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Innovation Unveiled in China
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Innovation Unveiled in China

Karthik Rao, Managing Director, Nielsen Greater China

Billions of dollars are spent every year researching and launching new products in China. In a recent Nielsen study of major industries, new products contribute over 75 percent of annual growth in China, which equates to 56 trillion RMB. While China is the second biggest country behind the U.S. in terms of innovation testing, multinational companies (MNCs) generate 70 percent more revenue from innovation than local companies.

More than half (56%) of local innovations are “me-too” products compared to 10 percent for MNCs. Among companies with revenue from innovation, nearly two-thirds (63%) of innovations are incremental, while only 14 percent are “me-too.”

Karthik Rao, managing director, Nielsen Greater China, identified the importance of creating new ideas to help stimulate consumer demand and how companies can drive more revenue from innovation. Speaking at Nielsen’s Greater China Consumer 360 Conference in Beijing, Rao discussed a landmark study that provides a roadmap for how to increase the odds of new innovation success and outlined what successful companies are doing differently than others.

Drive more revenue

How can local companies drive more revenue from innovation? Winning big through innovation requires long-term sustainable growth, which comes from having an innovation process in place and implementing it every step of the way:

  1. Build a separate innovation team. A team focused solely on innovation drives more revenue. Forty-three percent of local companies do not have formal new product development team, while only 18 percent of MNCs do not have one.
  2. Make time for ideation. Take time for white space identification and ideation. Nielsen studies show that companies that invest in the ideation stage earn 20 percent more in revenue from new products.
  3. Have a rigid and consistent process. Companies with stage gates drive 53 percent more revenue from innovation than those that do not. Only one-third of local companies have stage gates, while almost two-thirds (62%) of MNCs do.
  4. Launch with excellence. An effective knowledge management system gives an edge from learning from past launches. Companies that have consistently used and updated a knowledge management system have generated 12 percent more revenue from innovations than companies that have not.

Manage ideas lightly, but handle the process precisely

Innovative companies in China will purse breakthrough and incremental innovation rather than “me-too” products and should allow at least one year for the innovation process. Involving global expertise at later stages than early on and adopting a knowledge management system will greatly improve your chances for new innovation success.