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JUN 21, 2018

3 Pillars of Value Creation for the Digitization Age: Smart Cities in China

By George Nagatsuka

China presents an attractive yet challenging market for many business professionals. GLOBIS MBA students went to the country’s No. 1. business school, CEIBS, for a short exchange program. This is the second of three articles about what they learned.

A previous article in this series highlighted how China may be the world’s fastest-growing cashless society, due in part to the ease of Alipay and WeChat Pay applications, which enable Chinese to easily buy goods and services using only their mobile phone.

This is actually part of a larger trend of the development of the “Smart City,” a concept I learned about from CEIBS Professor Guo Bai while on a 3-Day Visit Program to China’s top business school. The experience opened my eyes to the business environment there.

According to the Economic Times (2018), “China started piloting national smart city development in 2012 to encourage the use of the latest technology, such as artificial intelligence and Internet of Things, to help the flow of [automobile] traffic, improve law enforcement and make public buildings more energy efficient. China aims to nurture 100 new smart cities from 2016 to 2020 to lead the country’s urban planning and development.”

One example of “Smart City” initiative is increased surveillance via the operation of thousands of CCTVs around their cities to track anything from vehicles, citizens and visitors (via facial recognition software) and through AI… to be able to score people on their social behavior. Needless to say, this heightened surveillance and rating of citizens brings its own new benefits and drawbacks.

Indeed, the rate of “smartization” seems to be increasing. As mentioned previously, Alipay and WeChat pay enable cashless transactions, and in this environment, Chinese companies strive to offer more of these forms of payment to greatly expedite transaction cycles.

According to Professor Guo Bai, mobile payments (in general) and its daily peaks appear to be 11 times greater than the US, along with logistics of package delivery occurring at a much higher rate. It appears the reason is due to strong computing power and infrastructure that China now possesses. Recently, Chinese companies are known for their fast responsiveness to customer requirements. Lastly, there is considerably more Venture Capital funding available in China than in any other country.

A unique point related to the entrepreneurship and management of Chinese companies—perhaps compared to Japan and other developed countries—seems to be that many Chinese companies are embracing the Digitization Age and striving for overall supremacy. According to Professor Bai, there are 3 pillars of Value Creation I would like to highlight, along with my personal takeaways.

Optimization: bringing together online and offline information related to customers, products and services. This can be done through shipment tracking, logistics, robotics and AI. Looking back, I realized that this is essential in order to be effective in a competitive digital economy.

Platformization: The network effect involving product and service value increases as more consumers or customers are engaged. For me, this means ensuring that my future company is positioned to share the product or service value with other customers that we deal with via a collaborative network.

Customer-Centered: Customers now have greater buying power due to being more informed. Digitization results in more efficient, lower cost processes and programs. It is important to embrace digitization and invest in technology involving automation of mundane processes.

My CEIBS experience went by very quickly, but the case studies, company visits and most importantly, the interactions and discussions with professors and other students (both from GLOBIS and CEIBS) were invaluable. My time in China gave me a lot of insight and helped me formulate many ideas about future possible ventures. It was an inspiring experience!

Cover Photo Copyright: jamesteohart