China's Digital Transformation: 6 Years, 6 Key Terms

Although the pandemic has ended, the market will not simply return to what it was before. Only by reshaping growth can high-quality growth be achieved.

Digital transformation has been one of the core themes running through the development of Chinese enterprises since 2018.

Before 2020, discussions related to digital transformation such as the integration of informatization and industrialization, Industry 4.0, industrial internet, and intelligent manufacturing were rising one after another. Traditional industry companies were developing their IT capabilities, and internet and technology companies were also actively "empowerment" to traditional industries. The integration of IT and OT (Operational Technology) is the general trend of digital transformation. Companies with different backgrounds all hope to become the leaders in this tide.

The sudden pandemic in 2020 has given new meaning to digital transformation in two aspects. On the one hand, the rapidly changing and continuously pressured market environment tests the determination and resilience of enterprises to continue digital investment. On the other hand, the previous explorations of digital transformation have gradually begun to eliminate the false and retain the true. What kind of digital investment is truly valuable, and enterprises are thinking about this issue more and more.

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Investment may not have a return, but not investing may be abandoned by the times.

However, some trends are always certain. The development and application of digital technology have indeed reshaped the management, operation, and business ecology of enterprises in all aspects. The integration of IT and OT is also a profound change that many physical enterprises are undergoing. Many enterprises hope to achieve the effects of sorting out processes, reducing costs and increasing efficiency, strengthening management, promoting research and development, and stimulating innovation when choosing to invest in digital transformation.

Some bubbles are gradually bursting. We have seen some internet technology companies trying to replicate the successful experience of consumer internet to the enterprise side, only to find it difficult. We have also seen some giants of physical enterprises trying to build industrial internet platforms to sell their own experience to other enterprises, but there is no obvious successful case so far. In the final analysis, the needs of enterprises vary greatly, making it difficult for one company's experience to be scaled and replicated to other companies. Digital transformation is a big wave and a big trend, but it also needs to be step by step, and it is difficult to achieve overnight.

In September 2020, China proposed the national goal of achieving carbon peak before 2030 and carbon neutrality before 2060, involving all industries. The carbon emission content in products is also becoming an important consideration in international trade. In 2023, the tide of generative artificial intelligence (Generative AI) swept China, and GenAI products represented by ChatGPT brought endless imagination to the industry. These two major trends are also affecting the process of enterprise digital transformation.

Starting from 2018, this article selects a keyword each year to summarize the experiences and lessons of the past six years of digital transformation of Chinese enterprises and records the process of digital transformation of Chinese enterprises.2018: A Top-Priority Project

In 2018, Fang Hongbo, the chairman of the home appliance giant Midea Group, began his third term as chairman. At the start of his tenure in 2012, he initiated sweeping reforms. That year, he streamlined Midea's product categories and closed over 30 businesses unrelated to the main home appliance business and with low gross margins. This led to a 23.5% decrease in Midea's revenue from 134.1 billion yuan in 2011 to 102.6 billion yuan.

However, 2012 also marked the beginning of Midea's digital transformation. In that year, Midea began to comprehensively rebuild the group's IT system, launching the "632" strategy: to create six major operational systems, three major management platforms, two major portals, and an integrated technology platform at the group level. Midea hoped that by building the "632," it would establish group-level business processes, group-level master data management, and group-level IT systems. The goal can be summarized with the "three ones": one Midea, one system, one standard.

It was not until 2015 that Midea's revenue scale returned to the level of 2011, reaching 138.4 billion yuan, but the net profit increased from 6.1 billion yuan in 2012 to 13.6 billion yuan, more than doubling. The "632" strategy was the starting point for Midea Group's digital transformation at the group level, and this strategy was precisely promoted by Fang Hongbo.

In a speech in September 2023, Fang Hongbo admitted that in 2012, digital transformation was still just a concept. At that time, the group's business structure was diverse, with significant differences, and the core was to strengthen control over the group and maintain consistency. The "632" strategy was to build all business, management, and the core of corporate operations into a system, then unify processes, standards, and systems. After unification, the benefits were tasted, so the entire enterprise's digital transformation was promoted starting with the "632" strategy.

Cutting off more than 30 billion yuan in diversified business revenue and launching the digital transformation "632" strategy were the two most important changes at the beginning of Fang Hongbo's tenure at Midea. Although these two actions were in different directions, there was a consistent logic behind them: to strengthen refined management of the company.

Under Fang Hongbo's promotion, over the past 10 years, Midea has invested more than 17 billion yuan in digitalization. In 2022, Midea's revenue and net profit increased to 345.8 billion yuan and 29.6 billion yuan, respectively, and the role of digital transformation was indispensable.

In September 2018, Accenture, the world's largest management consulting company and technology service provider, released the "China Enterprise Digital Transformation Index" research report for the first time, pointing out that digital transformation is not a simple deployment of digital infrastructure and hardware and software, but a systematic project. It involves the development concept of the enterprise, corporate culture, organizational structure, corporate governance, business processes, and other aspects, which must be promoted in a coordinated manner. Without the participation of senior leadership, digital transformation will be difficult to advance.

Accenture pointed out in this report that for digital transformation to succeed, it must be a "top-priority project."The so-called "top leader" project is not just about emphasizing the importance of digital transformation by the top leader, but more crucially, it is about understanding the inherent logic of this transformation. Digital transformation is inseparable from process reshaping and cross-departmental data integration. Relying solely on the IT department to advance it often leads to half the effort for double the result. Digital transformation is not just about using information system software like ERP and CRM, nor is it just about building an Internet of Things system or creating a digital dashboard. Reshaping business processes, breaking data silos, and unifying data standards—if these deeper changes are not initiated, digitalization will only be superficial.

"Organization and process are the way, informatization is the technique," an intelligent manufacturing expert once summarized to Caijing Eleven People. He said that if the top-level design is not well done, and the organization and processes are not well organized, then relying solely on informatization means cannot achieve true digital transformation.

Six years of practice have shown that for the digital transformation of any enterprise, the "top leader project" is an evergreen keyword. However, not every top leader needs to be personally involved like Fang Hongbo. "Listening to governance behind the curtain" is also an effective way to implement the "top leader project," which means the top leader clearly declares the strategic significance of digital transformation, then authorizes other executives to take the lead in front, and steps in personally when encountering unsolvable problems.

2019: Digital Spillover

Digital spillover is a phenomenon where leading enterprises gradually export their digital capabilities externally. The year 2019 was a year when large Chinese technology and manufacturing enterprises collectively sought to spill over their digital capabilities.

Enterprises attempting to export digital capabilities are divided into three categories: first, internet giants such as Alibaba, Tencent, Baidu, and JD.com. Second, ICT hardware companies such as Huawei and Lenovo. Third, manufacturing companies such as Midea, Haier, Sany Group, and China Aerospace Science and Industry Corporation. These three types of enterprises have different backgrounds and logics for digital spillover.

By 2019, internet giants saw online traffic gradually drying up, with the growth of e-commerce, video, social networking, gaming, and other businesses slowing across the board, necessitating the search for new growth points. Therefore, the business focus shifted from "mobile internet" to "industrial digitalization," providing digital capabilities to industries (finance, manufacturing, telecommunications, services, automotive, etc.) and helping governments or public sectors achieve digital management.

The digital spillover of internet companies is reflected in two aspects: first, the spillover of IT infrastructure, such as providing cloud computing and data middle-end services externally; second, the spillover of management concepts and methods, which they have proven within their own enterprises to be effective in improving efficiency, promoting innovation, and establishing agile organizations.

The digital spillover of internet companies is also an expectation of policymakers. The new and old drivers of domestic economic development are undergoing a transformation, with old drivers such as real estate, old infrastructure, and heavy industry declining, while new drivers such as the digital economy, industrial internet, new energy, and carbon neutrality are emerging. Policymakers hope to use this to promote industrial rebalancing.

Some argue that the traffic innovation of internet companies in the past did not create enough incremental value, and the platform commission model has increased the burden on the physical industry. High-growth, high-profit internet companies need to strengthen technological innovation and give back to the physical industry.The digital spillover of ICT companies is the result of customer demand pushing back. For instance, Huawei used to excel in selling ICT hardware products such as servers, storage, and networking equipment. These hardware products did not require Huawei to personally serve customers; instead, partners were responsible for distribution, deployment, and operations and maintenance. However, as the demand for enterprise digital transformation has escalated, corporate customers now require a comprehensive "software + hardware + services" solution package. Huawei realized that it must personally engage to understand the business scenarios of its clients.

Starting from 2019, Huawei has continuously emphasized concepts such as "jump with the parachute you make yourself," gradually releasing its own digital management experience to the outside world. Huawei also proposed to provide enterprise customers with a full process of digital services, including "initial consultation and planning, mid-term implementation, and post-operational operation and maintenance."

In 2019, Huawei established an independent cloud business unit (BU). Huawei judged that cloud services are the future development direction of traditional IT and expected to use the cloud BU to drive the output of the ecosystem construction, sales channels, and post-service capabilities accumulated during the traditional IT phase.

The purpose of the digital spillover of manufacturing enterprises is to serve the same needs of similar enterprises.

Manufacturing enterprises have generally established independent digital subsidiaries. These include Midea (Meiyun Zhishu), Haier (Caos), Sany Group (Shugen Interconnection), China Aerospace Science and Industry Corporation (Aerospace Cloud Network), etc. Manufacturing enterprise groups generally hope to transform their digital cost centers into revenue centers. Their requirement for digital subsidiaries is to serve the parent company while also acquiring external customers and being able to survive independently in the market.

Looking back at 2019 today, the aforementioned three types of enterprises all understood the demand side of various industries from the perspective of "empowerers," and their expectations for the Chinese digital market were overly optimistic. In the following years, this optimistic expectation was gradually broken by reality, as each industry has its own uniqueness. The supply side hopes to provide standardized products to the demand side to achieve scaled profits; the demand side, on the other hand, hopes that the supply side will delve into their own business scenarios to provide personalized product services.

Over the past five years, the insufficient matching of supply and demand has always been a deep challenge in the Chinese digital market, but the understanding of digitalization between the supply and demand sides has also been continuously aligning over these five years. In this process, the overall level of digitalization of Chinese enterprises has continued to improve.

2020: Resilience

In 2020, affected by the pandemic, the global manufacturing supply chain faced a severe crisis, the impact of which continues to this day, making supply chain security a focal point of concern for both enterprises and governments.The sudden market environment changes brought about by the pandemic control measures have shown that companies with robust digital infrastructures have generally responded better, demonstrating greater resilience. On the other hand, the changing market conditions also test the determination of companies to invest in digitalization.

At the beginning of the outbreak, the movement of people and logistics was disrupted, and working from home became the norm, leading to a significant development in online conferencing software. For the manufacturing industry, companies with a solid foundation in IoT technology could provide remote maintenance, helping to reduce losses and weather the crisis.

TCL CSOT is a leading liquid crystal panel company, with a large amount of production equipment imported from abroad. The commissioning of new equipment requires technicians from Japan and South Korea. After the pandemic, the movement of personnel was blocked, and the commissioning of new equipment faced significant challenges. Remote maintenance solutions began to play a crucial role.

TCL CSOT, based on its existing Equipment Health Management (EHM) technology, combined with Augmented Reality (AR) technology, transformed the traditional EHM into a remote equipment maintenance solution. Field engineers were equipped with AR glasses, allowing remote experts to share real-time business scenarios with them. They could see the operation of the equipment and interact with the field engineers in real-time. With the real-time sharing of industrial site data, combined with the backend system to find best practices, remote experts could quickly make decisions and accurately complete remote debugging and diagnostic services.

In addition to supporting on-site maintenance that is difficult to reach, digital infrastructure can also help companies understand supply chain and market conditions in a rapidly changing environment, enabling them to make decisions quickly, which is even more valuable.

At the beginning of the pandemic, Schneider Electric's medium-voltage frequency converter orders related to real estate and large infrastructure projects were postponed, while the demand for short-cycle orders related to people's livelihoods, such as mask machines and packaging machines, rose rapidly. Schneider Electric relied on its internal digital interaction system between production and sales, as well as its digital interaction system with customers, to ensure production delivery during the drastic order conversion.

Specifically, systems such as sales forecasting, ERP supply chain control, supplier management, procurement management, and customer management need to be integrated to accurately grasp how many orders are being tracked, how many need to be shipped, and how many have started production. Based on this, production requirements are proposed to the factory, and then combined with the factory's equipment operation status, personnel situation, and upstream and downstream logistics, the final production plan is formulated.

Under drastic changes, the difference in digitalization levels determines whether business operations can function normally, which is first reflected in supply chain collaboration. Midea has a supplier collaboration system with its suppliers, which is led by Midea. The shipping and component procurement between Midea and its upstream and downstream partners are all directly completed through the digital system, without the need for face-to-face communication. The daily management logic has already been integrated into the system. With the support of this system, when a supplier encounters a problem, the production ratio can be immediately adjusted in the system, and other manufacturers can be arranged for production.

As the pandemic continues to change, which markets recover faster, whether consumer demand for products has changed, whether inventory and production scheduling can keep up, and whether component supply can be quickly adjusted? All these need to be supported by data for decision-making, and this data-based decision-making will further reduce dependence on manual labor. At this time, Midea's years of digital accumulation played a key role.Many cases have shown that under the test of the pandemic, businesses with a better digital foundation have shown greater resilience in the rapidly changing market environment, which in turn has prompted these companies to further increase their digital investment. For many small and medium-sized enterprises (SMEs), survival is the primary task, and digital investment does not yield short-term results, leading to budget cuts in this area. The pandemic has also led many companies to shift their digital investment to a more pragmatic "small steps, quick pace" model.

Accenture's 2020 "China Enterprise Digital Transformation Index" research report also found that resilience is a key capability demonstrated by digital leaders when facing the pandemic challenge. Digital leaders rely on real-time data analysis to predict future trends, achieving market foresight and early warning ahead of the market. At the same time, they fully integrate data from the sales end to the production end to the supply end, achieving high collaboration between upstream and downstream, thereby quickly adjusting supply according to market demand. The standardization of internal processes in these companies, as well as the intelligence of human-machine collaboration, also ensures the stability of their operations and maintenance.

2021: The Watershed Year

"From 2018 to 2021, the advantages of digital transformation leaders have continued to expand, while other companies, due to lagging strategic deployment, weak foundations, unreasonable organizational structures, and lack of talent, often adopt a patchwork approach to deploying digitalization, making it difficult to fully tap into the value of digitalization." This is the most eye-catching conclusion in Accenture's 2021 "China Enterprise Digital Transformation Index" research report.

Under the pandemic, the gap in digital transformation has amplified the gap in business capabilities. After surveying hundreds of listed companies, Accenture found that the revenue growth of digital leaders in 2021 was 3.7 times that of other companies, a figure that averaged 1.4 times from 2016 to 2019.

Luckin Coffee is currently the largest coffee chain in terms of revenue in the Chinese market. In 2020, Luckin faced a crisis due to financial fraud by its then-management team. The year 2021 was a crucial year for Luckin, as it not only stabilized its position but also created a gap with its peers. Digital capabilities were an important factor in this.

As a startup founded in 2017, Luckin Coffee's technology team once numbered nearly a thousand people. Almost all of Luckin's business and management are data-driven, involving various aspects such as product development, store location selection, supply chain procurement, marketing automation, and Internet of Things (IoT) management of store equipment.

Since 2020, Luckin has launched products such as thick milk latte and coconut latte at a pace of 1-2 hits per year. Luckin's product department tracks the popularity trends of drinks based on various ingredients and flavors, deriving different product combinations. Thanks to the data-driven product innovation mechanism, Luckin can continuously introduce new flavors of coffee and retain popular flavors based on weekly repurchase rates.

Complex and diverse flavors require precise supply chain management. In 2021, the total number of Luckin stores exceeded 6,000, all of which are deployed on Luckin's self-developed intelligent store management system. The sales of each Luckin store change daily, with differences between Mondays and Fridays, weekdays and weekends, requiring the prediction of sales to prepare goods in advance. The company's algorithm-based automatic restocking system has accomplished this task.In 2021, Luckin Coffee's revenue reached 7.97 billion yuan, marking a year-on-year increase of 97.5%, surpassing all other listed coffee chain companies in the Chinese market. During that year, the revenue growth rate of peers was generally between 20% and 30%. After 2021, Luckin's revenue and profit growth levels continued to rise, achieving profitability in 2022 and consolidating its leading position in the Chinese market.

At the 2021 China Enterprise Digital Transformation Index release forum, Zhu Hong, Senior Vice President of Accenture and Chairman of Greater China, pointed out that a watershed in digital transformation is forming between enterprises and industries. With higher digital maturity, leading companies have further expanded their competitive advantages, accelerated growth post-pandemic, and aimed for breakthrough innovative growth.

Zhu Hong said that the differences in transformation willingness and investment across industries are directly reflected in corporate performance. For example, in the retail industry, facing new changes in consumer behavior and willingness, digital capabilities have become their "way out of the dilemma." Retail companies have accelerated the layout of omni-channel marketing, continuously upgraded intelligence in various links, maximized efficiency, reshaped user experience, and thus entered the first echelon of digital maturity. Industries such as chemicals, building materials, and metallurgy, under the pressure of an uncertain global supply chain network and cost control, have stagnated and reduced digital investment.

2022: Prudent and Practical

Digital transformation is a long-term and deepening process, with numerous hot concepts associated with it, such as integration of informatization and industrialization, Industry 4.0, industrial internet, intelligent manufacturing, etc., all of which have sparked heated discussions. Behind the continuous emergence of new concepts is the deepening of digital transformation. After the pandemic test, companies have become more cautious and pragmatic in their investment in digital transformation.

The market environment in 2022 was quite special. The world economy gradually recovered after the pandemic impact, and the interrupted supply chains were gradually restored. However, the outbreak of the Russia-Ukraine war that year brought new shocks to the global market, with energy prices soaring and the global economic situation under pressure. Under such circumstances, companies have become more cost-effective in their investment in digital transformation.

Accenture's 2022 China Enterprise Digital Transformation Index report shows that Chinese companies' investment in digital transformation has become more refined, with 80% of companies focusing on the direct financial returns of digital projects, a year-on-year increase of 28%. These companies hope to achieve "visible" returns in an uncertain environment through "meticulous cultivation" of digitalization.

Xia Xiaohu, General Manager of Shanghai Wangu Control System Co., Ltd., which has been engaged in intelligent manufacturing and digital transformation services for a long time, told Caijing Eleven People that during these two years of the pandemic, there has been a significant change in corporate digital investment. Previously, some companies were for obtaining subsidies, and some companies were for creating image projects such as digital exhibition halls and digital large screens. Now they have actual needs, especially some large state-owned enterprises, hoping to digitally transform some heavy business scenarios and organizational structures, and have proposed very specific technical requirements.

Xia Xiaohu gave an example that some companies previously used IoT technology to collect data in the workshop, aiming to grasp the production status. Now they hope that every step of the production process can be controlled and managed by digital technology, and all links from design, software, programming to logistics, production, and equipment are connected, which no company would do before.In his view, over the past few years, the first batch of factories that underwent digital transformation have seen results, and unsustainable practices have been identified. Moving forward, there will be a greater focus on sustainable and in-depth digital investment, along with a willingness to make significant investments in upgrading digital systems and software. The demand for technology is becoming more realistic, and there is a growing emphasis on grasping the core. Within enterprises, there is also a stronger emphasis on closed-loop management and taking responsibility for decision-making, with investments and outcomes that must withstand scrutiny.

Ding Xiaohong, Vice President of Schneider Electric and Head of Process Automation and Digitalization in China, shares this sentiment. She told "Caijing Eleven People" that overall, customers from various industries have become more pragmatic. Previously, clients discussing digital transformation were more focused on large screen displays and the adoption of more industrial internet platforms. Now, clients are more concerned with the return on investment. Even if the return cannot be reflected in financial data, it is necessary to inform clients of the value that this intangible return can generate.

Accenture's 2022 "China Enterprise Digital Transformation Index" report shows that after a divergence in digital investment decisions by Chinese enterprises in the previous two years, the digital transformation index score for Chinese enterprises has decreased for the first time, with the average score dropping from 54 points in 2021 to 52 points.

In the index research report for that year, Accenture pointed out that the highly uncertain global economic environment is a significant challenge faced by Chinese enterprises. These uncertainties have rendered the "extensive" approach to digital transformation ineffective, significantly compressing the window of opportunity for enterprises to explore widely and make extensive trials and errors. Faced with external pressures, most Chinese enterprises hope to increase digital investment to achieve survival and leapfrogging, but the deployment of digital investment is becoming increasingly cautious. Achieving a steady and continuous return on digital investment has become the mainstream idea for Chinese enterprises.

2023: Reshaping Growth

In 2023, with the end of the three-year pandemic, the daily production and business activities of enterprises have resumed. After being tested by the pandemic for three years, many enterprises have developed digital resilience, and returning to the rapid growth before the pandemic has become a common market expectation. However, the market will not simply return to the past; only by reshaping growth can high-quality growth be achieved.

CITIC Taifeng Special Steel is a specialized special steel manufacturing enterprise under CITIC Group and is also a leading company in the domestic special steel industry and a hidden giant in the global special steel industry. CITIC Taifeng Special Steel's business covers high-end steel for automotive use, steel for engineering machinery, steel for wind power, steel for marine mooring chains, steel for mining chains, and steel for aerospace.

After 2020, CITIC Taifeng Special Steel accelerated its digital transformation. In 2021, the first year of the "14th Five-Year Plan," CITIC Taifeng Special Steel established the "Intelligence and Informationization Department" to specifically coordinate the advancement of intelligent manufacturing. This company invests more than 500 million yuan annually in digital projects (excluding IT personnel labor costs and historical project operation costs), with overall IT expenditures exceeding 1% of the company's revenue.

In 2022, CITIC Taifeng Special Steel faced many difficulties: first, supply chain disruptions due to logistics and transportation obstacles under the pandemic; second, rising costs, such as the continued high prices of raw materials and fuel; and third, contracting demand, with new energy vehicles using less steel than traditional vehicles, and the slowdown in real estate and infrastructure leading to a significant decrease in demand. That year, CITIC Taifeng Special Steel's revenue was 58.33 billion yuan, with a year-on-year negative growth of 0.3%. The net profit experienced a year-on-year negative growth of 8.7%.The year 2023 continues to be a year of extreme pressure for China's steel industry. Data from the National Bureau of Statistics shows that in the first half of 2023, the business income of the ferrous metal smelting and pressing industry decreased by 9.6% year-on-year, and the total profit decreased by 97.6% year-on-year. According to the statistics of the China Iron and Steel Association, in 2023, the total profit of key member enterprises in half a year decreased by 68.8% year-on-year; the profit margin was 1.0%, and the loss-making enterprises reached 44.57%.

However, 2023 is a year for CITIC Pacific Special Steel to reshape growth, with both revenue and profit growth outperforming the market. CITIC Pacific Special Steel's revenue in the first three quarters of 2023 was 86.41 billion yuan, a year-on-year increase of 14.4%. The operating profit was 5.16 billion yuan, and the operating profit margin was 6.0%.

The accumulation of early digital transformation is an important driving force for CITIC Pacific Special Steel to reshape growth. In various aspects such as research and development design, safe production, business management, and environmental protection and energy saving, CITIC Pacific Special Steel has reshaped with digital technology.

In terms of cost control, the company has established a digital procurement system to improve procurement quality and reasonably control inventory in a refined manner. Its production system optimizes the allocation of coal and ore according to market costs, allowing the overall cost of iron water to be optimally controlled.

In terms of business innovation, digital transformation has enabled CITIC Pacific Special Steel to have flexible and small-batch production capabilities, and can adjust product supply in a timely manner according to market demand. In 2023, CITIC Pacific Special Steel faced the adverse impact of declining market demand for bearing steel and automotive steel, and accelerated expansion in industries such as petroleum, natural gas, electricity, petrochemicals, wind power, photovoltaics, and new energy vehicles, effectively resisting market fluctuations.

The story of "reshaping growth" is also being staged at the home appliance leader Midea Group.

After investing more than 17 billion yuan in 10 years, Midea continues to invest in digitalization, with an annual investment of nearly 3 billion yuan. In his speech in September 2023, Midea Group Chairman Fang Hongbo summarized that digitalization has three main benefits: first, the way of doing business is completely different from the past; second, the business model has changed from selling individual products and hardware in the past to selling integrated solutions now; third, the work mode, the way of working and interacting between employees and upstream and downstream have changed greatly.

From 2012 to 2022, Midea's revenue grew from 102.7 billion yuan to 345.7 billion yuan, and net profit grew from 6.1 billion yuan to 29.8 billion yuan. More importantly, its own funds grew from 5.1 billion yuan to 135.8 billion yuan, and the capital turnover cycle decreased from 26 days to -2.5 days.

A negative capital turnover cycle means that Midea has done more than 300 billion yuan of business in a year without using its own funds, all of which are social funds, and it still needs to deposit in the bank for 2.5 days. "This process indicator is a very good effect brought by digital transformation," said Fang Hongbo.Fang Hongbo introduced that the core of Midea's digital investment is in talent. Today, Midea Group has built a unified digital foundation and established two research institutions, one is the Group AI Innovation Center, and the other is the Software Engineering Institute. These two research institutions are responsible for the development of digital foundations and digital technologies.

At the beginning of 2022, Midea formulated the "Digital Midea 2025 Plan". Fang Hongbo introduced that by 2025, there are five standards to measure the level of Midea Group's digital transformation: Business Digitalization: Achieve 100% digital operation of the entire value chain; Data Businessization: From the user's perspective, driven by numbers, reaching the standards of the high-tech industry; Digital Technology: Establish core technology capabilities and maintain industry-leading advantages; Smart Home: The first choice in the global smart home industry; Digital Innovation: Digital technology is integrated into products and services, and digitalization supports business model innovation.

CITIC Pacific Special Steel and Midea Group are two representative enterprises reshaping growth. Integrating the digital strategy into every link of the enterprise's production and operation, and systematically transforming the entire value chain in a planned manner, is their common characteristic. This strategic vision is not limited to financial indicators, but the company's financial performance naturally rises with the tide.

Accenture's 2023 "China Enterprise Digital Transformation Index" report pointed out that enterprises that actively invest in comprehensive reshaping strategies can form a broader and more solid overall force, and stand out in financial dimensions, technical returns, and 360° value dimensions. At the same time, the value created by reshapers has far exceeded the financial level. They will be more actively balanced among multiple stakeholders, creating value in all aspects, and are committed to creating long-term and sustainable value.

By the end of 2023, the Chinese government has proposed the "dual carbon" goal for more than three years. More and more enterprises, especially large industrial enterprises, have realized that this goal is not a distant slogan, but something they have to do. For enterprises dependent on the international market, the carbon emissions in their products will directly affect the competitiveness of the enterprise.

In an article published in December of that year, Accenture experts said that digital enterprises can effectively manage the complexity, cost, and speed of the decarbonization process. The low-carbon economy and generative artificial intelligence (GenAI) will put forward new requirements for employee skills, and organizations need to adjust the team's skill structure to ensure that employees have the ability to adapt to future needs.

GenAI is undoubtedly the biggest global technology hotspot in 2023. "The iPhone moment of artificial intelligence," said Nvidia founder Huang Renxun in February 2023 when evaluating ChatGPT. However, ChatGPT is also the only hit product of GenAI so far.

In November 2023, Accenture conducted a survey of executives in China. 94% of the surveyed executives believe that GenAI has transformative significance, but only 20% of the surveyed executives said they have started to invest heavily in it. 60% of the surveyed executives believe that finding the right data strategy is the biggest challenge in applying GenAI. Other challenges include: a solid cloud foundation (46%), talent shortage (26%), data accuracy (24%), etc.

Anyway, today's discussion on digital transformation cannot avoid GenAI. However, for the demander, technology is just a tool. There is no essential difference between digitalization and intelligence. Both are integrating new technologies into the organization and business processes of enterprises, and the ultimate goal is to improve efficiency and reduce costs, accelerate innovation, and enhance productivity. Enterprises do not need to be anxious about GenAI, understanding new technologies, and using new technologies, this is the best way to embrace the future.