ok...i see why brand innovation is big

For the past 24 hours I have been an observant (not an ethnographer, of course, I simply don't satisfy the criteria) in this strange mishmash of culture and energy called Shanghai. This place makes New York look like a suburb of Cleveland - if NY is always on, then Shanghai is ALWAYS ON. I've been trying to pay careful attention to the brands that people are wearing, buying, listening to, looking at, inundated by, and so on. My tentative conclusion is that the Western brands that are here are more visible, but that the majority of regular folks are most into Chinese brands that I don't recognize.

So if you're Pepsi, I guess you just do stuff like buy up lamppost real estate and hang signs on every single post in the downtown area and make them big and colorful and light up and night. And if you're KFC, you buy all the greatest real estate - and build up so you can sell even more of the Colonel's secret recipe. And if you're Zegna, you take really, really good care of the white people that walk into your store, because they might just drop enough cash to underwrite the store's profitability for the next month.

But what do you do if you're an average brand trying to make it? What do you do if you're Clif Bar, or Crate & Barrel, or any one of the "small" businesses in America that could do really well here? Trapped between the big spenders and the established Chinese players, can you really afford to just "test" market to the Chinese to see how your products or services fly? Doesn't it cost a lot to develop the relationship capital that's necessary to succeed here? And aren't there new companies springing up every day in China?

I think the answer is that these guys can come to market , but they have to know a couple things. First and foremost, establish that there's an unmet need. There are a lot of candy bars, but what abot one that's healthier and tastes better? Next, think about the potential size of the market. Just in terms of magnitude. Are we talking about 1 million people or 10? It makes a big difference in how much you can spend (invest) today in order to bank on the probability of a reward tomorrow. Then, think really critically about the probability that someone will jump in before you. If there are zero to two players in a market, or if it's new, or if barriers to entry are really high, or if suppliers are super concentrated, then you probably have a good shot. If those factors are in the opposite direction, consider whether it's even worth the investment. Then talk to potential customers. Don't underrate or overrate this part - Ford and Starbucks would never have been born if people just got ideas from customers. But find out what they like and don't like, what they get mad about, what they wish they had, what they've heard stories about, and so on. Capture their imagination and see if it fits what you're good at producing. If it does, now might be just the right time to get in here.

But most of all, don't adapt an existing set of brand equities to this market. Pizza Hut is a semi-luxury restaurant in China, one where we today paid $10 (yes, US Dollars) for 5 pieces of 2x2 inch garlic bread. The same amount of garlic bread in the US costs about 15% as much. But good (deep dish, lots of toppings) pizza is hard to find here, and Pizza Hut realized that early on - so they transferred the product and concept really easily, but created a more upscale environment and alluring restaurant feel, and walk home with probably a decent day's pay for a day's work. Budweiser touts itself as a fancy import, not the neighborhood water. Starbucks? Well, people are probably pretty sick of being able to get tea every single place they go, so why not take a chance selling Frappuncios? We were in 3 Starbucks today and I can report that almost none of the scores of drinks we saw being consumed were anything but coffee-based. I guess the bottom line is: retain the core of your brand equity, but make sure that it's delivered in a way that uniquely fits an unmet need and excites people. I could have academically told you that's the way it should be before I got here, but it's so obviously relevant now. More to come from the Mainland, I am sure...