Brazilian Design for New Urban, Middle-Class World

Countries across the global South are experiencing rapid urbanization as people move to cities for better economic opportunities — and this massive social change is creating new business opportunities. Those who recognize how fundamentally people’s lifestyles are changing will be those who will benefit from this big shift in populations.

Finding ways to live well in urban areas will be critical to determining whether this move repeats past urban failures — from the favelas of Brazil to the slums of India — or introduces a new way of living that is exciting and colorful. Design and designers will be critical to this change.

One young design company in Brazil, Sao Paulo-based furniture studio NUUN  (nuun.nu), is attempting to resolve a dilemma common across the rapidly urbanizing global South: How to create a design aesthetic that fits with the new way of living and being?

The company consists of designer and founder João Eulálio Kaarah and architects Renato Périgo and Carolina Sverner.

Périgo specializes in furniture and interior design, while Carolina Sverner worked with respected Japanese architect, Shigeru Ban (shigerubanarchitects.com), who is well known for designing buildings and houses made from paper and for creating easy-to-build homes for people after a disaster has struck (http://www.ted.com/talks/shigeru_ban_emergency_shelters_made_from_paper).

A collaboration among upcoming artists, designers and architects, NUUN tries to infuse its designs with a sense of “brazilianness”. Brazilianness is a modern aesthetic, made for modern lifestyles in the new urban landscape, that draws on aspects of Brazil’s culture and environment.

The young studio’s first collection of furniture offers simplicity. Called Eos, it tries to blend urban cosmopolitanism with raw nature. Brazil is known for its jam-packed urban cities as well as its vast expanse of Amazon rainforest. In practice, NUUN’s look is a mix of contrasts redolent of what used to be called brutalism: concrete mixed with glass, steel, wood and semi-precious gems. NUUN takes inspiration from NASA’s Earth Observation System (EOS): the collection vibes off of space satellites, antennae and the dry soil of the backwoods. NUUN says that “despite its Martian features, [the collection] is as Brazilian as it comes”. There is the modular Panorama sofa (http://nuun.nu/products/panorama) in five colors, capable of being re-shaped to fit a variety of living arrangements. A glass-topped coffee table with a concrete base and a side table with a carbon steel metallic structure to complement the sofa.

Elsewhere in the world of Brazilian design, footwear brand Grendene S.A. (http://ri.grendene.com.br/EN/Company/Profile) has become one of the world’s largest producers of footwear and made one of its founders a billionaire. And Grendene has boosted its international success by turning to another Brazilian success: supermodel Gisele Bündchen (giselebündchen.com.br).

Grendene began in 1971 and owns various successful shoe brands, including Melissa (melissa.com.br/en/), Grendha, Ilhabela, Zaxy, Cartago, Ipanema, Pega Forte, Grendene Kids and Grendene Baby.

It has six industrial zones with 13 footwear factories and can produce 240 million pairs of shoes a year. It undertakes all areas of production— from making its own moulds for the shoes to creating PVC (polyvinyl chloride) (http://en.wikipedia.org/wiki/Polyvinyl_chloride) – and handles its own distribution.

While Grendene is already a well-known shoe brand in Brazil, it wanted to expand its presence overseas to increase profits. Named after the two brothers who founded the company, Alexandre Grendene Bartelle and Pedro Grendene Bartelle, Grendene started working with supermodel Gisele Bündchen in 2002 to help her launch her own line of affordable flip-flops, iPanema (ipanemaflipflops.co.uk). The brightly colored sandals with elaborate patterns became an instant success.

But do celebrity endorsements really work? In the case of Bündchen and Grendene, the answer is yes. According to Forbes, 25 million pairs of the flip-flops and sandals are sold every year, accounting for 60 per cent of Grendene’s annual exports of about US $250 million.

Brazil was able to produce 864 million pairs of shoes in 2012, up 5.5 per cent from 2011.

Of these, 113 million pairs were exported to the United States, Argentina and France.

Brazil, like many other countries, has had to work out how it could compete with cheaper shoe imports from China. The strategy it chose was to target the growing number of middle-class people both in Brazil and elsewhere, as well as the high end of the market.

In 1979, Grendene created the Melissa brand, which has now become a coveted style leader. It collaborates with top design names such as Karl Lagerfeld and architect Zaha Hadid.

Making a partnership with Bündchen is part of the company’s strategy to reach higher-income buyers.

And it is working: Grendene increased its export revenue by 50 per cent in 2013.

Co-founder Alexandre Grendene Bartelle became a billionaire according to Forbes World’s Billionaires list and is worth US $1.4 billion. He owns 41 per cent of Grendene S.A. and close to 40 per cent of the Dell Anno brand.

This is a critical lesson for manufacturers in the global South. Grendene had achieved strong market dominance at home, and was already benefiting from growing wealth among Brazil’s middle classes. But it was the overseas market that had the potential to clinch even more profits for the company.

Bündchen’s high brand profile has enabled the company to compete head-to-head with the well-known Brazilian flip-flop brand, Havaianas (havaianas-store.com).

Another modern design leader owned by Grendene, Dell Anno (lojasdellanno.com.br), is a maker of modernist cabinets and furniture.

Dell Anno only use wood from renewable forest sources, to protect and preserve the Amazon and other native forests. Dell Anno tries to recycle as much as possible: up to 80 per cent of the water used in manufacturing is recycled, and byproducts from the production process such as a sawdust, wood, plastic and cardboard are also reused.

Dell Anno makes a full range of furniture for kitchens, bedrooms, closets, home theatres, home offices, service areas, restrooms and commercial environments. Dell Anno uses research and development to study trends and advise customers on the best options. The brand offers its staff training to help standardize customer service, and also has an excellent blog covering developments in modern design around the world (http://www.lojasdellanno.com.br/blog/).

By David South, Development Challenges, South-South Solutions

Published: May 2014

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Baker Cookstoves – Designing for the African Customer

An innovative social enterprise is using design to create an energy-efficient cookstove for Kenya. By turning to an experienced Swedish architecture and design firm, the people behind the Baker cookstove wanted to make sure the stove’s design was as efficient as possible and relevant to the customers’ needs, while also making sure it is visually appealing and something a person would proudly want in their home.

The Baker cookstove (bakerproduct.com) has been designed to be a high-quality and desirable product that also accomplishes the goal of saving money for the user. This unique product is being developed and made at the company’s factory in Nairobi, Kenya.

Baker’s owner is Top Third Ventures Global (topthirdventures.com), a social-impact company registered in Kenya and founded in 2011 by American Lucas Belenky and Björn Hammar, a Swedish/Finnish entrepreneur. Their goal is to make sure that everyone in the developing world has access to an affordable, high-quality efficient cookstove.

While cooking is a daily necessity for billions of people, it is also costly and polluting. By switching to energy-efficient cookstoves, families can reduce the cost of cooking daily meals and, if the stove is designed right, cut the amount of pollution generated. One of the great obstacles to the take-up of energy-efficient cookstoves to date has been the absence of sustainable business models to sell and distribute them.

The Baker cookstove, designed as an aspirational product and backed up with a seven-year guarantee, hopes to change this dynamic. If things go to plan, the company hopes to significantly scale up its production based on customers wanting to have a Baker cookstove proudly on display in their home.

The Baker cookstove is the product of a deliberate attempt to use design and a well-thought-out production life cycle to create an item that is eye-catching, effective, and manufactured consistently to a high standard.

Designed by Claesson Koivisto Rune (http://www.ckr.se/), a Swedish architecture and design firm, the Baker cookstove is a sleek, round, modern stove and comes in eye-catching colors such as orange. It could easily fit in with other kitchen products in a high-end design shop. And that is the point: they want people to want the Baker cookstove.

Quality is key, and engineering and design teams constantly monitor the product and make adjustments to the cookstove as they receive feedback from customers.

The Baker cookstove is benefiting from new financing being made available through carbon credits, which its founders believe will bring big changes to the energy-efficient cookstove market over the next 10 years.

Baker’s chief executive, Lucas Belenky, told Southern Innovator magazine – this newsletter’s sister publication – about the thinking behind the Baker cookstove.

SI: What role does design play in the Baker cookstove social enterprise? At what stage did Top Third Ventures start to think through the production life cycle for the Baker cookstove? What did you feel was missing in the other cookstove models currently available on the market?

The Baker cookstove is the cornerstone of the social enterprise. Top Third Ventures is at its core a product company. There are different aspects to the business model to make it work (i.e. carbon credits and big data) but everything depends on the success of the Baker product. We started thinking through the production life cycle from the day the company was founded in late 2011. The Baker is designed for usability, aspirational value, and performance, prioritized in that order. The most important thing is that the Baker is easy to use and does not require its users to change their daily routines or cooking habits. Cooking cultures vary greatly across the developing world so it is important to understand exactly who your customer is and focus on meeting their requirements. When you have a product that is easy to use it needs to be desirable as well. Beyond the service provided, the product should make the customer feel good about themselves. Finally, the Baker cooks the same food with half the fuel and much less smoke.

The priorities seem reversed for other cookstove models on the market. Efficiency comes first, then the aesthetic design, and cultural conformity is last. Hyper-efficient cookstoves are great for health and the environment on paper but the benefits are not realized because widespread adoption isn’t achieved. Most products are imposed through a top-down approach instead of starting with the customer and designing the stove around them.

SI: Why did you choose to have the Baker cookstove designed by Claesson Koivisto Rune, a Swedish architecture and design firm? What were some of the challenges encountered when designing the product and the production life cycle? What advice do you have for other social enterprises looking to offer an appealing product to low-income households?

We wanted the Baker cookstove to be an aspirational product that you use as much because of the performance (less fuel and less smoke) as because it is beautiful. Claesson Koivisto Rune believed in our vision at a very early stage and I doubt we could have gotten where we are today without them. Challenges around the design mainly involve keeping the costs down. Our customers do not have a lot of disposable income so balancing affordability with performance and world-class design is tough.

For other entrepreneurs selling to low-income households my advice is identify your customer, listen to them, and never stop listening. This is obvious to most businesses but for social enterprises sometimes the grant organizations or other dispersers of donor funding become the customer without you noticing.

Finally, often just because the consumer is in a developing country, enterprises neglect aesthetic appeal and branding. Do not do this. Your consumer behaves for the most part like their counterpart in the developed world. They want products that look nice and make them feel good.

SI: What role is information technology playing in the Baker cookstove’s development? How do mobile phones help with reaching customers in Africa? How does offering software products such as Top3Tracker help Baker cookstoves?

Information technology has a huge impact in decentralized areas because it enables cheap flow of information. For Top Third Ventures it allows us to track our sales in real-time, communicate with current and future customers instantly, and gain valuable insights about how to improve the sales pitch and marketing strategy. The Baker cookstoves also depends on carbon finance, which requires a dialogue with current customers to ensure the usage of the cookstove is accurately measured. Information technology such as our Top3 Tracker significantly reduces the cost of accessing carbon finance.

SI: It is said an innovator is somebody who disrupts existing products and ways of doing things. How is Top Third Ventures innovating and disrupting the current approach to energy-efficient cookstove distribution?

We hope to change the way products for low-income households are designed, marketed, and sold. Top Third Ventures’ Baker cookstove embodies our conviction that these products should be customer-centric, have aspirational value, and conform to local cultures. The success of our product will show that consumers in the developing world want the same thing as their counterparts in developed countries.

Top Third is a partner of the Global Alliance for Clean Cookstoves (cleancookstoves.org).

Lucas Belenky from Top Third Ventures Global.

The Baker cookstove by Claeson Koivisto Rune.

By David South, Development Challenges, South-South Solutions

Published: December 2013

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Southern Innovator Issue 4: https://books.google.co.uk/books?id=9T_n2tA7l4EC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 5: https://books.google.co.uk/books?id=6ILdAgAAQBAJ&dq=southern+innovator&source=gbs_navlinks_s

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Better by Design in China

In recent decades, China has been known more for its inexpensive manufactured goods than as a producer of high quality products. But this is changing as the country seeks to move up the economic chain.

China’s long-established design traditions were largely overlooked as the country made its breakneck push to become the world’s manufacturing powerhouse. But now Chinese manufacturers want to be known for high-quality designs and products rather than just for cheap-and-cheerful merchandise.

China is a critical lesson for the rest of the global South, and offers much inspiration to any country trying to develop, modernize and eradicate poverty.

The country is the main reason for the dramatic reductions in global extreme poverty rates, and it can be proud of using its average yearly economic growth rate of 10 per cent to lift 440 million Chinese out of poverty – the biggest reduction of poverty in history (The Economist). The strategy of exporting manufactured goods into Western markets at competitive prices has dominated the past 20 years.

But China faces a dilemma as other nations in the global South are moving into this niche. It needs to quickly become a high-value nation, with unique products and designs generated in the country.

Luckily, a renaissance in Chinese design in the last five years has been gradually grabbing the attention of the world’s creative community.

Innovative Chinese designers are creating home furnishings and interiors that are being snapped up by European companies.

The Italian kitchen utensil design company Alessi turned to eight Chinese architects – including Ma Yansong and Yung Ho Chang – to design a range of trays called (Un) Forbidden City. The architects’ designs were manufactured in Italy – a reversal of the pattern that has dominated for the past 20 years.

The architects drew on Chinese traditions and 21st century technologies to design the trays. One was made using a 3D scanner which captured images used to make a mould.

The drive to change and transform China’s global economic role was promoted in 2011’s Beijing International Design Week (http://www.bjdw.org/en/), with its theme of transforming “Made in China to Designed in China.”

“When you have so much of a manufacturing base in one place, it’s natural that people start thinking about how to climb the value chain,” Philip Tinari, director of Beijing’s Ullens Centre for Contemporary Art (UCCA) (http://ucca.org.cn/) – a champion of new artists and designers – told howtospendit.com.

“Chinese design has become something to rally around and, unlike art, enjoys great official support because it’s a way of improving China’s long-term economic position, as opposed to expressing thoughts about what’s been going on.”

Other Chinese designers grabbing attention include Chen Xuan, who makes tables; chair-maker Gui Yang; Li Bowen, a maker of wicker chairs; and Ge Wei, a maker of jewellery boxes.

Designer Huo Yijin makes contemporary tea trays, using heat-reactive lacquer coating to create dazzling effects.

“Users can see the wonderful effect of water and temperature reacting on the tea trays when they drink Kungfu tea in the traditional way,” Huo explained.

Jingdezhen, Jiangxi province – a city that has been making ceramics since the Ming Dynasty (1368–1644) – is now attracting craftspeople from around the world looking to tap into its expertise and skill. One attraction is Mr Yu’s Big Ware Factory. Its unparalleled ability to create giant-size pottery is a design niche with much potential.

Many foreign creatives are being drawn to China for its can-do attitude and the ability to break with conventions stifling creativity in the West. The next five years could see the world’s design centre of gravity shift eastwards again.

By David South, Development Challenges, South-South Solutions

Published: November 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

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Design Collaborations Revitalize Traditional Craft Techniques

Keeping alive traditional craft techniques and methods in the age of globalization is a tricky balance to get right. As countries seek to increase living standards and income, traditional craft-making methods are often jettisoned in favour of attracting manufacturing and other high-value activities – meaning rich and potentially lucrative skills can be lost.

One promising new initiative is bringing craftspeople in the global South together with established and well-known designers in The Netherlands to create the market incentives to continue using traditional techniques. It is establishing a brand and a business model to sell unique and original craft products into the European marketplace. By doing this, it hopes to open up new markets in Europe – and in time, the rest of the world – for craft makers from the global South so they can continue to earn an income using their traditional skills and techniques.

The brand is called Imperfect Design (http://www.imperfectdesign.nl/) and was founded in 2011 by Monique Thoonen, formerly the managing director of Dutch Design in Development (ddid.nl) – a matchmaker between Dutch designers, producers in developing countries and European importers. Imperfect Design takes the idea a step further: It is a brand dedicated to creating high-value, well-designed craft products for the European marketplace.

The idea began to percolate in Thoonen’s mind in 2010. She received a good response from some of the Dutch designers she approached – who were keen to work with craft workers in developing countries – and this gave her the confidence to launch Imperfect Design.

“We saw that many designers were very interested to work with craftsmen/small workshops in developing countries,” she explained, reflecting on her previous experience working with Dutch Design in Development. “The designers and the crafters learned a lot about the inspiring cooperation and it resulted often in good quality products/collections. However, it was hard to find good sales channels for the products. In 2010 the idea came about to set up an own brand.”

Thoonen was seeking a business model that could be sustainable and rewarding for all the participants along the value chain (http://en.wikipedia.org/wiki/Value_chain).

“The cooperation is inspiring for Dutch designers,” Thoonen said. “The craftsmen will learn a lot about product development during the project and will earn money from the orders. The idea is to build up long-term relations with producers in three countries in three continents – each continent one country.”

For Thoonen, the business model approach is at the core of Imperfect Design.

“The idea of my business model is not doing good. It must be a profitable business model, otherwise it can’t be sustainable. Making it profitable is a big challenge and also forces us to keep the commercial aspect every day in mind.”

The criteria for selecting the designers includes a resourcefulness and creativity that can shape a high-quality craft product with the resources and tools at hand for the collaborating craft workers in the developing country. It is also crucial they understand how to shape the craft product into a high-value item that can command a high price back in Europe.

According to Thoonen, “the products must be differentiated from the market, otherwise it can be copied easily by large producers in China. It is really important to create new things, as the prices are in general higher than from mass production, so the consumer must understand why the price is higher.”

So far, Imperfect Design has begun working with craftspeople in Vietnam and Guatemala, and it is currently selecting a country in Africa. Craft workers can contact Imperfect Design about collaborating but the number of people it can work with is limited at this stage. Imperfect Design places emphasis in taking the time to build sustainable relationships.

A common criticism of craft products sold in many markets is their sameness and sometimes poor and inconsistent production quality. Trying to enter an overseas market and understand what consumers want or desire is a very difficult thing for a craft worker to get right. This is where the experience and knowledge of a designer can make a big difference. Designers can help to hone the craft product, improve the production methods and position the product in the overseas marketplace.

“The workshops have fantastic qualities and materials to work with,” says Thoonen. “When you combine that with the strength of our Dutch designers, you can create products which are commercial, of high quality, and beautiful.”

One of the first collaborations to bear fruit is between Dutch designer Arian Brekveld (arianbrekveld.com) and craft workers in Vietnam. The collaborations have resulted in lacquer tables, trays and candlesticks, ceramic vases, iPad bags and throw cushions – all made using techniques and materials unique to Vietnam.

Imperfect Design allows the designers to select which country they would like to work with. Brekveld’s previous experience travelling widely in Asia tipped his interest towards a country in that continent. He appreciated the friendly and welcoming contacts he had made in Vietnam, who showed a strong interest in collaborating.

Brekveld wanted to bring a “designer’s eye” to the possibilities in Vietnam. He asked: “How could they make the crafts more beautiful and customized for the market in Europe?”

He found Vietnam was not just an interesting place to work, but also a country undergoing significant change. As a result, he found it critical to go and see what was happening in the country and to see first-hand the working conditions in the workshops.

This was a contrast to many of the design briefs he normally undertakes in Europe, where there often isn’t the intimacy of working directly with the craft workers in their workshops.

The time spent in Vietnam was intense and involved visiting multiple workshops to see which would be the best partner.

“We visited four or five lacquer companies to see what their skills were, looking for possibilities,” he said. “It is very special to see by yourself, to really to take a look by yourself, to see what companies do.”

Brekveld was surprised to see that concepts that had been discussed and explored earlier in the day would be presented to him as completed works by the end of the day. The quick work pace and precision really impressed the designer, and the project took months to complete in comparison to the years required by some projects he works on in Europe.

A group of women from the ethnic Catu (http://en.wikipedia.org/wiki/Co_Tu_people) community in central Vietnam weaved the fabrics for the iPad bags and cushions. It was very valuable to work with them in person because he could see what they were – and weren’t – capable of. The fabrics are made into iPad bags and cushions in the capital Hanoi by disabled craftsmen.

Brekveld said visiting the remote workshop saved a lot of time and frustration.

“It was a big difference compared to sitting behind a desk and sending designs. You really see all the possibilities that are there.”

Brekveld is seeking to design products that do not fit in with a clichéd idea of what comes from a developing country.

“If you look you can see the imperfections but they are not obvious. These designs would not necessarily sell in their own country. We try to design products showing the skills they have, using their techniques – not using patterns they would use for themselves. We look at their process and say ‘you can make that and that’. On the other hand, we don’t want to tell them to do something completely different. We look at the technique – a combination of European design language with their abilities.”

But what about quality control? Brekveld says that is an issue he looks at right from the beginning of the design process. “I am a maker, try to make myself – try to think about it before hand.”

He is ambitious for the collaboration to flourish.

“We hope these relations are long-term relations,” he said. “We hope to expand the collection.”

He will present the collections during Dutch Design Week at the end of October 2012 in Eindhoven (ddw.nl).

For Thoonen, success will bring many benefits. “If we manage to sell the collection well in the market, then we can give more orders,” Thoonen said. “In short: it will create work, but also development in quality and design.”

By David South, Development Challenges, South-South Solutions

Published: September 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

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Southern Innovator Issue 4: https://books.google.co.uk/books?id=9T_n2tA7l4EC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 5: https://books.google.co.uk/books?id=6ILdAgAAQBAJ&dq=southern+innovator&source=gbs_navlinks_s

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Designed in China to Rival ‘Made in China’

 

Harnessing the power of design to improve products and the way they are manufactured is a critical component of successful economic development. And the high export value of designing and making “computer equipment, office equipment, telecommunication equipment, electric circuit equipment, and valves and transistors” was flagged up as a priority for developing nations back in 2005 at a meeting looking for “New and Dynamic Sectors of World Trade” (UNCTAD).

One country taking up this challenge is China. It now boasts twice as many Internet users as the United States, and is the main global maker of computers and consumer electronics, from toys to games consoles to digital everything.

China is also on course to become the world’s largest market for Internet commerce and computing.

The centre of gravity is very much moving China’s way: One study of 769 firms investing in 2,203 Chinese companies by Stanford University in California, found “the same firms that were successful in Silicon Valley … have transplanted their expertise to China,” according to Marguerite Gong Hancock in The New York Times.

But the country wants to move from ‘Made in China’ to ‘Designed in China’. This is critical because the majority of the profits to be made are actually in the designing, patenting and marketing of products. Manufacturing, as has been shown in the recent media controversy over the products made by Apple (apple.com), is not the main profit centre.

Apple employs 43,000 people in the United States and 20,000 overseas. But through its network of sub-contractors,the number employed overseas in Asia, Europe and elsewhere is around 700,000 (The New York Times). This includes around 200,000 assembly jobs in China. These workers can make US $17 a day or less.

Apple makes hundreds of dollars in profit for each of its iPhones. Apple can do this because it is the designer of the phones and holds the copyright, and it is the branded company that has built up its reputation and developed a highly sophisticated marketing and distribution network around the world. Through clever use of design, Apple created products that look distinctive in the marketplace. And those are the factors that determine the ability to make this profit. As has been noted, it isn’t just cheap wages that keep Apple’s profits high.

Getting consumers to desire and buy your products is a challenge for any company. Design plays a major part in understanding the unique demands of countries and markets, and what people find appealing or repellent.

A product that has both a successful design and is produced efficiently will generate a good profit.

The classic example from the past is Japan. Devastated during World War II, Japan set about re-building its manufacturing prowess from scratch. It brought in American innovators to introduce new concepts in manufacturing.

Japan’s openness to the new ways enabled it to re-fashion its manufacturing industries to exporting to the developed Western nations, in particular the United States. At first, quality control was an issue and Japan was mocked for making cheap quality trinkets, toys, automobiles and motorcycles. But it quickly changed from this to a reputation for making quality, affordable products and moving quickly into the burgeoning micro-electronics and consumer products markets. It also was a pioneer in computer gaming and entertainment.

The recent achievements in supercomputing in China are pointing to where things can go. China has developed the Sunway Bluelight MPP supercomputer (http://en.wikipedia.org/wiki/ShenWei). It is able to do a quadrillion calculations per second: making the Sunway Bluelight one of the 20 fastest supercomputers in the world. It was built with a Chinese-made microprocessor, and importantly, uses lower amounts of power than other supercomputers.

The clever bit is the ratio of computing power to wattage used. Energy-efficient computing is critical if computers are to make the jump to the next level in processing power.

All these trends coming together hint at big changes in the coming years.

In the past two decades, the electronics sector has enabled a number of developing countries to improve trade performance, in particular East and Southeast Asian nations.

Improving education is critical to the growth strategy. Improving education, like encouraging the pursuit of engineering as a profession, as China has done – it now has more than half a million estimated graduates, the most in the world – means new skills and ideas are coming to the industry (engineeringinchina.net).

But this is not enough. New ideas are essentially a creative process and this needs connections to business and the ability to experiment and play with ideas. Start-up incubators have proven a successful way to do this.

Thailand is a good example: Around US $4.5 billion was invested in the country’s electronics industry between 1986 and 2001. This created 300,000 jobs. The sector became so important it made up a third of the country’s exports.

Realizing that much of the work was assembly manufacturing, the government set up the Thailand IC Design Incubator (http://www.nectec.or.th/rd/electronics/be204-45/be204-45.php) to work on hard disk drive development and move up the value chain.

“In 1978, I saw workers stringing together computer memories with sewing needles,” Patrick J. McGovern explained to The New York Times. McGovern is the founder of the International Data Group, which invests in Chinese enterprises.

“Now innovation is accelerating, and in the future, patents on smartphones and tablets will be originated by the Chinese people.”

In the past, China was not able to make significant progress on this development for two main reasons. The first is copyright piracy and theft of intellectual property rights. During China’s economic rise, this theft was rampant and the country developed a reputation for being home to a vast marketplace of knock-offs of major Western brands. And the second reason was the heavy hand of the government, which scared off many entrepreneurs.

But China is re-structuring its industries to focus on innovation. In 2011, China surpassed South Korea and Europe in total patents and was in a neck and neck race with Japan and the United States. As fuel for the innovation rocket,venture capital is critical. And China is now the world’s second largest venture capital market, with the total jumping from US $2.2 billion in 2005 to US $7.6 billion in 2011.

It is this journey up the manufacturing ‘value chain’ that many countries look to with admiration and jealousy. And the secret to being able to move up this value chain is design – savvy product design combined with savvy design of manufacturing methods to continually drive down costs and drive up quality. How long until China has its own Apple and not just an Apple knock-off (http://www.bbc.co.uk/news/technology-14503724)?

By David South, Development Challenges, South-South Solutions

Published: February 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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