Digital innovation, where China's underdevelopment is an advantage

Monday 12 November 2018

Article

China's digital development has attracted global attention. Last week I joined a digital camp run by one of the leading global retailers in Shanghai to discuss the new retail brand, HEMA, launched by Alibaba. The group was engaged and critical in debating how disruptive HEMA is, how sustainable it would be and how exactly it is new and different vs. leading retailers in developed markets.

The discussion highlighted how the digital landscape in China could be different from that in many other parts of the word. For example, as shown in the attached graph, people in China have more positive attitude to the digital and its impact on their life. Why is that?

One explanation is that China is still a developing country with a lot of underdeveloped markets. As a result, new digital technologies have been able to provide benefits to Chinese consumers who have not yet been reached by traditional incumbents. This has led to a faster pace of adoption of digital options.

This is happening in social media, since traditional media is constrained. It is happening in online games, since traditional entertainment options are similarly constrained. It is happening in eCommerce, since traditional retailers are still in the early days of development in offering choice, price and service. It is happening in mobile / digital payment, since consumer banking products are still limited in a large part of China. It is potentially happening in AI, because China still has a large population of poorly-trained labourers who lack quantitative and analytical skills (mainly because of an absence of critical thinking training in schools). Emerging AI technology allows Chinese enterprises to overcome this difficulty by giving managers the facilities to make analytical, data-based decisions despite the labour force’s input.

No wonder more people in China would embrace digital innovation with more excitement...