That is the wrong question to begin with. By itself, that question will not bring long-term success. Innovation that succeeds over time needs to fill a real need. It needs to add something to society, make life better, healthier, more enjoyable. It needs to address moments in a person’s life when a pain point could be eased by a genuinely useful product or service. This kind of innovation satisfies customers and inspires employees.
- Identify an insight
Successful innovation does not happen in a vacuum. It is not only about creating the next new and shiny thing—unless that thing emerges from a deep understanding of people and their needs and wants. That kind of understanding requires the observation and analysis necessary to identify a human or cultural insight.
- Go with the flow
Innovation has a rhythm. It rises and falls like the tides. Try to produce the most powerful waves of change. But also prepare for the lulls between the waves, the quieter periods of preparation. And create a bond between the brand and consumers so consumers remain loyal to the brand during the highs and the inevitable lows.
- Be holistic
Encourage every department in the organization to be innovative. Unless the innovation commitment is extensive and uniform it will not work well. No matter how enthusiastic and committed the product development people feel, they will not innovate if the HR department applies the brakes with policies that reward excess caution. Conversely, innovation reinforces innovation with an additive effect that can lift an entire organization.