Don't forget the channel

Clayton Christensen, co-author of The Innovator's Solution, stresses the importance of channel innovation when trying to enter a country-market with a disruptive offering. His main arguement is that you have to find a channel partner who is motivated to sell your product. How do you do this? Your offering has to present higher margins relative to what the channel partner is already selling. Often this is not the case, so encumbent channels are motivated NOT to stock your product.

Here in Taiwan Uni-President, a Taiwan-based firm, has a lot of the distribution channels stitched up. They operate the franchise for 7-Eleven convenience stores. They also run the Starbucks franchise in Taiwan (and possibly parts of China). In a word, they have a lot of power.

You would think that Uni-President would be a good bet if you wanted to enter the Taiwan market (and China) with your product, however, you have to realize that there are thousands of food manufacturers from all over the world contacting this company with the same intention: sell my stuff. Why should Uni-President be motivated to stock your product? They probably aren't; and if they do, they'll hammer you on price.

So what do you do? Well, if you're are a whisky producer from Scotland, you could look at some of the smaller, independent coffee shops here in Taiwan. A bottle of single malt whisky will offer a higher margin for these coffee shop owners relative to what they usually sell -- cookies, a bar of chocolate etc. They, unlike Uni-President, are motivated to sell it.