Enter the Dragons1 Build Your Perspective2 Use 3 Behaviors to Maximize3

Every Industry Is Becoming a Digital Industry

Products are becoming platforms
Digital services are differentiators
Ecosystems bring value
Industry boundaries blur
CX becomes digital anthropology

E.g. The car is becoming a moving platform for digital service consumption

The Digital Dragons Are a Critical Part
of This Digital Story

Digital dragons are large organizations that exhibit seven key characteristics:

Build and orchestrate large, modern platforms, ecosystems, de facto standards with many partners.
Active and skilled in collecting, analyzing, monetizing big data about customers and others, using AI.
End-to-end involvement and capability in industry supply chains.
Provide infrastructure, cloud-based apps, and tools at scale.
Have “deep pockets.” Invest heavily in R&D in areas like AI, IoT, and robotics.
Compete as principals in industries beyond digital services, such as online retail.
Talent magnets, attracting scarce skills; e.g., data scientists, digital anthropologists, cloud architects.

Example: The Amazon Ecosystem

Digital Commerce (Core)
Retail
Logistics and Fulfillment
Digital Media and Entertainment
Technology
Financial Services
Customer Insights and Marketing
Healthcare

Retail

Whole Sale

International/Cross-Border

Example: The Alibaba Ecosystem

Digital Commerce (Core)
Retail
Automotive
Digital Media and Entertainment
Technology
Financial Services
Customer Insights and Marketing
Healthcare

Retail (China)

Whole Sale (China Domestic)

International/Cross-Border

The Digital Dragons Are More Complex Partners
Than Have Ever Existed Before

Enter the Dragons1 Build Your Perspective2 Use 3 Behaviors to Maximize3

Attitudes to the Dragons Vary Considerably

How do the digital giants (Google, Amazon, Baidu, etc.) factor in to your company’s (business) strategic thinking?

“Our business strategy is based on evolving a partner ecosystem; we won’t succeed alone. We are currently co-developing solutions with one of the digital giants, and discussing with another. The collaboration is enlightening. We learn new methodologies and other things, and mixing people is making for better results. It seems to us a non-zero-sum game, where both really get value.” — Martin Piqueras Caro, CIO, SUEZ

Each Organization Must Build the Digital Dragons
Into Their Planning and Execution

Build Your Digital Dragon Deck

Example: How Audi Deals With “Digital Champions”

Digital strategy goals: $1 billion profit by 2025. Effortless customer experience. Reducing general complexity.
Share with others in Volkswagen group using groupwide digital services committee. For example, leveraging Volkswagen Connect.
Four components: Big-ticket items (e.g., bringing existing products into the digital age), must-dos (e.g., support for new smartphones), wow factors (things customers didn’t expect), enablers (heavy lifting, like in-car connectivity).
Spun off an autonomous intelligent driving company, AID.
Digital is a “two-speed industry.” Top digital companies, wholly focused on digital, with an army of smart digital talent, patient investors, and big visions. And everyone else. Even the giants in each industry shouldn’t go toe to toe with the digital giants on their own turf. Companies have to be realistic and understand trade-offs of working with the digital giants versus going it alone.
There is an opportunity/imperative to learn from these digital giants. “We made a list of 60 digital champions. We studied them and distilled out a set of 12 principles for digital success. We then boiled them down to four to five rules.”

John Newman
VP and Head of Digitalization, Audi AG

Model How the Digital Dragons See Your Business

"We want BAT (Baidu, Alibaba, Tencent) to be a part of our supply chain, but they see us as a participant in their platform." — Li Hongwei, head of IT and IS planning and management, Dongfeng Motor

Think Through Your Posture Regarding the Digital Dragons

Enter the Dragons1 Build Your Perspective2 Use 3 Behaviors to Maximize3

Ignore the Chinese Digital Dragonsat Your Peril

Public / Private Internet Companies, Ranked by Market Valuation (5/29/18)
Rank			Market Value ($B)
2018	Company	Region	5/29/13	5/29/18
1)	Apple	USA	$418	$924
2)	Amazon	USA	121	783
3)	Microsoft	USA	291	753
4)	Google/Alphabet	USA	288	739
5)	Facebook	USA	56	538
6)	Alibaba	China	-	509
7)	Tencent	China	71	483
8)	Netflix	USA	13	152
9)	Ant Financial	China	-	150
10)	eBay + Paypal*	USA	71	133
11)	Booking Holdings	USA	41	100
12)	Salesforce.com	USA	25	94
13)	Baidu	China	34	84
14)	Xiaomi	China	-	75
15)	Uber	USA	-	72
16)	Didi Chuxing	China	-	56
17)	JD.com	China	-	52
18)	Airbnb	USA	-	31
19)	Meituan-Dianping	China	-	30
20)	Toutiao	China	-	30
		Total	$1,429	$5,788

Source: Kleiner Perkins, 2018 Internet Trends

China’s Government Is Strongly Driving the Digital Agenda
Initiative	Details
Made in China 2025	Issued May 2015 by Premier Li Keqiang. Inspired by Germany’s Industrie 4.0. To upgrade Chinese industry. 3 timelines — 2025, 2035, 2049 for China to become leader. Priority sectors include advanced IT, automated machine tools & robotics.
Social Credit System	Extensive plans to collect data about people and companies, score their behavior, and provide incentives based on social credit score. Data initially being collected from government agencies and stored on the National Credit Information Sharing Platform.
Next-Generation AI Development Plan	Issued by State Council 20 July 2017. Catch up to global AI leaders by 2020. By 2025, achieve major breakthroughs in AI research. Use AI to drive industry reform. By 2030, become world leader in AI research and application. Use AI to build intelligent economy/society to make China world leader. Value of AI to surpass 1 trillion yuan ($147.80 billion) by 2030.
13th Five-Year Plan (2016-2020)	Adopted March 2016. A broad and ambitious set of objectives, including 6.5% annual GDP growth and Increasing R&D spend from 2.1% to 2.5% of GDP.
Belt and Road Initiative (BRI)	(Also known as Silk Road Economic Belt and the 21st-century Maritime Silk Road.) Issued by Xi Jinping in 2013. Goal is to connect 2/3 of the world’s population across 70 countries through land links (the belt), and sea routes (the road). Also includes banking/funding, university/engineering alliances and clean energy programs.
19 Super Regions/City Clusters	As outlined in China’s 11th five-year plan, Chinese has been developing of regional city clusters, to drive shared economic prosperity and growth. Three are designated as super-clusters (Yangtze River Delta, Inc., Shanghai; Pearl River Delta, Inc., Guangzhou; and Jingjinji, Inc., Beijing). Eight are described as emerging clusters, and a further eight are frontier clusters.

Baidu builds global autonomous driving ecosystem

OUR RECOMMENDATIONS

Accept, understand and socialize the role and importance of the digital dragons in the next decade.
Build your digital dragon knowledge deck; don’t ignore China.
Construct your view of how they see your company/industry.
Choose your strategic posture regarding the digital dragons; each has their advantages and risks.
Build time in for learning through productive friction.

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THE DIGITAL CENTURY BUSINESS

Winning in a World of Digital Dragons

Every Industry Is Becoming a Digital Industry

The Digital Dragons Are a Critical Part
of This Digital Story