Digital Transformation

The Background In Terms Of Big History
The world is moving very rapidly in this generation. The digitization of data and its derivative phenonema have accelerated dramatically in the last five years. As the internet was being universalized, starting approximately twenty years ago, the digital revolution began to turn everything into data en masse, first quantitative, then text, image, voice. Following that, these data interacted, interconnected, and formed spontaneous networking webs that multiplied at an exponential rate, generating secondary, tertiary data and databases. That completed a loop, and then the process repeated in the next cycle. These cycles repeated enough times to build databases big enough to enable additional layers of processing, produce extra-human learning, and help generate new algorithms to mimick levels of so-called intelligence. With huge leaps in processing speed, super-computers and task-performing devices began to routinely “solve” problems and “complete” more and more jobs, faster and better than the traditional humans. On top of it all, mobile connectivity made the networking systems seamless, the databases readily attachable, and constantly processing even without prompt. The key factors to all these developments are continuous integration, differentiation, connectedness, accumuation and creation. What is characteristic is their exponential growth, both quantitative and qualitative. It is like a perpetual kaleidoscope.

All these can be likened to the birth of a biological embyro, the replication of cells, the differentiation into functional organs and the formation of an organism, with some evolving into “thinking” beings, giving rise to social affiliations, identities and group dynamics. Except this all happened in the digitization process at a very rapid and still accelerating pace. And it is amazing to recall that it all began modestly about half a century ago, with the coding of data into strings of 0s and 1s. Those of us who lived back then probably had experienced the use of punch cards and paper tapes to check for input accuracy! Whereas today, we are literally witnessing social evolution whizzing by at ultra fast-forward modes.

This year, we may have witnessed the beginning of yet another age — the age of quantum technology. China appears to be leading in the engineering applications realized from the more abstract portion of theoretical quantum physics. They claim to have some success in fields such as communication and encryption applications. That frontier dovetails into the digital universe, but also promises a technology that may transcend the digitized protocol and operative paradigm. But let’s not worry about that for the purpose of this discussion for the moment.

The term “Digital Transformation” is already somewhat jaded (for example, its discussions in Wikipedia are no longer details-specific). What I find the most revelatory is how the Chinese authorities have translated the impacts of this new (and potentially the biggest yet) socio-industrial revolution into practical action strategies.

What A Business Faces In The New Reality
With that as the background, let us see what a company faces. In a nutshell, it has a lot of catching up to do during the last ten years, and must keep racing in order to stay current and viable, because changes in the environment is still accelerating today.

China’s State Department formally announced four years ago to launch the nationwide initiative to go “Internet-Plus” or “Internet+” in all aspects of social activities, be it business, government, culture, academic, etc. They declared that all individuals and social units will be transformed, some more wholesale than others. That is because the social environment 社会生态 is undergoing fundamental structural changes in conjunction with technology in producing a new Industrial Age.

They used the analogy of electricity replacing steam and horsepower, in a previous industrial and social transformation, to highlight the real implications of the internet. The universal introduction of electrical energy eventually also ushered in the electronic and semi-conductor age, the politics of oil necessary to fuel the new civilization, and the related politics of money currency.

The Chinese leadership explains and tries to convince the people of the need for and the direction of the “Deepening of Reform 深化改草”, to embrace and create the new culture and modes of existence in an internet-propelled civilization. They urge people to use the empowering tools (which the government will invest in and make increasingly accessible) and their imagination to create the new realities. They stress that the progress will be cumulative and exponential. Successful adaptation will reap unprecedented benefits to the individuals as well as the social collectives. The industry came out with a catchy slogan: “in the vortex of a tornado, even a pig would go flying”, .

The Internet+ initiative in China is sweeping because it means, for a start, everybody and everything in society would be maximally digitized, become data and pliable into databases. Organizations and individuals have to be connectable, and invariably interconnected with each other and with the outside network universe, as a matter of course. That way, the connectedness forms infinite possibilites for systems, and provides means for new solutions to be discovered, and new processes to be designed and controlled. Naturally, businesses would want connectedness to the fullest extent possible and, in any case, not less than their competitors or peers.

Most importantly, organizations and individuals have to be able and ready to morph. To do so, they should be adept at functioning in open-platform environment and good at collaboration. To cite an actual example that is apropos with the electricity analogy, Oppo was a company manufacturing light bulbs (we used to love their products) that turned into one of the country’s top-three smartphone manufacturers, and then into one of the major mobile music service-providers, and now a specialized Big Data marketing platform. The point is: in the new Digital Industrial Age, even a company’s core business, its identity and its brand must evolve, eventually even beyond recognition. Even Coca Cola may become a totally different business, or “lifeform”, as the Chinese technocrats call it.

Internet+ = Social Macro-Chrysalis And Micro-Metamorphoses

Under China’s Internet+, “Connect Everything” has become not just the slogan but the operative paradigm . Like electrical wiring, it is nothing before connection, but it can become or create many things after connection. Other generic slogans are data and application “sharing”, “collaborating”, “automating”, “participating”, etc. “Open platform” is a virtue. “Discovery” and “innovation” become routine. Accessing the biggest of Big Data, Smart Data, and learning from and with “all that exist out there” are the hallmarks of quality and requisites for survival. “Collaborate, innovate, connect, and create” form one procedural cycle that immediately go on to the next, all within one operating cycle, instead of requiring many operating cycles. In other words, individuals and organizations have to customize their products and services (because the non-customized and routine ones will be the tasks of “intelligent” machines and “thinking” computers) and innovate. Governments have a huge task and bigger responsibility, in providing the sustenance and nourishment for these new modes of social activities in an open and accessible, yet suitably secured, cacoon or chrysalis.

I came to understand China’s policy at relatively close range and got to digest a lot of their usually dry and technocratic documents. But the ones related to Internet+ and its complements, such as Beidou+, are anything but mundane. They are quite exciting and stimulating. The documents coming out of the Development and Reform Commission (发改委) and its associated committees and task forces are intellectually superb and practically expository. Historically, I have also found the studies coming from the Central Policy Research Office that are released (most of them are not) to be richly educational. Often, once you understand the policy thinking, you will be able to find richly-refined and practical tools and resources that the government and its complements would provide out in the public, to help realize the stated objectives.

In the case of Internet+, the practical strategy revolves around what is known as BAT (Baidu, Alibaba and Tencent). These are three companies that help users go digitized, organically connected with and operating on ever-developing new phenonema/modes of existence(新生态). They have become the infrastructural “motherships”. Some describe BAT as today’s cyber utility companies, much like the old gas and electric companies. Alibaba and Tencent are the contending category-killers. In China, my preference is to work with Tencent.

Until you start exploring applications with, say, Tencent, you will not realize how little you can accomplish on your own, and how versatile Tencent’s platforms and teams are. Nowadays, most tasks and projects are in essence plugging into applications, self-designed, purchased or shared. But like enriching uranium, the functions in a big network-based and data-rich universe require scale, high-end technology and complex accompanying systems. Platforms such as Tencent’s and Alibaba’s exist to collaborate, facilitate, enable their users. They do not try to own-and-operate. Their business is Big Data, connecting everything, and driving synergy from those. It does not benefit them to own and operate businesses that are their clients; instead, as more businesses become enabled by them and operate, they grow. They even seed start-ups and invest private equity in their growing customers, 20% being the optimal maximum. They are internet utilities, with venture capital and other specialized service subsidiaries.

To undergo a so-called digital transformation, a company should go to Tencent or Alibaba and find customized services and collaboration counterparts. They have worked out, or have access to, a lot of solutions already, and have unparalleled data and user/vendor networks. (By the way, the current focus in China has gone beyond Internet+ and onto the phase of Artificial Intelligence+, or what I call “AI with Chinese characteristics”. Simply put, as in Internet+, everybody needs to add a dimension to their mode of existence, such that 1+1 = 2 x C, where C should be the human creative input).

The new environment also has big impact on organizational structures, human resource’s functional descriptions and compensation policies. In short, staff employees are empowered and should be more directly-interphasing with customers and even developing products in the process. Management has new challenges, must serve new functions and possess different skills to produce effective results. They each has a different “mode of existence”. There are many studies and analyses on that in China. Many people, who were successful in their past, fail to adapt.

Many books were written several years ago on Internet+. They are in Chinese only. Emerging articles and books are now focused on AI+. I am trying to catch up on those. If you go to Tencent or Alibaba, you will learn more the real way. They will direct and assist you to go surf their web universe and experience what is out there (体验). That is how things get going these days. You experience, you connect, you learn, you create, and you are transformed by transforming the process you are connected to. Otherwise, AI will take over. That is why it is important to find out how they plan to apply AI and the directions they are heading, not just with Tencent and Alibaba, but with everyone out there.

Good luck.

-doublewood

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