Prototyping China: Living in Beta

Continuum has been doing work in China for 15 years, mostly focused on China as a consumer 
market. Our multinational clients have been 
betting on China’s emerging consumers as a key 
to their companies’ growth agendas since the 
early 1990s. But working with China as a client market had been sporadic. A few years ago, we 
decided it was time for Continuum to begin a 
deliberate expansion into the mainland.

The plan was to design the business after a careful immersion in the local market researching the client base and understanding the competition. Like any strategic design project, we would start with an experiential discovery phase, figuring out who we wanted to target and what type of business model would make the most sense. Then we’d devise a way to enact a relevant service offering, build a network of partners and mine the region for talent.

I came to Shanghai to build the China business in April 2009, and I’ve realized that my experience starting up a creative consultancy exactly mirrors, and sometimes pales next to the millions of other Chinese entrepreneurs who are all endeavoring to create value and sustain a living in this hyperdynamic market. They’ve let me in on a common secret in China—something that homegrown entrepreneurs know by heart and practice as a matter of habit: Mutate the business to match the market because everything is a prototype.

Ready, Set, Go.

Ready is the guy I buy my handmade shoes from in Shanghai, and his cousin owns a shoe factory south of the city. Ready is the first to admit that he doesn’t know much about shoes, but he is an expert at knowing how to respond to, and increasingly anticipate, demand. His small one-room shop is a showroom of all the latest: Prada, Gucci, Varvatos, Ferragamo. Besides making copies of well-known brands, he also takes suggestions from customers, who sometimes want to make small changes here or there or to try their hand at designing their own shoes. He then incorporates these user-created designs, some horrible, some amazing, back into his catalog.

Last time I visited Ready, one entire wall of shoes had been replaced by women’s handbags. He explained that since his customers’ wives are always waiting around for the men to get fittings and pick shoes, he wanted them to have something to 
choose, as well. Rather than women’s shoes, which seemed more difficult, he decided on bags. He described his first handbags as “horrible,” but customers quickly began giving him tips to improve his designs—some even started designing bags themselves and using Ready’s cousin’s factory as a private manufacturer. Ready’s next step? Recognizing that enough customers are interested in the process of handcrafted shoes, he’s offering tours to his cousin’s factory and charging his mostly foreign customers a premium for getting a piece of the provenance story. He’s already booked four trips this month. This is also his fourth business—the first three didn’t work out as well as this one. Ready is 19 years old.



Observing these local business owners, some of them only teenagers, introduced an early spark of inspiration that made me wonder if the studied, deliberate strategy I had planned on was overkill and that perhaps Ready was the one we should be learning from. Immersing in street-level entrepreneurship also solidified my larger suspicion that China is a leading indicator for other emerging markets when it comes to sheer bottom-up innovation.

The following insights and observations—cultural, corporate and consumer—gathered during the first formative years of operating in China continue to inform the way we incorporate local market thinking and behaviors into our global practice.

Better All the Time

In China, few consumer conceits resonate better than better. “Practice makes perfect” reigns in the Western Hemisphere, but in China it’s “There is no best, there is only better.” Originally popularized by a domestic refrigerator brand, this phrase has permeated the cultural consciousness and now holds more meaning that it ever did as a commercial slogan. Better expresses many meanings for and about Chinese culture, not the least of which is humility. In continually striving to be better, one of the noblest pursuits, there will always be a brighter tomorrow, a more secure and stable life, a more productive society and a happier outlook.

“Better City, Better Life” was the official tagline for the 2010 World Expo in Shanghai, and it perfectly captured the zenith of optimism about China’s ascendance on the world stage. In preparation for the Expo, Shanghai transformed its footprint: widened old streets, added three new subway lines, increased the number of buses and taxis and repaved much of the city’s thoroughfares, including the historic Bund artery. In transportation alone, the city got noticeably better. You could literally feel the ground under your feet changing.

“Good, Better, Best” doesn’t translate well as a positioning strategy in China because many consumers don’t aspire to have the best and they are not interested in good. Better has more resonance than best because, as one of our respondents in a laptop study told us, “If I have the best already, then I can only go down from there. That’s why I prefer ‘better’—I know it’s always improving.” While most mature consumer markets around the world are experiencing a post-positioning shift in branding and product creation, China is still enjoying a plethora of new brands, product categories and novel offerings. The message still matters as much as, or sometimes more, than the product itself and better is a key message to design for.

“Better value for money” is one of the most-repeated phrases on the streets of China. When consumers talk about better, they mean that something has improved performance or added functionality. This is more prestigious or offers something extra, like a free-trial product or a combo-pack. But better is most certainly not cheaper. A less expensive product merely means that it is not as good as something else of similar pedigree. The price of something is the defining feature of any consumer product in China’s tier 1 and 2 markets. So many of the best brands have realized that it’s better to give something away than to lower the price.

Understanding better as a comparative and relative concept is also a good consumer segue into understanding how consumers grasp the value of brand meaning.

Prototyping Meaning in China’s Consumption Laboratory

Many foreign brands in China have long since realized that their very identities can be, and often must be, recontextualized for the China consumer. After all, what the brand stands for globally and what it means to local consumers may take on completely different, and sometimes unintended, meanings.

Brands, foreign and domestic, are increasingly taking control and reinventing aspects of their messaging, identity and offerings in different channels, media and markets within China. You can see this in foreign lifestyle and fashion magazines, fast food chains and consumer electronics brands. Domestically, many personal-care and home-care categories are regionally customized. It has led to an amazingly fragmented and noisy marketplace where consumers have had to look for relevance beyond brand name and price as indicators of quality.

But it has also liberated some very well-known global brands that are not as known for innovating in their home markets. Disney, for example, decided to prototype a beta business focused on English language learning for early school-age children. Combining Disney’s treasured archive of character and story assets with an immersive, experience-based learning curriculum resulted in a breakthrough new education model that has supplanted existing rote learning methods for language education. Disney English has grown to 22 schools in less than two years and doesn’t show any signs of slowing.

Disney was able to cross over into a completely new business by getting creative about how to deliver the imagination experience in a new and relevant way. The Disney slogan “Where Dreams Come True” resonates with affluent young Chinese parents who recognize that the rigidity of the education system in China may be limiting for their single child’s future aspirations—and their own. Disney English is an example of innovated-in-China and so far exists only here. The business innovators in China are channeling what is meaningful to consumers and creating hybrid offerings that promise new value.

All too often we hear the story of shanzai culture, where outright copying has unfortunately been the defining story of China’s global contribution. But experimentation, iteration and sampling are core to how creators work. Starting with something, copying it, smashing it, building on it, combining it with other things and seeing what happens when it comes out the other end is what leads to interesting variations and sometimes unexpected breakthroughs. It is the story of innovation. Sooner or later it will also be the story of China’s ability to re-create better than anyone. There is no better beta laboratory in the world than China right now to recombine, re-source and recycle meaning.

This ground-up innovative spirit that leads to the promise of a better tomorrow and the experimenting with meaning that leads to brand reinvention are vital ingredients for China to emerge as a world-leading innovator. The final ingredient is an appetite for failure at an organizational level.

Failing to Win

There is a noticeable tension in the way many larger organizations in China approach innovation because they often attempt to innovate without acknowledging experimentation as a critical input to the creative process, something Ready does instinctively and Disney English does deliberately. This hints 
at the larger truth prevalent in China that failing 
is ultimately antithetical to succeeding. Making 
a mistake, miscalculating or being wrong is the worst thing that can happen because it leads to a loss of face.

The network effect of guanxi, or maintaining relationships, makes losing face a very real fear for many Chinese and may inhibit a culture of trial and error within the corporate structure. But increasingly, China’s enterprises are realizing that for innovation to become the engine of growth that the government’s 12th five-year plan has set forth, they must focus more on getting the inputs to the innovation process right than on concentrating only on the outputs. Building a nation of innovators means shifting innovation from being a technical process to being an organizational practice.

It is convenient to think of innovation as a linear step-by-step process, but in practice it is much more cyclical and chaotic requiring a collaborative and creative intelligence to manage successfully. Failing is not the goal. Rather, the goal is to try to experiment, to fiddle and tinker and to build and test. That incremental failure nets success is counterintuitive, but, ultimately, getting to better requires a beta ethos. Innovators value failure mainly because it reveals opportunity.

Accelerated Evolution

China’s massively rapid commercial change reflects a nation-in-beta. It’s apparent in the way brands and consumers play out the real-time tug-of-war between value and meaning but also in the way that businesses, big and small, design their processes and offerings in an accelerated way. I believe China is an emerging innovator of the first order because people like Ready are mutating small businesses everywhere and, in the process, writing China’s future as a creative consumer laboratory. Witnessing the hyperevolving street-level entrepreneurship has been as instructive as participating in the innovation efforts at the other end of the spectrum—the semiprivate corporations, state-owned enterprises, multinational corporations and joint ventures of every kind.

The same way ethnographers look for lead users to uncover extreme needs and inspire nonobvious solutions, Continuum looks upon China as the market that will teach it more about innovating than any other place on earth. Because it is extreme in almost every sense, China affords us the opportunity to experiment and forces us to be highly adaptable. But it also means that we must embrace the vulnerability that accompanies an accelerated marketplace lest we succumb to believing that what has worked so far will continue to work. We came to China to embrace the future; to prototype new ways of working, new tools, new collaboration models and new businesses, something Continuum advocates often to its clients and now is doing for itself.

This article was published in IDSA’s Innovation Magazine, Frontiers of Innovation, Summer 2011.