Learning to Love Shanzhai Marketing

Peter’s Tex-Mex
Ex-Post Hospital
1331 hrs.

In my column in Media magazine in December I forswore the practice of knocking the unsophisticated way in which many Chinese companies conduct marketing. Shanzhai Marketing, I noted, was for many companies better than no marketing, and that the better and more earnest of these companies was at least building their craft in a Chinese context.

As both a participant in and an observer of the marketing craft in China, part of me wants to see Chinese companies adopt world-class marketing practices before they leap overseas. At the same time, I nurture a growing appreciation that not only will marketing in China will be different than it has been elsewhere, but that practices developed in China will change the way marketing is conducted worldwide, especially as Chinese companies begin their inevitable quest for global leadership.

What we want to avoid, naturally, is the worst of those practices, most particularly the endemic kickbacks and petty corruption that undermine marketing effectiveness. Rather than dismissing local practices out of hand, though, we would be well-served to start questioning our own assumptions about what makes for good marketing practice.

Just to give one example from the public relations side, corporate communicators (including agency types) can foster closer relationships with journalists in China than would be possible elsewhere. This does not necessarily mean that anything improper takes place: on the contrary, it means that the PR professionals wind up with a better idea of what the journalist wants to write about, and is less likely to bother him or her with stories that would be of little interest. It is axiomatic that, in a world of user-generated content and citizen journalism, such practices would have benefits that extend far beyond journalist relations.

Editors who continue to insist on a rigid church/state divide between their journalists and corporate spokespeople have understandable concerns, but this would not be an unmanageable practice and it would do little to undermine western journalism’s vaunted (but, with respect, largely fictional) objectivity.

Another aspect of Shanzhai Marketing that I appreciate is the resistance to rigid metrics among marketers, particularly when it comes to new media. I am an advocate for measurement, but I also recognize that it is impossible to measure all of the effects (positive and negative) of a marketing campaign with the tools we have. Feelings, beliefs, and unspoken convictions cannot be reduced to mathematics, and the attempt to do so is fraught with increasing peril as our segmentation increases. Sadly, marketing in the west is rushing willy-nilly into the waiting arms of the quants, as if persuasion could be reduced to a mathematical formula, but much of what goes into crafting a superb communications program is intuitive.

Shanzhai Marketing, at its best, is an intuitive exercise, one that relies on a deep empathy with and an instinct for the audience over research and quantitative metrics. What we could use in marketing is a comfortable balance between the two, and Chinese marketing practices could help us do that.

I do not advocate seeking virtue where there is none, and it is not my goal to promote a “noble savage” view of Chinese marketing. But our failure to recognize the cultural basis (and bias) of international marketing tools, and to disregard the virtues of the wiser homemade practices will only undermine otherwise great marketing campaigns.

Does Geely Care About Volvo Owners

In the Hutong
Do Marketers Dream of Sheepvertising?
1553 hrs.

When I wrote in Media in October about Tengzhong acquiring Hummer, GM’s suburban assault vehicle marque, I noted that in addition to the challenge of developing new vehicles and upgrading its lackluster marketing program, Tengzhong would need to completely rehabilitate a brand that had become the poster child of environmental nihilism. As we enter the home-stretch of Zhejiang Geely Holding’s purchase of Volvo from the Ford Motor Company, Geely faces many of the same problems as Tengzhong, but with one more very important issue.

Current owners.

One of Volvo’s greatest assets is its consistent consumer satisfaction, a factor that helps significantly in building repeat business. Repeat business is really important – it drops your customer acquisition cost, and that means you don’t have to spend as much on advertising and other forms of marketing, savings that either go right to the bottom line or to the customer in the form of lower prices. In other words, high satisfaction means greater competitiveness. No rocket science there.

But Volvo’s dependence on its large customer base means that Geely will have a major communications challenge ahead: how to convince millions of Volvo owners around the world to stick with the brand when some Chinese compact-car manufacturer with neither reputation nor brand awareness outside of China starts running the show?

Initial messages have been alright, but have come off in that stilted sort of a way that sounds like they’re playing to the industry, the dealers, the unions, and the street, but forgetting the consumer.

This is a worrying first sign that Geely has a tin-ear for its current marketplace, and is thus ignoring one of Volvo’s great undervalued assets: Volvo owners. Unless Geely is betting on China being Volvo’s only market in the future, or on having to spend a fortune correcting for it’s weak communications, it needs to start tuning into current owners, and right quickly.

Marketing Monday: The Prospects for Asian Brands

In the Hutong
Sitting on the heater
0935 hrs.

Benjamin Li starts the year off with a quick look at the prospects for Asian brands in a thought-provoking piece in Media Asia. (Tip of the Silicon hat to Casper Oppenhuis de Jong).

“A major prediction this year has been that the next globally-recognized brands would come out of Asia’s emerging markets, reflecting the shift in global economic power from the West. But over a year since the Western economies crashed, where are these brands?”

Where indeed.

Reading through my comments and those Benjamin gleaned from others in the business, the simple answer is that while Asian (read non-Japanese, non Korean) brands had the motive and opportunity to leap onto the world stage last year, they lacked the ability to do so. Those of us who predicted that 2009 would be the year of the Asian (read “Chinese”) brand overestimated the the ability of those brands to execute, to size up and seize the opportunity in such a short period of time.

Nonetheless, I suspect we will look back on 2009 as the year that China’s brands began to see the potential of being more than just Chinese brands, and a year that something changed in the psyche of an entire generation of future Chinese business leaders. China’s managerial thirty-somethings no longer think about “if” China will have global brands, but about how to get them there.

The results may not show up for a while, but something important has begun.

Holding Fire on Google vs. China

In the Hutong
The Semi-Sabbatical Begins
1243 hrs.

A lot of excellent thinking – and a lot of polemic tripe – has been written in response to Google uberkounsel David Drummond’s blog post last week announcing Google’s intention to stop filtering Google.cn content and possibly leave China altogether.

There is much in the way of speculation and precious little in the way of information bubbling to the surface right now, and rather than simply add to the froth, I’m going to spend some time doing some homework before discussing them.

In the meantime, my thoughts are with the people at Google China, and my hopes that despite the uncertainty that must surround them every day that they can still enjoy their coming Chinese New Year holidays.

History Friday: A Clash of Eagles – Stilwell vs. Chennault

Beijing Airport Expressway
It’s Quiet…too quiet
0932 hrs.

I have been engaged in the study of the Second World War on an off-and-on basis since I was about eleven. As a part of that ongoing effort, I have just finished my most recent sojourn into the China-Burma-India theater, having read Donovan Webster’s The Burma Road, Jack Samson’s The Flying Tiger,” Carl Molesworth’s Sharks over China“, White and Jacoby’s Thunder Out of China, Barbara Tuchman’s Stilwell and the American Experience in China, Maochun Yu’s OSS in China, and a skim through The Stilwell Papers. I’ll be back to dive into The Dixie Mission and the region’s logistics, but I’ve got to get through my stacks on The Russian Front, the German generals, and a couple of other topics first.

Two Generals

So I thought it would be a good time for a wrap-up, and to address the issue that has been bothering me the most: the conflict between two American generals in the theater, General Joseph Stilwell, Chiang Kai-Shek’s chief of staff and China-Burma-India theater commander, and General Claire Chennault, the retired Army captain who was Chiang’s air advisor and the organizer of the American Volunteer Group (Flying Tigers,) and, after Pearl Harbor, commander of the U.S. Fourteenth Air Force.

Whenever I get into a discussion with someone who has read a bit on World War II in China, I usually find that person has developed a preference for one or the other: Stilwell, the crotchety old China hand, admired by those who like him saw Chiang and/or the Nationalist administration as the greatest barrier to China’s success in the war; and Chennault, the leather-faced air pirate who saw airpower as the solution to Chiang’s desire to fight the Japanese into a holding action.

Over the years, I have tended to sympathize with Stilwell because I saw the failings of the Nationalist government. Having just read a series of books on both sides of the question (and a remarkably contrasting series on the European theater,) however, I now see the issue very differently.

War makes strange trench mates, but the differences between these two were such that a clash was almost inevitable. Stilwell’s background was privilege, Yankee, West Point, Infantry, and a soldier’s general who was an army lifer with connections to Chief of Staff George Marshall. Chennault was hardscrabble, Southern, Air Corps, a tactical rebel (he wrote the book on pursuit aviation when the Army Air Corps thought in terms of heavy bombers) who had been medically retired as a captain before being hired to help rebuild China’s Nationalist Air Force.

Stilwell was – nominally at least – Chiang’s military Chief of Staff, but the two clashed constantly. Chennault was an expert hired to do a specific job, but curried favor with the Generalissimo and Madame Chiang through his Southern charm, his (relatively) cheap aerial victories, and his advocacy of Chiang’s low-cost approach to fighting the Japanese.

There is much in the two men to suggest that together they could have made a superb theatre commander. But a closer examination suggests that this oversimplifies the command problems in the theatre.


Stilwell was a fighting general, so much so that he was nearly appointed by Army Chief of Staff George Marshall to lead Operation TORCH, the American landings in North Africa. Somebody then remembered that Ol’ Joe had spent several years living in China as a military attache and could speak the local tongue, so at FDR’s personal request Stilwell was sent to China. Georgie Patton went off to North Africa.
Even the eventual outcome of the war in the European theater do not automatically endorse that choice. For one line on his resume, the U.S. Army sent a fighting general to a theater that demanded a soldier diplomat. Not only was CBI a theater short on fighting forces and long on politics, for all of Stilwell’s area specialization he either never understood the finer points of playing Chinese politics, or didn’t care.

To put it charitably, Chiang was trapped between three forces: the Japanese, the Communists, and the byzantine politics of Nationalist China, while Stilwell saw only the Japanese. The General was left with a choice: try and change Chiang’s thinking, forcing him to set aside his domestic rivals and focus on the invader, or find a way to wage war within the limits of Chiang’s worldview. Stilwell chose the former – not a bad choice, but one that demanded patience and diplomatic skills beyond Stilwell’s ken.

And while correct in doubting Chennault for his almost religious belief in the decisive role of air power, Stilwell was no less parochial in his incomplete appreciation of what air power could accomplish on the battlefield.

(Pentagon wags described Stilwell as the best four-star battalion commander in the Army. The jest was accurate with regards to Stilwell’s acumen, but its implied criticism of Stilwell’s command style ignores the importance of leading a Chinese army from the front.)

Had Stilwell been a corporate executive in 2009, I would have categorized him as the China Hand Curmudgeon, someone who would never let the Chinese slip one past him, but whose distrust would create permanent barriers between him and local partners and subordinates that would preclude success.

In the end, perhaps, the fault lay with Stilwell’s assignment. No one in Washington truly understood what his role demanded, and as a result sent the wrong man to do the job.


Chennault was in the right place at the right time, in a region nobody else wanted to be in, with the support of the local head of state. A thoughtful if not visionary aerial tactician, he not only lacked an appreciation for ground war and what we now call “combined arms” battle, he was drunk on the War Can Be Won From The Air Kool-Aid that was and is the chosen nectar of birdmen everywhere.

These failings were unique to neither to Chennault nor to World War II: indeed, the U.S. military has spent much of the past six decades trying to stamp out parochialism in both attitude and thinking. But in a theatre so thin in leadership and strategy, his failings were magnified. Chennault ignored the ground war to such an extent that he found himself evacuating forward airbases because he had laid no plans to defend them against Japanese infantry.

While Chennault’s strengths were in tactical aviation – stopping the other guy’s bombers and providing close air support – his focus shifted to trying to win the war through strategic destruction of the enemy’s backfield, nearly to the point of forsaking the troops on the ground. In the early part of the war, when ground action was light and his resources few, this may have been the better choice. But his persistence in this strategic focus when the need for tactical support was greater and in view of the limited resources at hand suggest a hunger for glory rather than military calculation drove Chennault’s thinking.

And while Chennault got along with Chiang far better than the more expert Stilwell, one is left with the impression that the mutual good-feelings were driven either by Chennault’s political naivete, lick-spittle kow-towing to Chiang as his patron, or a willingness to play ball with the Generalissimo as a means of furthering his own interests. (Chennault’s lucrative postwar role in Chinese civil aviation does little to dispel such cynicism.)

Chennault, in a word, went local, and regardless of his reasons for doing so it weakened him as a commander and, I would argue, undermined American unity in China and limited Allied bargaining power with Chiang. The consequences of the latter can only be imagined.

The Leaders We Have

In a much-criticized rejoinder to troops in Iraq complaining about America’s lack of material readiness for the 2003 invasion, former Secretary of Defense Donald Rumsfeld told a group of assembled soldiers that “you go to war with the Army you have.”

Source and circumstances notwithstanding, the remark is an historical truism, in particular when it comes to leadership. In World War II the shortcomings of leadership in the US armed forces were most evident in the China-Burma-India theater because not only did we have to work with the leaders we had, we had so few leaders there.

As I read Rick Atkinson’s magisterial “Day of Battle” about the Italian campaign in World War II, I was struck by how the imperfections of one American army commander were somehow compensated by other officers around him. Lucien Truscott balanced Mark Clark, Omar Bradley balanced George Patton, and somehow Eisenhower, thrust into the role of Chief Military Politician, held it all together amidst competing national agendas and egos.

China and “Deep” Leadership

The CBI theater lacked the depth of leadership that would have compensated for the weaknesses of Stilwell and Chennault, allowing them to play their roles but ensuring that their failings never stood in the way of success.

But perhaps of greatest relevance, a study of Stilwell and Chennault underscores that in war, as in all human endeavors, “great” leaders are usually just the most visible element a larger team of leaders working in obscurity. The best leader, without others to compliment or offset his shortcomings, will struggle to reach his full potential.

Too readily linking the lessons of war to the conduct of business is a suspect practice. But my own experience makes clear that the enterprises that succeed in China – foreign or Chinese – are those with the strongest bench of leaders, and top men who are not afraid to be second-guessed and corrected by their juniors.

You go to war – or market – with the leaders you have. Better to have more leaders, in this case, than less.

Is Polymathy Dead?

Somewhere above Orchard Road
Dude looks like a lady
2158 hrs.

The Economist Foreign Editor Edward Carr wrote a paean to the polymath in the Autumn issue of More Intelligent Life that sounded like a eulogy. Carr believes – with some justification – that the class of people who can claim expertise in more than a couple of fields is dying out. Carr notes that the rapid expansion and dissemination of knowledge – especially scientific knowledge – over the past century has made it increasingly difficult for people to claim expertise even in one field, much less many.

Farewell to the Polymaths

Carr clearly has a soft spot for people like Jared Diamond, Umberto Eco, Brian Eno, and Oliver Sacks, people who were able to come up with profound insights or innovations in diverse fields based on their wide breadth of knowledge. But his concern is not entirely sentimental. Polymaths are an endangered species, Carr tells us, and we as a race will be much diminished by their passing.

The question is whether their loss has affected the course of human thought. Polymaths possess something that monomaths do not. Time and again, innovations come from a fresh eye or from another discipline. Most scientists devote their careers to solving the everyday problems in their specialism. Everyone knows what they are and it takes ingenuity and perseverance to crack them. But breakthroughs—the sort of idea that opens up whole sets of new problems—often come from other fields. The work in the early 20th century that showed how nerves work and, later, how DNA is structured originally came from a marriage of physics and biology. Today, Einstein’s old employer, the Institute for Advanced Study at Princeton, is laid out especially so that different disciplines rub shoulders. I suspect that it is a poor substitute.

I understand Carr’s sentiment and I share it to some degree, but I do not agree with his implicit contention that when polymathy dies nothing will rise to replace it.

Welcome the Medicians

Carr would do well to read Franz Johansson’s short but excellent Medici Effect: What Elephants and Epidemics Can Teach Us About Innovation. While pitched to the business crowd with its front page focus on making new and useful things, Johansson delivers an insight that actually touches a far wider range of intellectual endeavor than the merely commercial.

Johansson points out that some of the best innovation actually comes out of people who are actually specialists, but instead of trying to develop multiple specialties, they instead cultivate interests about fields completely unrelated to their core competency. He gives examples so numerous that you realize that this is an increasingly common phenomenon.

What appears to be replacing polymathy, then is something similar but far easier to master and much more common: the cultivation of ideas and concepts across fields by specialists who are neither polymath nor monomath but something in between.

A New Creative Elite

As we exit the knowledge era and enter the creativity era, Johannson has found the nexus where creativity can happen. All it demands, he seems to tell us, is the commitment to master a single field or craft, and the curiosity and sense of wonder to develop other interests, then look for ways to meld them.

If China is going to address the challenges implicit in evolving from an economy built on nimble hands and strong backs to one built on creative minds, its education system (including postgraduate training) is going to have to do more than just build better analytical skills. It will need to stop chunking out narrow specialists and start encouraging a wider range of enquiry from an early age.

Easier said than done, to be sure, but it leaves us with a much more hopeful prognosis for human intellectual endeavor than Carr’s heartfelt dirge. The Medicians may never truly replace the Polymaths, but hopefully the former will make up in quantity whatever they may lack in quality.

Is the Future of Film About Relativity

The Silicon Hutong Suite
Overlooking Orchard Towers, Singapore
1409 hrs.

As China’s film industry struggles to turn itself into a real industry (rather than a government-sponsored propaganda tool-cum-art form,) producers and filmmakers are searching for near- and long-term sources of finance and distribution. Seeking new models with which to finance China’s growing film biz, the gaze of mainland producers naturally turns to markets outside the mainland.

A Bunch of Cash Holes

What they find is that the entire global industry is engaged in the quest for new sources of cash. Even people like Steven Spielberg and Ron Howard, bankable filmmakers both, are finding that it is harder than ever to get the money they need to make their films. Spielberg has not only had to cut a long-term distribution deal with Steve Jobs’ crew over at Disney, he has had to go to India’s Reliance BIG Entertainment for cash as well.

Spielberg’s hunt for production money is a symptom of a wider contagion that has affected the film business. Production costs continue to rise, digital revenue is not ramping up as quickly as is we had all hoped, and younger audiences are spending more time online or playing games. More immediately, the financial crisis has meant that the usual sources of cash have either slowed or evaporated.

All is not gloom, though. For several years now, a new crop of film finance companies pairing hedge funds and private equity directly with producers has not only given Hollywood a much-needed new conduit of cash, it has in some cases brought a more bottom-line approach to production. (Full disclosure: my brother-in-law is an executive at one of these companies.)

A New Kind of Mogul…

At first glance, one of the most intriguing examples of the type is Relativity Media, profiled in this month’s Esquire magazine. The article sounds a hopeful note, positioning Relativity and its 34 year-old leader, ex-venture capitalist Ryan Kavanaugh, as honest water merchants in an increasingly dry land.

Relativity appears to do some smart things. They focus on getting movies made, not optioning a hundred properties and turning one into a film. They ensure costs remain in line with good business sense. They try to earn profit by being sensible about costs and distribution, not trying to make blockbusters.

…Or Just Another Old Quant?

I was really prepared to put Kavanaugh into my pantheon of people who are building the future of Hollywood. But when I got down about two-thirds of the way through the article, things started to go a bit awry. I think this was the paragraph that set off the alarm bells:

“Before Relativity commits to financing a particular movie — either through its slate deals with Sony and Universal or on its own — it’s fed into an elaborate Monte Carlo simulation, a risk-assessment algorithm normally used to evaluate financial instruments based on the past performance of similar products.”

Now, I am nobody’s idea of a “quant,” but neither am I the anti-quant. I like playing with spreadsheets and plugging in assumptions and variables a lot more than I like to admit in polite company. I also think there is a dearth of analytical, quantitative thinking in creativity-driven businesses.

So I like the fact that Kavanaugh and Relativity are trying to bring the sensibilities of management accounting to Hollywood. The future of film is not the subordination of art to business, but the quest for an equitable balance. Kavanaugh’s bottom-line focus while rising above gratuitous bean-counting is a step forward in this regard.

Yet while Relativity would protest that only a part of their decision-making is driven by their computer models, I see cause for concern. Basing investment decisions using computer modeling based on past performance or market behavior is a riskier proposition than the quants might have you believe. Long-Term Capital Management leaps to mind, as do a half-dozen major financial organizations that have similarly vanished into clouds of hubris in the past year.

The Black Swan Cometh

In the entertainment industry, where tastes and media consumption are in the throes of massive change, common sense demands we be especially selective about using the past as a guide. What is the half-life of a set of audience assumptions in a single market like the US, then multiply that across the worlds markets, from whence comes 2/3 of the average film’s revenue.

If, on the other hand, the company’s investment decisions are driven by the knowledge and instincts of its executives, it is likely making decisions on a basis little better than anyone else in Burbank, Santa Monica, or points between.

Relativity may have convinced themselves that the modest goals of their approach  (“don’t lose your shirt”) are enough to stave off an unforeseeable catastrophe – a major box-office flop, or even several in a row. If so, I think they are kidding themselves. The recent history of the finance industry has proven that betting your money on the mathematical rationalization of the irrational behavior of millions of decision makers is pure folly.

All of which is why I hope that, despite Relativity’s apparent success to date, we in China decide to eschew such an approach to film finance, at least for the time being. There are far too many more fundamental steps that the industry here could be taking to improve its bottom line and its box office performance.


Seeking Alpha reader and film executive Andy Almay noted that I my characterization of Spielberg going to Relativity was in error:

“Spielberg didn’t go to Reliance.  It was the other way around. Reliance wanted to buy into Hollywood.  They also made deals with a number of name performers and down the line they may rue the day.  Performers have been notoriously bad at picking successful projects.”

The point, though, remains. When the man who is arguably Hollywood’s most successful and esteemed producer needs to turn some of his creativity to fundraising, all producers will need to do more of the same.

History Friday: The Burma Road

Recovering on Orchard Road
Is this my second or third iced tea?
1318 hrs.

The image of unsung heroes scraping a truck route through the planet’s densest jungles and highest mountains – under fire, no less – to feed and arm the people of China was too good to resist, so it was with great anticipation that I picked up Donovan Webster’s The Burma Road.

What I was hoping for was a dramatic and detailed retelling of what it took to construct this feat of combat engineering and human endeavor, so initially I was disappointed. (Lesson one: pay more attention to subtitles.) Using the construction of the road as a backdrop, Webster chose instead to cover the entire China-Burma-India (CBI) theater in World War II, with an emphasis on Burma and India, and some of the more colorful personalities who drove the progress of the war in this part of the world.

CBI for the Rest of Us

As a campaign history the book suffers, perhaps unfairly, because the standard for World War II historians has risen drastically in recent years. Just when you thought everything about the conflict was that could be known or written has already seen the light of day, we have had a cascade of superb books that have, in many cases, redefined how we relate to and understand the war. Three examples among many:

  • The first two books of Rick Atkinson’s planned “Liberation Trilogy” (the Pulitzer Prize-winning An Army at Dawn and the even better Day of Battle) not only amount to the best accounts of the North African and Italian campaigns ever written, they are compelling a complete rethinking of how we must view the war in Europe.
  • Over in the Pacific, John Parshall and Tony Tully, both part-time American historians, have written Shattered Sword, an account of the Midway battle emphasizing the Japanese side that casts new, unexpected, and iconoclastic insights on the American victory in that pivotal battle. So much for the Hollywood version.
  • Edward S. Miller, another gifted amateur historian, offers in his superb War Plan Orange and Bankrupting the Enemy, together bringing to light the long overture to the war against Japan that most popular histories skim or ignore completely.

Burma Road does not approach the insightful yet accessible scholarship of those accounts. What Webster does instead is to consolidate the works of others with his own on-the-ground research to fill a gaping hole in the popular history of this “tertiary” but locally critical theater in World War II.

Most works about CBI have focused on either personalities (Stilwell, Merrill, Wingate, Chennault) or units (the Flying Tigers, the OSS, the Marauders, the Chindits). Webster pulls these disparate threads together into a single tapestry that gives a good feel for the region’s “War-on-a-Shoestring” as the world focused on Europe, Africa, the Atlantic, and the vast Pacific.

Picking Nits

I have a list of minor quibbles with the book, most of them rooted in Webster’s background as a journalist rather than a military hitorian, that are illustrative of the issues that might keep The Burma Road from taking its deserved place among popular World War II histories:

  • Webster refers to an officer “retiring his commission” when what was meant in the context was “resigning his commission.”
  • Throughout the text, Webster comes across as something of a Stilwell partisan. I tend to sympathize with “Vinegar Joe” myself (his assessments of Chiang were politically incorrect but fairly accurate), but his lack of political acumen consistently undermined his tactical strengths.
  • The maps in the work are far too few, and the few there are are not very helpful in orienting the reader.  What is worse, the symbology – the way he represents different units and their movements – would cause a corporal to giggle.

Despite these quibbles, I enjoyed Burma Road and at a well-written 335 pages, I found it a worthy read, if for no other reason than it gave me a new point from which to re-commence my own studies on the CBI theater. For anyone largely unaware of the progress of the war on China’s southern border, I highly recommend it.