Should We Be Looking East for the Real Disruptors?

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When Western brands are looking for inspiration, they are often quite introspective. The same names come up time and again: Apple, Google, Uber, Airbnb, Amazon. And it’s been like that for years; even the youngest of those companies is coming up on a whole decade since founding.

The important question, then, is a crucial one: Have these ubiquitous examples of great digital-first brands become passé? And if they have, where else can we look for inspiration?

The answer, resoundingly, is Asia—and specifically China.

Chinese brands are growing at record levels as the Asian giant moves from a product-based economy to one of consumption, says the BrandZ 2017 China report, which also finds Chinese brands now represent more than 10 percent of the world’s top 50 most valuable brands.

And it’s not just the brands; Chinese consumers are streaks ahead of Western counterparts, too. Research conducted in March 2017 by Madjor shows China is ahead of the US in a lot of digital engagement and consumption; they found, for example, that 76 percent of Chinese digital users create and share original content online compared to 41 percent of Americans, while 86 percent of Chinese regularly use mobile payment to pay offline (US: 45 percent).

This is creating the perfect storm: consumers who are pushing for innovation and companies that are ready and able to innovate. Even the government—not previously renowned for its open-mindedness—is encouraging disruptive behaviors in Chinese companies.

China Follows the Consumer

Benjamin Duvall, chief evangelist officer (Asia) for social insights firm Linkfluence—a resident of China since the late nineties, and working in marketing in China for over a decade—believes that disruption is shifting east for a simple reason: Chinese brands follow the consumer, remaining fast and flexible.

A woman holds a gray Hero 4 camera

The most obvious comparison here is China’s WeChat and Facebook-owned WhatsApp. WeChat was founded one year after WhatsApp, but the former has already expanded into content, gaming, finance, and search while the latter is still essentially a messaging app. From chat, to sending money, to ordering groceries, to the Chinese tradition of gifting, there is virtually nothing you can’t do on WeChat, says Duvall.

“There are two fundamental reasons mobile and social adoption is so far ahead in China compared to the West. One is cultural, and the other is economic,” he continues. “On the cultural side, China has a very deep-rooted relationship with the accumulation of social capital and especially gifting. In pre-communist China, social infrastructure and navigation of bureaucracy were the main paths to success. In post-1949 communist China, planned economics and scarcity both served to reinforce the importance of social connections. Modern Chinese culture, which is still very collectivist, means that people are far more eager to share their experiences and accomplishments, and far less wary about privacy and data access.

“The economic reason for the boom in mobile and social adoption is the simple fact that mobile has brought a wealth of services to the people who’ve never before had them, especially in the lower-tier cities. The ability to purchase millions of products, to invest, and to share these experiences with others has transformed Chinese society in a way that digital technology in the West has not because many of these services were already accessible.”

A crowded street in Shanghai, China

Image attribution: Hanny Naibaho

Mobile-First E-Commerce Fuels the Boom

Indeed, it’s digital engagement, mobile, and e-commerce that’s leading the way. PwC’s Total Retail report tells an interesting story of commerce and marketing in China: 61 percent of product searches start at Tmall (Alibaba’s online mall); 79 percent of consumers buy products at least monthly via mobile or smartphone and 52 percent weekly or daily; 41 percent use social platforms as a way to receive promotional offers; 70 percent of consumers use social networks as a source of inspiration for purchases. Customer service online becomes key, too: 71 percent of Chinese consumers have spent more because of positive social media interactions, and it’s all enabled by social e-commerce.

Michael Cheng, Asia Pacific & Hong Kong / China retail and consumer leader at PwC, writes in the report: “China, the largest eCommerce market in the world, is now setting the benchmark for present and future global retailing. This is driven by its mobile-first consumer behavior, innovative social commerce model, and a trusted digital payments infrastructure.

“eCommerce is the clear growth story. According to PwC’s Economic Quarterly Q1 2017, the national online retail sales of goods and services reached 1.40 trillion yuan in the first quarter, 32.1% higher than a year ago. In comparison, retail sales of the physical stores went up by 7.2% only.

“China today is characterized by mobile-first consumer behavior, vibrant social commerce adoption, and a ubiquitous digital payments infrastructure. In addition, the market is fiercely competitive. Local and international brands compete for consumer’s attention and wallet share, the internet giants race to build broad digital ecosystems to strengthen their existing network effects, and well-funded start-ups redefine customer experience. Only the most innovative survive in this dynamic retail environment.”

The traditional view of Chinese companies as the cheap knock-offs, the wannabes, the imitators, is outdated. As George Yip and Bruce McKern writefor Forbes, “While China has been learning management practices from the West for the last 30 years, Western companies operating in the country can now learn from China how to improve their activities in the rest of the world.

“Today’s Chinese customers and users behave quite differently from those in the rest of the world. They are fast maturing, fast adopting, often e-savvy, have a ‘forgive and forget’ mentality and are often creating micro-niches . . . [They] are seen as one of the fastest adopting groups in the world when it comes to new products and applications. While Chinese consumers often enthusiastically embrace newness, perhaps their most notable characteristic is their passion for internet- and mobile-related products and services.”

A man looks at his smartphone

Image attribution: Steven Arenas

Time to Learn Again from China

Yip cites Huawei (telecoms), Haier (appliances) and Lenovo (personal computers) as China’s big global success stories, whose “size today provides the resources and cash for continuing investment in innovation as well as overseas expansion.” There’s also Tencent, owner of WeChat and the world’s third-largest Internet company, and Alibaba, lazily called China’s Amazon, which recently listed on the NYSE.

“Many centuries ago, the world learned from China,” writes Yip. “For the last hundred years, however, China has been patiently learning from the world. It is now time for the world to learn from China once again. Multinationals should ‘seize the day’ or, more appropriately, bǎ wò dāng xià (把握当下).”

The big things to learn from Chinese brands, then, are their focus on innovation, and their focus on consumer need. Duvall says the latter is both good and bad.

“It’s a good trait because Chinese consumer brands simply see no reason not to provide a new feature or product if they know consumers will pay for it. For most Chinese companies, product development follows the customer and sales. There is no need for a formal ‘customer’ role in product development because many Chinese companies have never used product and marketing requirement docs and live and breathe the principles of agile development—even if execution is often shoddy.

“On the negative side, Chinese brands often don’t understand how this lack of consistency damages brand equity and makes it difficult to build emotional commitment and consumer loyalty. This is changing and there are some great examples of Chinese brands, such as hotel brand Nuo or mobile phone company Huawei), but there is still a long way to go.”

Then there is China’s tendency towards cross-functional thinking, continues Duvall: “The most exciting aspect of Chinese tech is a complete disregard for functional thinking. Content is not just social media text, photos, and videos; advertising isn’t just display and search; e-commerce isn’t just online stores; and influencers aren’t just about brand ambassadors and pay-for-post. All of these areas—and the many others I’m sure I left out—are being smashed together by platforms and consumers with a complete disregard for how easy it is for brands and agencies to manage these new formats. Whether it’s Tmall stores adopting real-time live streaming, or bike rental services becoming powered by mobile advertising, each year sees a new innovation and there’s little way to predict what will come next.”

Not All of Asia Is the Same

Don’t mistake China for being all of Asia, though. Chatting with a few marketing directors based just over the bay in Hong Kong tells a different digital engagement story.

“There are still lots of Asian cities that are not well-developed for technology,” says Vivien Li, who works in telecommunications. “For hardware adoption in Asia, yes, everyone has a smartphone, but not many people accept wireless payments and the concept of the ‘smart city’ is still weak. You may find more of a use case in China for wireless payment and new technology, but not the rest of Asia. The bottleneck for China is broadband coverage; most internet connections still use ADSL, not fiber.

“It’s difficult to predict what’s coming as there is so much room to grow,” Li continues. “However, we can see government is playing a more important role for technology development because now they can see the opportunities there for better city planning, waste management, transportation development, and so on, with these new technologies.”

Fashion marketing director Hoi Wai Chan, who’s lived both in London and Hong Kong, is even more succinct: “Asians love to develop new technology to make things more convenient. Even older people now use Apple products.”

The world really is converging—but it’s clearly starting to skew east. Says Duvall: “While Silicon Valley is still the heartbeat of the internet and digital industry, this is changing quickly; Zhongguancun and Sand Hill Road are likely to meet somewhere in the middle. After all, many Chinese startups are founded by Chinese entrepreneurs who cut their teeth at Western counterparts; many started as copycats, and many receive investment from both US and China-based funds.

“However, the Chinese market offers advantages that the West can’t duplicate, including extremely digitally friendly consumers, a massive and rapidly-growing market that offers huge scale with opportunities to test and fail, and a consistent financial and policy support from the Chinese government embedded in the five-year plan. While disruptive innovation will continue to come out of Western startups and some multinationals, China is quickly shifting the global center of gravity to the East.”

Western companies often have too much organizational baggage to test, learn, and iterate when it comes to content strategies. Looking east can teach us to be nimble, to not be afraid to test and learn, and to focus on the consumer need.

This article first appeared in www.skyword.com

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About Author

Lauren McMenemy

Lauren is a storyteller. A journalist by trade, she has worked in agencies, in-house and in the media over her 20-year career. She's worked as an editorial strategist and content creator for some of the world's biggest brands, setting up processes and guidelines, advising on planning, auditing content, building loyal audiences, leading social campaigns, writing blogs and flyers and presentations - pretty much handling the stuff with words. She was born in Australia, has resided in London for the last decade, and writes fiction on the side. You’ll often find her grinning like a fool at a rock concert.

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