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Five "I"s of China's Internet Strategy
   2015-12-21 11:28:06    CRIENGLISH.com      Web Editor: Liu Ranran

By Luo Yu,  Photo by Da Qing / Imagine China

The Internet has been revolutionizing and will reshape nearly every aspect of our life. In a sense, technology is moving far ahead of the mentality of legislators and regulators, who have now become warier of grave challenges posed by cyber security and global governance, as the Internet is developing at an unprecedented pace.

Hence, stakeholders have to seek out a balance between creating disruptive innovation and warding off perils and even evils of all stripes during the process, which requires concerted efforts from governments and tech companies around the world. In the meantime, the Internet plays a pivotal role in Chinese economic restructuring and transition. Here, I outline five ĦħIĦħs, namely Innovation, Integration, Intelligence, Integrity and Inclusiveness, as China's future Internet strategy.

Innovation

Innovation is the driving force behind the Internet. From my perspective, innovation in Internet economy is mainly driven by two forces, namely well-established Internet companies and hundreds of thousands of 'makers' and start-ups spawned by the 'mass innovation and mass entrepreneurship' strategy. The former will create and optimize functions and products based on a humongous amount of data and feedback generated by consumers.

No offense, but if you use WeChat, you will highly likely discard all other social networking apps, be it WhatsApp or LINE. WeChat will amaze you by virtue of its functions and user-friendliness, trumping ALL its rivals, thanks to Tencent's continuous effort to enrich and upgrade user experience, and the fact that China has the world's biggest online community.

On the flipside, countless makers have been incentivized by the drive of 'mass innovation and entrepreneurship'. Innovative ideas and business models have sprung up across industries. 'Mass Maker Spaces' have been created where incubators are established and angel investors and venture capitalists are captivated by smart ideas and are keen on the success of entrepreneurs. The central government has also issued a series of supportive guidelines to cut red tape and streamline the registration procedures for start-ups.

Integration

2015 witnesses many former arch-rivals happily getting married (at least ostensibly). Such consolidations include the merger of Ctrip and Qunar in the online travelling market, Didi and Kuaidi in the taxi-hailing industry, and Meituan and Dianping in the group-buying business.

Not surprisingly, the forces behind all these gigantic deals are BAT. Yes, the three dominant yet sometimes unscrupulous Chinese Internet goliaths, namely Baidu, Alibaba and Tencent.

Are such consolidations good or bad? Well, the move not only ended their nasty cash-burning race and escalating pricing wars, but also started caring about shareholder returns.

Meanwhile, Internet technologies are bound to expand into traditional fields gradually. Now we see that a lot of companies in traditional sectors have set up their websites and jumped on the 'WeChat business' bandwagon, but setting up these online platforms is just a primitive marketing ploy. Without a doubt, companies need to do more. They should integrate and optimize product development, financing, manufacturing to sales, marketing and customer interactions, moving up the value chain throughout industries in an attempt to create smarter agriculture, manufacturing and services.

Intelligence

How can companies, particularly SMEs and companies in traditional industries, be more intelligent? My advice is simple: rather than waiting for the Internet to reshape your industry or the way you do business, you should learn to adapt to the new changes, capitalize on the Internet and accelerate your productivity.

One may argue that discrepancy in development between big giants and SMEs is to be more noticeable. As pointed out by McKinsey & Company, China's Internet economy is mainly consumer driven and enterprises, especially SMEs, have lagged far behind their western peers in terms of enterprise cloud adoption and big data implementation.

Domestically, SMEs are faced with mounting pressure by BAT which seems to be permeating every sector in the market and over-diversifying their portfolios. But SMEs don't have to be extremely pressured because for one, it's beyond the ability of tech giants to monopolize every market as a lot of them are fragmented in nature, and for another, the excellence and leadership in a niche market can pretty much guarantee companies with a promising future, to be an industry giant just like BAT in the future (who knows?) or to be acquired or partnered and embedded into a larger ecosystem. The power of the SMEs relies on those innovative ideas that can enhance business efficiency, cutting down the middle man, thereby elevating the customer experience.

Besides, PwC's 2015 Global Digital IQ Survey also indicates that Chinese companies focus too much on sales and marketing, yet ignore the supporting activities such as customer service, human resources and operations that indirectly facilitate revenue growth. In a general sense, Chinese companies are quite confident in digital investment and have created big data sets whereas they are less confident than their global peers in effectively utilizing the data to drive business value, particularly data analytical skills that are developed internally. They need to bear in mind that data has to be created and analyzed rationally to understand their market as well as customers, to serve business objectives, not to show off how much meaningless data they can generate.

Integrity

The e-commerce market is filled with fraudulent practices like click-farms and marketing scams. Similarly, despite China's recent efforts to regulate the once-volcanic and now chaotic peer-to-peer (P2P) lending industry, business fraud has been prevalent and hindering the development of sector, where borrowers intentionally default on their loans and platform owners, vanish after fundraising for themselves without repaying investors. Speaking of fake products on e-commerce websites and dubious business activities on P2P lending platforms, it's really about the Integrity on the Internet. That's why investors remained cautious with sales numbers in the newfangled Double-11 Shopping fiesta, as share prices of almost all e-commerce giants dropped after the spree.

Integrity is in dire need in this topsy-turvy market. Taking the P2P lending market as an example, you cannot solely count on businesses to correct themselves. One thing worth trying is more cooperation between Internet banks, commercial banks and online lending platforms, because credit check services offered by Internet banks such as Alibaba-backed MYbank and Tencent-affiliated WeBank can cut off borrowers that are more likely to default. Therefore, I don't see the emergence of Internet banks as a huge threat to P2P lending, because their products are not the same in nature and differ significantly in returns. Rather, Internet banks are complementary to the industry, as they can get access directly to the credit history with big data that has been generated for years by Alipay and WeChat, thus strengthening the due diligence process on loan applicants.

Inclusiveness

Looking into the future, Internet will also be more Inclusive, rendering a wider array of choices for different target customers. It'll be much easier to purchase goods from overseas as cross-border e-commerce booms; rural residents can equally enjoy the benefits brought by e-commerce; and there will be more tailor-made products ranging from customized wearable devices to smart homes that enable you to control every device at home remotely.

Last but not least, the role of the government can be focused on three areas. As the regulator, it helps with eradicating counterfeits, establishing an online credit rating system for credit-starved SMEs and furthering tax exemption on cross-border e-commerce; as the big boss of the state-owned companies in China, it facilitates weeding out companies with overcapacity, shutting down zombie factories and upgrading economy; and as the legislator, it makes favorable policies to create a more amicable environment in which any would-be entrepreneur could grow and thrive.

To sum up, the 'Internet Plus' concept boils down to five areas. Based on Integrity, we are going to see more Integration between traditional sectors and Internet technologies, and in the tech sector where new consumption models will be created and multi-billion dollar mergers and acquisitions of well-established business entities are expected to happen. In the digital era, companies need to be more Intelligent and Inclusive. They need to understand, interpret and harness the data to make critical decisions to satisfy diversified customer needs. However, I would mainly pin my hope on Innovative capabilities of Chinese companies, in that innovation is the underpinning factor for Chinese economic development and the key to capturing the hearts of millions of customers in the global market.

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