Rethinking Business Operation in DT Age ——Jet Jing, Vice President, Alibaba Group

1. Rethinking Business Operation in DT Age
——Jet Jing, Vice President, Alibaba Group
In the next half hour, I hope that everybody can imagine ourselves
staying in the mobile Internet world which Stephen Maher (President of
Mondelez China) mentioned just now. The mobile Internet is changing
everything, and what kind of opportunities can we grasp, in F&B industry,
especially in aspect of product innovation? In the ecosystem created by
Ali today, what should Ali do to help our cooperators? And professionals,
who focus on helping brands to create innovative products, what should
they do to make this suppositional world a reality?
There is no doubt that consumption upgrade in China is going on today.

2. But at the same time, all enterprises have to face a fact: all products’
lifecycles are shorter and shorter, and an increasing number of
consumers are fickle in affection. The reason is that the Internet and
mobile Internet accelerate the speed of information circulation, which
strengthen consumer’s ability of accepting new things and forget old
ones.
In fact when we talk about consumption upgrade at the moment, we are
comparing the current market situation with the past 10-15 years. But for
the mass market and vertical market throughout China, what’s next for
them? All CEOs are eager to grasp opportunities. It seems that vertical
market is attractive, but whether the opportunities brought by it and the
execution of them can benefit the market or not is a question. Actually, in
the past, it was hard for vertical niche markets to achieve profitable sales.
Why? Why that kind of challenge exists? Are product innovations the
work of R&D teams or marketing teams only? Actually, it’s not. Whether
a company can grasp the opportunities of consumption upgrade, use
product innovations to build its core competitiveness in the market as
soon as possible, change its old, low-price and large-scale production
structure is decided by product innovations. It is closely linked with the
organization structure, executive ability and channel management ability
of the brand building. If these three sectors remain unchanged, it is

3. fruitless to discuss how to produce the goods which conform with and
even lead consumption upgrade.
How to make essential changes? The volume of transaction on Double 11
Shopping Carnival at Tmall.com in last year reached at 120.7 billion. But
what I want to share today is not the volume of goods sold out but
something behind this figure. In fact, the whole business basic facilities
which created the noticeable number, had reached a key tipping point
and been changed in essential, and this Double 11 Shopping Carnival
was that key tipping point. In the future, the mobile Internet would be
the main force definitely, and the whole business world would be linked
with it closely. Now, there are more than five hundred million users per
month to complete all kinds of interactions in Ali ecosystem and on retail
platform, without any time and space restriction. From getting
information to purchasing goods, as long as there is a smart phone,
users can make it, and even they can arrange the delivery time. This is the
first point: the mobile Internet has remolded the whole business world in
the end of last year. The second point, the payment system and logistic
system have enabled all brands to deliver goods to consumers smoothly
and wherever users are, they can make such an older. Such an
establishment of consumption relationship is the precondition which is
most basic and essential to discuss consumption business. Traditionally,

4. when it comes to F&B business in China, all people think are how to
construct channels, how to popularize and how to produce goods. While
when everything changes essentially, what changes can product
innovation that we can achieve make?
What do five hundred million people mean? Behind this large group,
it’s a complete ecosystem constructed by Ali, which takes ten years
continually. There is a big difference between China’s Internet and
others’. In other places, in sectors of the mobile Internet and Internet
infrastructure, Google, Facebook and Amazon have completed three key
functions, namely facing brands, branding for reaching consumers and
completing purchase. These three functions are in a fragmented system.
However, in Ali, by linking Uni lD, we can connect retail worlds with
online consumption system. Up to now, we have achieved that how to
find consumers, how to transform consumers into our fans, users and
even loyal users in following time by analyzing their behaviors. This is not
to sell goods online only, but to understand target groups. Last year,
many board members and top managers came to Ali to discuss that in
new environment, how a brand takes its own business orientation and
makes its own product innovations. While our first question was always
that do you think how many people should be your users among these
five hundred million consumers, but you haven’t made it. Do you think

5. how many people are the ones who you should development products
for? But you never acquire their information and data of how they
consume this kind of productions. So the question is quite simple: “how
many users do you want among these five hundred users.”
The first is that based on Uni lD, what can a brand do factually. Using Uni
lD to connect two worlds, it is not exaggerative to say that in the past
half a century, the consumer industry all over the world were based on
the industrial logic basis formed more than 60 years ago, which was with
mass communication, mass distribution and mass manufacturing. With
such logic, there is no necessary correlation among all divisions of labor. I
believe that everyone here today experienced that before taking a
product to market, it would take three months to reinforce the brand
promotion, make ads and social media propagations or make videos, but
sales departments don’t anchor their hope on that specific
communication would bring specific consumers and specific consumers
can feel even good about the brand. You don’t know whether
consumers who step in stores next minute watch the ad or not, so only
maximizing every link, every execution can be ensured. There is a
sentence which is popular in the traditional ad industry: a half of
marketing fees are wasted, but because the other half is vague, any
penny cannot be slashed. The reason is that in the past, business worlds

6. are separate. And after completing the connections, consumers begin to
know more productions, become interested in them, then buy them and
become loyal fans of some productions. In the past, this kind of
connection was just a concept, especially for mass consumer products, it
is extremely hard to operate. Who can tell me that how many people in
China became your users last month, and they never bought anything of
yours, but in the last month they did? And how many consumers left? Or
the repurchase rate has continued to fall for three months? Most brands
cannot offer such a set of data, because there was no real ecosystem
providing and linking these data. What people can see were only the GRP,
arrival rate and frequency of media, and the number of branches,
weighting coverage and price, and all these data are sample data. The
final market shares and penetration we saw were telling us how a brand
and a product perform behaved in an overall and comprehensive view,
but at operating level, there was no change. But today, this chain has
been completed, which means that the whole industry can really be
consumer-centric. Consumers of a brand become its most important
property, and in the past, such property could not be accumulated,
managed and operated.
How to influence innovations? Once consumers can be operated, it is
time to make strategies. First, all innovations should make design goals

7. on the basis of insights and understanding the needs of consumers, this
is Uni Strategy. The Uni Data based on consumer operating helps you to
make specific strategy. After manufacturing productions, how to make
target consumers know and interact with that with peak efficiency and
the operation in the following time. In the whole industry and the real
economy, operation includes all situations that consumers interact with
brands and purchase goods. So in the whole consumer operation, what
involved with innovations are whether brands transform consumers into
their users with the best experience and interaction methods, and make
consumers use the most familiar and easiest methods to complete their
every purchase without violating their will in the whole process. Because
it presents every link which brands must consider, from the birth of new
products to forming scale to forming mature businesses.
Let’s pay attention to that, in Ali system, besides such basics,
atmosphere and possibilities, how all tools and methods make
innovations happen faster and with a higher success rate. To start with, in
our product innovation logic, the first step is R&D. Researching and
developing products from nothing to meeting consumers’ needs.
Meeting needs have become a key to a brand’s R&D. Not every
production must be new totally, and many productions’ appearance is
to meet the needs which have not been met.

8. The second point is to create needs. It requires higher imagination, but it
always faces higher risks, too. Because there is no CEO opposing taking a
new product to market, but every CEO must consider the success rate of
that in China. According to different research institutions, the highest
success rate is below 10%. That’s to say, among all new productions
taken in Chinese market every year, what fulfilling companies’
expectations only take up to 10% at most. As for how to make or seek
rules for creating needs and control risks, we will share that with you
later.
What I want to share now is the most basic part: meeting mass needs,
forming quantity production, and in the middle part, meeting the relative
historical needs and specific customers’ demands by customization.
Besides, how to create more needs without obstacles and how to take
more products to market on the condition that maintain the normal
operation of companies and even improve the profitability, these are
something we should think. With the influence of market, the circle in the
far end are telling us how to screen and create needs, how to make such
a prediction, how to produce it in the most exciting way and make it form
scale and a sustainable and dependable business.

9. There is another example, and thanks to Mr. Zhang’s share before. Yili
Industrial Group, a leading enterprise in China, made an all-around
strategic cooperation with Ali last year. And there was an extremely
important sector that how to help Yili to accelerate product innovations,
and at the same time, improve the success rate of new arrivals
nationwide. What do these lines on the top represent for? This milk
brand was based on the Internet totally. Yili’s employees use Ali’s
system to screen consumers’ needs to have an insight, and then design
products which were launched in Tmall first and then were marketed in
the whole Internet and even in the whole country.
When taking a product into market, what costs most time to ensure its
success rate? It’s the repeated verification, verifying its concept and
verifying the original mode of it. I believe that everyone here is
experienced expert in the aspect of product innovation, and as we all
know, it is more and more difficult to do that and find the proper target
group. And in most cases, the people you find may not be your audience.
However, in Ali’s system, we can help Yili to find the right person by
analyzing what consumers consumed in the past. Second, how to find
enough people who are eligible? Apparently, it is hard to make offline
researches even in the leading cities. For a national brand, it can make
numberless questionnaires on Ali and Tmall platforms to find enough

10. people who are representative of product innovation really. Of course,
the most important thing is that driven by productions and the Internet,
the efficiency of consumers’ feedback is higher than offline ones. When
you have more precise consumers and faster speed, the whole product
innovation and verification cycle which lasts 12-18 months originally can
be shortened dramatically. So-called big data, so-called new retail
platform and how Uni ID is utilized by product innovation, these are
something which Yili felt and understood with us. Thus, in this year, on
the Tmall platform, Yili is going to have more innovations based on such
a system to accelerate product innovation and improve its success rate.
Since what production development needs to solve is speed and veracity,
Yili is an excellent example. But besides production development, what
got more people’s attention is whether a new production can be
launched or has a nationwide influence.
We should rethink five points. When you talk about the value which a
new product can bring to company, whether you are mapping the sales
of it with a traditional and rigid thought or considering the number of its
consumers in the whole country really. Those five hundred million
consumers in China don’t have any physical barrier actually. Making a
brand send products to consumers and getting money back, finding

11. products through the whole process mentioned above, this
consideration is totally different from others—as for traditional launches
of new products, the sales and the number of distributions within 6
months are the consideration.
The second is the intensive experience interaction. The intensive
experience interaction makes us consider that if we really care about our
products? If we do, have we imagined that when some interactions
between every production and consumers happened, how do consumers
understand the benefits brought by the product? Making a search in our
minds, there are packaging, ads, and all kinds of Bandler on the Internet.
But are they enough? Can they tell consumers the stories behind the
product, the real reliable technological process and the real valuable
origin clearly and touch them? Just now, one speaker shared that there is
no relationship between price and quality. But if the quality cannot make
consumers understand its supporting point, consumers would pay
attention to price only. But we hope an increasing number of people to
but high-quality goods. How to help those enterprises which devote
themselves to high quality and product innovation? Full channel
transformation which means that we should rethink that in different
channels, whether their transformations depend on the natural
properties or the mobile Internet today has helped us addressing the

12. barriers met in the process of consumers’ first purchase and
completing continuous purchases? C2B is a hot word, but whether this
word forms a large-scale and enforceable solution? Ten years ago, there
were lots of people talking about C2B and customization, but how do we
make it today?
The last point is to operation actively. Because in the past, after listing,
not all brands and excellent consumer goods companies have a team
that is eager for success. Although we work hard, do we really influence
consumers we meet and turn them into the users of ourselves actively?
Let’s pay attention to Ali’s solutions in these five aspects. First, the
strong experience interaction and nationwide coverage. The last Double
11 Shopping Carnival is a carnival of all citizens. That not only refers to
entertainment, more important thing is that it made an integration of
income with Internet. 13 million, the number of people who visited
online flagship store of Shanghai Jahwa Corporation, it is also called UV
(Unique Visitor). What does 13 million mean? In 2005, there were a
thousand department stores in China, but all their traffic in ten hours was
nearly 13 million. When 13 million users gather within four hours, it was
beyond all brands’ imagination. Frankly speaking, it was also a figure
surprising us. We did not expect that within four hours, there were 13

13. million consumers watching the ads played in Shanghai Jahwa’s Double
11 Gala and making interactions on their phones, and then became
Shanghai Jahwa’s UV. This also gives us a hint on how product
innovations meet and interact with consumers.
Since it comes to experiencing interaction, we have to talk about
packaging. What can be showed on packaging? There are a lot of
packaging enterprises attending this meeting today, and I would like to
ask a question that nowadays, why does packaging exist? I have engaged
in the packaging industry, and at that time, I thought packaging was
designed for offline stores and shelves, so almost all rules in the
packaging industry focus on shelves. While recently, I find that packaging
today needs to restore its nature—packaging is a platform which can
contacts consumers and make most interactions with them.
In the mobile Internet world, it is common that the goods are delivered
to consumers directly after being manufactured in factories. Although
consumers have received the goods, they may not understand the goods
thoroughly. Many companied have applied VR, but what I want to
emphasis is to rethink the value created by packaging. Based on VR and
the mobile Internet, opining Tmall App or Taobao App, consumers would
find that they can interact with products, which plays a better

14. performance than the role played by packaging in our imagination.
Wherever consumers are, they can make interactions with productions
on their phones and completing all information the brands want to
deliver.
Look at other strong experience interactions. We can vaguely see Estee
Lauder’s counter. In male’s opinion, it seems that there is no
relationship between senior beauty makeup and them. We can make a
consideration that what should the mobile Internet do in the retail
environment? It is to reconstruct the influence of the ancestor for
consumers. In a retail place, many food brands don’t have beauty
advisors but many long-term promoters and nutrition consultants. In
malls nationwide, there are millions of promoters. Then how do these
promoters provide consumers the most valuable information?
Our target consumers include those living in remote areas. No matter
she is in Turpan and Kanas in Xinjiang or Mohe in the northeast, she can
enjoy the same level personal service from beauty consultant. She
doesn’t need to go to stores during working time and enjoy the BA
online service provided by Estee Lauder’s Fatetime. BA is a method, and
in the retail environment, when a new production launched, it can make
consumers accept the product and complete their first purchase. This is

15. true for high-end beauty makeup, and offline food industry is also the
case. How to make such services not be restricted by time and space and
complete the most valuable mission so that consumers would not miss
these most missionary and creative goods just because they do not
understand them. BA is a very good reference.
Besides BA, all of VR, DR and 3D make the same contribution to brands
and new product innovations. How to utilize technologies combining
them with the mobile Internet, making them a more simple and effective
promoting way, which helps brands showing consumers their
productions ’properties, functions and meanings completely to make
them close to consumers’ life. Taking a serious consideration, when
these technological means interact with every single consumer, what
consumers see is totally customized. What they saw in last minute would
influence what you will see next minute. This is customized promotion
which is based on big data, and it really influences every link in the whole
retail process. But what kind of innovation does it bring to us? The
answer is to increasing the possibilities of effective acceptance between
product innovations and target consumers. The goal of all launches is to
find right consumer groups and make them know and contact the
production with few barriers. But in the past, all our experiences and
interaction environments are same. Fortunately, the technologies today

16. can bring substantial changes. Estee Lauder utilizes technologies well.
Through the face recognition, consumers can immediately know the
effect of a certain kind of cosmetic on themselves. These technologies
make that true online, even it is hard to make it offline. Technologies give
us imaginary space that can help consumers to make decisions
benefiting themselves more easily.
Here is another case, which is about Mondelez China, an honored guest
here, too. This case has been promoted and put into practice in 24
different brands. Customization is wonderful, because it is difficult for
productions which have no character to be popular in the era of mobile
Internet. But it is easier said than done, and it is harder for a brand to
build a customized platform. Last year, Mondelez China utilized Tmall
enabling millions of consumers to visit its online official flagship store
and complete their own product customization. Consumers can choose
patterns, colors and words to achieve a complete product customization.
But the most important thing is that all productions are put into the
supply chain system in order forms, thus the manufacture are completed
and then the productions would be delivered to consumers. It is
unprecedented. Making a further thought, we customize packaging
today, so what would be customized tomorrow? Consumers are here and
there, and their influence is never a simple concept of sales but a real

17. sense of brands’ interpretation. This customized service is a perfect
experience based on Oreo’s brand property. All consumers attending
and enjoying the experience would not only by the products online, but
also offline. This is what we learn by big data. Within one day, many
potential consumers appear. This is the real production which pays
attention to consumers themselves really, especially for the promotion of
new productions. Although the potential consumers Mondelez China
gained do not buy any productions, Mondelez China can make plans
aiming at these potential consumers unprecedentedly to turn them into
consumers of Mondelez’s Oreo.
In fact, there are many brands keeping pace with the trend. If only having
a very touching interaction, a product cannot achieve a continuous scale.
For F&B companies, store is an extremely important channel. But in such
a channel, the goods in stores can meet the needs of people around
them? Obviously, the answer is no. Why I said that so confirmedly? I said
that not because our cooperators have such experiences simply, but also
taking traditional supply chains into consideration. It is almost
impossible to meet the needs of people around stores. There is no data
and transparent value chains tailing after the effectiveness of all
resources put stores. Thus for brands, we should solve the main problem
first. In the store system nationwide, what can be sold are best sales on

18. the whole. With mobile Internet, we can help brands know the real stores
in real time through platforms, such as LST. Information would alter
brands’ distribution completely. In China, no matter what kind of
channels or stores, all can make it.
After talking about the possibilities on the front end, let’s discuss
background. For a branded company or consumer goods company, if it
has no idea about the progress of an event or the number of new users
on specific platforms and channels, it is impossible to optimize and
allocate national resources effectively. It seems that many vertical niche
markets we talk about today are very attractive, but it cannot achieve a
continuous and profitable growth. Why? That’s because that there is no
more resilient supply chain which includes manufacture and logistics,
and no more customized and effective marketing method. I have
mentioned things about the front end, and I am going to talk about the
whole logistics system. In the past, the end of supply chains is stores, and
the shelf rate is the rule. In fact, a soaring number of brands have
reached billions of sales scale on Tmall platform. And their supply chains
are “end-to-end” supply chains which are driven by consumers. It is a
historical proposition that how to reference big data and utilizes such an
supply system to make the goods which aims at the vertical niche
markets are delivered to consumers at a lower cost but with a higher

19. efficiency. This is vital for the vitality of product innovation. All in all,
everything would be reflected on the data screen. Knowing that what
kind of productions, marketing and solutions of supply chains are
effective, and based on that, to optimize combinations, and that’s the
active operation I have mentioned.
To achieve that I have mentioned—build Uni ID ecosystem and make
innovation possible to the utmost extent, decision makers should be
aware that the whole organization including both internal and external
need to be redesigned and planned focusing on consumers. In the final
analysis, sales come from consumers, not from specific channels or
provinces. Whether they are research departments, marketing
departments, sales departments, supply chain departments, production
departments, it is important for them to understand the needs of
consumers, and to lead and meet these needs. Thus it is urgent and
necessary to transform and upgrade organizational capacity.
In the end, the reason why product innovation changes is that for the
first time in history, we are able to let consumer-centric operation
happen. Based on data, we can understand and find consumers
efficiently and provide them with better interactions and service. In this
way, we can master the process of product innovation better, from its

20. birth to growth to mature. There are five hundred million consumers
waiting to be explored, and it is time to utilize the power of
unprecedented Chinese innovation. I do hope my share today can inspire
more cooperators to reimagine and lead the future.