The rise of digital ecology: How does the "gray wolf pack" transform the industrial chain?

In the previous article

We briefly introduce the differences in the starting points for understanding the operation of the economic world from different eras in the industrial age and the digital age. It was mentioned that we need to jump from the dichotomy analysis framework of "market and enterprise" to the "market, digital ecology, enterprise" trichotomy analysis framework of the digital era to look at the new economic world.

At the same time, in the digital age, due to the cross-chain competition caused by the rise of the digital ecosystem, we need to have a new understanding of the scope and relationship of the "market"; because the rise of the digital ecology promotes the change of the value role of the enterprise, it also makes us need to have a new understanding of the role of the "enterprise".

The consumer Internet has flourished in the 20 years from 1998 to 2018, in the process of which the digital ecology of the platform began to appear and changed the people's food, clothing, housing and transportation, and also made great changes in the operation of consumer goods/service industries. With the deepening of industrial digitalization, we see that around 2018, a new type of digital ecology - gray wolf packs began to emerge.

The digital ecology is the main body of competition in the digital age, especially the gray wolf group digital ecology of the industrial Internet is a new species. Taking the digital ecology of the gray wolf pack as a typical example, we use the upper and lower two articles to do the "Rise of the Digital Ecology" panel discussion.

The previous article discusses several core topics:

(1) What is the gray wolf pack that appears in the wave of industrial Internet.

(2) The digital ecology of the gray wolf pack has made a huge change to the traditional four-stream of the industrial chain.

(3) The comparison between different digital ecosystems of the consumer Internet and the industrial Internet.

First, what is the gray wolf pack ecology?

Take the rural electrical appliance industry chain market as an example:

In the industrial era, the industrial chain market of rural electrical appliances is an offline trading market. With the advent of the consumer Internet, consumers' eyeballs have shifted to the Internet. Platform enterprises such as Pinduoduo, JD.com, and Taobao capture eyeball traffic through business design skills and abundant capital investment, and unite commodity suppliers and service providers to form a digital ecosystem of close cooperation between enterprises to achieve online consumer commodity trading and follow-up services. This process forms an online trading market.

According to the statistics of the National Bureau of Statistics in 2021, the total retail transaction volume of online consumer goods (including electrical appliances) was 13 trillion yuan, while the total retail sales of social consumer goods in that year were 44 trillion yuan. This means that the online share is about 30%, and the remaining 70% is still offline transactions.

This phenomenon is not surprising, for consumers, the consumption within 2 to 3 kilometers of living and working places is a high-frequency norm, and offline merchants in this range naturally have faster response speed and better service experience; long-distance e-commerce procurement is not the norm for consumers.

In terms of the transaction structure of the offline market in the rural electrical appliance industry chain market:

As can be seen from the above figure, based on the specific target customer groups (township residents) in the industrial chain market, according to their daily electrical commodity procurement needs, a supply chain system with the characteristics of "fragmented, networked" transaction structure has been formed between the electrical brand/production enterprise groups connecting different categories.

Industrial chain markets with such characteristics abound in China. The "invisible hand" proposed by economist Adam Smith promotes disorderly game competition between enterprises, and from the perspective of the industrial chain, such a market is generally inefficient and internally attrition.

Listed in Hong Kong this year, H Company has rebuilt a new digital ecosystem based on such an industrial chain market, as follows:

Enterprise H has partnered with 160,000 rural village and town retail shops (b), as well as hundreds of excellent electrical brand/suppliers, which together form a symbiotic digital ecosystem. This digital ecology covers 21 provinces and more than 20,000 townships, and together provides high-quality electrical goods and services for residents of townships and towns everywhere.

In this process, Enterprise H empowers other partners in the digital ecosystem.

For example, for retail stores participating in the ecology, digital empowerment is provided, and digital tools are provided to help these traditional husband and wife electrical appliance stores to carry out digital transformation, forming three forms of one store, offline digital stores / online community stores / online virtual stores.

At the same time, it also carries out commodity empowerment to build a multi-, fast, good and provincial electrical product supply chain for stores.

The third empowerment is the empowerment of finance, which provides corresponding operating capital support around these stores.

The fourth empowerment is community operation empowerment, which helps stores to manage and guide the online operation of customer groups.

Finally, there is activity empowerment to help stores carry out corresponding activity planning and activity customization in combination with market changes and holidays.

On the one hand, these husband and wife retail electrical appliance shops in the ecosystem have mastered all aspects of the skills needed for operation in the digital age, and on the other hand, they have the support of the high-quality and fashionable and inexpensive electrical appliance supply chain provided by H enterprises, and establish a strong competitiveness in the face of township residents. These selected and empowered terminal stores will eventually have the opportunity to beat other local stores that have not participated in the ecology, defeat the electrical appliance e-commerce stores in the online e-commerce platform enterprise ecology, and achieve higher growth in their own store revenue.

Such an interdependent and symbiotic and mutually beneficial digital ecology is called the digital ecology of the gray wolf pack. H enterprise is one of the first wolf enterprises, this head wolf enterprise in 2021 revenue of nearly 50 billion, the entire ecological transaction scale is hundreds of billions.

There are also such gray wolf swarm ecology abroad. Everyone knows 7-11 convenience stores, and the average person will think that this is a traditional chain convenience store, nothing more. But it accounts for half of the market in Japan, with average single-store revenue and foot traffic far exceeding that of its peers. The combined profits of the three chains (Lawson Convenience Stores and FamilyMart) in the Second to Fourth Places in the Convenience Store Industry in Japan are still less than half of 7-11. The per capita profit generated by the 7-11 headquarters is close to 1.2 million yuan, which is comparable to that of Internet giant Alibaba. In the global retail industry, "there are only two convenience stores, 7-11 convenience stores and other convenience stores".

Essentially, 7-11 is a digital ecology of gray wolves. This ecosystem is a digital network of nearly 711 Japanese headquarters, nearly 20,000 stores, more than 170 factories and about 140 distribution centers.

Through the digital system, tens of thousands of enterprises have formed a closely cooperative digital ecology, which is reflected in the competition of a competitive entity to participate in the market. Japan's 7-11 headquarters as the head wolf enterprise to empower the entire ecosystem, free of charge to provide IT systems to support the operation of each partner; free to provide thousands of store operation supervision, to help stores improve operating efficiency; joint production plants launch 100 new products a week and so on.

In the digital ecology of mutual benefit and symbiosis of the gray wolf pack, different enterprises do a good job of dividing the value, sharing industrial resources, trusting and relying on each other, abandoning the old business philosophy of mutual game between enterprises in the industrial age, and fighting the world in a group, and finally the various enterprises in the gray wolf pack ecology have also obtained amazing economic returns.

Second, the impact of the digital ecology of the gray wolf pack on the offline market of the industrial chain

In the early industrial era, in China's supply shortage of about 70 to 80 years in the 1970s, manufacturers had a strong voice. With the continuous enrichment of commodity supply, in most industrial chain markets, production enterprises circulate layer by layer through a batch, a second batch or even a third batch, reaching retailers, and finally reaching customers covering the whole country and even the world. With the positive flow of goods from production enterprises to market customers, a pyramid forward supply chain structure based on the production promotion of manufacturers has been invisibly formed. See figure below:

The gray wolf pack digital ecology is not the case. By uniting thousands or even hundreds of thousands or millions of retail distributors around the target customers of the industrial chain market, the head wolf enterprise gathers their needs and then returns to the excellent production enterprises, so as to form a reverse supply chain form (hereinafter referred to as the "reverse bow supply chain system") with fixed production, efficient operation and bow shape to achieve "industrial chain optimization".

This is a subversion of the traditional offline supply chain structure. This subversion has essentially also caused changes in the "four streams" of the industrial chain.

1. Changes in business flow

In the past, commodities flowed from the production enterprises to the final customer, and there was a game relationship between each transaction between fragmented enterprises, and the industrial chain market was low due to the generation of internal friction in this game. The reverse collection mode of fragmented terminal dealer procurement demand formed by the digital ecology of the gray wolf pack, the efficiency of business flow transactions within the ecology is very high, and it is examined from above the industrial chain, which greatly reduces the internal friction game of the industrial chain and improves the transaction efficiency of the industrial chain.

Excellent terminal retail dealers, head wolf enterprises and excellent production enterprises trade in accordance with the established rules, there is no complex interest game, and together form an altruistic symbiotic digital ecological organization, working together to provide competitive products and services for end customers in the market.

2. Changes in logistics efficiency

In the industrial era, the logistics efficiency in the industrial chain market is very low, and the transaction game between enterprises is further reflected in the opacity between production and marketing figures and the opaqueness between inventory quantities. Between manufacturers and distributors, between distributors, between distributors and retail distributors, each other does not know their respective sales volume and inventory, can only guess each other.

Therefore, there is a management "bullwhip effect" concept appears, that is, with the huge changes in the demand of final customers, from retail distributors to production enterprises will form an amplification effect, it is difficult for production enterprises to have a rapid response to market demand to achieve capacity and demand matching, either a huge inventory backlog has been formed in the industrial chain, or the scarcity of commodities in the industrial chain leads to the inability of final customer demand to be met in time.

Through the reverse bow-type supply chain system, the gray wolf group ecology makes the production and marketing data between enterprises in the ecology transparent, the inventory transparent, the logistics distribution and warehousing can be optimally configured, and the logistics efficiency based on the industrial chain has been greatly improved.

3. Changes in the flow of funds

Finance in the industrial age is the finance of individual enterprises, which is based on "credit finance based on fixed assets". We see financial institutions, banks, and small loan companies, and their lending basis is based on the fixed assets of a single enterprise to determine the amount of credit funds granted. The reality is that a large number of SMEs do not have sufficient fixed assets to obtain effective capital borrowing for productive activities.

Although a large number of small and medium-sized enterprises do not have sufficient fixed assets, they need funds for the procurement of products and the sale of goods required for their main business. This is based on the capital scenario required for the specific movable property of "commodities". Traditional financial institutions based on "fixed assets-based credit finance" is difficult to meet the "movable property financial needs" of small and medium-sized enterprises, and it is easy to form a mismatch between the two.

The state hopes that financial institutions will pour water into the capillaries of the economy and make it accessible to small and medium-sized enterprises. Because financial institutions cannot grasp the circulation information and data of movable property of small and medium-sized enterprises, it is difficult to assess and prevent and control the risk of movable property, and to a certain extent, they cannot meet the scene needs of their specific funds.

In the digital ecology of the gray wolf pack, with the help of the reverse bow supply chain system and the movable property circulation data formed by the digital ecology, the price of movable property is "accurately estimated, sold, and seen" becomes a reality, and every enterprise in the ecology has clear operating data, and each movable property can be relatively controllable, understandable and disposable through means. In this case, movable property finance may emerge. This is the new form of supply chain finance in the digital age.

In specific practice, based on such a digital ecology, relevant financial institutions and financial technology service providers such as Huaxia Bank, Ping++, Ping An Bank and other related financial institutions and financial technology service providers are helping first wolf enterprises or core large enterprises to provide movable property finance-related services such as sorting systems, new supply chain financial products, etc., which can greatly help small and medium-sized enterprises to operate their business liquidity.

Based on the characteristics of different commodity categories (commodities, FMCG, etc.), supply chain finance has different roles in the construction and formation of the digital ecology of the gray wolf pack. Considering the limited space, we will not explore this aspect again.

4. Changes in the flow of information

Based on the above changes in business flow, logistics and capital flow, as well as the reverse collection form of the gray wolf group ecology to sell and produce, in the digital collaborative network, the information flow also runs more efficiently. This is the impact of the gray wolf pack ecology on the fourth stream of the industrial chain.

In the process of changing the four streams of the offline industrial chain trading market, the digital ecology of H Enterprise will provide competitive electrical goods services for residents of townships and towns around the world. Township residents will be easily impressed by the high-quality, low-cost new electrical appliances and better after-sales service that they can get, and they will be easily impressed and buy household appliances through the electrical digital ecology of H Enterprise. This also means that the gray wolf group digital ecology such as H Enterprise has the opportunity to grab the original online electrical appliance trading market cake of the consumer Internet Taobao, JD.com and other digital ecosystems.

The phenomenon of the industrial Internet based on the gray wolf pack of vertical industry chain markets continuously encroaching on the original market cake of the digital ecology of consumer Internet platform enterprises will be the norm.

Third, the difference between the digital ecology of the gray wolf pack and the digital ecology of the platform

On the front line of China's investment, we have seen a large number of gray wolf swarm ecology appear in different industrial chain markets, such as frozen products, office supplies, clothing, vegetables, hardware, packaging, industrial spare parts, auto parts, industrial additives, flowers and other hundreds of different industrial chain markets formed for different target customer groups. This is the first time in the history of the world economy that this phenomenon has occurred in bulk in a certain region.

The digital ecology of these gray wolves in the industrial Internet era and the platform digital ecology in the consumer Internet era are analyzed based on the perspective of the industrial chain market, and there is a very big difference. Pick some of the main comparisons to elaborate accordingly:

1. The objects and concepts of value created by core enterprises within the digital ecosystem are different

For platform enterprises in the era of consumer Internet, the object of value services created by their construction ecology is consumers. By creating value for consumers, the platform enterprise realizes the control of "eyeball traffic", according to the concept of "this tree is planted by me, this road is opened by me, leaving the road to buy money", and the business partners in its ecology play interest games to obtain corresponding dividends. Such a digital ecology is symbiotic, and no one can do without whom, but the ecology is still "self-interested". In the process of their own growth, platform companies believe that the market cake (traffic) is "burned out" by themselves with money, and other enterprises in the digital ecosystem are attached to themselves to share profits.

For the first wolf enterprise of the industrial Internet, it not only creates value for customers in the industrial chain, but also creates value for partners in the ecosystem. Head wolf enterprises should bring partners in the ecology to create the strongest ecological competitiveness, get a larger share of the market cake, and make a fortune together.

For example, Japan's 7-11 headquarters does product empowerment, management and operation empowerment, IT empowerment, logistics empowerment, etc., by helping the stores in the ecosystem to obtain incremental revenue, the 40% to 60% of the incremental income is taken as its own income (the commission income of franchised stores accounts for nearly 90% of the revenue of 7-11 headquarters), and does not earn the difference in the middle, channel fees and advertising fees). Such a digital ecology is symbiotic, and no one can do without whom, but the ecology is "altruistic" inside. In the process of its own growth, the head wolf enterprise believes that the market cake is the unity of the small partners in the ecology, and no one can do without whom, so it needs a fair share of profits.

2. The market scope of the industrial chain of ecological impact is different

The digital ecology of the consumer Internet platform affects the traditional retail market where consumers buy consumer goods, and eventually forms a market of 10 to 20 trillion yuan in China, and ten or so platform enterprises of more than ten billion US dollars; the digital ecology of the gray wolf pack of the industrial Internet affects most of the industrial chain market in the economic world, and the market size affected in China is about 150 trillion to 200 trillion, and eventually there will be dozens or more of the ten billion dollars of head wolf enterprises.

The digital ecology of the consumer Internet platform mainly affects the food, clothing, shelter and transportation of consumers, and the gray wolf group ecology of the industrial Internet has changed the collaborative relationship between enterprises in the industrial chain market.

3. Differences in ecological formation methodologies

Due to the advent of the Internet, "the world is flat" means that consumers' eyeballs are no longer limited to real-life scenarios, but extend to virtual networks to obtain information and related services. Platform enterprises of the consumer Internet obtain eyeball traffic through huge financial support, and then form the delivery of services/goods, form a digital ecology and make profits. This process is similar to the process of Columbus discovering the New World, using weapons to frantically enclose the land, establishing his own territory for development and profit. The author calls it a "methodology for ecological construction."

This is not the case with the formation of the gray wolf pack ecology. In an industrial chain market, in most cases, it is the first wolf enterprises to unite competitive value roles (excellent terminal dealers, excellent manufacturers, excellent R & D institutions, excellent logistics providers, etc.) to form an efficient operation of the ecology, and constantly expand market share, and with the continuous growth of the ecology, invisibly realize the digital transformation of the industrial chain. It is a continuous process of value creation, a revolutionary process of breaking the old world and building a new one. The author calls it a "revolutionary methodology for ecological construction."

Finally, it can be simply summarized, see the following figure:

Fourth, the similarities between the digital ecology of the gray wolf pack and the digital ecology of the platform

Since the digital ecology of the gray wolf pack and the digital ecology of the platform are both digital ecosystems, the two also have some of the same laws, see the following figure:

1. Ecological improvement of the efficiency of the industrial chain

Whether it is the digital ecology of platform enterprises or the digital ecology of the gray wolf pack, it has promoted the changes in the four streams of the industrial chain and achieved the improvement of the efficiency of the industrial chain. See figure below:

The industrial chain structure of the industrial era we have all learned is a pyramid supply chain system formed from the production enterprises, resulting in an industrial chain market as fragmented, internal consumption and inefficiency.

Most of the digital ecology of the gray wolf pack is based on a specific industrial chain market, uniting excellent terminal dealers (indirectly grasping fragmented customer needs) and then reversing the docking of excellent producers, forming a reverse bow supply chain system. The digital ecology of "fixed production by sales" covers the entire industrial chain market, and the transformation and digitization of the traditional supply chain are more thorough, so as to achieve "survival of the fittest" and "common prosperity". Such a digital ecosystem improves the efficiency of most of the industrial chain and achieves the optimal industrial chain.

The emergence of the digital ecology of the consumer Internet platform is also based on the era of overcapacity, focusing on the procurement needs of consumers, achieving reverse collection and procurement, and forming a reverse bow retail supply system. Compared with the traditional supply chain system, the digital ecosystem of "sales and supply" has a stronger competitive advantage, and to a large extent solves the problem of inefficiency in the traditional retail market of consumer-related products/services. Therefore, the digital ecology of the consumer Internet platform has a certain degree of advancedness, and it can have stronger vitality than traditional individual enterprises.

2. Ecology leads to blurred boundaries of the industrial chain

Whether it is the digital ecology of the platform or the digital ecology of the gray wolf group, there will be a phenomenon of cross-heterogeneous commodity category operation. For example, Jingdong, Taobao, and Pinduoduo not only operate 3C and household appliances, but also operate fresh, office supplies and even industrial products; the digital ecology of H enterprises not only operates household appliances, but also operates alcohol, agricultural materials, agricultural machinery, transportation, etc. The operation business of these cross-heterogeneous commodity categories essentially breaks the traditional industrial chain market boundary of each specific commodity category, and has formed a huge impact on the offline market transactions of the traditional industrial chain.

In the digital era, the rise of the digital ecology has blurred the boundaries of the industrial chain, resulting in a huge impact on the transaction structure of the cross-industry chain market, which is in stark contrast to the phenomenon that it is difficult for the diversified operation of a single enterprise to change the transaction structure of another industrial chain market in the industrial era.

The operation of traditional self-employed enterprises facing ecological cross-border and dimensionality reduction in the digital age will become the norm.

3. Ecology has led to changes in the value role of the industrial chain

In the process of the rise of the platform digital ecology and the gray wolf group digital ecology, the value role in the ecosystem is set by the core enterprises. For example, there are Taobao stores, jitter stores, etc., as well as Internet celebrities, bloggers, UP owners and so on. These value role settings make traditional individual enterprises have to transform and change their traditional business habits, so that they can participate in the digital ecology and embrace the digital ecology. The value role in the industrial chain market has led to more diversity and changeability due to the emergence of digital ecology. The industrial chain market where traditional enterprises are located has also changed the trading role due to the digital ecology, which makes the transaction structure within the industrial chain market vague.

The above three common points also make using the "market, digital ecology, enterprise" trichotomy analysis framework to analyze the economic world of the digital age and guide the operation of individual enterprises.