This is how global business is transforming due to internet effectgbs17
Technology innovation in the last decade has predominantly been viewed through a developed economy lens. But, in the past five years, the dynamic nature of emerging markets has turned that theory on its head. Emerging markets have unique challenges that have spurred innovative solutions. Since these new innovations usually address a large number of users in these markets, they have grown increasingly compelling for the world to learn from.
What were once considered innovations that only applied to emerging markets are becoming more mainstream in developed economies because of certain trends that are picking up across the world.
So what are these trends? As more and more people connect to the Internet, information asymmetry is becoming a thing of the past. Before making a purchase, consumers are free to do their research, read reviews, and compare prices on the Internet.
Over the past 5-6 years, the smartphone industry has undergone tremendous change, and the quality of products and technological skills have become better. The core change now is to make great products with a spirit of craftsmanship and an insistence on high quality. Whoever can make great products, while making sure the cost stays low, is truly benefiting people. However, the traditional mindset that affordable products must be of low quality is the greatest obstacle these companies face.
At Xiaomi, we have had to double our efforts to make even better products in order to persuade consumers. There is an insurmountable difficulty that lies in this and it is a long journey of convincing users time and time again. They have to keep using our products before they accept us.
Yet, I believe that the power and unstoppable influence of the Internet means information asymmetry will sooner or later come to an end. At that point in time, people will truly understand what our “Internet+” model is — having the DNA of a company born in the Internet era and taking advantage of the opportunities afforded by this to build a highly efficient consumer technology company.
Our unique, sustainable business model is built on three interlocked revenue streams: hardware, Internet services, and our Mi Ecosystem of connected products. It is about connecting everything around us with beautifully designed but technologically rich products that are very affordable. Our success is driven by our ability to be the most efficient company in the world at selling innovative products because our roots lie in ecommerce, the most efficient distribution channel.
Another trend I see in the immediate to near term is the tighter integration of offline distribution and online commerce or what I call as the ‘new retail’ model. Looking at the long term, there will still be a large contribution of offline retail to the economies of many countries. Even though ecommerce is growing, it will take years of development dependent on many factors.
When we talk about retail, what comes to mind immediately is the high cost of rent and labour resulting in products that cost more. However, consumers’ requests for better user experience and consumer service continue to increase. They also see cost and efficiency as important factors in their consumption process.
Combining the cost and efficiency of ecommerce and customer service and user experience of offline retail is innovative and has great value for society.
‘New retail’ refers to the integration of offline and online operations, by applying the advantages of ecommerce into offline retail, improving the shopping experience, increasing the efficiency of circulation and quality of products and providing genuine goods at fair prices to consumers. It achieves the goal of increasing consumption through such innovation. The success of ‘new retail’ is not just simply combining the benefits of offline and online retail, but requires innovation in research and development, the optimisation of product manufacturing the transformation of supply chain management and the use big data. In time, I feel that we can absolutely have the same efficiency and cost in offline distribution as in online stores.
Internet finance or digital payments is another key area where companies from emerging economies will lead from the front.
Over the next ten years and beyond we are set to see even faster changes in the payments landscape, building on the accelerating growth in electronic payments and the advent of new and disruptive market players. Last year, Xiaomi launched Sichuan XW Bank in a joint venture with partners including New Hope Group and the Hongqi Chain. We have a team of over 300 people working on laying the foundation in the financial sector for loans, insurance, securities, finance and payments, as well as securing the necessary licences. This is extremely important for our future. Commercial giants of the future will not only be Internet companies, but also finance companies, because the future of finance lies in artificial intelligence (AI) and big data.
Which brings me to AI. I believe that AI is not a faraway concept. In the next 2-3 years, almost every technology business will consider themselves as AI companies.
AI will become a core element for these companies, just like the Internet was the basic element in the past. While talking to several businesses, I find that many feel AI is a faraway concept and can only be relevant as breakthrough innovation in certain fields. But I believe that AI is the most important technological revolution in the next 10 years. The breakthrough in AI technology will lead to a new round of technology and industry revolution, bringing farreaching impact on every aspect of human lives.
Ultimately, companies that will succeed in the next decade are those that seamlessly integrate these elements into their operations so that they become a part of their business DNA.