Old China and New China – How much do you know about the waking dragon?

Old_New_China_How_much_you_knowWhat do you think you know about China? Maybe you have read the stories about the whole of Beijing being enveloped in smog? Perhaps you saw the viral photograph of the new roadway that was built around a house? Does the country really have a national pork reserve to battle inflation? Do they really televise the sunrise on giant outdoor screens? A little digging is needed to sort fact from fiction on seemingly ‘crazy‘ stories. In reality, a closer inspection of ‘New China’ the super-power needs to be undertaken.

If your perception of China as an industrial power is still around low quality production; mass production, cheap labor, patenting or copyright issues, corruption and bribery; environmental issues and health concerns, the extreme rich and their extravagant behaviors…some of these might still remain true, but it’s also time to have another look at China the innovator, against a backdrop of a slowing economy.

The educated and wealthy beat the drum in the ‘March of China’ 

Though every sign indicates the economic growth is slowing down since 2013, it might also be good timing for the market to shift its emphasis from achieving quantity to focus on quality. This is reflected, to some extent, in policy and certainly in Millennial tastes for luxury goods and services.

China’s new Premier, Li Keqiang, said,”More effort should be made to improve the quality and benefits of development, with a focus on promoting economic restructuring and upgrading.” The continued rise in worker salaries has added impetus to the move to a less labor-intensive and higher-value-added economy.

Apart from moving into a long-term, more knowledge driven, service focused economy; Chinese government also has determination to move from Made-in-China to Innovate-in-China. Not only has the Chinese government placed greater emphasis on local innovation in its latest five-year plan, but the growing sophistication of China’s market is creating a powerful economic rationale for local designs and products.

Crucially, the Chinese companies that are succeeding are those that take a data-driven approach to serving the customer. Examples include Tencent’s QQ instant-messaging service; Sina Corporation’s microblog, Weibo; and Alibaba’s Web-based trading platform,Taobao. Deep, analytically driven customer insights are often at the heart of such innovation and not just the practice of Western world major brands.

Research by Mckinsey into the explosion of a wealthy middle class reveals: “Changes in economic profiles have been and will continue to be the most important trend shaping the consumer landscape. The Chinese are certainly getting richer fast”

In their future view, McKinsey expect by 2020, “167 million households (close to 400 million people), will become the standard setters for consumption, capable of affording family cars and small luxury items. Companies will be able to respond by introducing better products to a vast group of new consumers, thus differentiating themselves from competitors and earning higher profits.”

The National Bureau of Statistics for China detail how disposable income has tripled in the last 8 years.

How to innovate as a business in a slowing economy? 

As we have seen there is a significant shift in the demographics of China along lines of life-expectancy, a population explosion of yester-year sees a Millennial generation educated, employed and with money; set against a more connected country, virtually and physically. Businesses have had to adapt to survive and this starts at ensuring a seamless customer experience is the standard, something the Millennial expects.

If you think drone delivery is something innovative from Amazon, you are wrong. Earlier in Sep 2013, SF-Express, a Chinese delivery company tested its drone delivery in Dongguan city, way ahead of Amazon who captured the mainstream media attention with theirannouncement in December of last year.

If you think Apple is the poster child for innovation and the ability to customize its product for users, you need to know what Xiaomi is, and how quickly they’re reacting to the market and user needs. Compelling approaches to delivering product updates, iterative and localized, are helping this infant smartphone provider expand in market share and of course, value. They are just one company assuming the new model of consumption. Out with the – purchase, use, declare obsolete, discard – in with the new, founded on constant improvement, upgrade and iteration.

Haier is a classic case of a Chinese company shifting its business focus from delivering price competitor products to quality service. Haier is the leading home appliances company that values the customer journey and its service to customers. Haier has established an Open Partnership Ecosystem as the channel for collecting customer feedback.

China Merchants Bank is the fastest growing in China, having forged the best reputation for good customer experience from counter service to tele/web/mobile platforms.

JD.com is the largest market of B2C online shopping platform in China, a popular consumer e-commerce offering and the most influential e-commerce website in China. JD owns logistics system itself to provide fast-delivery service to its customers.

How best to win consumers in the new China landscape?  Businesses need a multi-faceted approach that is as nuanced as the personas that wish to do business with them. A dual strategy for mass market and the affluent market is not enough, a sophisticated means of managing the fragmented market needs to be astute and dynamic, reacting as much to environmental, Governmental and customer changes as they do to trends and technological advances. A Customer Experience strategy should be a priority in joining up business systems and process, certainly with the end user in more control than ever. In the words of Forrester, “The days of double-digit GDP growth in China are over. In the face of slowing economic growth, the one true, defensible competitive advantage is to become customer-obsessed.”

Exploring digital customer experiences with Forrester 

Looking at the Chinese market is like looking into a kaleidoscope, you find something surprising at every single turn. And if you look further, you will see how the time is changing and the market is moving. In the coming weeks we will explore the business approaches to handling the digital customer experience at scale, in a localized and personalized manner.

Otto de Graaf will be speaking at the forthcoming Forrester event in Shanghai on Wednesday 19 March. You can find out more details on how to Drive Digital Customer Experiences In A Slowing Chinese Economy on the event page.

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