Mark Stocker is a brand consultant and strategist. For the past 20 years he has assisted over one hundred businesses with their brand development and marketing. As managing director of the agency DDG he has played an active role in helping Taiwan’s enterprises think about new market opportunities. He is a strong advocate for Taiwan to develop its own international business identity.

By Stuart Hill

Mark Stocker thinks Taiwan is facing a national crisis. If the number of its international brands is any reflection of prosperity, Taiwan is in big trouble. While Taiwan’s education system, business style and political culture have provided a winning formula for an era of hardware manufacturing, those golden days will soon be over — if they aren’t already. Margins in the manufacturing of IT hardware tend to be around 3% these days.

A recent discussion on Facebook emerged from an article written by a foreigner who was leaving Taiwan. (See the English conversation. And the Chinese conversation it sparked on Facebook.)

He was complaining that there was a poor climate of innovation in the country. He was trying to launch his own startup but finding it difficult. He complained about the lack of support from government and commented on the lack of creativity among Taiwanese graduates.

Having also followed that Facebook discussion, how does Mark Stocker define the climate for innovation in Taiwan?

“I am sure you will agree, this is not an easy question to answer,” Stocker says. “In part because there are so many factors that are in play and in part because Taiwan is a country in flux. There is risk of stereotyping the situation, which would be an injustice to individuals and organizations that have done things differently.

“Your question is about the climate of innovation in Taiwan today. The short answer, based on my experience, is that innovation is being seriously stifled by three things: an OEM/ODM mindset, Confucian values, and the education system. These factors are affecting businesses of all sizes, although the situation is a little bit different inside each company.”

He’s obviously analyzed this issue a lot. Stocker refers me to something he’s shared with others before: “There are two types of innovation. Exploratory innovation is defined by discovery, experimentation, and risk taking with a focus on new ideas, new products and new strategies. Exploitative innovation is defined by building on and extending already existing ideas with a focus on incremental improvement or adaptation of existing products and strategies.”

He adds: “So in a way we need to be careful when talking about innovation. Are we talking about exploratory innovation or exploitative innovation? Taiwan is very good at the latter, but head-shakingly incompetent at the former.”

Among a pervasive atmosphere of self-fulfilling business gloom in Taiwan, Stocker argues passionately for change; challenging business owners to shift from top-down management, incremental innovation, and reliance on price and speed as their only product differentiators. But he also pushes employees to be more responsible and to be brave about making decisions and generating ideas.

On the DDG website, Stocker regularly shares his thoughts on his corporate blog. He doesn’t pull his punches. Here are just some of his opinions, first about the relationship between employees and employers:

“To put it simply, bosses aren’t happy with employees; and employees aren’t happy with their employment. This is a serious issue. Not only for the competitiveness of Taiwanese companies, but also for the competitiveness of the nation of Taiwan. There is a cultural stalemate going on inside companies that is hindering them from achieving greater potential, at a time when transformation and advancement is an imperative for Taiwan’s small and medium-sized businesses and brands.”

This leads to one of the big three challenges facing Taiwanese business as he sees it: Confucian values.

Says Stocker: “Unfortunately, too many Taiwanese are afraid to tell their boss what is going on and what should be done. Taiwanese employees don’t feel they have the right to make decisions, and for this reason they refrain from communicating (anything) with their superiors. There is no debate, there is no challenging of the status quo; there are no crazy ideas. The boss has to do all the talking, and over time since he/she is doing all the talking, he/she starts to do all the thinking as well. We end up with these incredibly flat organizations, with a boss on one layer and all employees on a second layer. Employees wait for the directive from the boss, and ignore anything coming laterally from co-workers. They also won’t collaborate with other employees to find an idea to work on, because the only relationship they need to attend to is that with the boss. It is very hard to be innovative when the only interaction is boss-to-employee in a downward direction.”

But there are solutions:

“Bosses can help drive change by clearly defining roles and responsibilities for all individuals within the organization, and by making it clear that decisions must be made by those responsible for a given role. In meetings, the boss should strive to talk less, and to encourage greater and more open sharing by employees. For employees, the task is to recognize that the health of the company is a result of the decision-making and action of every individual, and not just the boss. Employees should communicate more openly with the boss, as well as with colleagues across the organization. In particular, issues that are hindering the company’s performance should be brought into the open, and a plan of action should be developed collectively to address each obstacle.”

Having worked as a catalyst for attitudinal and behavioral change in industry, Stocker’s lengthy experience puts him in a unique position to talk about Taiwanese business methods:

“Taiwan’s four decades of economic development were built largely on a single business model: winning export orders by delivering a quality product at a lower price (aka CP Value). Despite the increasingly uncompetitive nature of this business model, and in spite of sales of millions of copies of books like Blue Ocean Strategy and Value Proposition Model, Taiwan has failed to break its reliance on the CP Value model; not much unlike a college student who continues to rely on mom and dad for money after graduation.”

Put more simply:

“I have come to a realization that Taiwan manufacturers are trapped in this downward price spiral for one simple reason: because they continue to define themselves as ODMs.”

And here is the core of the problem:

“Unlike the contracting manufacturing model, however, international branding requires a company to expand the points of contact from a few long-term customers to hundreds of channel partners and, in many cases, millions of consumers. Furthermore, the addition of marketing, product strategy, customer service, and consumer experience to the management mix swells the number of decisions a company must make in order to succeed. The decision-making requirements of an international brand are exponentially more complicated, making it near impossible for a single business owner to be successfully involved in all decisions.”

This OEM/ODM mindset is another of Taiwan’s key three challenges, as Stocker sees it:

“For the most part, Taiwanese companies are waiting to be told what to do by their OEM/ODM customers. When companies do try to escape the OEM/ODM trap by doing their own brand, they tend to over rely on their existing customers’ product lines to define their own-brand product portfolio. But without a brand, little sense on how to differentiate through marketing, and a me-too product (since they only dare to do what their big client was doing in the first place), they don’t make much progress.

“Overall the OEM/ODM mindset limits the willingness to take on many of the risks needed to do effective exploratory innovation. It was a great way to make money when it lasted, but the era of delivering the highest CP Value has now past — lost to China. Meanwhile, the habit of listening to the OEM/ODM customer for so many years has meant that many companies never got the chance to exercise their product marketing muscles, so they remain highly incompetent in the area of deciding what products to do and what not to do.”

This brings us to the third key inhibitor on Taiwan’s international success: education.

“The business environment as far as I can tell is a reflection of the classroom. People are trained into this way of thinking/acting over 16 years, and when the company they join reinforces this mode of operation, people just default to what they are used to.

“When each individual is taking his/her own test, you aren’t going to build a very innovative culture. No experimentation. No exploration. No observation. No conversation. No debate. To the converse, if you as an individual do come across a good idea, you are going to keep it to yourself, and when the timing is right you will ‘start your own company’. This is why Taiwan has so many small and medium-sized businesses! But small businesses lack the resources to invest in big breakthroughs. So most small businesses are really just doing exploitative innovation built on an already existing innovation.”

Yet Stocker isn’t all doom and gloom, and having worked with so many business people across multiple industry sectors, he also has positive things to say:

“Taiwan has been highly successful at costing down material and production technologies in order to manufacture professional-grade goods that help drive the development of prosumer market segments. It’s time to stop thinking in simple terms (volume up, cost-down) and start looking for opportunities from the market perspective.”

He’s also got positive suggestions for how companies can escape from their corporate crises:

“A collective purpose and envisioned future for the organization brings individuals together in pursuit of a common objective so that decisions happening across the organization have a common core. The business owner is then left free of the many minute decisions that once took up his or her day, so that more time can be spent on the next big objective. It’s a win-win situation for all, and the recipe for building a robust global brand.”

At the very least, it’s a specific direction and some constructive advice for Taiwan’s tough way ahead.

(All images for this article taken from the DDG website: www.ddg.com.tw )