The Innovation Enterprise Conference Series in Shanghai: Key Takeaways from Day 2

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1 The Innovation Enterprise Conference Series in Shanghai: Key Takeaways from Day 2 FGRT attended Innovation Enterprise s most recent conference series in Shanghai on September 6 7. Below, we provide our key takeaways from day two. 1) Ray Xiao of Adidas shared how the company has leveraged big data to drive store performance, which helps to provide actionable insights to management in a number of areas, including store operations, pricing and promotions, as well as assortment and range optimization. 2) Kapil Kane of Intel introduced the company s Ideas2Reality program, a China-wide corporate incubator and accelerator program, which is focused on incubating ideas generated solely by internal employees, which are then potentially turned into Intel technologies. Apart from attracting talent, it helps to increase engagement and nurture entrepreneurship among its engineers. 3) Xin Liao of Haier Linkcook shared his journey in developing smart home appliances with Haier, one of the largest home-appliance manufacturers in China. Haier promotes the idea of being a service provider: consumers may only buy a fridge once, but they use services frequently. 4) Taylor Howard of Alibaba Group shared her experience in international user experience design (UED) to bring Singles Day (a local concept) to the global stage. About Innovation Enterprise Conference FGRT attended the latest conference series organized by Innovation Enterprise on September 6 7 in Shanghai. The conference featured three summits, namely Chief Innovation Officer Summit, Big Data & Analytics Innovation Summit and Digital Marketing & Strategy Innovation Summit. 1

2 1. Leverage Big Data to Drive Physical Store Performance Ray Xiao, Head of BI & Analytics at Adidas talked about the company s shift from selling wholesale to selling through franchises in China, emphasizing the importance of driving store performance. In order to improve, the company needs to provide the right product, at the right place, for the right consumer, as well as to deliver a best-in-class retail experience. Source: FGRT Adidas is leveraging big data analytics to provide actionable insights to management in a number of areas, including store operations, pricing and promotions, as well as assortment and range optimization. Store operations: By correlating store performance with variables such as traffic data, mystery shopper data, location data (e.g., the layout of a mall and nearby competitors) and discount data (discount provided), the operation team can understand what drives sales at stores. It is also possible to carry out store-level diagnostics to focus on a specific area for individual stores. Pricing and promotions: Instead of providing mass discounts, which hurts profitability, by analyzing both past and future data i.e., events and consumer purchase data it is possible to suggest a specific discount on an individual item to run a more effective promotion scheme. Assortment and range optimization: Each product has a number of attributes, such as price, color, cut and technology, known as product DNA. Understanding which attribute drives sales for an individual item, it is then possible to make decisions on price and other attributes. 2

3 2. Intrapreneurship Going Back to the Garage Kapil Kane, Director of Innovation at Intel, shared the company s Ideas2Reality (I2R) program, a China-wide corporate incubator and accelerator program, which is focused on incubating ideas generated solely by internal employees. The aim of the program is to attract talent and bring intrapreneurship to the company; staff participating in the program essentially act as a startup within the corporation. After I2R was launched in 2013, participants were able to turn ideas into technologies, however, they were not able to successfully commercialize these new technologies and turn them into business. Intel wanted to understand why this was happening. After some research, it looked at various unicorns to see what made them successful and found that several, including Dropbox, Airbnb and Reddit, came out of the Y Combinator program, an American seed accelerator. Based on what it discovered, Intel launched the I2R Accelerator program, providing guidance and helping engineers to commercialize their ideas. Of the 350 ideas that were generated, 75 were incubated and 20 were accelerated. This resulted in eight ideas that became either Intel technologies, design wins or Business Unit landings. Even though not all projects were successful, Kane believes that the program benefits the company by nurturing entrepreneurship among its engineers. Source: FGRT 3. What Can You Do with a Refrigerator? Xin Liao, CEO of Haier Linkcook, shared his journey in developing smart home appliances with Haier. Haier, which is one of the largest home-appliance manufacturers in China, is a significant player in the refrigerator industry, accounting for over 30% market share in China and 19% globally. At Haier, Liao heads a team to build ecosystems for smart appliances. Vision: Invent the Fourth Screen at Home Haier s vision is to design refrigerators that go beyond the function of storage. The company wants to create smart refrigerators that can suggest recipes, play music and 3

4 videos, alert the user when certain food is about to expire and order products on e- commerce portals before they run out. Pursuant to this vision, Haier has been collaborating with key industry players, including China s largest online cooking recipe provider available on mobile, Yiguo.com, one of the largest fresh produce e-commerce companies in China (similar to AmazonFresh), QQ music and others. According to data collected from the refrigerators, around 100,000 families use it each day, with an engagement of 40-plus clicks and usage of 80 minutes per day. Source: Haier.com Haier has been expanding into other kitchen appliances, such as cooker hoods and wine fridges. Make Everything as a Service As a household appliance manufacturer, how does Haier ensure that consumers purchase frequently from the company? Haier promotes the idea of being a service provider, rather than a product manufacturer: consumers may only buy a refrigerator once, but they use services frequently. Using Rolls-Royce as an example, Liao discussed how Rolls-Royce has blurred the line between selling things and offering services. The company s profits come from servicing and maintaining engines, rather than selling them. It charges customers for every hour that they rent an engine, and it promise to maintain and replace the engine. Liao believes this approach has been effective in aligning the interests of the buyer and seller. Similarly, Haier is more like an Internet of Things (IoT) company than a product company. Take wine fridges as an example, Haier can switch from product to service, which causes users to buy products on its e-commerce platform. 4

5 4. From China with Love: Taking Local Concepts to the Global Stage Taylor Howard, Lead Content Strategist at Alibaba Group, presented on international user experience design (UED). Her team is mainly responsible for AliExpress, with the goal of bringing Singles Day (a local concept) to the global stage. Source: Aliexpress.com The problem that AliExpress faces overseas is low awareness and consumer trust. Only 38% of overseas consumers have trust in products made in China. The AliExpress team sets clear metrics to measure the extent that international shoppers know about (another name for the Singles Day shopping festival). The team s goal was to reach as many people as possible, while minimizing resources, through: 1) a live video campaign; and 2) a #Happy1111 campaign. The three-month campaign resulted in 95 million impressions and a reach of 45.7 million. Live video campaign: In the run-up to Singles Day 2016, the team launched a series of videos: cooking with AliExpress in September, bath time with AliExpress in October and celebrate with AliExpress in November. Within the first three seconds of watching a video, the viewer knows exactly what the product is about. This campaign resulted in a high level of engagement and videosharing. The #Happy1111 campaign: The goal of this campaign, which urged users to snap photos or upload short videos of what makes them happy, was to make people think about Singles Day as part of their everyday lives. AliExpress is readying itself for Singles Day 2017, and has set high expectations for it. 5

6 Deborah Weinswig, CPA Managing Director FGRT New York: Hong Kong: China: Esme Pau Analyst Eddie Wong Senior Research Associate Hong Kong: 2nd Floor, Hong Kong Spinners Industrial Building Phase 1&2 800 Cheung Sha Wan Road, Kowloon Hong Kong Tel: London: Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0) New York: 1359 Broadway, 18th Floor New York, NY Tel: FungGlobalRetailTech.com 6