Nielsen China president Mitch Barns on innovation in China

A widely-held perception about China is that its economic success over the past decades were merely due to the vase size of its market. Many western business executives believe that Chinese companies are not competitors to global giants.

Barns called the thought that innovation in China is based on the size of the market "a big mistake."

Despite the fact that China ranks as the third largest market in terms of new fast moving consumer goods product testing, only two per cent of new product ideas in China achieve sustainable success in the market.

"Mega brands require the same long-term commitment and investment in establishing themselves in China as they do elsewhere. In fact, the success hurdle is higher here because of the intense competition," he said.

Barns offered four winning tips for innovation in China:

• Superior, in-depth local consumer understanding is key to success for both local companies and multi-nationals, as the retail environment is diverse and the competition is intense. Beyond understanding the local consumers, there is no unique 'China-specific' formula. The keys to success in China are mostly the same as they are in other major markets around the world.
• Innovators are not always more successful than followers. The first mover can have the advantage by creating unique solutions and setting the barrier high. As a follower, simply copying rarely works. Second movers do have a chance to win, but they must move quickly and differentiate themselves.
• Multi-nationals have generally imported and adapted brands and technologies from other markets. Acquisitions have also played a role. True 'made in China for China' innovations are still somewhat rare among multi-nationals, but they offer big potential, especially as a strategy to pursue the growth opportunity in China's lower tier cities. In recent years, a growing number of multi-nationals have established R&D centers in China.
• Local companies can be successful in the premium segment. A variety of approaches have proven successful, including playing the  'China card' by using traditional Chinese elements and building close, strong relationships with local retail chains.