In terms of product and service development, three major changes are affecting the world we live in. The first is the balance of global production and consumption; the second is the way products and services are conceived, developed, and delivered; and the third is the perception and expectation of consumers around the world.
As China and India and other less-developed but highly populated regions gain new buying power, the center of gravity of world consumption is shifting from the United States to these larger populaces. Not only are these economies increasingly voracious in terms of consumption quantity, but consumer perceptions and expectations are rising at the same time, as the new wealth allows them to also pursue life, liberty, and happiness.
At the same time, these other countries are gaining new production skills beyond just the ability to manufacture. The United States is certainly still a significant global market for and source of innovation. At the same time, the EU is still evolving as an entity, and new alliances are forming to help countries and companies compete more effectively and open the borders for the development of interconnected markets. Russia is still a question mark but has tremendous potential given its natural resources and population, and the rest of the former Soviet bloc nations are emerging in the global economy as well. Emerging markets in China, India, and several countries in Africa are new growth areas for production and consumption of products and services.
China is now making a major change that will affect all the companies in that country and also worldwide competition. China realizes that to become a serious player in the World Trade Organization, it must be more than the world’s leading supply manufacturer. China is not only turning out 300,000 engineers annually, but the country is putting major investment into industrial design. By the year 2010, China will have 500 schools of industrial design. China will become a major source of business, engineering, and design for its own emerging consumer market and will compete in global markets as well. it is already beginning to take over development of new products from former powerhouse engineering countries, such as Germany and the United States. China will follow in the same development path that first occurred in Japan, then in Taiwan and Korea. You might not drive a Hyundai today, but in fewer than 10 years, you will be tempted to buy a car from China from a company that you do not yet even know the name of. Haier has already become a competitor in the United States in refrigerators and TV monitors.
Just a decade ago, China did not have any business schools. Chinese engineering was based on copies of the Russian approach to mechanical and electrical design. its design schools were either craft schools or based on Russian and East German models of design education and practice. We are witnessing one the fastest movements to modernize in history by the world’s largest country. Remember one thing: The Chinese have been here before. Two thousand years ago, China was way ahead of Europe and light years ahead of the Americas. You might not know much about its heritage, but China invented the compass, paper, printing, and gunpowder. This is a country that was “built to last,” and it won’t have any problems going from “good to great” again.
If China is attempting to become a global competitor based on innovation, and india is close behind, there is no turning back for other countries. Finland is investing huge resources in design and innovation in a program aptly named Finnovation. Building on the early success of Nokia, Finland wants to become a knowledge- and innovation-based country. Even Poland is trying to redesign its brand. It is seeking to rid itself of its image as a land of labor and strife, and is working to bring a fresh look to improve tourism. From countries to companies around the world today, the key is finding a brand strategy that serves as a center for sustained innovation and implementing a method to achieve that strategy—to innovate. The strategy must serve as guide for using methods that promote organic growth and serve evolving needs of consumers as the social, economic, and technological (SET) factors continue to change and produce opportunities for new products and services.
Not only is there a shift in global production capabilities, but the new ease of delivery of product and information is hastening the demise of economic borders. Products and services can now be developed anywhere by anyone and shipped everywhere. soon, GM will likely sell more Buicks in China than in the United States. Haier has set up a manufacturing and distribution center in south Carolina and is competing in many white goods categories. Samsung recently became a global competitor in design and innovation after decades of being the low-cost option, and its major competitor is Nokia in Finland, not just Motorola.
The media channels that bring information and entertainment into our homes are becoming increasingly global; markets are forming around interests and themes more than geographic location. As fantasy is beamed around the world, everyone is forming his or her own visions of the ideal fashion, car, home interior, and lifestyle experiences. Harry Potter and Michael Jordan transcend geographic limitations. There is an air-conditioned Starbucks in the Forbidden City in Beijing, and there is an Eiffel Tower in both Paris and Las Vegas.
The interplay between the innovative, empowered individual and the forces of global commerce have never been more important. The emerging economies are not threats but sources of endless opportunities. What they all point to is two directions for business strategy. Companies can either choose to be the cheapest, or they can choose to be innovative. This book talks about the latter, because in every market, only one company can be the cheapest, and the competition to be the low-cost provider is fierce. Unlike the lose-lose economics between low-cost competitors, innovation is a win-win that lessens competition among companies by differentiating products, allows producers to increase their prices, and delights customers by providing greater value to them. As companies determine their core values and capabilities, they establish unique brand identities that connect company to consumer. Competing up the price ladder enriches people and companies. it is well demonstrated that people will pay for products they value. As the SET factors continue to shift, the companies that can most effectively read market trends will win.