182. Explore Scalable Digital Solutions #3 - Digital Ecosystem

In this week's blog I'd like to share some observations from the most recent visit to China during Easter holiday, about the digital ecosystems in a rapid changing huge ancient country:

Tales of two economies

On one side: gradual demographic change, excess supply in the property market, local government debt and geopolitical tensions are influencing economic dynamics on an unprecedented scale, on the other side, the scale of China's digital economy reached 45.5 trillion yuan ($6.6 trillion) in 2021, ranking second in the world and accounting for 39.8 percent of the country's GDP, and there is no sign of slowing down.

One example is the cashless payment everywhere you go in China, regardless if you are doing grocery in the morning market or purchasing furniture at home, there's almost no cash can be seen.

Thriving Digital Ecosystems

According to Gartner, a digital ecosystem refers to

an interconnected set of services, individuals, and organizations that share digital platforms for a mutually beneficial purpose. These ecosystems can span industries and include various stakeholders such as customers, partners, suppliers, and competitors. The key components of a digital ecosystem include platforms, APIs (Application Programming Interfaces), data, and participants. Gartner emphasizes the importance of collaboration and openness within digital ecosystems to foster innovation, agility, and value creation.

In fact, as of today, 50% of the world’s top 30 brands and 70% of the world’s $1B unicorn start-ups achieved their success by building flexible digital platforms and leveraging complex digital ecosystems to grow their businesses.

Take WeChat Pay as an example, a popular digital wallet introduced by Tencent’s WeChat in 2011. Thanks to its simple interface, integrating social media and mobile payment services, along with compatibility with various in-app applications such as WeChat Mini Programs, WeChat Pay extends its services in China to include a range of financial products, from investment funds to insurance, enabling users to make payments directly within the app. In 2022, around USD 400 billion transactions were done through WeChat.

As companies, the benefits are:

– Access through vast distribution channel from megacities to rural country side

A mini program lets you access it at any given point of time by simply clicking on the ‘mini program’ feature on the discover section of your WeChat app without downloading the app

- Enrich Brand Experiences

For example Gucci’s mini program allowed users to put a virtual mask on their selfie or picture. This feature attracted millennial consumers to try it out and show it off to their social networks.

Immersive Digital Experience

Xi'an, once the capital cities of 13 dynasties with a history of over 2,000 years, is the home of the Eighth wonder -2200 year-old Qin Terracotta Warriors & Horses; it is also known as the beginning of the Silk Road, a city opening to the trade route 2100 years ago.

For little kid who is not familiar with the ancient history about the Terracotta Army, we went to watch "Legion Resurrected", which was a combination of Virtual Reality and Performance at the same time, which tells the based true stories about the life of a family story based on real archeological findings.

Expand ecosystem to create new business scenarios and services

From Cellphone to Sell Cars (e.g. Xiaomi)

China’s large domestic market offers powerful scale advantages that enable the rapid commercialization of digital technologies. Accounting for more than 40 percent of the value of worldwide transactions, China has the world's largest e-commerce market. The sheer size of the Chinese internet user base encourages continuous experimentation and enables digital players to achieve economies of scale quickly.

For example, Xiaomi is one of the world’s leading smartphone companies. The company has also established the world’s leading consumer AIoT (AI+IoT) platform, reached approximately 699 million smart devices connected to its platform (excluding smartphones, laptops and tablets) as of September 30, 2023. Xiaomi products are present in more than 100 countries and regions around the world.

Xiaomi, the famous cellphone producer, held its Xiaomi EV Technology Launch, officially unveiling Xiaomi EV's five core technologies - E-Motor, Battery, Xiaomi Hyper Die-Casting, Xiaomi Pilot Autonomous Driving, and Smart Cabin, putting to their first car: SU7.

From the development of foundational core technologies, Xiaomi aims to redefine the technology of the automotive industry.?Smart electric vehicles are trending towards integration of the automotive industry with consumer electronics and intelligent ecosystems. Integrating full-stack technologies is a necessary step for the industry's evolution. Lei Jun stated that by integrating industrial manufacturing, smart software, and AI, Xiaomi EV will completely redefine the automotive industry, marking a significant leap in its technological landscape.?

I found it interesting how Xiaomi pays great attention to details to attract female customers by implementing makeup mirrors which they have learnt from providing smart home make up mirrors, so that the like is more nature, more than 20% owners of SU7 are females.

Check out the vision of "A Human X Car X Home Ecosystem" video here

To summarize,

regardless how technology evolves, the key question is not about the technology itself, rather how to leverage technology to provide an rich experience that can acquire, connect and improve customer experiences in every step along the way, to create cost efficient, scalable, sustainable business model.

There's a lot to learn and the future has never been more exciting as today.