Showing posts with label China. Show all posts
Showing posts with label China. Show all posts

Monday, August 18, 2014

What’s going on in digital China?



















Another newsletter out from the Universe Foundation's Suitable for Growth project, which looks at how Danish companies can expand their market in China beyond premium customers in the coastal cities.

This issue examines online China. China has the most Internet users of any country, and they are among the active users of e-commerce and social media. Clearly, no foreign company can ignore the digital dimension of the Chinese market – but they need to be aware of how Internet use is different there.

You can read an Interview with the Danish founder and owner of Shanghai-based, web agency Shanghai jungle, Alexander Schultz.

Frank Zhan, director at Grundfos China, talks about Grundfos’ use of Weibo Miniblogs. 
And there’s an overview of the Big Four Chinese web services.

Thursday, May 15, 2014

Following China to the next level

Just published the latest newsletter in the Suitable for Growth project at the Universe Foundation. Lots of interesting information, frankly - if you are interested in business in China, that is.
Humphrey Lau, GM of Grundfos China, tells that the coastal cities are now so different from the in-land markets that Grundfos has split their China operations in two divisions.
Ed Tse, former head of Booz and co in China talks of the innovations coming out of a new generation of Chinese companies emerging from the mid market, and they can become important players way beyond China soon.
And lots more...

Monday, March 17, 2014

Wednesday, January 22, 2014

Scaling your business in China - how to handle growth


In the Universe Foundation’s “Suitable for Growth”-project, we just published the latest issue of our newsletter on business in China. This time we focus on Scaling: What happens when you start growing? How do you keep in control, what kind of organization do you need, what are the dangers that can get you into trouble?

Good advice from the CEO’s of Radiometer and House of Amber.

Tuesday, October 08, 2013

SfG Newsletter: Consumer insights in emerging markets

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How do you understand customers in places that are very different from your home-market? Brilliant companies like Toyota, MacDonalds and Danish fashion company IC-companies have failed to connect to the Chinese consumers, thinking that they could simply push the same products that were successfull in the West.

The latest newsletter from the ”Suitable for Growth” project at the Universe Foundation focuses on how to collect market insights in emerging markets, for instance by using ethnographic observations and organizing insights in ”Customer journey maps”.

It also offers lots of entertaining examples of cultural quirks and surprises collected in China. And it features a rare insight into how Haier, the Chinese white goods manfuacturer, uses customer understanding as its core competitive advantage.

It's obvious - if you can see it

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Jan Chipchase is probably the worlds leading consumer anthropologist. He has spent decades travelling the world doing consumer research for companies like Nokia, diving deep into local cultures, following consumers in their homes and at work.

In his book ”Hidden in plain sight”, Chipchase presents his methods and how companies use his observations to win customers, even in the most foreign markets and cultures.

His website is a wonderful and ever-changing collection of his snapshots and observation from criss crossing the world – China, Libya, Japan, Afghanistan... -   in search of insights that can lead to better products.



It’s obvious: If you want to create suitable products, you need to know your customers well.

Jan Chipchase is probably the worlds leading consumer anthropologist. He has spent decades travelling the world doing consumer research for companies like Nokia, diving deep into local cultures, following consumers in their homes and at work. Today he is head of consumer insight at Frog, a leading American design company.

In his new book ”Hidden in plain sight”, Chipchase presents his methods and how companies use his observations to win customers, even in the most foreign markets and cultures.



The inspiration that Jan Chipchase collects is anything but linear and direct. Seeing a child by the roadside in Ho Chi Minh City selling gasoline to scooter drivers from a large bottle placed on a stack of bricks, and using a simple plastic hose to fill the scooters’ fuel tank, Chipchase realizes that this is the absolute minimum of what a gas station can be.

He uses the observation to start thinking about what a gas station would be like if it didn’t even sell gasoline. In an age of electrical cars, which can charged when people park at home or at their job, what services remain for the gas stations to deliver: bathrooms, food, car service, picking up parcels? How do gas stations make a difference when the gas is gone?



Building trust

Noticing that in some places, consumers making a cup of tea will sniff the milk before they pour it into the cup, Chipchase starts wondering about the many ways that companies need to build trust in their brand by allowing users to ”sniff the milk” before they buy.

How to signal trust, reliability, status varies tremendously between cultures – and understanding how to meet the locate requirements and style of communicating quality is crucial – for instance, if you are selling milk, chicken or beer in China.

A Chinese example of building trust is the use of carpet mats in elevators, and seat coverings in taxis with the current day of the week printed on them – a way to show customers that this is a clean place.

One reason why Ebay has failed, but Taobao has succeeded in China, is that Taobao allows customers to put the payment into an escrow account at Taobao. Sellers know that the money has been deposited, but it will only be released, when the customer has received the goods and is satisfied with them.



No-one wants to be seen as disabled

A particularly interesting case, which Chipchase describes in his book, is the process, Nokia went through when it considered whether to create a handset specifically suited for illiterate users in developing countries.

Nokia has a very strong brand in developing and emerging markets. Of the more than a quarter of a billion phones it sells annually, a large part are the simplest and cheapest model, and millions of them are sold to people who are illiterate.

Chipchase and his colleagues did extensive research into how illiterate people use phones and services such as texting or receiving information. They realized that illiterates do not want to carry a phone, which clearly signals that they have no education. People have invented all sorts of work-arounds that allow them to use the phone despite not knowing letters and numbers, so for them, the most important factor was that the phone is cheap and reliable.

The surprising conclusion for Nokia was, that it would be better to continue selling one, really cheap phone, rather than developing and marketing a new model, which would inevitably be more expensive.

Therefore, Nokia decided to focus its efforts on designing little changes to the general interface that could help the illiterate.



Go out and live with people

A lot of Chipchase’s work has been helping Western companies understand what consumers in the emerging markets become willing to pay for as their buying power increases.

He repeatedly emphasizes that ”low-income people are in fact some of the worlds toughest customers. Because they have to make every rupee count, they can least afford to buy poorly designed products”.



”Hidden in plain sight” is also a bit of a manual. Chipchase describes how he and his teams start their scouting in a new location by finding local helpers – ”fixers” – often students, who can take them for tours, explain local quirks and set up meetings in private homes and companies.

Rather than staying at a hotel, Chipchase prefers renting a house for the whole team to live in, and he recommends renting bikes, to get a closer feel for the city’s flow and life. He likes to wake up early to observe the city coming to life; unfolding the functions, rituals and habits of everyday life.

Barbershops are one of the places he visits to get into conversations that go deeper than an outside observation. He confesses, that he has managed to take a shave twice in a day, just to meet more people.



It’s all about looking at the world with a systematically open and curious mind: Visiting people in their homes, sneaking a peek in their refrigerator and bathroom, joining them on their commute to work, studying what they carry in their pockets and bags, and asking why they carry it.  Weeks of observations lead to a better sense of how people consume, in order to make their lives more convenient and maintain the social status they strive to express: whether it be through the use of mobile phones, banking services or deodorant and toothpaste.

In Bangkok, Chipchase found a shop selling false braces for teeth. The cheap braces obviously were not working, but they were worn by people who wanted to signal that they had the means to have their teeth straightened.



Find a problem and fix it

It becomes clear from the many examples in the book how blockbuster products and service have emerged, because someone realized, that there was an everyday problem, which could be fixed – but which, as the title of the book has it, had been hidden in plain sight.

A simple insight into how users behave allows designers to come up with improvements – big or small: Google understood that we often forget to attach files when we mail others, so in Gmail, if you use the word ”attach” in your message, and you don’t attach a file, the system will ask if you want to attach a file, before sending.



What’s suitable for customers is not always obvious, there is any number of ever-changing  dimensions and variables to consider and weigh against each other. Jan Chipchase’s book will give readers a good introduction to some methods that can business choose with more precision.



Chipchase'sblog, future perfect, is a treasure trove of funny and thought provoking observations from around the world.

Monday, September 02, 2013

Fake goods galore

Wonderful set of photos from a high-end shopping mall in Shenyang, China - with Fake brand names: Starbocks, Cnanel, Herwes, Cairter etc.
Via: Offbeatchina.com


Newsletter on Chinese mid-market; Relations between HQ and subsidiary

To what extent should the subsidiary in China be allowed to act differently than the mother-company in Denmark? It’s a delicate balance: The Danish headquarter needs consistency and
coordination among its divisions – but the subsidiary in China needs freedom and resources to pursue opportunities in a rapidly changing market.
The latest newsletter from the Suitable for Growth project at the Universe Foundation focuses on how to manage that balance.

Saturday, August 10, 2013

New kid on the block

 
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There’s a new newspaper in some of the vending boxes on street corners in New York, The China daily – the largest english language Chinese paper.

It’s a slim, slick, well produced paper. A bit sterile, but not bad, really. In many ways similar to USA Today. 
The price is 25 cents – compared to USA Today which sells at a dollar.

Clearly, they are not there to make money.
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A similar effort towards presence in New York is Xinhua, the Chinese news agency, which has rented one of the most visible spaces on Time Square. It most cost a fortune, but they haven’t invested much in producing some content that can stand out amidst the blizzard of great ads around it. They show a stale orange square with letters.

Wednesday, July 17, 2013

Bottom-up tweaking – or top-down defeaturing?

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Here is an article from the most recent newsletter of the Suitable for Growth project at the Universe Foundation. You can read the rest of the newsletter here. 

Is it possible to defeature a product created for a developed world market – a top-down approach – or should you start bottom up? Or put in another way: Is it in fact possible to change a high-end product solution to a mid-market product solution?
This is a critical question when a Danish company sets out to target the Chinese mid-market.







Western companies are trying to lower their prices in order to compete in the Chinese mid-market. Chinese companies are trying to raise the quality of their products to compete with imported brands. The prices and quality of Western and Chinese products are converging – but they arrived at the same level from different directions.







A western company that wishes to adapt or change its existing product to make it better suited for a lower cost market – in emerging markets or in the West – often finds this difficult, painful and not sufficient to lower prices substantially.

“Transplanting” a western product 1:1 for production in China can give some savings due to lower cost of manual labor, etc., but often not enough to compete in the local mid-market.

Defeaturing the product by removing specific nice-to-have features and functionalities can bring down costs further, but likely still not enough for the product to become competitive in the Chinese mid-market, where prices are typically 50% lower than in the high-end segment.



One reason could be that the original product and the entire value chain, which surrounds it, are ”native” high end. The functionality, the quality, the supply chain, the marketing, and the development efforts are all rooted in the Western culture and economy, and the various elements have been optimized as a system for this context.

Individual elements may not be easily removed, and even if they are, the result may not affect costs substantially.



What’s really needed is a radical re-engineering of the product and the processes to eliminate the things that don’t add value, while keeping or even adding functionalities and features that customers are willing to pay for.

However, such radical cost innovation can be rather difficult to execute on its own for a Danish SME, as it can be costly and it also challenges the organizational mindset and culture.



Starting from bottom instead

Re-designing an existing product, which was originally developed for the Western market and for manufacturing in the West can be described as a “top-down” product development – and as described, this approach tends to be both difficult and insuffiicient for reaching the Chinese mid-market.

Instead, companies might consider using a “bottom up” approach – as one of the participants in the SfG project did.

They found a local manufacturer, which had developed a solution for matching a certain set of functions and a level of quality, which could be suitable for the particular low-end customers that the company was trying to target.

Then the company added a number of tweaks that raised the functionality to a level where the product had positive differences compared to competitors, and which added a certain feel and functionality that lifted it beyond being merely ”good enough” to a level where the company felt comfortable lending their name to it.

This allowed them to offer a new line of products at 50% of the price of their high-end products.



One could call this approach ”tweaking from the bottom”.  It offers some interesting potential advantages over a ”defeaturing from the top” strategy.

Just like a product developed in the West is ”native” high-end, a Chinese product will be ”native” low cost, in the sense that the way it was developed, the components used and the manufacturing process is grounded in Chinese circumstances. Likewise, the features it offers and its level of quality are based on the local producers’ knowledge of the market.

The bottom up approach makes full use of this local knowledge.



Doing what you are best at

One of the greatest obstacles to the top-down defeaturing is culture.

Western engineers may not have the inclination to take away features and essentially making a great product less great. Also, they don’t likely have the insights to prioritize on behalf of customers in a low-cost market.



In contrast, the bottom-up tweaking approach gives the Western engineers a chance to do what they are best at: developing solutions that are better. By tweaking something that is not quite up to Western standard and adding a few selected touches make a real difference.



For an SME company, it is demanding and risky to develop a completely new solution that is radical enough to create the cost reductions that are needed to compete in the Chinese mid-market. Indeed, radical innovation is in itself a very western and high-end approach, compared to the incremental, market driven way, Chinese companies typically use.



By starting from an existing, locally developed solution, the investment in innovation from the SME is limited to the tweaking of the product – and for this, the company can typically draw on knowledge from its high-end products.



This also indicates that as markets, production and development become more globalized, Danish engineers and designers could find an important role – and employment - specifically focusing on tweaking and improving low-cost designs to lift them beyond being merely “good enough”..  




5 approaches to cost reduction



1)      Local production in China: Manufacturing of the same product 1:1. cost reduction mainly achieved through reduction in labor costs, transportation costs and import tax

2)      Defeaturing: Removing nice-to-have features and functionality. Costs reduction achieved through lower product (material) and process costs.

3)      Cost innovation: Re-engineering the product and processes. More fundamental changes of product and manufacturing processes adapted to the local situation. Costs reduction achieved through lower product (material) and process costs.

4)      Radical innovation: Start from scratch. Clean slate development of new product, based on deep knowledge and insights into customers need and local manufacturing processes and competences.

5)        Tweaking bottom up. Building on the inherent low cost of a Chinese designed product, and adding value by tweaking up some features to make the product stand out in the market.

Wednesday, July 03, 2013

Rising wages and aging population in China


A recent article in BusinessWeek details the rising salaries in Chinese factories. In 2012, 25 provinces increased wages by an average of 20,2%. The article describes how large manufacturers like Fox Conn and Flextronics move inland for lower wages, but also because there are more workers available. BusinessWeeks points out that, according to China Bureau of Statistics, the number of working-age Chinese in 2012 fell by 3,45 million – due to the aging of the population.  

Monday, July 01, 2013

Nøjsomme løsninger i Radio24syvs kina program

Jeg fortalte om vores konklusioner i projektet om nøjsomme løsninger i Globus, Radio24syvs ugentlige program om Kina.
Du kan høre indslaget her - det starter ved 11:42 og varer 11 minutter:

Tuesday, June 04, 2013

Counterfeit paradises - amazing photo book from China

 
Matthew Niederhauser is a photographer living in China with a keen eye for the absurdity of the ways Chinese developers create completely artificial town as replicas of German villages, French chateaus or Venetian canals. You can see a large collection in his online book, Counterfeit paradises. Very funny, very weird - a bit hard to comprehend, actually.The pdf is rather large, so it takes a while to load. It's worth the wait. 

Foxconn's robots are late

Interesting update on the situation around Foxconn’s plans to deploy massive numbers of robots in their immense factories in China – the ones that, among other, produce phones and computers for Apple.

Several details I wasn’t aware of:

- Foxconn is losing money, $US 316 mio. last year

- Foxcon build their own robots – they call them Foxbots. They started constructing the robots with the help of MIT back in 2009. So far they have only made 20.000, but the plans are to build a million.

- Unusually, there is currently a freeze in hiring at Foxconn, or at least thay was the situation back in february, after the new year holiday.

Wednesday, April 03, 2013

Chinese phrases for key cultural concepts

Here are some Chinese phrases that anyone dealing with China might find useful to know: 

Fendou - 奋斗 
Struggle, hard work. There’s a strong belief that hard work and plain living is the way to build up a person – and a country, as well. Fendou is the drive that allows China to catch up

Renao - 热闹
Lively, hot, noisy. Whereas Danes typically prefer a quiet, orderly setting, Chinese often like to go where everyone else is mingling, talking, eating.

Mianzi - 面对
Face. Showing a big face, protecting face is very important. Nice clothes, a big car, an impressive façade on the house, paying the bills at restaurants – even if you can’t really afford it.

Shanzhai - 山寨
Literally: The bandit’s nest. Refers to pirated copies and low quality semi-legal products. Shanzhai companies are used to working fast, delivering what customers want, really cheap and with whatever means it takes.

Hexie, 和谐
Harmony. A very important concept in later years. Chinese leaders have emphasized the wish to develop a harmonius society, with comfortable, stable and fair relationships. Family and teams in companies should also be in harmony.

Shuang -
If something is just great, feels wonderful, clear, bright and satisfying, the Chinese will call it Shuang, in an affectionate voice.

Jia You-  加油
Literally means: Add gas. Usually a shout to encourage someone to work harder: Go! Commonly used at sporting events, or to ask employees to speed up.

Monday, April 01, 2013

When the copy comes before the original

Here's a great little story about copying in China:
Zahia Hadid, one of the world's leading architects, has drawn the very distinct Wangjing SOHO complex, which is currently under construction in Beijing. However, it seems that someone has gotten hold of the drawings and used them as a very direct inspiration for a similar complex, which is under construction in Chongqing. Apart from illustrating that anything is subject to copying in China, there's a delicious twist to the story, because apparently the building in Chongqing will be completed before the one in Beijing. So the copy will precede the original.
You can read the full story in this article from Der Spiegel.


Thursday, March 21, 2013

Bang & Olufsen's $ 32.500 loudspeakers for China

Red and Gold are auspicious colors in China, and so is the number 88. So here are Bang&Olufsen's 88th anniversary special edition loudspeakers  - as seen in a fancy Hong Kong magazine. 
Price: 243.000 HK dollars - US$ 31.500 - 182.000 Danish Kroner 

Tuesday, May 22, 2012

China: Getting old before they get rich

Getting old before they get rich, is a sentence that’s popping up a lot about China. If you want a quick overview of just how dramatic and fast the ageing of the Chinese population is, this article in the Economist, ”China’s Achilles heel” is a good place to start.

Among the facts are:
Shanghai is believed to have the lowest fertility rate in the world, just 0,6 in 2010 – way below the 2,1 rate which is necessary to keep the population number stable.
A fast rise in lifetime combined with rapid urbanization and the one-child policy means, that the number of old people is growing, and the number of young is dropping much faster than in the west. By 2020 it is expected that a third of Shanghais population will be over 60 years old.
The 4-2-1 families of four grandparents, a couple and their only child has become the norm, and obviously this will become a considerable burden on the lone child soon.
China is not prepared.  The systems of pensions and healthcare cover only a fraction of the population. Just adapting the physical infrastructure to accommodate elderly is a huge task. 

How this plays out at the personal level is well illustrated by this BBC program”Assignment: Too old to get rich” – which portrays how elderly in Shanghai get by. Some are faced with climbing the stairs to the 8th floor because there is no elevator; some are ashamed because their spouse is becoming demented in a culture that often sees dementia as a form of mental illness. Others join the crowds of elderly in IKEAs cafeteria, sipping coffee and hoping to meet a companion.

One obvious conclusion: there is vast potential for Danish companies to deliver expertise on how to support an ageing society. But the solutions need to be really cheap.

Saturday, February 04, 2012

The economic outlook as seen from Davos

There are always some amazing panel sessions at Davos, and luckily we mere mortals can tune in via the World Economic Forum website. One of the heavy-duty sessions was about the economic outlook for 2012; with participation from a handful of the central players determining what will happen.


Martin Wolf, of the Financial Times chaired the panel, and started off with a few salient points to set the stage for the discussion.

He started out by observing that "The mood in Davos is that people are feeling relief in the way that somebody who has just been reprieved form hanging feels a relief. In stead of feeling the immanent prospects of catastrophe, there is a sense that things have been done which have eliminated very substantially the immediate risk of disaster, particularly in Europe, particularly because of the activities of European central bank, although not exclusively so. And that therefore we can start to think about the slightly longer term, which means the next few months, or perhaps even longer.


Martin Wolf then pointed out that the current economic crisis has been going on for nearly 4,5 years now, and by the time we reach September, according to IMF's forecasts, Chinas economy will have expanded by 60 percent over the past 5 years, the Asian developing and emerging countries, which are half the worlds population will have expanded by 50 %, the emerging world by about 35% and the developed world by essentially zero. So these 5 years will have seen the most extraordinary and unprecedented speed of transformation of the relative weight of countries.

Tuesday, January 10, 2012

Where Apples come from (is not a pretty place)

An excellent, thought provoking and very different podcast piece: Mike Daisey, an American stand up storyteller and Apple fan goes to Shenzhen in China to understand where those beautiful machines are made. It’s simply a guy telling a story of what the city looks like, what the workers told him, what the factory floors and cramped dormitories and endless hours are like, how workers are crippled by repetitive motions and toxic chemicals… Very bleak, very stirring to hear about – and remarkably, even entertaining to listen to.

I can certainly recognize his description of Shenzhen and the particular harsh and repressive side of Chinese culture that you see such places.

Mike Daisey may be a bit colorful, and certainly his mission is not to try to give a balanced view. It’s emotional, but the producers of the radio show, which aired his report – This American Life – have tried to fact check everything he told. In the second half of the program they talk to experts and rattle off regular journalistic data that largely supports the first story.

It takes an hour to listen - it's very well spent.