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Winning in a World of Digital Dragons

Every Industry Is Becoming a Digital Industry

  • Products are becoming platforms
  • Digital services are differentiators
  • Ecosystems bring value
  • Industry boundaries blur
  • CX becomes digital anthropology

E.g. The car is becoming a moving platform for digital service consumption

The Digital Dragons Are a Critical Part
of This Digital Story

Digital dragons are large organizations that exhibit seven key characteristics:

  • Build and orchestrate large, modern platforms, ecosystems, de facto standards with many partners.
  • Active and skilled in collecting, analyzing, monetizing big data about customers and others, using AI.
  • End-to-end involvement and capability in industry supply chains.
  • Provide infrastructure, cloud-based apps, and tools at scale.
  • Have “deep pockets.” Invest heavily in R&D in areas like AI, IoT, and robotics.
  • Compete as principals in industries beyond digital services, such as online retail.
  • Talent magnets, attracting scarce skills; e.g., data scientists, digital anthropologists, cloud architects.

Example: The Amazon Ecosystem

  • Digital Commerce (Core)
  • Retail
  • Logistics and Fulfillment
  • Digital Media and Entertainment
  • Technology
  • Financial Services
  • Customer Insights and Marketing
  • Healthcare

Retail

  • Amazon.com
  • Amazon Prime
  • Amazon Seller Central
  • SOUQ logo
  • Zappos.com logo

Whole Sale

  • Amazon Business logo
  • Amazon Seller Central

International/Cross-Border

  • Amazon.com
  • Amazon Seller Central

Food

  • Amazon Go logo
  • Whole Foods logo

General Merch

  • Amazon Books logo

Logistics and Fulfillment

  • Amazon Flex logo
  • Fulfill by Amazon logo
  • Beijing Century Joyo Courier Services

Film and Video

  • Amazon Studios logo
  • Prime Video logo

Entertainment & Digital Media

  • Audible logo
  • Good Reads logo
  • Amazon Kindle logo
  • Twitch logo
  • Music logo

Cloud Computing

  • AWS logo

Devices

  • Amazon Key logo
  • Amazon Kindle logo
  • Amazon Echo logo
  • Amazon Fire logo

VPA & AI

  • Amazon Alexa logo
  • Amazon AI Services

IoT

  • AWS Greengrass logo
  • AWS IoT logo

Payment

  • Amazon Coins logo
  • Amazon Pay logo

Banking

  • Amazon Lending
  • Amazon Seller Central logo

Investment

  • Joint venture with Citi and Berkshire Hathaway
  • Investments in Indian Fintechs

Customer Insights and Marketing

  • Amazon Advertising logo

Healthcare

  • Amazon Pillpack logo

Example: The Alibaba Ecosystem

  • Digital Commerce (Core)
  • Retail
  • Automotive
  • Digital Media and Entertainment
  • Technology
  • Financial Services
  • Customer Insights and Marketing
  • Healthcare

Retail (China)

  • Cun.taobao.com
  • Juhuasuan.com
  • Taobao.com
  • Tmall logo

Whole Sale (China Domestic)

  • 1st.1688.com logo

International/Cross-Border

  • Alibaba.com
  • Aliexpress logo
  • Lazada Group logo
  • TMall Global logo

Food Delivery

  • Ele.me logo
  • Koubei logo

General Merch

  • Easyhome logo
  • b&q logo
  • Sun Art logo
  • Suning logo
  • Intime Retail logo

Logistics and Fulfillment

  • Amazon Flex logo
  • Fulfill by Amazon logo
  • Beijing Century Joyo Courier Services

Autmotive

  • Amao.com logo
  • Banma Technologies logo

Film and Video

  • Amazon Studios logo
  • Prime Video logo

Entertainment & Digital Media

  • Audible logo
  • Good Reads logo
  • Amazon Kindle logo
  • Twitch logo
  • Music logo

Film and Video

  • Alibaba Pictures logo

Entertainment & Digital Media

  • Alisports logo
  • Alibaba Music logo
  • Weibo.com logo
  • UC Browser logo
  • Youku logo

Cloud Computing

  • Alibaba Cloud logo

Devices

  • Tmall Genie logo

VPA & AI

  • Ali Genie logo
  • Blockchain

IoT

  • Alios logo

Payment

  • Alipay logo

Banking & Investment

  • ANT Check Later logo
  • Get Capital logo
  • Jiebei
  • ANT Financial logo
  • My Bank logo
  • Zhima Credit logo

Customer Insights and Marketing

  • Alimama logo
  • Brand Databank

Healthcare

  • Alihealth logo

The Digital Dragons Are More Complex Partners
Than Have Ever Existed Before

Attitudes to the Dragons Vary Considerably

How do the digital giants (Google, Amazon, Baidu, etc.) factor in to your company’s (business) strategic thinking?
“Our business strategy is based on evolving a partner ecosystem; we won’t succeed alone. We are currently co-developing solutions with one of the digital giants, and discussing with another. The collaboration is enlightening. We learn new methodologies and other things, and mixing people is making for better results. It seems to us a non-zero-sum game, where both really get value.” — Martin Piqueras Caro, CIO, SUEZ

Each Organization Must Build the Digital Dragons
Into Their Planning and Execution

Build Your Digital Dragon Deck

Example: How Audi Deals With “Digital Champions”

  • Digital strategy goals: $1 billion profit by 2025. Effortless customer experience. Reducing general complexity.
  • Share with others in Volkswagen group using groupwide digital services committee. For example, leveraging Volkswagen Connect.
  • Four components: Big-ticket items (e.g., bringing existing products into the digital age), must-dos (e.g., support for new smartphones), wow factors (things customers didn’t expect), enablers (heavy lifting, like in-car connectivity).
  • Spun off an autonomous intelligent driving company, AID.
  • Digital is a “two-speed industry.” Top digital companies, wholly focused on digital, with an army of smart digital talent, patient investors, and big visions. And everyone else. Even the giants in each industry shouldn’t go toe to toe with the digital giants on their own turf. Companies have to be realistic and understand trade-offs of working with the digital giants versus going it alone.
  • There is an opportunity/imperative to learn from these digital giants. “We made a list of 60 digital champions. We studied them and distilled out a set of 12 principles for digital success. We then boiled them down to four to five rules.”
John Newman John Newman
VP and Head of Digitalization, Audi AG

Model How the Digital Dragons See Your Business

"We want BAT (Baidu, Alibaba, Tencent) to be a part of our supply chain, but they see us as a participant in their platform." — Li Hongwei, head of IT and IS planning and management, Dongfeng Motor

Think Through Your Posture Regarding the Digital Dragons

Ignore the Chinese Digital Dragons at Your Peril

Public / Private Internet Companies, Ranked by Market Valuation (5/29/18)
Rank     Market Value ($B)
2018 Company Region 5/29/13 5/29/18
1) Apple USA $418 $924
2) Amazon USA 121 783
3) Microsoft USA 291 753
4) Google/Alphabet USA 288 739
5) Facebook USA 56 538
6) Alibaba China - 509
7) Tencent China 71 483
8) Netflix USA 13 152
9) Ant Financial China - 150
10) eBay + Paypal* USA 71 133
11) Booking Holdings USA 41 100
12) Salesforce.com USA 25 94
13) Baidu China 34 84
14) Xiaomi China - 75
15) Uber USA - 72
16) Didi Chuxing China - 56
17) JD.com China - 52
18) Airbnb USA - 31
19) Meituan-Dianping China - 30
20) Toutiao China - 30
    Total $1,429 $5,788
Source: Kleiner Perkins, 2018 Internet Trends

China’s Government Is Strongly Driving the Digital Agenda

Initiative Details
Made in China 2025 Issued May 2015 by Premier Li Keqiang. Inspired by Germany’s Industrie 4.0. To upgrade Chinese industry. 3 timelines — 2025, 2035, 2049 for China to become leader. Priority sectors include advanced IT, automated machine tools & robotics.
Social Credit System Extensive plans to collect data about people and companies, score their behavior, and provide incentives based on social credit score. Data initially being collected from government agencies and stored on the National Credit Information Sharing Platform.
Next-Generation AI Development Plan Issued by State Council 20 July 2017. Catch up to global AI leaders by 2020. By 2025, achieve major breakthroughs in AI research. Use AI to drive industry reform. By 2030, become world leader in AI research and application. Use AI to build intelligent economy/society to make China world leader. Value of AI to surpass 1 trillion yuan ($147.80 billion) by 2030.
13th Five-Year Plan (2016-2020) Adopted March 2016. A broad and ambitious set of objectives, including 6.5% annual GDP growth and Increasing R&D spend from 2.1% to 2.5% of GDP.
Belt and Road Initiative (BRI)

(Also known as Silk Road Economic Belt and the 21st-century Maritime Silk Road.) Issued by Xi Jinping in 2013. Goal is to connect 2/3 of the world’s population across 70 countries through land links (the belt),
and sea routes (the road). Also includes banking/funding, university/engineering alliances and clean energy programs.

19 Super Regions/City Clusters As outlined in China’s 11th five-year plan, Chinese has been developing of regional city clusters, to drive shared economic prosperity and growth. Three are designated as super-clusters (Yangtze River Delta, Inc., Shanghai; Pearl River Delta, Inc., Guangzhou; and Jingjinji, Inc., Beijing). Eight are described as emerging clusters, and a further eight are frontier clusters.

Baidu builds global autonomous driving ecosystem

OUR RECOMMENDATIONS

  • Accept, understand and socialize the role and importance of the digital dragons in the next decade.
  • Build your digital dragon knowledge deck; don’t ignore China.
  • Construct your view of how they see your company/industry.
  • Choose your strategic posture regarding the digital dragons; each has their advantages and risks.
  • Build time in for learning through productive friction.
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