Motto for the Internet age: adapt or die

Economics and electronics seen as inseparable twins

The world can look to a future in which the real economy and the Internet economy become a seamless entity, and only those who adapt to that reality can survive and prosper, experts say.

"In the future the economy will demand collaborative development," says Jack Ma, founder and chairman of Alibaba, in a speech at the China Green Companies Summit in Shenyang, Liaoning province. "No Internet company will be able to survive just by being an Internet company or do well for the next three years. The Internet economy is not a virtual economy; It's begging to be combined with the real economy."

The Internet plus initiative, announced by Premier Li Keqiang at parliamentary sessions in March, aims to integrate mobile Internet, cloud computing, big data and the Internet of Things with modern manufacturing. Experts say that with the rise of mobile Internet, the program could open up a wealth of business opportunities.

Since 2010 network hardware infrastructure in China such as 4G technology has developed rapidly. By the end of last year there were an estimated 649 million Internet users, 557 million of whom use mobile phones to get online.

In the past few years the Internet era has reshaped China's traditional industries, but it has not all been one-way traffic. Lately, Chinese Internet companies have also sought opportunities in traditional sectors, such as Alibaba and LeTV in the car industry.

Ma says that, in the Internet era, companies need to adapt and innovate. When many business people talk about Internet plus they are still thinking from the point of view of traditional industries, he says, and it will take a long time for many to get used to a new mindset.

The Internet economy in China has experienced huge growth in just 20 years, Ma says, but in the next 30 years the growth will be even more explosive. That means businesses need to think about where opportunities may lie, and when an industry, companies and even cities consider Internet plus they need to think about how they can innovate.

"Some people say we should think about Internet plus and what the plus means for Internet companies, but the more important thing is for traditional companies to think about what the plus means for them. This is where the potential and the future is."

For Internet companies, that means turning to technology that could benefit them in a broad way.

"All companies, if they want to survive and live healthily, need to comprehensively innovate in their organization at the levels of talent and culture."

Wang Wenjing, chairman and chief executive officer of Yonyou Software Co Ltd, divides companies in China into three groups. About 10 percent know about the concept of Internet plus, he says. About 80 percent know about the concept but do not know how to put it into practice, and the rest probably have no idea about Internet plus at all.

Liu Donghua, founder of the China Entrepreneur Club and founder of a Web-based social networking platform Zhisland, says that in the early years of the Internet he worried that it would overturn the whole traditional sector, but he soon realized that traditional industries could build their own capacities to embrace the Internet.

Zhisland is aimed at top business people and now has more than 4,000 companies as members, the bulk of them in traditional industries. Liu says he has developed services to help traditional industries make the transformation into the Internet era.

The Internet era will bring two big changes to companies, Wang says. One being the basic way in which businesses work.

"They need to transform to put the customer at their center, which is the customer-to-business model. Many companies say customers come first, but have never lived up to that. But now with the Internet, especially the mobile Internet, the shift from product-centered to customer-centered is finally about to happen. In many industries we are seeing more and more cases of companies successfully making changes to embrace the Internet. In the past few years some companies that have not made the transformation and stayed with the product-centered model have found it difficult to make money."

Another area of change is the inner workings of companies, he says. The Internet and intranet can help improve communication, getting people to work better together, thus greatly improving efficiency.

Most companies have a pyramid model, with employees at different levels, and usually orders come from the top, Wang says. However, in some successful companies in the Internet era, the distance between the top and the bottom has become narrower, and a lot of technological innovation is in fact initiated by those at the bottom.

"The innovation of many Internet companies comes from the grass roots, which changes the innovative model that usually goes from top to bottom. In this case it is the grass roots, those closest to customers, who drive innovation."

Cloud and big data technology have helped Internet companies like Yonyou greatly, for example in researching products, and carrying delivery services, and this could improve companies' efficiency and reduce costs, Wang says.

Companies could also use Internet technology to develop new areas of business, such as financial and marketing services for customers.

Liu De, founding partner and vice-president of Xiaomi Technology Co Ltd, talks of the company's experience in selling phones. In the Internet plus era, individual customers' requirements have become more important, he says.

Xiaomi is the quintessential Internet business, with no physical shops, and its virtual doors open only once a week at a particular time, when phones are made available for purchase online, first come first served, and until stocks run out, which can be within an hour.

For each of the past five years, on one day only, the company has staged a huge promotion it markets as the Xiaomi Fans Festival, when a buying frenzy sends millions of yuan into its coffers.

When the promotion was held on April 8, more than 20 million people bought smartphones, double the number last year. In last month's promotion the company raked in 2.1 billion yuan ($338 million; 308 million euros) in just 24 hours. Guinness World Records said Xiaomi had created a new world record with "the largest sales of mobile phones on a single online platform within 24 hours".

Last year, the company says, it sold 61.1 million mobile phones, 227 percent more than in 2013. Last year's sales brought in revenues of 74.3 billion yuan, compared with 31.6 billion yuan in 2013, a rise of 135 percent.

"The Internet can improve company efficiency and reduce costs," Liu says. "You can sell direct from factory to customer and save a lot of hassle. In addition you can reduce the cost of decision making because you use the Internet to connect with customers, and specifically design products to meet market demand."

In traditional household appliance companies, for every product there may be 100 types, he says, with only 30 being profitable.

"However, through the Internet we can accurately target about 80 percent of people, make only one kind of product and sell it well, which greatly improves efficiency."

The Internet provides a more transparent environment, he says, where customers can understand companies and products more readily. For example, whenever a new Xiaomi phone comes out, those who are interested can find out what company made the screen and what company made the casing, and can gauge whether the price is reasonable, based on what they see.

"The Internet era is good for companies that are totally transparent in what they are doing and what they are selling."

The Internet is more than just a tool and should be regarded as a new way of thinking, Liu says, and that implies respecting customers.

"When the customer gets a product or comes across a problem, you fix it right away online. A company that holds those kinds of values is well suited to Internet plus."

Xiaomi says it has more than 110 million registered users, about 90 million of whom are very active online. Most are men in their 20s who are studying or who studied science or engineering at university.

"These people are different from others," Liu says. "They understand products, have a good education and can discern the good points about products, and usually they can reflect a whole group of consumers. If some of them like it, the whole group is very likely to like it.

"So with our products online, tens of thousands of people could take part in a discussion, and you could see what good points are being made and where the differences of view are."

Liu says the company has a team of more than 40 who collect feedback about Xiaomi phones every day. There are 8,100 employees, and everyone is considered a customer service representative, who can monitor social media such as Weibo and WeChat and pass on feedback to the company.

Zhang Guiping, who has been helping SMEs embrace the Internet for five years, says: "'Plus' first means accelerated speed, and the Internet plus era means "to use the speed of a 100-meter race to run a marathon, which demands companies, including Internet companies like us, to speed up transform and innovate."

In transforming to adapt to the Internet plus era, one important element is specialization, she says.

"We can no longer just develop a software platform, and then let companies all use it. We have to make different products to satisfy different companies' demands. This is a great opportunity for us, but also a challenge in the Internet plus era."

Contact the writers through chenyingqun@chinadaily.com.cn