4 minute read 15 Sep 2019
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What China can teach the world about digital transformation

By

EY Global

Multidisciplinary professional services organization

4 minute read 15 Sep 2019
Related topics Digital Consulting Innovation

China’s fast-learning, hard-working entrepreneurs are driving rapid commercialization of digital businesses.

China has been the world’s factory floor for several decades. But China is now the world’s shop front too.

By the end of this year, China will boast 55.8 percent of global online retail sales. And this figure is expected to exceed 63 percent by 2022. Meanwhile, the US share of global e-commerce market will fall by 15 percent.

China has one of the most advanced digital ecosystems in the world, with more than 800 million active internet users and 788 million people with mobile phones in their pockets.

China’s fast-learning, hard-working entrepreneurs are driving rapid commercialization of digital businesses, and tech analyst IDC predicts Chinese companies will invest more than $1 trillion in digital transformation over the next three years alone.

In this time of rapid, hyper-connected change, new questions need to be answered.

Four big questions for western businesses navigating a digital future are below.

Question 1: How can purpose inspire new ways of working as well as thinking?

Transformation starts at the top: In China, digital transformation is increasingly led by the Chief Executive Officer (CEO), instead of the Chief Information Officer (CIO) or other C-level decision makers. While Chinese working culture can be hierarchical, forward-thinking CEOs are hiring Chief Digital Officers (CDO) to translate their vision into a full digital transformation program. An empowered, hands-on CDO can oversee a CEO’s ambitious agenda and make rapid, revolutionary change.

Question 2: How can constant reinvention lead to continued relevance?

Fail fast to innovate faster: Chinese companies have a unique approach to digital transformation, in which multiple prototypes are tested with customers before the most successful variation is rolled out. This model is radically different to design-led transformation, in which research identifies the product variation most likely to gain traction. When undertaken at scale, the Chinese innovation model is super-fast, but requires significant data and digital technology. But using this approach, WeChat has grown from a simple messaging platform into an ecosystem that solves nearly every customer problem.

Question 3: Could our customers also become our co-creators?

From imitator to innovator: While China has a reputation for creating copycat businesses, or shanzhai¹, many entrepreneurs have replicated foreign models at scale, creating innovative new offerings in the process. From Singles Day² to bike share systems, reverse shanzhai sees western companies copy Chinese concepts. And China now produces five times as many science and engineering graduates as the US, and many of these work for leading tech companies developing products and services that match – or even surpass – that on offer in the West.

Question 4: What happens when intangibles become more valuable than physical assets?

Speed and convenience are king: The customer service mantra in China of 9-9-6 – meaning 9am to 9pm, six days per week – brings a new meaning to "friction-free" commerce. Brands understand that they are not just purveyors of products, but partners helping their customers to live better lives. China has already created a full digital infrastructure based on speed and convenience, so get obsessive about digitizing your own business.

The answers come from understanding transformation as a way to unlock both value and human potential.

With scale, speed and convenience on their side, the market leaders in China are certainly raising the bar on customer experience, and the rest of the Chinese market is maturing rapidly.

The fast-pace brings significant pressures – and many market entrants are looking to create the five-star customer experience at a tenth of the cost – but it’s up to the rest of the world to evolve its customer experience to meet these growing expectations.

Now is the time to boost the speed of the trajectory your business needs to take.

Driven by people, powered by technology, this is business transformation for a better working world.

  • Show article references

    1. Shanzai refers to counterfeit consumer goods, including imitation and trademark infringing brands and/or particularly electronics, in China
    2. Singles Day is a holiday celebrated in China on 11 November. Unmarried people commemorate the occasion by treating themselves to gifts and presents, leading Singles Day to become the largest online shopping day in the world, by quite some margin.

Summary

China has one of the most advanced digital ecosystems in the world, with more than 800 million active internet users and 788 million people with mobile phones in their pockets. In this time of rapid, hyper-connected change, new questions need to be answered. Read the four big questions and answers for western businesses navigating a digital future.

About this article

By

EY Global

Multidisciplinary professional services organization

Related topics Digital Consulting Innovation