Jack Ma: Industrials must 'digitalise or fail'

Alibaba founder warns the industrial sector it is next in line for the kind of digital disruption that has transformed the consumer sector in the last decade.

China's consumer market has faced a decade of digital disruption. The structural transformation amid the rise of e-commerce has taken consumption beyond the traditional physical store and forced vendors to fundamentally alter their business models to meet the demands of a new generation of digital customer.

Now companies in the industrial sector are being warned to prepare for similar revolutionary change within the next decade or risk failure – with big companies likely to be most affected.

And if that isn't enough to make investors sit up and take notice consider who the warning comes from – Jack Ma, chairman and lead founder of Alibaba.

Speaking on Tuesday at the 2017 Global Netrepreneur Conference in his hometown of Hangzhou, Ma said the rapid development of internet technology, big data, cloud computing and artificial intelligence will transform the world in a way “much faster than anyone could have expected”.

“In the age of internet, industrial companies that do not digitalise their business are bound to fail,” Ma warned.

Transforming production

One of Ma’s bold predictions is the ultimate reverse of the business-to-consumer (B2C) model that has existed in the industrial landscape for years.

In future, industrial firms will have to adopt a C2B model, where products are designed and developed based on customers’ standards and requirements.

The typical, standardised production will be challenged because the internet will reduce the cost for customers to select the best product at the lowest price. Meanwhile, the impact of branding will fall because customers will be able to customise their purchases.

“Customization will be the key concept in the industrial world in the future,” Ma predicts. “Today, customising a product could be very expensive. In the future, no companies could survive without customising their products for their customers.”

The power of the internet could potentially hurt large industrial companies the most because they will no longer have exclusive access to key technologies and data, Ma said. It will also break the geographical barrier to the process of manufacturing and production, allowing manufacturers to pick suppliers from all over the world.

"Now we say ‘Made in China’ but tomorrow it will be ‘Made in Internet’,” Ma said. “Size will no longer matters because even the smallest company will be able to source, procure and assemble their products in different parts of the world with the use of the internet.”

Ma has a stake in these changes in the form of Alibaba’s rapidly expanding logistics platform Cainiao. According to Ma, Cainiao plans to develop a nationwide logistic network in seven years that is capable of delivering products to every part of China within 24 hours. And in 10 years, Cainiao will aim to deliver any product globally within 72 hours.

Cainiao’s expansion forms part of the five globalisation targets that Alibaba aims to achieve in the future.

According to Ma, the e-commerce giant aims to achieve global procurement and global sale (Alibaba and TMall), global payment (Ant Financial), global logistics (Cainiao) as well as global travel, which involves developing new technologies such as facial recognition to facilitate travel between countries.

The Global Netrepreneur Conference started out as a platform for shop owners on Alibaba's Taobao marketplace to exchange ideas. “Netrepreneur” is a word coined by Ma to refer to the next generation of entrepreneur that embraces the online world.

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