On October 16, 2020, IDC China Digital Transformation Conference was held.
The key words of this year's conference are "new normal", "new model" and "new winners". The so-called "new normal" refers to continued epidemic prevention and control, declining economic growth, and global political and economic challenges. The so-called new model refers to the emergence of users deeply online, contactless commerce, digital products and services become mainstream. The so-called new winners refer to the rise of industrial Internet, the emergence of unicorns in traditional industries, and the continuous rise of Internet upstarts.
The pandemic earlier this year has undoubtedly accelerated the process of enterprise digitization, and digital transformation has become a solid driver of enterprise and economic growth. Against this backdrop, Wu Lianfeng, vice president and chief analyst at IDC China, said: "In the future, enterprises should become firmly on the digital road, digital operations will achieve scale, and the innovation speed of such enterprises will be an order of magnitude higher than traditional enterprises."
IDC China's vice President and chief analyst Wu Lianfeng | IDC
What is the significance of digitization for enterprises and industries? What are the possible challenges of digital transformation for traditional enterprises? What are the trends in business development and digitalization in the post-pandemic era? To address these questions, Geek Park recently interviewed Wu Lianfeng, vice president and chief analyst of IDC China. Here's the conversation, as compiled by Geek Park:
Geekpark: In the annual ceremony of IDC China's digital transformation, there was a word called "multiplicative innovation". Could you discuss the status of multiplicative innovation and its impact on enterprises and industries based on the selection cases?
Wu Lianfeng: For enterprises, the core of doubling innovation is acceleration. Currently, digital enterprises will innovate faster. We have surveyed more than 400 manufacturing companies around the world, which can be roughly divided into digital and non-digital types. We tracked their performance over four years, from 2013 to 2017, and found that digital companies' sales and profits grew at least 3% a year on average.
Average annual profits and sales for non-digital firms are falling, perhaps by minus 3%. As a result, the leading firms will get further ahead and the laggards will fall further behind, which is one of the effects of multiplier innovation. In addition, we also see that the current market environment requires faster and faster speed of innovation. Just as Zhang Ruimin, CEO of Haier, once said, "fast fish eat slow fish", this is part of the explanation for the multiplication of innovation.
Take Perfect Diary, a beauty brand, for example, its digital marketing is very strong. A series of links such as product planting, promotion and sales are all on digital channels, such as Tmall and wechat mini program. Meanwhile, Perfect Diary also has a large number of content on Xiaohongshu, b station and Douyin. At that time, we saw a set of surprising data: in three years of perfect diary, more than one hundred thousand little red book notes and nearly ten thousand short videos were made. Three years, the company's performance is also very big.
Therefore, when we say that enterprises should innovate and multiply innovation, we mean two things. One is to say that the innovation within the enterprise is not a single point, its innovation scale and scope should be expanded. On the other hand, in the Chinese market, your innovation needs to be adapted to the needs of a larger user base.
Geekpark: In this year's IDC China Digital Transformation Awards, there is a new award named Business Model Changers. From the perspective of business model reform, how does IDC sort out the industry changes in 2020?
Wu Lianfeng: One of the themes of this year's selection is the new normal of the digital economy. In the past two years, we have seen the rise of industrial Internet, and traditional industries began to use digital technology to further tap industrial demand and change their business models. For example, China Eastern Airlines has a special big data lab, and they will use aviation big data to create some innovative ways to generate revenue, such as the "fly if you want" product. This is the kind of business model change that we've seen with digital means.
Traditional industries have a better understanding of their own industries. After understanding digitalization and information technology, they will gradually try to use big data and other technologies to connect more users, so as to achieve changes in business models. One of the benefits of change is that traditional industries will have a better understanding of users' needs, and the other is that they may slowly turn a one-off approach to doing business with users into a long-term service. This change in business models is all about the digital economy.
Geekpark: This year, due to the impact of COVID-19, another obvious trend in the transformation of digital business model is the rise of contact-free economy. What do you think of this business model and phenomenon?
Wu Lianfeng: There are four main aspects of contactless connected business. First, technology can enhance or replace people, such as unmanned vending and delivery, unmanned hotels and restaurants, and manufacturing robots. The second is to use technology to reduce personnel contact, such as Internet medicine, online classroom and education, remote operation and service; The third is to use technology to do marketing and coordination, such as live sale and intelligent shopping guide, virtual car and house viewing, network conference and business activities; The fourth is to use technology to create digital culture, such as large-scale online concerts, cloud travel services, cloud culture and group construction.
In fact, a larger trend behind this contact-free economy is digital first. For enterprises, the question may be how to prioritize the use of digital technology to solve problems.
Geekpark: How can we tell if a company is in a digital-first state?
Wu Lianfeng: Actually, there are several sets of data to support this. The first is the proportion of IT spending on digital transformation. Second, the percentage of IT spending that comes from the business. We used to say that IT costs belong to the IT department, but now if the business department can use IT costs, it probably means that the business and technology are closely integrated. Digital first means that enterprises need to think about how to use technology to replace people and help people, how to support people's services, and how to use technology to build digital culture.
Geekpark: For companies in traditional industries, what are some of the challenges they might face in achieving digital transformation?
Wu Lianfeng: We have previously reviewed the challenges faced by global enterprises in digital transformation, including insufficient innovation collaboration: there are too many initiatives and involve too many departments and technology providers, and there is a lack of digital platforms to optimize resources and innovate faster. Limited experience and skills: Existing resources, especially human resources, are insufficient to support the complex needs of digital transformation. Short-sighted tactical planning: The company lacks a clear strategic transformation plan and a long-term investment roadmap. Isolated organizational structure: Lack of cross-business coordination, the company's potential cannot be maximized, and the speed of change is limited. Outdated appraisal systems: The legacy of key Performance indicators (KPIs) systems that fail to motivate organizations, track progress and guide investment.
Combined with the development of the Chinese market, Chinese companies face several more differentiated challenges.
First of all, the cognitive dislocation of digital transformation. For example, the perception of digitization between IT and business departments is sometimes quite different. IT is more concerned with security, system upgrades, cost control. Business departments are more concerned with agility, automatic intelligence, and the ability to promote sales. Both departments have the right understanding, but as an enterprise manager, how to combine the needs of the two from a higher dimension will be a big challenge.
Secondly, the phase positioning of digitization is not clear. Some enterprises may think that they have done a good job of digitization, but when we evaluate it, we find that there is still a long way to go to reach the ideal state. There are also companies that feel like they're not making progress on digital, but from our perspective, they're doing just fine. One of the challenges is that many companies do not know exactly which stage of digitization they are in and what problems they will encounter.
Then there is the lack of budget. In some cases, digital transformation may not be part of the corporate budget. For example, if we ask the company whether the relevant budget has increased this year, we will find that the fund is very random. It may be that the budget for a big project this year is large, but if there is no relevant project next year, there may be no budget. This is actually quite common.
Geekpark: This year's pandemic has accelerated many companies' digital efforts. The impact of the epidemic on thousands of businesses is also very big. What permanent changes will take place in the post-pandemic era?
Wu Lianfeng: Since February this year, we have conducted monthly surveys of global enterprises. We have sorted out six major trends on this issue. The first is that business finances need to be predictable and flexible. The core point here is that the epidemic has a great impact on the entire economy and the business of enterprises, which requires companies to have a more dynamic management of their own finance, operation, expenditure and other aspects.
Second, a digital-first customer engagement model. Digital first is about delivering services in a contactless way. Third, adapt to telecommuting and working from home. Working from home could become a must-have corporate norm. Fourth is the increase in technology-driven business models, which need to be digital, with more automation, contactless solutions, and greater trust and self-service.
Fifth, enterprises should do a good job of new business continuity plans, through digital and other means to resist the risk of emergencies. Finally, data-driven business models are becoming a big trend. Leveraging data analytics, artificial intelligence and other technologies is central to organizations' ability to better adapt to the dramatic changes of the future.
