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Shan Zhai: How Imitation Fuels Innovation in China

By Mary Bergstrom

For many, the hunt for growth has led them to China. Its size and pace are too alluring to ignore; China claims about 46 cities with more than two million inhabitants and went from 33.7 million Internet users to 513 million in one decade.

But in China, not every consumer is equal. History and culture have conspired to provide youth with unprecedented access, advantage – and pressure. Young people are raised in a world of abundant consumerism and constant development; they are always on the look out for the next, better thing. Estimated to reach 500 million under the age of 30 by 2015, youth have taken the lead in trying and defining new attitudes and behaviors.

When writing my new book All Eyes East: Lessons from the Front Lines of Marketing to China’s Youth, I was often asked what ideas from China have the power to move abroad. I love questions that seek to understand the big picture, the currents that move us all. The answer is: plenty. Having been plopped into a world of consumerism, they are hard at work changing the game to suit their own needs.

Young Chinese are among the first to feel entitled to entertainment. Pirated as it is, they can access music, books, TV shows, software, games and movies from every corner of the world for free online. This sense of entitlement has spread around the world, sending media businesses into a tizzy as youth continue to consume but have stopped buying. High expectations for low cost and constant newness have forced media businesses to become creative in their offering.

The expectation that products should cater specifically to the consumer is most apparent in shan zhai. When shan zhai (meaning high mountain) first grabbed headlines it was cast as a cluster of bandit businesses operating outside of government control. These companies were taking ideas from mature brands and executing forgeries for consumers anxious to get a deal.

These fakes were often haphazardly produced, quickly misspelling brand names in the rush to get to market to make fast money. Other copycats took a longer-term approach, tweaking names and visual identities just enough to make associations with the original. In this vein, KFC inspired KMC, McDonald’s sparked MKC and Starbucks provided the impetus for SPR Coffee. Still other imitations masqueraded as identical twins, virtually indistinguishable from the real thing, excepting the price and retail experience.

Author Mary Bergstrom

Over time, shan zhai has evolved to represent more than just a cheaper version of a pirated idea. It has become a disruptive force with both commercial and social implications. Shan zhai now represents an ethos that what you do with an idea is more important than the idea itself. It is a rebellious stance against the dominant authority to make something work for people, not brands.

With new status, shan zhai brands don’t need to hide behind other brand names. Apple iPhones, for example, are popular and profitable inspiration for shan zhai. Upstarts present their takes (including the HiPhone and the SciPhone) with a wink to consumers. These conscious misspellings are not meant to fool, they are deliberately differentiating from the original. They are acknowledging that their functionality may be similar (and at times even more robust) but they are decidedly not Apple. And they are not trying to be.

Shan zhai companies are no longer operating in dark back rooms, many are moving into the big time. They have not rested on others’ inventories, they have created unique mash-ups of their own and now boast their own intellectual property portfolios. With the advantage of impossibly short production cycles, focus on the needs of the domestic market exclusively (at least at the onset) and flexible interpretations of intellectual property, shan zhai brands force questions about what is and what should be.

Although initial consumer appeal was doubtless due to price, a shan zhai culture has emerged in China that values fast and flexible innovation above the origination of an idea. The best of breed examples are innovative, ruthlessly fast and flexible; they take risks and understand both what their competitors offer and what consumers want. They break stride and challenge incumbents to keep on their toes. They remind brands that ruthless attention to detail and marketing a clear and differentiated value is mission critical. And most, importantly, they give a peek into the values that China is bringing to innovation.

From a consumer perspective, the acceptance of shan zhai culture coupled with imaginative, relevant and forward-looking functionality is a boon. From the point of view of what China has to offer the world, these disruptions have the power to change expectations for entire categories. For brands, shan zhai serves as a learning opportunity to look to the consumer to see what is important, to be flexible in how they think of themselves and to be ready to find inspiration in unexpected places.

Mary Bergstrom is the founder of The Bergstrom Group and author of All Eyes East: Lessons from the Front Lines of Marketing to China’s Youth (Palgrave Macmillan). 

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2 Comments

  1. Posted April 12, 2012 at 7:52 am | Permalink

    For additional perspectives on this and other topics about life in China today, please visit my stepson’s blog here: http://www.isidorsfugue.com.

  2. Posted April 16, 2012 at 3:57 am | Permalink

    Bergstrom’s discussion is an informative one, but one wonders if anyone with a first-hand knowledge of China edited her book. Shan Zhai (山寨) most certainly does not mean “high mountain.” It originally referred to a mountain village, and suggested one which was both far-off and fortified.

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