Benjamin A Shobert: Some strategists have suggested that brand
development for Chinese companies in particular isn't important because
ultimately these companies will be most successful in still-developing markets
(Indonesia, Philippines, Africa, etc). One strategist I've spoken with says
that when a Chinese businessman goes to an American retailer he is bewildered;
but when he goes to a market in a developing
economy he says to himself "this feels like home". Would you agree with this?
Are emerging markets brand sensitive?
Joe Baladi: Let's start out by avoiding the danger of
generalizing about Chinese companies: the notion that Chinese companies are not
interested or are only marginally interested in developed or mature markets is
dangerously flawed. While many, and probably most, continue to struggle with
branding best practices, there is little evidence to suggest that they are not
determined to move up the value chain. In fact, the evidence suggests exactly
the reverse.
We see a dual strategy that includes home-grown highly developed high-tech
companies manufacturing everything from consumer electronics to complex and
complicated computer and biotech technologies to an acquisition binge of global
brand names and brand name companies. Lenovo was certainly not an isolated case
just the most celebrated one - at the time. In the automobile sector alone,
venerable Western brands have been scooped up by Chinese companies: Geely - a
Chinese motor vehicle company - raised eyebrows when it bought the Swedish
Volvo brand. This came in the wake of brands like MG and Rover - two famous
British automotive brands - also making their new homes in China.
During the 1990s, I worked with large multi-national consumer goods' companies,
where many of the most interesting markets were in emerging economies. The
aspirational desires in these markets were the same as in developed ones. Were
there differences in resources and disposable income? Of course. But companies
that place themselves in these markets, who develop packaging and products
unique to these markets, will be successful.
Consumers in developing markets may be less brand conscious, but Chinese
companies still need to be successful in these markets in order to gain the
critical mass needed to develop overall strength that will allow them to move
up the value chain in more developed markets. The Chinese very much need
emerging markets as a launching pad for their own domestic brands and their
plans to own globally successful brands.
In the book, I quote [Prime Minister] Wen Jiabao when he publicly called for
Chinese entrepreneurs to be more innovative and create, and I quote, "brand
name export products". Again, it is an absolutely flawed idea that they don't
want to move up the value chain. Look at military stealth jet fighters and
high-speed trains; the Chinese have spooked the Americans with the former and
with the latter they have not only matched Japanese technology, but they have
now gone beyond and are now innovating and selling back into the West. We are
talking about industrial products in this case and not consumer goods, and
while China may be a bit slow in learning how to brand, they have targeted
industries where they have established the right controls, and with government
intervention have been able to meet every new challenge that has come their
way.
BAS: What would you say to Westerners who are overly cynical
about Chinese companies' ability to make this transition from passive
manufacturing to branded products?
JB: There are definitely issues with innovation and branding with
Asian business overall, and Chinese business specifically. But I would say that
the development of truly great Chinese brands is a question of when, not if.
The recent assessment of global test results where Shanghai schools came out on
top created surprised and some concerns around the world. As one New York Times
reporter commented, Confucianism is a winner because of its emphasis on
education, and one of the Chinese government's top priorities is education. It
is a mistake not to recognize China's focus on getting better and doing so
fast.
Now, you would think this would mean that innovation would be happening fast,
but it isn't. To some degree culture does play a role. For all the good that it
can do, Confucianism limits contributions by lower level employees. It demands
a very high respect for authority, and in business this translates into the
boss knowing everything. If the boss knows everything, he does not often
solicit opinions from his employees which means that their creative energies
are not tapped, which in-turn results in a failure of employee "engagement". So
you are left with a company that wants to move up the value chain, but doesn't
understand how to do that. A lot of this also has to do with anxiety over fear
of failure and the loss of face.
Innovation comes from within a company, not from without, and the internal
energy of your employees is always the best way to develop new products. The
notion that innovation comes from outside (usually from a management consultant
or similar) betrays a more fundamental issue of confidence and self-awareness.
Innovation and branding is similar to the process of personal development.
Identity and values come from within. They can't be created by a third party.
BAS: Why does building a brand for Chinese companies matter and
what happens if China, as a national economy, cannot evolve brands? What
happens if it is forever caught up in role of captive manufacturer for the
world?
JB: It is a mistake to think that China is incapable of moving up
the value chain - both with high and low end products. We are now seeing the
low end of manufacturing move out of China into lower labor cost markets like
Vietnam. These industries are migrating to other countries as a consequence of
Chinese businesses moving up the value chain - it is a manifestation of China's
overall economic development.
The recognition of the need to change is a symptom of that. In parallel,
Chinese consumers are also developing higher expectations. The pace of change
in China is not only at the speed of light, but it is also dynamic. I think
that it is dangerous for Western companies to be complacent and believe that
Chinese competitors will always occupy the lower end of the market. What the
Chinese can't develop on their own, they will simply buy.
Building Chinese brands matters to Chinese companies because they matter to all
companies. The absence of strong branding relegates a company to a commodity,
and there is no future in that. Also, the single most powerful driver of
economic growth is consumer spending. Consumers - be they Chinese or Western -
buy brands, first and foremost.
Separately, brands also matter because they also reflect the national character
of a country. What people think of China is to a very large extent a reflection
of what people think of its brands: from milk products, to high-speed super
trains. This creates either virtuous or vicious cycles. In that sense, brands
emerge as a geo-political driver. The more globally recognized and respected a
country's brands are, the bigger the halo effect that is created. That effect
is typically translated into power and influence, which helps put Wen's
comments into greater context.
BAS: Your analysis of Asian CEOs was quite strong in my opinion;
but, to the extent some of the problems are historically culture (ie the role
of the leader and hierarchy in Confucianism), is it really possible to change
these mindsets?
JB: I am not a psychologist, so I don't feel qualified to comment
on whether people - Asians or others - are capable of changing. Having said
this, I think it is somewhat dangerous and disingenuous to define - or more to
the point - interpret Confucianism in such narrow terms.
One dimension of Confucianism, is definitely its strong emphasis on education
and that does encourage exploration, change, and learning, so in that sense I
am very encouraged about the next generation of Asian business leaders (in
particular those educated in the West who are now returning back to their home
countries). Many of these are going to bring back Western best practices that
coupled with local cultural understanding will help elevate Asian companies to
new heights.
I will say, however, that independent of the willingness or unwillingness of
the present generation of Asian CEOs to change, the real root issue ultimately
goes back to branding education: a lot of CEOs just don't know. For now, this
general lack of knowledge about the importance of branding is the real issue.
Getting that knowledge across to them is the challenging thing mostly because
they are resistant to the very notion that they don't know. Is this "cultural"?
I think it is fair to say that some of this is to do with ego and arrogance
that is common to all leaders in general and not specific to Asian CEOs in
particular.
BAS: On page 70 you identify a list of "key brand elements".
Which of these do Asian companies - especially Chinese - most struggle with and
why?
JB: You are referring to the elements of what I call the "Brand
Blueprint." The blueprint is an essential tool that provides guidance and
direction not only for management, but for all employees. All seven elements
are important: core brand values, core brand attributes, core brand benefits,
core brand personality traits, the company mission statement, vision statement,
and the positioning statement.
Collectively, they provide the company with its strategic identity as
well as direction. From a branding perspective, I would say that
differentiation is critical. The most powerful differentiation is
emotions-driven. So core values, purpose and even brand personality emerge as
leading edge. I think Asian brand owners struggle with the "Brand Blueprint"
because it is conceptual in nature, it is not visible or tangible and because
they gravitate to functional benefits.
Asia CEOs usually struggle with the emotional dimension to brand building.
"Purpose" commonly referred to as mission statements, provide an ideal vehicle
for imparting emotional brand cues. This gives the company the opportunity to
communicate what it truly "believes" in. As important and valuable as purpose
is, it is usually misunderstood in Asia. I always ask CEOs what their company's
purpose is and they almost always say "to make money." Rarely do I hear: "to
build a great company" which is usually the most effective way to make money.
Without great purpose, a lot of companies won't be able to make the transition
from good to truly great.
BAS: You state that for many CEOs, they do not understand that
"neither a logo nor a slogan amounts to branding" - can you expand on the
misperception behind this and what it says about where Asian business is stuck?
JB: The widespread misperception among many Asian CEOs that logos
amount to brands is, I think, just a manifestation of the lack of branding
education that characterizes this group. In my book, I talk about just how much
in a hurry Asians are about everything. While this does reflect energy
and vitality in positive ways in many areas, in others the result of this is
not so positive. Branding is a good example of the latter. To many CEOs logos
are a kind of short-hand for brands. It reflects a mentality bent on finding
and taking short-cuts, but there are no short-cuts in strategic branding.
BAS: On page 141 you talk about "the courage to be different" -
is this again a cultural problem, not only for the CEO, but also for the people
in Asia he is marketing to? In other words, beyond luxury goods, is there a
reason brand development isn't happening in Asia that is related to the
audience, not just the companies making products?
JB: When you are in a hurry to make money, you tend to look at
and adopt what works elsewhere. This has included outright replication of not
only business models, but also branding strategies in Asia. By definition,
branding requires at its core differentiation.
Be that as it may, outright copying has delivered short-term success to many
companies. These are now struggling to develop further and grow in the absence
of innovative thinking. A lot of these business leaders are trapped in a
mindset that relies on the tried and true. They are reluctant to experiment
mostly for fear of failure and the loss of face this could bring with it.
The courage to be different will therefore come from individual visionaries and
increasingly from the new generations of leaders - particularly those trained
in the West. The best of the latter will be those who are selective about what
from the West they deploy and what from the East they maintain. Ultimately, it
is a hybrid approach that will succeed in Asia.
BAS: Do your insights on why Asian brand building is so rare and
difficult suggest that the Asian economic miracle is misunderstood by those in
the West? Is it fair to say that Asia's economy could reach a point of
premature maturity if Asian companies cannot learn brand development?
JB: These are tough questions to answer. I don't think these
economies will prematurely mature - but they could develop more slowly than
people think. First, these companies have to understand the unprecedented
opportunity that is in Asia itself: the huge and changing Asian population and
market growth. Inevitably, Asians will create great brands, but the concept of
how to create these brands could slow them down.
As far as Asian brand building practices and the Asian economic miracle, I am
not sure the two are related. The former relates to the absence of best
practices that at some point will be adopted. As for the latter - the Asian
economic miracle - I think that the West has a huge amount it can learn from
Asia. Some very interesting models were created by the Japanese, the Koreans,
and Singaporeans in the 1970s and 1980s.
Government intervention and the championing of specific industries drove a
great deal of the growth strategy that underpinned the Asian economic miracle.
To some degree competition was suspended in favor of the perceived greater good
of strengthening the national economic strength of these countries. But it is
important to remember that the sectors which most benefited from this strategy
were heavy industry, and not brand-sensitive consumer goods.
As to your second question, I do think that many Asian economies will not reach
or deliver to the potential they are capable of unless they create strong
global consumer brands. Doing so will not only engage Asian consumers. They
will do more - they will emerge as catalysts that will impact the world. This
is more a matter of later than sooner, versus it not happening at all.
There is a sense of urgency to this, because the opportunities in the Asian
marketplace are so large. If the Chinese don't get "it" fast enough, the
Koreans will, and if the Koreans don't, another Asian country will figure it
out in their place. This is an Asian battle within Asia, and the West is
sleeping right now.
Benjamin A Shobert is the managing director of Teleos Inc
(www.teleos-inc.com), a consulting firm dedicated to helping Asian businesses
bring innovative technologies into the North American market.
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We see a dual strategy that includes home-grown highly developed high-tech
companies manufacturing everything from consumer electronics to complex and
complicated computer and biotech technologies to an acquisition binge of global
brand names and brand name companies. Lenovo was certainly not an isolated case
just the most celebrated one - at the time. In the automobile sector alone,
venerable Western brands have been scooped up by Chinese companies: Geely - a
Chinese motor vehicle company - raised eyebrows when it bought the Swedish
Volvo brand. This came in the wake of brands like MG and Rover - two famous
British automotive brands - also making their new homes in China.
