Internet + Transformation

Transcription

1 Internet + Transformation Winnie Lo August 2015 Fung Business Intelligence Centre

2 Internet plus one of the buzzwords in China nowadays. What is it??? 2

3 Internet plus was a strategy originally ini4ated by Pony Ma, chairman of Tencent, a leading internet company in China, in Internet plus is a strategy to integrate all industries and to create a new ecosystem in new areas through internet technology 3

4 REPORT ON THE WORK OF THE GOVERNMENT Delivered at the Third Session of the 12 th Na4onal People s Congress on March 5, 2015 Li Keqiang Premier of the State Council, China Internet plus We will develop the Internet Plus ac4on plan to integrate mobile Internet, cloud compu4ng big data, and the Internet of Things with modern manufacturing, to encourage the healthy development of e- commerce, industrial networks, and Internet banking, and to guide Internet- based companies to increase their presence in the interna4onal market. 4

5 Market in the era of Internet plus Keen CompeAAon: Local à Global Niche market growing up More SKU, but shorter product life cycle Lower loyalty to brand Mass markeang can t fit all More stringent supply chain requirement 5

6 TradiAonal enterprises Vs. Internet enterprises TradiAonal enterprises Internet enterprises Opera4on: Focus on economies of scale Aim at cost minimiza4on Serve the mass market Compe44veness: Focus on product: func4on, outlook and price Supply chain: Large volume Keep inventory Opera4on: Value consumers opinion, invite consumers involve in R&D and produc4on process through social media Differen4ate itself by offering customiza4on, target at to create, to share and win- win Serve the long tail market Compe44veness: Address consumers pain points, change the consump4on behaviour and develop a new niche market Supply chain: Small volume, numerous orders Zero to low inventory 6

7 Internet helps reducing the transacaon costs Buyers obtain reliable recommenda4ons of shops and products from Friends Wechat Moments Based on viewing/ buying records, buyers receive accurate push messages from Wish Research Informa4on Payment Guarantee Alipay provides escrow service. Payment will be released to online sellers, upon the buyers confirm receipt of the order Indemnity is guaranteed on Taobao pla`orm to protect the right of online shoppers 7

8 Business model in the era of Internet plus PracAces Social media + business Free Long tail Cross- sectors Channels PlaNorm O2O Business model in the era of Internet plus The new comers would not compete head to head with the market incumbents at the very beginning. Instead, they take root at the low end of the mainstream value network through internet. Aeer a certain period of 4me, the so- called low end ac4vi4es are well- accepted by the market and replace the mainstream. Uber is a case in point. 8

9 4 business pracaces observed in the era of Internet plus Free Social media + business Wechat: - A social media app Dianping: - A restaurant search engine - Now also provide payment func4ons for mobile shopping, movie 4ckets, taxi, etc. - High s4ckiness of app users and gain from high traffic volume - Now also provide other search func4ons, e.g. cinema, KTV, shopping mall, etc. - Relevant search ranking can be improved by the payment of adver4sing fee Tenpay PracAces Long tail Cross- sectors Xiaomi: - A mobile company in China Amazon book: - Sell small quan44es of a large number of items - Now also offer TV, auto, home products, etc. - Enjoy a higher total transac4on value than in - Lower opera4ng risk through business selling large quan44es of a few items diversifica4on 9

10 2 major business channels in the era of Internet plus Ecosystem In the era of Internet plus, the one able to orchestrate a strong collabora4ve ecosystem with all the stakeholders and make quick responses by realloca4ng resources on their pla`orm will win the market compe44on Internet giants in China are establishing their own ecosystem to lure for greater traffic online and enhance user s4ckiness E- commerce pla`orm Social media pla`orm O2O The focus of O2O (Online to offline) in China is s4ll on using the Internet to op4mize offline assets. More and more consumers go online to research goods, but seqle their purchase at brick- n- mortar stores (also named as reverse showrooming) No maqer how, both online and tradi4onal offline retailers have realized that they have to integrate offline and online, and offer beqer consumer experience. They are moving forward to facilitate seamless integra4on of all channels Mobile Hardware + Apps Ecosystem Search engine 10

11 Mobile technology: A disruptor for tradiaonal retailers and e- commerce players Mobile technology evolves not only business models, but also strategic management, organiza4onal structure, human resources, supply chain management, etc. More and more shoppers are now buying via mobile instead of via PC. Buying prac4ces between using mobile and PC are not the same: Different groups of users in terms of age, career, loca4on, etc. The shoppers sit in front of a PC at a par4cular period during a day vs. The shoppers surf online by using their mobile any4me anywhere The goods display on a 15- inch or 17- inch monitors vs. The items display on a 4- inch or 5- inch mobiles (Shoppers normally exit a page, if the messages of the first few lines are not eye- catching) The user data collected via mobile is far more accurate than that of PC, as mobile apps capture the LBS informa4on, dura4on of using par4cular APP, etc. 11

12 4 challenges facing tradiaonal enterprises when they transform Success in the past is the greatest obstacle of the future success The expansions of tradi4onal enterprises are bounded by the past successful experience, exis4ng customer segment, profit model and business model. The management is difficult to think out of the box and create new value to the company TradiAonal business model simply running with the aid of internet technology is not the same as value creaaon models in the era of Internet plus Many enterprises keep using internet technology to modify their goods and services. However, this is simply providing some upgraded offer to their exis4ng clients. Under the true era of Internet plus, enterprises bring in not only modified goods, but also new products, new market, new organiza4on structure and new value chains Internal barriers against transformaaon Huge investment (human resources and funding) needed to rejuvenate new businesses, but its return is uncertain Also, the newly generated sales may not able to cover the loss of overall business in the short run No HR head No Financial Controller Lack of talents who are able to balance the tradiaonal company culture and business innovaaon 12

13 How to create new value The beauty of the Internet is to shorten the distance of stakeholders. The Internet cannot replace the real economy, but rather facilitate the informa4on flow of enterprises Internet is a founda4on of transforming the organiza4onal structure, opera4on model and the value chain of a tradi4onal enterprise When tradi4onal enterprises transform in the era of Internet plus, they have to informa4ze their opera4on. Simply copying the success of industry models but abandoning ones core competence is not the best solu4on The tradi4onal enterprises should transform and create new value by understanding its own core competence, strategic resources and adop4ng new technology A tradi4onal enterprise can open resources for internal innova4on team/ entrepreneurs and provide a flexible environment for them to explore new markets for the enterprise. Once the new teams are well established, the successful model can also be applied to exis4ng divisions Allow fault Direct authority from top management Different KPI mechanism Focused mission Internal innova4on teams in a tradi4onal company 13

14 Value CreaAon of Starbucks Case 1 The strategic posi4oning of Starbucks is not selling coffee, but crea4ng a culture of belonging to all Starbucks customers Internet + interface: Starbucks offers free wifi for its clients at numerous of stores, this is a successful O2O interface. Starbucks customers can surf online freely and are willing to spend more in the stores Internet + community: Starbucks established an online community, named My Starbucks Idea. Clients can suggest and comment on Starbucks s products on this community. Within 5 years, Starbucks has received over 150,000 sugges4ons, of which, Starbucks has taken around 300 sugges4ons and upgraded their services accordingly Internet + LBS & O2O: Aeer downloading the Starbucks APP, allowing the LBS access, Starbucks customers can order coffee and able to select delivery or self- pick up Source: Business Wire 14

15 C2B model of Haier Case 2 Haier, a top home appliance manufacturer in China, implemented a scheme named my refrigerator, my design. Within one month, Haier received more than one million proposals. Nowadays, more than half of Haier s refrigerator orders are based on the customized designs by end consumers, the 4me spending on R&D has been halved. How does it work? On that R&D online pla`orm, Haier announced a specific R&D topic. They would then receive numerous proposals from the en4re country. Haier can develop the product based on these customized request. Also, Haier set up an accelerator fund to support the interac4on between Haier s users and its internal product design team. Apart from funding, Haier orchestrates the resources of R&D, suppliers, and distributors to facilitate the manufacturing and distribu4on of the newly created goods. The users can trade their crea4ve ideas to Haier, and Haier can implement the idea and create beqer goods with a higher margin. This is indeed an innova4ve disrup4on to the tradi4onal manufacturing industry. According to the Group Chairman of Haier, I own the resources of the world, everyone is my R&D and human resources. Source: ihaier.com 15

16 Case 3 ZARA s store always trendy The 2- week 4me span supply chain structure makes ZARA famous in the fashion history. The fast fashion model allows ZARA to reduce unnecessary markdowns or prevent out of stocks, and keep its profit soar. Apart from its innova4ve supply chain structure, merchandizing strategy and store management allow ZARA to outperform its compe4tors in the internet era. Merchandizing strategy In the past, 35 out of 100 pcs of ZARA fashion were sourced by European merchandizers and the rest were planned items by designers. Nowadays, the ZARA merchandizers turn to Instagram, Facebook, etc. They follow bloggers, opinion leaders and the stylists on the social media. And they would also be inspired by street fashion. ZARA successfully discovered the simple- style trend in 2013 and sporty- style trend in 2014, and offered the products that customers wanted in advance. Their mission of our design fulfills the need of consumers was in effect realized. Store management ZARA s store management also truly fulfilled the principle of customer- oriented. POS data is the core. ZARA would closely monitor the data, and adjust the produc4on and opera4on in a very short lead 4me, correspondingly. Source: zara.com 16

17 Contact Fung Business Intelligence Centre 10/F, LiFung Tower, 888 Cheung Sha Wan Road, Kowloon, Hong Kong T: (852) F: (852) hqp:// Management Theory and Business Model Winnie Lo Research Manager T: (852) Picture sources: Freepik and company websites Copyright 2015 Fung Business Intelligence Centre. All rights reserved. Though the Fung Business Intelligence Centre endeavours to have informa4on presented in this document as accurate and updated as possible, it accepts no responsibility for any error, omission or misrepresenta4on. Fung Business Intelligence Centre and/or its associates accept no responsibility for direct, indirect or consequen4al loss that may arise from the use of informa4on contained in this document. Find us on WeChat 17