Recently, the Wall Street Journal covered an article about the Rise of China’s Innovation Machine. The article talks about how China’s innovation companies are going to challenge established players in the world. I agree with the fact that the world’s second largest economy, with 85% of the population being educated, has the right convergence of resources to be an innovation powerhouse. However, China’s biggest issue is not capital, technical skills, or infrastructure for innovation. The biggest challenge is creating global brands to leverage this innovation.

Chinese companies have become successful either by exploiting the domestic market or by becoming part of the supply chain for global brands.

To become a global brand, Chinese companies should address the following issues:

  1.  For Chinese companies, they need to first decide that they want to be a “global company” and not just export the existing products.
  2. To create global brands, Chinese companies will have to invest directly in the marketplace. Most Chinese companies look for channels that can establish and generate sales, channels never create brands. Companies have to manage their own brands and channels support the brand to generate sales and provide logistics support.
  3. Hire local experts in the marketplace to avoid costly experimentation of learning about the market through sales channels.
  4. Go into the market for a long term play.
  5. Win English speaking markets first.  English is a world language with almost 2 billion people speak it either as their first or second language.

I hope Chinese companies can leverage their own market and innovation to create global brands.