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Sony had a problem in China: The company was seen by many young Chinese as Daddy's brand. So in August the company opened a design center in Shanghai. The three designers there quickly set about trying to understand the lives of young Chinese, giving 50 of them digital cameras and asking them to document their daily lives in photographs. By September the designers had tacked dozens of the pictures -- people in their bedrooms, hanging out with friends, playing basketball -- onto the wall and divided the group into seven categories, such as "Cheerful Next Generation" and "Try Hard for Life." Then the team set out to design a line of MP3 players that would appeal to the trendsetters in these groups. The devices, in muted colors with a smooth river-rock-like appearance, are scheduled to hit the market in China early next year. "If we understand [young Chinese], we can design better products for them," says Katsumi Yamatogi, the veteran Sony Corp. (SNE ) designer who heads the studio in Shanghai's trendy Xintiandi district.
There's a lot of that going on in China these days. As Chinese companies seek to build global brands and foreigners aim to boost sales in the mainland, they're transforming the country's design business. Chinese manufacturers realize they need better products if they want to break out of China and beef up their margins on sales abroad. And foreign companies such as Sony are starting to see that as Chinese consumers get more discriminating, they're no longer content with the tired, designed-somewhere-else models that many overseas-based marketers once sold in China.
This is powering a boom in design on the mainland. The best Chinese companies are building their design staffs or hiring outsiders to help them make more products of their own. Design is one of the most popular majors at Chinese universities today, and hundreds of design consulting firms have sprung up in Shanghai, Beijing, and Guangzhou. "Large companies [in China] are saying: 'We can't catch up fast enough,"' says Craig M. Vogel, a professor of design at the University of Cincinnati who has worked as a consultant to several companies in China. Even young designers from abroad are flocking to Beijing and Shanghai to try their luck in the world's most dynamic consumer market.
That's a dramatic change from just a few years ago. Although China manufactures the bulk of the world's electronics, shoes, and much more, those products typically have been designed in Europe, the U.S., or Japan. When Chinese companies did make their own products, as often as not they copied designs from abroad. Today, in contrast, just about everyone in China seems to want to be the next Samsung. A decade ago the Korean conglomerate was a second-tier brand that made me-too consumer electronics. But after years of focusing on design, Samsung today earns more awards for design than even Sony or Apple Computer (AAPL ), and it's one of the world's most valuable brands. "Design is the way companies improve their competitiveness," says Yu Zida, a vice-president who oversees design at appliance maker Haier Group Co.
As locals get better at design, multinationals are realizing that they need to develop products specifically for the Chinese. So Sony, Samsung, Motorola (MOT ), Nokia (NOK ), General Motors (GM ), Volkswagen, and many others have opened design shops in China to research local tastes. Not so long ago, General Motors Corp. made few changes to models sold in the mainland, figuring that consumers buying their first cars wouldn't be too choosy. But as competition has picked up, the carmaker has built up its Chinese design team. The staff has nearly tripled -- to more than 80 people -- since 2002, and at the Shanghai Motor Show this year the group showed a concept sedan called the ALA, which looks something like a pagoda when viewed from the rear.
Most of the Chinese design staff's time, though, is spent tailoring vehicles developed elsewhere to the Chinese market. In one case, GM took a family minivan sold in the U.S. as the Chevrolet Venture and restyled it as a car for executives, calling it the Buick GL8. To boost its appeal to big shots who get driven around by chauffeurs, the designers gave the GL8 a tonier interior and a longer hood, with a more pronounced grille and headlamps. "The front face of the car becomes a big part of the design inspiration," says James Shyr, gm's chief designer in China. "One of the key requirements of an executive car is you have to see it from far away."
Some Chinese designers call that sort of ostentation "gold teeth design." It's a hit in China, where it's more important to appear rich than to have a fat bank account. That means companies both foreign and local often trot out products that sell well in China but might not have much resonance in other markets. Lenovo Group Ltd. (LNVGY ), for instance, has had fabulous success with a cell phone that holds a few drops of perfume, filling the room with sweet smells as the battery heats up. And Volkswagen designers in Shanghai have for the first time been permitted by the company's design bosses to use artificial wood in a car. While customers in Germany would turn up their noses at a car with fake wood -- even if "real wood" is just a veneer that's less than a millimeter thick -- Chinese car buyers want it because it makes their autos stand out. "Understatement in China is a no-no," says Stefan Fritschi, chief designer at VW's Shanghai operation. "You want to impress your neighbor."
One problem faced by domestic companies and foreigners alike is a lack of trained designers. Fritschi, for instance, asked that the names of his designers not be published lest they be poached by rivals. To some extent, that gap is starting to be filled. Since Hunan University opened China's first school of design in Changsha 23 years ago, the discipline has taken off. Beijing's Tsinghua University is opening a new 60,000-square-meter design building, and in Guangzhou the Academy of Fine Arts just moved to a new eight-story facility with enough space for 3,000 industrial design students -- five times its current capacity. Today, China has some 400 schools offering design classes that together graduate some 10,000 industrial designers annually, up from just 1,500 or so five years ago. "Design schools are popping up like bamboo shoots," marvels Yan Yang, chairman of Tsinghua's industrial design department.
Design is even seeping ever deeper into Chinese society. Beijing has introduced into the national curriculum a new course called Technology and Design in which students learn about the history of design and what constitutes good design. "Traditionally, Chinese people are very good at design," says He Renke, dean of Hunan University's design school, who helped develop the curriculum. "Now we need a renaissance."
Is design in China at the same level as in Japan or Korea? Not yet. The level of instruction can be spotty. While the schools are good at teaching the creation of pleasing forms and using computers to render new products, they need to give students more guidance in what is usable as well as pretty. "The difference between technical skills in China and the West isn't that great," says Liu Guangzhong, a professor at Tsinghua and an independent consultant. "The problem is in innovation."
The other issue: The best Chinese companies know design is crucial. But others still haven't learned the lesson that it's worth spending money on design to distinguish their products in the marketplace. "Manufacturers don't think about what makes good design," says Zhou Yi, president of S.point Design, a Shanghai consulting firm that has done work for Siemens (SI ), Intel (INTC ), and many Chinese companies. "They really just focus on looks rather than functionality."
Then there's piracy. Just about any successful product in China quickly gets knocked off, which is a powerful disincentive to invest in design. GM, for instance, is suing Chery Automotive Co. for its QQ compact, a dead ringer for the Chevrolet Spark. And Motorola Inc. noticed copies of the A780, a PDA-phone combo its Beijing staff developed for the Chinese market, within eight months of the phone's debut. "I'm amazed at how efficient they are," says Kumo Chiu, who heads Motorola's Chinese design operations.
Still, the situation is improving fast. As Chinese companies face the same piracy problems as foreigners, Beijing appears to be more willing to crack down. Li Yiwen, a professor of design at Shenzhen University and an independent designer, came up with a basic Web camera design that has been branded and sold worldwide by the likes of Samsung, Yahoo (YHOOO )!, and Lenovo. Shortly after the camera hit the market, a factory in Shenzhen started churning out knockoffs. So Li hired a lawyer to talk to the factory and eventually settled for a payment of $63,000. "I was pretty satisfied with that," says Li.
Other Chinese designers are succeeding in international competitions. A student from Hunan University last year earned the top prize in the biennial Nagoya Design Do! competition for young designers. The project was a milk carton that has the day's weather printed on top -- which gives milk drinkers useful information and spurs dairies to keep their milk fresh. A graduate of the Tianjin Academy of Fine Arts studying in Germany was one of five finalists for the prestigious BraunPrize this year for a portable shelter that can be constructed quickly -- almost like a tent -- for a concert or sporting event.
The renaissance can be seen at the best Chinese companies, too. Lenovo has doubled its design team, to 80 people, since 2002. The computer maker -- which bought IBM's (IBM ) PC Div. in May -- this year won an Industrial Design Excellence Award for its ET960 smart phone. Yao Yingjia, Lenovo's chief designer, has broken down much of the Confucian hierarchy that hobbles innovation at Chinese enterprises and employs many of the same management techniques used by industry leaders worldwide. Every year, Yao takes team members on a two-day retreat where they bond by building rafts from scrap materials and sailing them across a lake. And when designers are working on, say, a new cell phone or laptop, they take over a "war room" for the duration of the project. There, team members paste photos of competing products on the wall, brainstorm about the attributes of the device, carve clay mockups, and immerse themselves in the project for weeks or months. "Asian culture is very top-down," says Yao. "But if you give your people too much direction, you won't get any surprises, and as a manager I like to be surprised."
Some of the best surprises, Yao says, come when his designers combine traditional elements of Chinese culture with today's technology. In one instance, a designer charged with developing a speaker phone modeled his proposal after the traditional Chinese "hot pot," a serving dish that families place in the middle of the table and share. The phone, which looks like a red and black dish, includes a remote control that balances on its tip in the center of the "dish" and automatically rights itself when it gets pushed over, like a wobbly doll. "This is a great example of a product that combines culture, style, and function," says Yao.
The best Chinese companies also are showing a commitment to getting designs right if they don't work out the first time. Appliance maker Haier Group, for instance, discovered through its research that people in Saudi Arabia like extra-large washing machines to hold the bulky robes that are common there. So the company started shipping a machine with a wash tub that could hold 6-kg loads, but it didn't sell particularly well. Two years later the company increased the size of the tub to 9 kg. It sold a relatively disappointing 6,000 units. In February, Haier tried again, this time with the biggest tub it makes -- 12 kg. The product has been a hit, selling 10,000 machines since its launch.
That's emblematic of the kind of attention that Haier Group pays to design. The company has 120 industrial designers and 25 more people doing consumer research. Product managers for each model line are responsible for following trends in various countries. So besides the Saudi machine, there's a tiny one for rural China that costs just $38. One for India, where the power supply is iffy at best, can handle dramatic fluctuations in voltage and will pick up where it left off if the electricity goes out. A dishwasher for the U.S. market features the controls on the top surface of the door rather than on the front so you can choose the cycle you want by pulling open the door a bit and looking down at the machine from the top. "[American] consumers complained to me that it's not convenient to control the machine from the front," says Shen Weibin, the machine's designer. "I realized I could put the controls on top of the door."
Even small companies are starting to understand the benefits of good design. Guangzhou exporter Soleil China Ltd. has been selling toys for pets since 1994. By 2000 more than 200 factories in China were making pet toys. So that year Soleil hired a packaging designer to give its goods an edge, and soon added a product designer. "We immediately saw better results when we started designing our own products," says Kate Feng, Soleil's general manager. Today she has four people creating toys and a half-dozen others helping make molds and control quality at factories. From their small corner of Feng's Guangzhou headquarters -- a jumble of pink leashes, squeezable rubber steaks, and plastic doggy Santas for Fido's stocking -- Soleil's designers come up with at least five new products a month. Each can be sold at margins of 10%, vs. 2% to 4% for items designed by foreign customers but made by Soleil.
Since Soleil's wares regularly show up on the shelves of U.S. chains such as Target (TGT ), Wal-Mart (WMT ), and PetSmart (PETM ), its success raises the question: Will the Chinese start doing design work that once would have been done in the West? That idea has designers from London to Los Angeles abuzz, fearing that their jobs could migrate to less-expensive shops in China or India.
In some instances that's happening already. Taipei-based Nova Design opened a Shanghai branch in 2002. Now it employs 130 people, even as the head office has shrunk to about 50 people from 70 a few years back. Designers in China earn about $350 a month to start -- less than half what their counterparts in Taiwan make. While other Taiwanese and Hong Kong outfits have struggled to get high-quality design out of Chinese staffers, Nova and others are plowing ahead in hopes of grabbing a piece of the growing mainland design business. To give their designers a boost in that race, both Hong Kong and Taiwan are pouring millions into design education and training. "This is a huge market," says Wen-long Chen, president of Nova, which has designed everything from cell phones and blenders to motorcycles and buses for Chinese manufacturers.
Will U.S. companies follow Nova's example and employ low-cost Chinese designers to create products for the American market? GM's James Shyr calls his designers "foot soldiers" who understand Chinese culture and therefore can help the auto maker sell more cars in China. But Shyr doesn't expect his foot soldiers to start helping their Detroit colleagues with the styling of cars made for U.S. drivers anytime soon. Designers in Detroit "know exactly what's going on in Springfield, and we don't," says Shyr.
Still, the Japanese and Koreans figured out what's going on in Springfield, and their designs eventually succeeded worldwide. Many Chinese designers have already started working overseas. Once these people have spent a few years in Milan, Tokyo, or New York honing their skills, some will doubtless return to China to help the mainland reach the next level. It may be many years before the design skills of Chinese companies equal those of a Samsung. But as China develops, plenty of mainland companies will surely be trying.
By David Rocks